Banks Mine Data and Woo Troubled Borrowers

by Chris Sturr | October 22, 2008

A good article in yesterday’s New York Times talks about data-mining companies that specialize in finding credit-challenged customers that banks can prey upon. Some selections, including a nice quote from Jim Campen, D&S Associate and frequent contributor:

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Using techniques that grew more sophisticated over the last decade, businesses comb through an array of sources, including bank and court records, to create detailed profiles of the financial lives of more than 100 million Americans.

They then sell that information as marketing leads to banks, credit card issuers and mortgage brokers, who fiercely compete to find untapped customers — even those who would normally have trouble qualifying for the credit they were being pitched.

These tailor-made offers land in mailboxes, or are sold over the phone by telemarketers, just ahead of the next big financial step in consumers’ lives, creating the appearance of almost irresistible serendipity.

These leads, which typically cost a few cents for each household profile, are often called “trigger lists” in the industry. One company, First American, sells a list of consumers to lenders called a “farming kit.”

This marketplace for personal data has been a crucial factor in powering the unrivaled lending machine in the United States. European countries, by contrast, have far stricter laws limiting the sale of personal information. Those countries also have far lower per-capita debt levels.

The companies that sell and use such data say they are simply providing a service to people who are likely to need it. But privacy advocates say that buying data dossiers on consumers gives banks an unfair advantage.

“They get people who they know are in trouble, they know are desperate, and they aggressively market a product to them which is not in their best interest,” said Jim Campen, executive director of the Americans for Fairness in Lending, an advocacy group that fights abusive credit and lending practices. “It’s the wrong product at the wrong time.”

And this particularly appalling bit:

Peter Harvey, chief executive of Intellidyn, a consulting company based in Hingham, Mass., that helps banks with their targeted marketing, says the industry’s newest challenge is to personalize each offer without appearing too invasive.

He describes one marketing campaign several years ago that crossed the line: a bank purchased satellite imagery of a particular neighborhood and on each envelope that contained a personalized credit offer, highlighted that recipient’s home on the image.

The campaign flopped. “It was just too eerie,” Mr. Harvey said.

Read the rest of the article.

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