Jeanette A. Tucker | 5/27/2005 1:49:28 AM
Prescreened solicitations are now among the principal techniques creditors use to inform prospective customers of the availability of their products and to establish new or additional business relationships with them, according to LSU AgCenter family economics professor Dr. Jeanette Tucker.
Prescreened solicitations are those creditors make based on information from the Consumer Reporting Agency (CRA), as permitted by the Fair Credit Reporting Act (FCRA).
If firms determine that the net benefits of prescreening are likely to be positive, they may engage in prescreened marketing as one way to generate new business.
The Federal Reserve was directed by Congress as part of the Fair and Accurate Credit Transactions Act of 2003 to study prescreened solicitations.
The report found that for consumers such offers reduce search costs by providing them with ready information about product availability and pricing tailored more closely to their financial experiences and needs. Because of their advantages to businesses and consumers, prescreened solicitations help promote competition and enhance consumer welfare in the market for credit.
Tucker says concerns have been raised about the inconvenience of receiving unwanted junk mail and the risk of fraudulent activity if offers are lost or stolen. Other concerns pertain to the privacy rights of consumers in regard to the information held by the CRAs.
The family economist says there have been additional fears that the large volume of prescreened offers might lead some consumers to take on more debt than they can reasonably handle. The Fed report did not find that prescreened solicitations had a significant bearing on the extent of these problems and, hence, found that further restrictions on prescreened solicitations are not likely to alleviate such problems.
Tucker notes that additional restrictions would likely significantly reduce the beneficial effects of prescreened solicitations on competition and consumer access to credit.
For information on related family and consumer topics, link to the FCS Web site from www.lsuagcenter.com. For local information and educational programs, contact an extension agent in your parish LSU AgCenter office.
On the Internet: LSU AgCenter: www.lsuagcenter.com
On the Internet: Federal Reserve System report: www.federalreserve.gov/boarddocs/rptcongress/UnsolicitedCreditOffers2004.pdf
Source: Jeanette Tucker (225) 578-5398, or Jtucker@agcenter.lsu.edu