NEW YORK — Last week, the United States Court of Appeals for the Second Circuit upheld a lower-court ruling that the sale and use of trigger leads is allowed under the terms of the Fair Credit Reporting Act (FCRA). Trigger leads are created when an application for home or auto financing “triggers” an inquiry at the credit reporting agencies, which can then compile and sell lists of consumers who are in the market for a loan.
In September 2008, the United States District Court for the Western District of New York dismissed a suit leveled by Rochester, N.Y.-based Premium Mortgage Corp. regarding the use of trigger leads. The company leveled nine claims against credit reporting agencies Equifax, Experian and TransUnion, as well as a reseller. The list of claims included misappropriation of trade secrets, fraud, unfair competition and tortious interference “with contractual or prospective business relations,” according to court documents.
Both courts found that each claim was preempted by the FCRA, which expressly allows the sale of prescreened consumer reports, of which trigger leads are, according to the Second Circuit decision, “one of the constituent parts.”
Experian responded to the ruling with a prepared statement:
"The decision upholds Experian's position that prospect triggers products are compliant with all FCRA requirements, and that they are a viable tool that encourages mortgage lenders and brokers, banks and automotive lenders, among others, to provide consumers with competitive choices on their lending and credit options."
Attorney Anne Fortney, a partner in the Washington, D.C. office of Hudson Cook LLP, followed the case closely.
“This is the third case brought under state law challenging the legality of trigger leads,” Fortney said. “The courts have agreed, without exception, that trigger leads are a form of prescreened credit reports and that states cannot regulate prescreening. This decision affirms the lower court ruling that trigger leads are indeed a form of prescreened credit reports.”
Look for an article on the use of trigger leads in auto dealerships in the November issue of F&I Management & Technology.