Courtesy Of Daniel Solove
Daniel Solove's mailbox has been jammed with credit card applications.
By Bob Sullivan Technology correspondent
msnbc.com
updated 8/8/2005 2:19:07 PM ET 2005-08-08T18:19:07

Daniel Solove wanted to do an experiment.  So soon after he moved to Washington, D.C. last year to take a new job, he started saving credit card applications he received in the mail.  After 10 months, the George Washington University Law School professor had gathered 69 pieces of junk mail -- 20 alone from Capital One.

He’s not ready to tape his mailbox shut, but he’s annoyed at the constant marketing pitches.

“This is an unreasonable amount of hassling here,” Solove, author of The Digital Person, said. He was particularly frustrated by Capital One’s persistence. "I think their no-hassle card means they stop hassling you if you get it.  I find them incredibly pushy."

Capital One didn't return requests for comment.

Solove’s frustration is shared by many Americans.  Pre-approved credit card applications flood mailboxes around the country every day, and while it might seem impossible -– even more are headed to U.S. homes this year than ever before, by one measure.  According to Synovate, which tracks the industry through consumer surveys, an estimated 1.4 billion applications were sent in the first quarter of this year. That’s 5.8 applications per household every month.

But for Solove, and others who feel inundated by credit card junk mail, a bit of relief is on the way.  Starting in August, banks that mail pre-screened credit card applications to consumers must include a prominent notice advising consumers how to get off their mailing list. The new Federal Trade Commission regulations, mandated by the 2003 Fair and Accurate Credit Transaction Act, took effect Aug. 1.

Starting immediately, each mailing must include a notice in bold type on page 1 listing the phone number and Web site that allows consumers to cut off credit card solicitations. Consumers who call 1-888-5OPTOUT or visit www.optoutprescreen.com can “opt out” of most mailings. 

The right no one knows
But the phone number, and the Web site, are actually old news. Congress gave consumers the right to opt out back in 1996. The Fair Credit Reporting Act of 1996 required the nation's credit bureaus to set up the opt out system, and to notify consumers of their rights “clearly and conspicuously,” said Katherine Armstrong, a spokeswoman for the Federal Trade Commission. 

But the opt out option wasn’t clear and conspicuous enough, consumer advocates say, since many consumers have no idea that alone would stop the junk mail.  A study conducted by the Federal Reserve in 2004 indicated only 6 percent of consumers had signed up to opt out.

The opt out rule was supposed to make credit card pitches more targeted, and reduce the amount of junk mail. Instead, said Brent Stratford of Synovate, the number of applications mailed home has risen steadily almost every year since.

Lack of participation led Congress to mandate the more obvious notification notices in its 2003 update to the Fair Credit Reporting Act.  And this time, the rules are much more specific, right down to the font size and location of the opt out on the piece of mail.

Major Market Indices

The rules might seem overly detailed, said Chris Hoofnagle, a  spokesman for the Electronic Privacy Information Center.  But they are necessary because companies keep trying to evade the spirit of consumer protections, he said. 

“People are sometimes frustrated with degree of detail in regulations,” he said.  “But details are made necessary by extremely slippery tactics the industry will use to avoid consumer protections.”

For its part, the credit industry says consumers are aware of their rights, and points out that 6 percent participation means the system is working.

“It’s a discredit to consumers, assuming they don't know anything about it,” said Norm Magnuson, spokesman for the Consumer Data Industry Association, Inc., a lobby group for the credit industry. It maintains the list of consumers who opt out. “Consumers are probably more savvy than that.”

The Federal Reserve's survey also concluded that the opt out process was working.  In general, the more credit a consumer had, the more likely they were to opt out, a sign the system works, the report said. That makes sense, the Fed said, because those consumers would no longer be interested in new offers.  Consumers with six or more credit accounts were four times as likely as those with one or no accounts, the report said.

