|
|
FRB Study on Prescreened Solicitations
As required by the FACT Act, the Federal Reserve Board has initiated action to conduct a study on how the credit and insurance prescreening and solicitation system affects consumers. The first step is to seek input from the public (which includes financial institutions, of course) on how the system currently works. The FRB has posed some interesting questions to which it would like answers by July 23, 2004.
One of the items under study is the method by which consumers may elect not to receive prescreened solicitations. FCRA currently allows consumers to notify credit bureaus that they do not wish their name or file used in preparation of lists sold to creditors or insurers for the use of solicitations.
The question here is whether the mechanisms currently available to consumers are sufficient for consumers who do not wish to receive solicitations. One of the questions to which the FRB seeks answers is the extent to which consumers are currently opting out to avoid prescreening and the solicitations that result.
This is not a straightforward question. It really has two parts. First is the obvious: how often do consumers actually opt out? The answer may well be that not many consumers actually do opt out. Tempting though it might be to conclude that this means consumers are happy to be screened and solicited, it actually leads to the second issue.
The second issue in this question is how easy or difficult it is for consumers to opt out or even to learn about opting out. This ties to the question of how often consumers use opt-outs. There may be many consumers who don't know that they have the ability to stop all that junk mail.
Next, the FRB wants to know what benefits consumers receive through prescreened solicitations. Previously, the marketing industry has touted solicitations as a vital method of learning about important and beneficial products, without which consumers could remain in dark ignorance spending their life's savings on costly products when they could have .... you get the idea. This argument is not going to work for this study.
Prescreening as a method of learning about products and comparative shopping should be evaluated and discussed from the real perspective of the consumer. This means that prescreening should be compared, from the consumer's perspective, to other methods of learning about and shopping for products.
The study will also look at whether consumers incur significant costs or are otherwise adversely affected by prescreened solicitations. On this issue, while marketers may claim the practice is harmless, consumer advocates are likely to raise concerns that such solicitations increase the risk of identity theft. Consumers who do not know that a credit card or HELOC has been offered may discover months later that someone picked up their mail and used their identity to respond to the solicitation.
There are also questions about cost implications on consumers. To answer this, users of prescreened lists will have to present information that shows the marketing technique to be more efficient - for both consumer and seller - than other marketing techniques.
The FRB also wants answers to questions such as whether prescreened solicitations help consumers to learn about products and services. If you argue yes, be prepared to explain why this is either the best or the only way to learn about them.
One small but very important question is whether using prescreening increases the creditor's ability to offer products to traditionally underserved consumers. This is the CRA, anti-discrimination question. It also has hidden issues of predatory lending. While difficult to answer, this concern may ride fairly high on what the
FRB considers in its final report
In preparing comments and suggestions, it is important to look at more than the marketing goal. The willingness of a consumer to deal with an institution is also critically important. Consider how consumers react when receiving offers and solicitations, not just how many times a sale is made. Put on both marketing and consumer hats before answering the questions.
Get your ideas in - even after the comment period!
ACTION STEPS
- This is a good time to take a hard look at all marketing practices. Consider them from the perspective of the customer, not just whether they meet marketing ideas.
- If your institution uses prescreened solicitations, prepare comments to the FRB's study. Include information about customer satisfaction or frustration with solicitations.
- Consider the real and complete cost of different types of marketing campaigns. Be sure to include all costs, from developing list criteria through postage.
- Talk with branch staff and review consumer complaints to find out whether there are complaints about your marketing practices.
- Look closely at all marketing practices to determine whether they reach low- and moderate-income consumers.
Copyright © 2004 Compliance Action. Originally appeared in Compliance Action, Vol. 9, No. 7, 7/04
Privacy Policy Disclaimer Recommend This Site ! Contact Us
BankersOnline is a free service made possible by the generous support of our advertisers and sponsors. Advertisers and sponsors are not responsible for site content. Please help us keep BankersOnline FREE to all banking professionals. Support our advertisers and sponsors by clicking through to learn more about their products and services.
|
| |
Print Friendly!
Email This Article!
Discuss NOW!