The Fair Credit Reporting Act (FCRA) strictly regulates the use of consumer reports as they contain highly sensitive information pertaining to a consumer’s credit worthiness. Each name on a prescreened list is treated as a consumer report by the FCRA. In order for a financial institution to obtain a consumer report or a prescreened list they must have permissible purpose specified in the FCRA. Additionally, the financial institution is responsible for extending a firm offer of credit to each of the consumers on their prescreened list. The following are some guidelines of what elements should always be on a firm offer of credit that is being sent to a consumer. Please note that the following are recommendations, any firm offers of credit should always be reviewed by the legal compliance professionals at your company.
- Indication that the consumer is pre-selected, pre-qualified or pre-approved for a firm offer of credit. The term pre-approved should not be indicated unless the customer is guaranteeing the offer to all who respond, regardless of whether or not the consumer’s credit history has changed. Without clearly disclosing that the consumer is pre-selected, pre-qualified or pre-approved this is not a firm offer of credit.
- Example: You have been pre-qualified to receive a 30-year FHA mortgage with ABC Financial, Inc.
- A minimum dollar amount identified that your financial institution is willing to finance. It is acceptable for the them to indicate an offer will be extended up to a given amount as long as a minimum (‘at least’) dollar amount the consumer will receive is also disclosed. This minimum dollar amount must be commensurate with the type of offer, so for example we look to a minimum of $4,000 for a new car (most new cars are at least double this amount) and $2,500 for a refinance. We look to a minimum of $50,000 for a Residential 1st Mortgage and $10,000 for a Residential home equity; 2nd or 3rd mortgage or home equity line of credit.
- Clients using the phrase "up to" in their advertisements will need to review the use of this term with their own legal counsel. The FTC's view is that financial institutions using these claims should be able to substantiate that consumers are likely to achieve the maximum results promised under normal circumstances.
- The first page or front of the mailer must include the ‘short’ PRESCREEN & OPT-OUT with type size no smaller than 12-point type
You can choose to stop receiving “prescreened” offers of credit from this and
- The second page or back of the mail must include the ‘long’ PRESCREEN& OPT-OUT NOTICE
- Begin with the heading “PRESCREEN & OPT-OUT NOTICE”
- Type size no smaller than 8-point type.
- Type style that is distinct from the principal type style used on the same page, such as bolded, italicized, underlined, and/or in a color that contrasts with the color of the principal text on the page, if the solicitation is in more than one color.
- Set apart from other text on the page, such as by including a blank line above and below the statement, and by indenting both the left and right margins from other text on the page.
PRESCREEN AND OPT-OUT NOTICE:
- In addition to that, you need to make sure to have your state license on the marketing, as well as the branch address and NMLS number where any loans generated would be processed. If you have a loan officer’s name on the marketing it needs to have their title, their NMLS number, and their name needs to appear as it does in the NMLS registry.
Again, please note that the these are recommendations, any firm offers of credit should always be reviewed by the legal compliance professionals at your company.