Page images

solicitations to consumers on the list.

The credit grantor

has no knowledge of the identity of any consumer on the list, unless and until a consumer elects to request the credit

offered by returning a response form to the credit grantor. Similarly, because the third party service organization has no knowledge of the credit criteria used to compile the prescreened list, the list cannot bear on the creditworthiness of any of the consumers on the list. Consequently, no significant privacy concerns are raised when the credit bureau transmits the prescreened list to a third party service organization that, without any knowledge of the screening criteria, mails solicitation materials to consumers

on the list.

Because these prescreening arrangements raise no significant privacy concerns, there is no reason to restrict them under the FCRA. Such arrangements enable both credit grantors and consumers to enjoy the efficiencies and other benefits of prescreening without the credit grantor receiving information regarding a consumer until the consumer himself or herself actually decides to return a response form and indicate an interest in the particular loan or credit account offered by that credit grantor. As a result, these arrangements represent viable prescreening alternatives that do not raise any of the privacy concerns under the FCRA that accompany traditional credit reports.

Moreover, once a consumer responds to such a

solicitation by requesting the loan or credit account

offered, the FCRA and all of its protections clearly apply to

any credit report on that consumer requested by the credit

grantor, just as it applies to a credit report obtained in connection with any other application or request for credit.

Under such arrangements, until the credit grantor requests

and receives some information on a consumer from a credit

bureau, there simply is no communication of information requiring protection under the FCRA.

No Other concerns Requiring Protections Under FCRA

None of these prescreening methods give rise to any other concerns that might warrant protection under the FCRA.

A consumer who does not qualify for a particular prescreened offering is not harmed, because he or she can always request the loan or credit account by submitting a regular

application for that product. In addition, the consumer's credit history is not affected, since credit bureaus ordinarily do not subsequently report to other credit

grantors the fact that a consumer has been the subject of

prescreening or that the consumer has failed to meet the particular prescreening criteria established by other credit


Although a credit bureau may annotate a consumer's

file to indicate that the consumer was the subject of a prescreening, that annotation ordinarily is only recorded to

enable the consumer reviewing his or her credit file to see

that the prescreening has taken place and to identify the creditor that requested that prescreening. Such a notation in the consumer's file generally is not available to subsequent credit grantors who request a credit report on the


Similarly, consumers whose names are included on a prescreened list or who otherwise receive solicitations through prescreening are not subject to any adverse consequences. Consumers are free to pursue or reject such


Although some consumers may feel

inconvenienced by simply receiving such solicitations in the mail, that issue is not limited to prescreened credit offerings. Rather, it applies to mail order catalogs and all other product solicitations sent to consumers through the mail. Accordingly, although VISA and MasterCard are

sympathetic to the concerns of some consumers about the

amount of unrequested advertising mail they receive, this

issue is wholly outside the scope of the FCRA. Moreover, a restriction on prescreening may actually increase the number of credit solicitations mailed to consumers, since credit

[blocks in formation]

enacted without amendment, credit grantors will be forced to rely on less selective and more costly means of marketing their products. For example, instead of targeting

prescreened consumers who are likely to qualify for credit, creditors will incur the additional costs of mailing solicitations to, and evaluating responses from, the public at large. In addition, many consumers would receive direct mail solicitations for credit programs for which they clearly

do not qualify. If these consumers respond to the

solicitations for credit and are rejected, they will have expended time completing applications without result and the rejection may well become part of their credit history. This clearly unfavorable result may be avoided through prescreening.

H.R. 4213 would continue to permit prescreening

under limited circumstances.

More specifically, H.R. 4213

would permit prescreening with respect to a particular consumer only where: (1) the consumer actually authorizes the credit bureau to provide prescreening information on the

consumer; or (2) the consumer receives notice that

information relating to the consumer in the credit bureau

files may be used to prepare prescreened solicitations, and the consumer does not notify the credit bureau to exclude information about him or her for prescreening purposes.

Although the affirmative consent option in H.R. 4213 provides no practical benefit for credit grantors, it is

possible that MasterCard and VISA would not object to a

reasonable notice and "opt-out" opportunity for certain prescreening activities, if it could be implemented by credit bureaus without eliminating the efficiencies and benefits currently provided by prescreening. VISA and MasterCard believe, however, that extensive additional analysis is necessary in formulating any such notice and "opt-out" provision. For example, there is substantial uncertainty

regarding how and under what circumstances credit bureaus

will provide the notice contemplated by H.R. 4213. Most consumers have credit files at various credit bureaus and

multiple notices from different credit bureaus are likely to result in inconsistent and confusing instructions regarding prescreening. The problem would be far worse if any

suggestion is made that such notices should be provided by credit grantors. A great number of consumers currently have

multiple credit relationships with a single credit grantor. Many other consumers have multiple credit relationships with different credit grantors. Similarly, applications for new credit relationships are constantly being submitted by

[blocks in formation]

notice and "opt-out" requirement that is not carefully

constructed could result in a confusing morass of

« PreviousContinue »