Written By: Karen Deis
First Trigger Leads! Now Secondary Use Credit Reports!
Read this interview with Terry Clemans, Executive Director of the National Credit Reporting Association, about how the Big Three Credit Bureaus have again interpreted the Fair Credit Report Act in their favor!
Karen: What is the National Credit Reporting Association?
Terry: In addition to the big credit agencies (Trans Union, Equifax, Experian), there are about 120 independent companies that produce mortgage reports. 100 of them are NCRA members who collect local credit data not normally reported to the huge credit reporting agencies. We have been around for 15 years.
Karen: What is this new, controversial interpretation of the FCRA called “Secondary Use of Credit Reports” all about?
Terry: It all started in February, 2007, where after 10 years, the Big Three rolled out new policies which radically changed the interpretation of the Fair Credit Report Act. They decided that they needed to track “secondary users” of the credit report and charge EACH secondary user each time they view the existing credit report.
Karen: Who is a secondary user?
Terry: Secondary users would be wholesale lenders, Fannie Mae, Freddie Mac (UD and LP) who will incur an additional fee assessed by the Big Three just for viewing the same credit report. So if you are “shopping” a difficult loan to 5 or 6 wholesale lenders, the mortgage company will be charged for each credit report by each lender—or 5 credit reports.
Karen: So how will this affect the consumer?
Terry: Ultimately, someone has to pay for it and I would assume that the mortgage company would pass on the additional credit report fees to the consumer.
Karen: I see an issue with TIL and disclosures—depending on the number of charges for each report viewed.
Terry: Yes, that will be an issue plus mortgage lenders are looking at creating disclosure forms to let their clients know about the possibility of additional credit reporting fees. I know that the National Association of Mortgage Brokers has recently drafted a letter, with a position paper, to the Federal Trade Commission, outlining why this is entirely unfair to the consumer. When they purchase a credit report, it should be good for the WHOLE transaction. I know there’s one lawsuit between CBC and Novis where the judge asked if this was an “intellectual property issue”. They said it was not! The case is still pending waiting for the judge’s final decision.
Karen: What does the FTC have to do with this?
Terry: The Federal Trade Commission regulates the FCRA. The FCRA law has not changed substantially since September 1997. But, now, the law is being interpreted to mean that if a loan did not close in the original mortgage lender’s name, that they have the right to charge another fee every time the credit report is viewed.
Karen: My initial reaction is that the Big Three have banded together just to collect extra fees since more and more states regulate trigger leads.
Terry: Yes, and here’s the rub—Fannie, Freddie and HUD “claim” that their mission is to lower the cost of home ownership an done of the driving forces of DO and LP was to lower that cost. Yet, the extra costs fly in the fact of their mission.
Karen: When will this go into effect?
Terry: The reason they have not implemented this earlier is that the tracking software was not in place to charge the additional fees and track each lender or wholesale company on who viewed the report. It is predicted that you will see the additional charges start to appear in the first quarter of 2008.
Karen: What is the NCRA’s position?
Terry: We are not happy about it and have been leading the fight to find out why, after 10 years and no change to the law, it’s being reinterpreted and going to cost the consumer more money for the same credit report.
Karen: What should individual mortgage companies do if they don’t agree with the secondary use fees?
Terry: If anyone is not happy about it, they should talk to their State Representative. Send a letter to the FTC. We are hoping that the Big Three feel enough pressure that they do away with this entirely because it’s really unfair to the consumer when they purchase a full report and then have to pay each time someone merely “reads” the same report over and over again.
Karen: How can people contact you for more information?
Terry: My email address is: TClemans@NCRaInc.org. I would love to get questions and hear the concerns of loan officers and mortgage lenders.
Copyright - 2007 - LoanOfficerMagazine.com
