Daily Report Pulls from CC Issuers

As this Wall Street Journal article states, your banks and credit card issuers can now pull your credit reports daily. File for bankruptcy today, have your credit card frozen tomorrow!


Careful, Your Bank Is Watching --- New Technology Lets Lenders Get Daily Reports On Customers, Allowing for Targeted Offers

By Ron Lieber
1,068 words
22 July 2003
The Wall Street Journal
D1
English
(Copyright (c) 2003, Dow Jones & Company, Inc.)

YOUR BANK is stalking you.

For years, credit-card issuers have quietly checked the credit reports of their customers from time to time to make sure they hadn't run up huge new debts elsewhere. If they found black marks, they would often make those customers pay a higher interest rate or lower their credit limit.

Now, in a development that significantly steps up the surveillance, banks have the ability to check up on customers on a daily basis. The three big credit bureaus -- Experian Information Solutions Inc., Marmon Group's TransUnion LLC and Equifax Inc. -- are touting new technology that can recognize so-called triggers: signs that tip off card issuers that it is time to rein in a risky customer. If a customer declares bankruptcy today, a card issuer can find out about it the day after and cut off charging privileges the day after that.

Lenders are using the trigger tools to do more than just the traditional review of risk factors. They are also literally watching their customers shop. Experian, for example, is selling banks a daily peek at current customers' credit reports. That way, banks can see if customers are looking to refinance their mortgage with a rival. ("Do you know what your customers are doing? Right now?" asks its marketing brochure.)

Bank One Corp. is using triggers to identify home-equity-loan holders who are shopping around. If they discover another lender has pulled a credit report on a customer -- a sign the customer is looking for a new loan -- Bank One can swoop in and make its own cut-rate offer to keep the customer from bolting. In May, Bank of America Corp. tested the triggers in its mortgage business, though the bank says it isn't using them now.

It is perfectly legal to track customers' credit histories and adjust the terms of their loans accordingly. Until recently, however, it was too expensive or complicated to get this information -- whether it be credit blemishes or loan applications -- on a daily basis. But new, more powerful computers and better databases have changed that.

In the past, Experian, a unit of Britain's GUS PLC, delivered gigantic data dumps to financial clients every month or two. Now, it can provide them with daily updates on specific customers. "Instead of [businesses] saying to us, `Here's 20 million names, please pull all the data on them,' they're saying `Here's 20 million names, and when something changes, tell us about it,'" says Richard Lombardi, Experian's director of marketing, portfolio solutions.

The kind of information tracked includes updates on bankruptcy filings or judgments against a cardholder, information on late payments to other billers, plus other data on how much credit they are using. In addition, when consumers apply for new credit cards, a notice of each application appears on their credit report.

The more frequent surveillance may raise privacy concerns for some consumers, but it won't have an effect on the quality of their credit. While applying for lots of loans and credit cards can lower one's credit score, banks can't damage your report simply by checking it.

J.P. Morgan Chase & Co. notifies customers whose credit-card terms change for the worse and provides an explanation upon request. It also tells cardholders they can get a free copy of their credit report because of the repricing.

A Chase spokeswoman notes that the bank uses triggering information to identify customers whose credit has improved as well, so it can give them a better deal on their credit cards. "More customers see the positive results of using credit-bureau information than negative results," she says.

The use of credit reports is drawing scrutiny now that parts of the Fair Credit Reporting Act, which sets rules on how companies use personal data, are up for renewal in Congress. Some consumer advocates and members of Congress would like to restrict the ability of companies to use data from a credit report to change the terms of a credit card. This is known as "risk-based repricing," which often means raising the interest rate on a card held by someone deemed a credit risk.

The new monitoring tools are especially useful for mortgage companies that want to keep their best customers from refinancing with competitors. Bank One tracks its best home-equity loan customers, and if it sees them applying for similar loans elsewhere, it calls them. "We don't say `Hey, we know you're looking for a loan somewhere else,'" says a Bank One spokeswoman. "We see it as irrelevant to say that we know you're out shopping. We should be constantly monitoring our customers' needs, and we are."

Experian executives note that there is a potential benefit for consumers who trigger a call from their current lender. "This just gives more options to consumers who are in the market shopping to raise their hand and say that they're looking for a better rate," says Laura DeSoto, a senior vice president.

Ed Mierzwinski of U.S. Public Interest Research Group, a consumer-advocacy group, warns consumers to beware of lowball counteroffers from their banks. He says they may get better rates by shopping around. Bank One disputes this, noting that it offers special rates not available in its branches to keep good customers.

To avoid an interest-rate hike on your credit card, pay all your bills on time. Maxing out your credit cards can be a bad sign, too, as is applying for a bunch of new cards, according to Ron Robine, an official with Bank One. "Just because an offer lands in your mailbox, don't respond because you'd like to have another credit card sitting in your desk drawer."