Prescreened solicitations--navigating the rules.

• Author: Pry, Carl G.
• Position: Marketing Compliance

A popular and often effective means of soliciting new loan business is to send prospects "preapproved" credit offerings. Letters advise consumers that "You have been preapproved for a $10,000 home equity loan," for instance. This practice normally involves formulating specific criteria for an offer and sending a list of those criteria to a credit bureau. The bureau then supplies a list of consumers that qualify, and the bank then prepares a marketing piece. When conducting this type of campaign, there are a host of roles that must be followed tinder the Fair Credit Reporting Act (FCRA) and related amendments added by file Fair and Accurate Credit Transactions Act of 2003 (FACF Act).

This issue's column discusses the requirements to make such offers, while the next cover disclosures that must appear in the promotional piece.

The rules are in place to provide protections to consumers, since creditors are obtaining "consumer report" information (i.e., from a credit bureau) without the consumer's prior consent or knowledge. The FCRA calls this a "transaction that is not initiated by the consumer," [15 U.S.C. 1681m(d)(1)] and while allowable, certain requirements must be followed.

First, under the FCRA, the qualification criteria used to determine what persons to solicit (sent to the credit bureau) must be retained by the bank for at least 3 years after the date the offer is made to a consumer. State law may require a longer retention period, however, so be sure to check your state. This includes qualifications regarding both creditworthiness (i.e. score, limits, and so forth) as well as required collateral (such as real estate). Second, a "firm offer of credit" [15 U.S.C. 1681a(1)] must be extended to each consumer whose name appears on the list supplied to the bank by the credit bureau. The offer must be one that absolutely will be honored should the consumer respond (and still qualify)...