The staff of the Federal Trade Commission’s (FTC) Bureau of Consumer Protection released a much-anticipated paper on lead generation on September 15, 2016. The 13-page report provides staff perspectives on the information covered at the FTC’s October 2015 workshop on lead generation, “Follow the Lead.” Below are a few of the paper’s themes:
- The paper describes the mechanics of lead generation and how it functions in the modern economy, including such topics as:
- What is Lead Generation?
- Who is Collecting Leads Online, and What happens to Them After Consumers Press “Submit”?, with descriptions of leads collected by a publisher or affiliate, leads transmitted to aggregators, leads sold to end-buyer merchants, and leads verified or supplemented with additional information.
- A deep dive into the online lending sector’s “ping tree” model (an auction-style approach) that allows consumers to be quickly matched with lenders that can underwrite and fund loans.
- Potential benefits to consumers and competition, including allowing interested consumers and merchants to maximally and efficiently connect with each other; and the ability to connect consumers quickly with multiple merchants, and their associated offers, that consumers may not find on their own.
- The paper also covers potential concerns for consumers and competition, and shares a number of suggestions to lead buyers and sellers for avoiding consumer protection concerns—and, in some cases, potentially unlawful conduct:
- Disclose clearly to consumers who you are and how you will share information.
- Monitor lead sources for deceptive claims and other warning signs like complaints.
- Avoid selling remnant leads to buyers with no legitimate need for sensitive data.
- Vet potential lead buyers and keep sensitive data secure.
- The paper promotes the benefits of industry efforts to adopt policies to help protect consumers, including references to the Advertising Self-Regulatory Council’s Electronic Retailing Self-Regulation Program established by the Electronic Retailing Association, and the Online Lenders Alliance’s “Best Practices.”
“As FTC staff has noted previously, for self-regulatory programs to be effective, industry participants should ensure that such programs include mechanisms for robust monitoring and enforcement, such as dismissal from the program and referral to the FTC for companies that fail to comply with the standards outlined in the code.”
Lead generation has become a key marketing technique used in a variety of industries, particularly lending (including credit cards, marketplace, small-dollar/short-term, and mortgage), postsecondary education, and insurance. Considering how common online lead generation is, because of its benefits for consumers and merchants, it is important to understand how it operates, the types of legal and regulatory requirements that potentially apply, and ways to avoid government scrutiny.
October 5-7, 2016 | Chicago, IL
The Lend360 conference offers the entire spectrum of the online lending industry, including valuable industry information and targeted networking opportunities. Venable associate Alexandra Megaris will be moderating a panel discussion on “The Future of Online Advertising and Marketing for Consumer and Business Lending” on Thursday, October 6th, 4:30 – 5:30 p.m. CT.
Related Articles and Presentations:
Preparing for a CFPB Examination or Investigation (Presentation)
Self-Regulation and the Lead Generation Market (Presentation)
CFPB and FTC Target Mortgage Advertising (Article)
Jonathan L. Pompan, Partner and co-chair of Venable’s Consumer Financial Protection Bureau Task Force, advises on advertising, marketing, and consumer financial services matters. He represents clients in investigations and enforcement actions brought by the CFPB, FTC, state attorneys general, and regulatory agencies.
This article is not intended to provide legal advice or opinion and should not be relied on as such. Legal advice can be provided only in response to a specific fact situation.