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efforts on consumers who are more likely to qualify for the particular loan or credit account offered, rather than sending advertising materials to the public at large.

As a result, prescreening enables credit grantors to materially reduce the costs of conducting these supplemental marketing activities and allows credit grantors to offer credit over a much greater service area. Consumers also benefit directly from prescreening. For example, because of the efficiencies created by prescreening, credit grantors can make credit available to a broader range of consumers with a greater geographic distribution. Prescreening also reduces the

likelihood that consumers will receive direct mail

invitations to apply for particular credit products for which

they clearly would not qualify.

Moreover, consumers who receive prescreened

solicitations enjoy other benefits generally not found in

connection with traditional application programs.


example, consumers who receive such solicitations typically

may request the credit offered merely by completing an abbreviated response form, rather than expending the time and energy required to complete the more extensive application forms traditionally used by credit grantors. Thanks to recent Congressional initiatives, such solicitations for

credit cards also include a uniform disclosure of principal credit terms to enable consumers to easily compare current credit card offerings with their existing credit accounts.

It is important to note, however, that although prescreening represents an efficient supplemental method of soliciting consumers for particular credit products, prescreening does not replace, or even reduce the use of, more traditional application and marketing activities. Thus, credit grantors who engage in prescreening activities also continue to market their credit products extensively to the general public. Applications are still provided by credit grantors to customers and non-customers alike. Applications continue to appear in a wide variety of magazines and other periodicals. "Take one" applications are still available at retail and other locations throughout the country. Prescreening complements the extensive array of traditional marketing methods for credit products by providing an efficient means of soliciting consumers who otherwise may not

apply for, or think they even qualify for, such credit


In short, prescreening is intended to increase the

number of consumers who are provided the opportunity to obtain loans or credit accounts. Prescreening does not

preclude anyone from submitting a traditional credit

application, nor does it reduce the likelihood that anyone submitting such an application will qualify for the credit



MasterCard and VISA believe that these benefits alone provide ample reason to permit credit grantors to continue to use prescreening for marketing credit and other financial products. There are additional considerations, however, which strongly suggest that prescreening activities should not be restricted under the FCRA.

Competing Purposes of the FCRA

It is important to recognize that the FCRA was never intended to be a comprehensive privacy statute. Instead, the

FCRA was enacted to require reasonable procedures for meeting

the commercial need for information in a manner that is fair

and equitable to consumers.

Accordingly, the FCRA requires

that the competing interests of commercial concerns and

consumers be balanced against one another.

When applying this balancing analysis in the prescreening context, it is important to note that none of

the three general prescreening methods described above present the privacy issues that are raised by traditional

credit reports.

In this regard, it is important to recognize

that only one of the three prescreening methods involves the

dissemination of a prescreened list of consumers to a credit


Even under that method, the credit grantor does not

receive the specific credit information found in credit


Moreover, the prescreened list provided to the

credit grantor does not contain any information that the

credit grantor can otherwise use to analyze or assess the credit history of the included consumers. To the contrary, a prescreened list provides very limited information, such as names and addresses, for consumers whose recent credit history suggests that they may be creditworthy. Thus, a prescreened list does not, and cannot, raise the same privacy

concerns as a credit report.

Indeed, the Federal Trade Commission ("FTC") itself

concluded nearly twenty years ago that prescreening "results in no significant harm to consumers and • . is not

inconsistent with the basic purposes of the (FCRA)."

16 C.F.R. S 600.5. Similarly, although the FTC may well have limited unnecessarily certain well established industry practices relating to prescreening, the FTC reaffirmed its conclusion regarding the permissibility of prescreening in its recently issued FCRA Commentary. In particular, the FTC stated that it "continues to believe the privacy infringement is minimal in prescreening, compared to that which occurs when a creditor obtains a full consumer report on a credit


The consumer's credit history is not reviewed by

the creditor; rather his or her name is simply included (or not) on the list provided to the creditor." FTC'S FCRA

Commentary, Footnote 14, 55 Fed. Reg. 18,804, 18,807 (1990).

The privacy concerns raised by the other two

prescreening methods described above are even less

significant. When, instead of receiving a list itself, a

credit grantor instructs a credit bureau to mail

solicitations directly to consumers identified by the credit bureau, there simply is no communication of credit or other

information of any kind from the credit bureau to the credit


The credit grantor does not receive a prescreened

list, and otherwise is not even aware of the identity of any of the consumers who received the solicitation unless and

until a consumer decides to return a response form to the

credit grantor.

As a result, this prescreening method cannot

raise any privacy concerns requiring protection under the


The FCRA does apply, however, if a consumer elects to

submit a response form to the credit grantor, and the credit

grantor obtains a credit report on the consumer.

Once the

consumer decides to request the credit, the credit grantor has a permissible purpose to obtain a credit report on that consumer (just as if the consumer had submitted a traditional credit application) and the consumer receives all of the protections currently embodied in the FCRA. However, because

no information is provided to the credit grantor by the

credit bureau unless and until the consumer requests the

credit offered, there is absolutely no reason to apply the

FCRA restrictions to such prescreening activities.

There also is no reason to impose FCRA restrictions where a credit bureau creates a prescreened list and forwards it to a third party service organization that, without any knowledge of the criteria used to compile the list, mails

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