Your Credit Report and Privacy in Peril
By George L. Duarte, MBA, CMC
Consumer Alert Part I - Your Credit Report and Privacy in Peril!
The latest privacy assault
outrage has begun on consumers in the last few months and it is called “trigger
list” marketing. When you apply for a home loan to your local mortgage broker or
banker and they pull a credit report as part of the process, the credit report agencies,
Trans Union, Equifax and Experian, will immediately sell your credit and contact
information to hungry lenders from around the country who will then bombard you
with telephone calls and other solicitations you never wanted or authorized. This
is a huge revenue generating scheme by the credit agencies who claim that this is
legal and in the consumer’s best interests by giving them more lenders to choose
from, when in fact it is an amazing invasion of privacy.
CAMB (the Ca. Assn. of
Mortgage Brokers) and NAMB (National Assn. of Mortgage Brokers) have begun to raise
hell in Sacramento and Washington, D.C. with our legislators and regulators, to
put a stop to this outrageous practice. Be aware there is a way to “opt out” of
this practice, by going to the credit bureaus websites, and be sure to write to
Rep. Pete Stark, Assemblyman Alberto Torrico, and State Senator Liz Figueroa and
complain that this practice must end now.
Consumer Alert Part II - “I’m Thinking of a Number"
We have all seen the commercial for freecreditreport.com, which claims that you
can get a free credit report from them, as you as a consumer are entitled to under
federal law. However, you have to sign up for their “service” for a year, for a
fee! They are being slapped by the FTC (Federal Trade Commission), but still are
in business. To get a truly free credit report, go to annualcreditreport.com, and
you are entitled to one free credit report per year, but BE WARNED: the credit score
you get for free may be wildly inaccurate by as much as 100 points, from the one
you would get from a mortgage broker (which are accurate), and the credit bureaus
are not disclosing why this may be (there is no free lunch, part 1).
By the way, State Senator Liz Figueroa started the credit score disclosure ball rolling
when she sponsored a bill several years ago authored by the CAMB, CAR and Consumers
Union requiring that consumers credit scores be disclosed to them. I had the pleasure
and honor of working very closely with Sen. Figueroa crafting this bill as the CAMB
representative. This bill sailed through, was signed by the Governor, and was the
model for a bill introduced the next year in Congress, which also easily became
a national law. Truly an example of “think globally, act locally”, and another example
of California leadership, nationally.
Consumer Alert Part III - “Toxic Mortgages”
An article on the cover of the 9/11 issue of Business Week magazine discusses in
great detail how “exotic mortgages” such as option ARMS, interest only loans, and
100 percent financing can be abused and how consumers can suffer. Consumers interviewed
frequently said they didn’t know how the loans worked or were surprised when they
adjusted. The article alleged that these loans are frequently bad for consumers
and should be curtailed. There are several lessons here:
- Read what you are signing and understand it!
- Be sure you know how the loans work before getting one.
- Be sure you are working with a trusted, experienced, professional mortgage expert,
who will ask you a lot of questions and counsel with you, and not just hard sell
you low rates and payments.
Research who you are working with. Are they members of their State Broker Association;
the Chamber of Commerce; the Better Business Bureau? Are they licensed? Do they
have references and happy customers or been in the business locally for some time?
It’s not just about the rate, it’s how a loan program fits into your personal needs
and overall financial picture. There really are no bad loans, only loans that are
not right for the people they have been given to. There are also unscrupulous or
incompetent lenders who do not disclose the features of the loans and how they work--that’s
how consumers get in trouble.
Here’s a hint: when the next refinance boom hits next year, “no cost” loans will
be popular again, and consumers should be aware of low “no cost” rates, because
they will frequently have 3 year prepayment penalties that are not disclosed. Beware!
The “no cost” loan really does not exist; you are actually paying a higher rate
somewhere (there is no free lunch, part 2).