Three Additional States Adopt Laws Regulating Use of Mortgage Trigger Leads
Three states—Arkansas, Idaho, and Utah—recently adopted new consumer protections with respect to mortgage loan trigger leads.
When a consumer applies for a mortgage loan, an early step in the process involves the lender or broker obtaining the prospective borrower’s credit report. “Trigger leads” generally refer to a process where lenders purchase reports from consumer reporting agencies (CRAs) which identify consumers who meet specific criteria and who were recently subject to a credit check in connection with an application for a mortgage loan with another lender. Under the Fair Credit Reporting Act (FCRA), lenders receiving these leads generally must use this information to make prescreened, firm offers of credit to these consumers (i.e., an offer of credit that the lender must honor if the prospective borrower does in fact meet the specific criteria used to identify them for the offer, with limited conditions). Since many mortgage lenders may receive a trigger lead about the same prospective borrower after their credit is pulled by the original lender, the prospective borrower may receive a sudden influx of unsolicited new mortgage loan advertisements and communications.
The new Arkansas law prohibits the use of mortgage trigger leads in a misleading and deceptive manner. This includes requiring upfront disclosures regarding: (i) the identity of the new loan officer and mortgage entity making the contact; (ii) how they obtained the consumer’s contact information or an explanation about mortgage trigger leads; (iii) that the information was purchased from a CRA without the knowledge or permission of the consumer’s original lender or broker; (iv) that the person making the contact is not affiliated with the consumer’s original lender or broker; and (v) that the purpose of the communication is to solicit new business. The new lender must make the consumer a firm offer of credit as provided for under FCRA. Additionally, lenders cannot use these trigger leads to solicit or contact consumers who have opted out of receiving prescreened offers of credit under FCRA or to call consumers on the national Do-Not-Call Registry. Note that mortgage trigger leads under these provisions do not include consumer reports obtained by a lender that holds or services the consumer’s existing loan. The Arkansas law will go into effect 91 days after the state legislature adjourns for the year, such that the anticipated effective date will be August 4, 2025.
The new Idaho law requires that the party soliciting a consumer for a residential mortgage loan based on a trigger lead must clearly and conspicuously inform the borrower upfront that they are not affiliated with the consumer’s original lender or broker and that the consumer’s contact information was purchased from a CRA without the knowledge or permission of the consumer’s original lender or broker. The soliciting party must comply with all aspects of FCRA regarding prescreened offers of credit, including the requirement to make a firm offer of credit to the consumer. Finally, trigger leads cannot be used to solicit consumers who have opted out of receiving prescreened offers of credit under FCRA or to call consumers on a state or federal do-not-call list. Note that mortgage trigger leads under this law do not include consumer reports obtained by a lender or servicer that holds or services the consumer’s existing loan. The Idaho law takes effect on July 1, 2025.
The new Utah law prohibits residential mortgage lenders and brokers from using prescreened trigger leads (i.e., information derived from a consumer report given to a third party that is not affiliated with the consumer) to solicit a consumer who has applied for a mortgage loan with another financial institution. Here, solicitation means contacting a consumer to market mortgage loan services, such as offering to accept a mortgage loan application, among other listed activities. Lenders and brokers who use trigger leads to solicit a consumer must: (i) inform the borrower upfront that they are not affiliated with the lender or broker with which the consumer initially applied; (ii) in the initial solicitation, conform to state and federal laws for solicitations using consumer reports (e.g., the requirement under FCRA to make a firm offer of credit to the consumer); and (iii) not solicit a consumer with an offer of certain rates, terms, and costs knowing that they will subsequently change the rates, terms, or costs to the consumer’s detriment. The Utah law takes effect on May 7, 2025.
These states join several others that previously enacted provisions addressing mortgage trigger leads, including Connecticut, Kansas, Kentucky, Maine, Rhode Island, Texas, and Wisconsin.
