Iowa Adopts Mortgage Trigger Lead Law

Iowa recently enacted House File 857 to regulate the use of “mortgage trigger leads” by financial institutions.  Iowa is the latest of several states who have enacted provisions addressing mortgage trigger leads.

Trigger leads are generated when a consumer applies for credit, particularly a mortgage loan.  This application triggers an inquiry with a consumer reporting agency, which can then sell this information (the trigger lead) to other lenders.  Iowa House File 857 specifically addresses situations where a financial institution uses this prescreened mortgage trigger lead information, derived from a consumer report, to solicit a consumer who has already applied for a loan with a different financial institution.  The law specifically excludes from the definition of “mortgage trigger lead” consumer reports obtained by the institution the consumer originally applied to for credit or an institution already holding or servicing the consumer’s existing credit.  The core purpose of the law is to prevent unfair or deceptive solicitation practices stemming from the use of these leads.

The legislation outlines specific actions by financial institutions (which are broadly defined to include, among others, banks, mortgage brokers, and lenders) using trigger leads that are deemed unfair or deceptive.  These include: (i) failing to clearly and conspicuously disclose in the initial solicitation that they are not affiliated with the financial institution the consumer first applied to; (ii) neglecting to adhere to state and federal laws regarding prescreened solicitations using consumer reports, such as the requirement to make a firm offer of credit; (iii) using information about consumers who have opted out of prescreened offers of credit or placed their contact information on a federal do-not-call registry; and (iv) soliciting a consumer with specific rates, terms, or costs, only to change them later to the consumer’s detriment.

The law was signed by the Governor on April 18, 2025, and is set to become effective on July 1, 2025.