Curiously, Missouri and Colorado residents were the most likely to have signed up for the list, with about 10 percent participation. That's three times the rate of residents in Arkansas and West Virginia, where opt-out uptake was the lowest. The Fed report offered no explanation for the trend.

Still carpet-bombing
Credit card offers are the result of what’s called “pre-screening,” a service provided to credit card issuers by the nations’ three credit bureaus, Experian, Trans Union, and Equifax.  In pre-screening, the bureaus select consumers with specific credit scores, so they are likely to qualify for particular credit offers. The screening prevents firms from mailing offers to people who would never be approved.

Only a single phone call is required – or a single visit to the industry Web site – to stop the flow of pre-screened offers. It won’t stop all solicitations, however.

“If you have an existing relationship with a company, they can still send you offers,” Armstrong said. Direct mail offers that don't go through the pre-screening process are also still allowed. But signing up for the opt-out system generally cuts down sharply on credit card offers, since the vast majority are pre-screened.

The opt-out option was supposed to benefit all parties. Only consumers who were looking for credit card offers would get them. People who weren’t potential customers wouldn’t, saving companies postage, and saving consumers the irritation. But it hasn’t worked that way. The number of offers never dropped in response to the opt out list, according to Synovate.

“It seems they are still carpet-bombing us with applications,” Hoofnagle said

Federal Register
Notices like this sample one provided by the Federal Trade Commission will begin appearing on credit card applications.
But there might be another reason for any perceived lack of consumer participation: the process of opting out can be unnerving.  Using either the telephone or the Web site, consumers must provide their Social Security Number and other personal information to get on the opt-out list.  Since many consumers have been instructed never to hand over that number to anyone on the telephone or the Internet, it’s possible many consumers abandon the process half-way, the FTC's Armstrong says.

Still, the credit bureaus need the information to positively identify the person going on the list. Armstrong said.

“It's the only way, as a practical matter…. to make sure they have the right consumer,” Ferguson says.

But others say the opt-out system should use another method for identifying consumers.

"That is a serious flaw," said Rob Douglas, who operates PrivacyToday.com. "Here we are trying to teach consumers not to be providing SSNs and that is what they ask for."

Douglas has another ID-theft related concern about credit card junk mail.  Theives take the discarded applications, fill them out, and intercept the approved credit cards as they head for consumers' mail boxes, he said.  While the Fed survey found that the applications don't raise the risk of ID theft, Douglas disagrees, saying theives commonly raid mailboxes and garbage cans looking for them.

An old debate
The new, more prominent notifications resurrect a decades-old debate the question of whether pre-screened applications are a good idea in the first place.  Their effectiveness continues to sink, Synovate says, with response rates down to 0.4 percent.  But Magnuson says mailed offers are convenient for consumers and an important method for them to obtain more credit. 

"I like to be able to shop at home," he says. He also thinks the issue of inconvenience of junk mail is overblown. “I haven't heard of a lot of people who are struggling, bringing in the mail because they have too many pre-screened pieces. I'm never quite sure that's true, that people don't want these."

If prescreening were limited or outlawed, credit firms would simply return to random mail solicitations, said Eric Goldman, a technology and marketing professor at Marquette University – and that would benefit no one.  Plenty of consumers really do want to receive the credit offers, he said.

Meanwhile, he’s not convinced that another government-mandated notice will do any good.

“When the government by fiat mandates disclosures … we get garbage,” he said.  “They can do more harm to consumers than good. They are so overwhelming that the rational consumer just ignores them."

Still, someone should make sure the Daniel Soloves of the world know their rights, consumer groups say. The new FTC notices should help.

For his part Solove doesn't see junk mail as a burning issue facing America's financial system. He just thinks the number of them he gets is a bit silly.

"This is constant pestering, not advertising," he said. "It just illustrates the fact that this is getting really out of control."

Bob Sullivan is author of Your Evil Twin: Behind the Identity Theft Epidemic

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