CFPB needs to crack down on trigger leads, CHLA declares

Trigger lead solicitations are "junk calls" and the Consumer Financial Protection Bureau needs to focus its enforcement efforts in this area, a letter from the Community Home Lenders of America declared.

The letter starts off by noting the CFPB's efforts as part of the wider Biden Administration focus on junk fees.

"Junk call trigger lead solicitations have proven to be abusive, and in some instances illegal. These practices must be rigorously investigated by federal regulators to ensure that consumers are protected throughout the home buying process," Scott Olson, CHLA executive director, said in a press release. "We encourage the CFPB to identify mortgage brokers or lenders that frequently engage in these impermissible solicitations and take the necessary actions to stop such practices."

The CFPB is reviewing the letter.

The correspondence is a follow-up to a November 2022 letter from the CHLA but now cites three specific practices that it claims are "abusive, anti-consumer and potentially illegal."

That earlier letter said the trigger leads do not meet the legal requirement that the solicitation be a firm offer of credit.

The latest letter firstly points out that some mortgage brokers are making trigger lead solicitations. Unlike mortgage bankers, mortgage brokers cannot close loans in their own names.

"We do not see how it is possible for a mortgage broker to meet the 'firm offer of credit' requirement in such situations," the letter states.

The second practice the CHLA calls out is the use of solicitations that misrepresent or falsely imply that the call is on behalf of the existing mortgage lender the borrower is working with.

Finally, CHLA believes that individual loan officers are making trigger lead solicitations without the consent of the company they work for.

"This is problematic, since the employing lender is not able to properly supervise language and practices used by such loan originators," the letter said.

Trigger leads have long been a vexing issue in the mortgage industry, as this regulator's complaint from 2006 shows. Maine was considering whether trigger leads should be regulated to prevent misleading solicitations, said William Lund, at the time, the director of the state's Office of Consumer Credit Regulation.

In a speech at the New England Mortgage Bankers Conference, Lund mentioned what would be a talking point for the CHLA letter almost 18 years later, that brokers or lenders have been accused of calling consumers and pretending to be their current lender offering a new loan product, or pretending that a referral was made because the original lender cannot fund the loan.

That is a likely violation of the Fair Credit Reporting Act, Lund said.

In the current session of Congress, bills have been introduced in both houses under the title the "Homebuyers Privacy Protection Act." While each bill has co-sponsors from both parties, neither has made it out of committee.

Much of the mortgage industry backs these bills, including The National Association of Mortgage Brokers, the Mortgage Bankers Association, the Independent Community Bankers of America and the Association of Independent Mortgage Experts.