FTC Releases Lead Gen Staff Perspective

On October 30, 2015, the Federal Trade Commission hosted a public workshop, entitled “Follow the Lead,” at which a variety of experts and stakeholders discussed online lead generation practices and key consumer protection issues.  On September 15, 2016, the Federal Trade Commission released a Staff Perspective summarizing the Workshop, and other information gathered through law enforcement and experts.

Lead generation has become a key marketing technique used in a variety of industries, particularly lending, postsecondary education and insurance.  The Perspective details the mechanics of online lead generation, as well as potential benefits and concerns associated with lead generation for both businesses and consumers.

A lead is someone who has indicated interest in purchasing a product or service.  The goal of lead generation is to connect companies with those consumers so that they can convert “leads” into sales.  In a typical scenario, consumers submit information online – typically on a website form.  Such leads may consist of a consumer’s name and contact information.  In some situations more sensitive information is solicited, including Social Security and bank account details.

Pertinent topics covered in the Perspective include, in part:

  • The FTC’s broad jurisdiction over lead generators, whether they are generating leads for a lender, an educational institution, or a company offering another good or service.
  • The collection, preparation and sale of leads, including what happens after consumers press “Submit.”  From a consumer’s first interaction with a publisher and the dissemination of consumer leads, to supplementing leads with additional pieces of information and the “ping tree” auction/filtration process, it is critically important to clearly and conspicuously disclose to consumers who the website operator is (and is not) and how it will share their information.  Transparently disclosing that consumer information may be sold and re-sold multiple times, that consumers may be contacted multiple times by numerous marketers, that information may be sold to companies that pay the highest price, and that information provided in online forms may be verified or supplemented with additional information will go a long way to keeping a marketer out of the regulatory spotlight.
  • The sale of “remnant leads” to clients offering consumers alternative products that were not requested. The Commission warns about the risks of selling remnant leads to buyers with no legitimate need for sensitive data. Lead sellers are potentially liable under the FTC Act if the purchaser has no such need.
  • Lead sellers should always keep sensitive data secure.
  • Vetting potential lead purchasers prior to doing business with them and monitoring existing lead purchasers for misuse of consumer data. For example, reasonably ensuring that lead purchasers do not use consumer information for unlawful purposes and have not been the subject to an FTC action. Never ignore warning signs that third-parties are violating the law. Willful blindness will not shield companies from FTC actions.
  • That responsible lead purchasing activity includes limiting the type of information collected and sold.
  • The diligent monitoring of lead sources for deceptive marketing claims and other warning signs, like complaints.  Regulatory agencies are particularly interested in misleading marketing techniques that entice consumers into filling out web forms.  Companies that choose to ignore warning signs and look the other way may be at risk of violating the law themselves.
  • The misuse of sensitive consumer information.
  • The potential benefits of third-party lead generation to consumers.  For example, lead generators may benefit consumers by connecting them quickly with multiple merchants, and their associated offers, that consumers might not find as easily on their own.

Contact an FTC defense lawyer to discuss the Perspective, if you are the subject of regulatory matter, or if you are interested in implementing preventative compliance measures.

Richard B. Newman is an Internet marketing compliance and regulatory defense attorney at Hinch Newman LLP focusing on advertising and digital media matters. His practice includes conducting legal compliance reviews of advertising campaigns, representing clients in investigations and enforcement actions brought by the Federal Trade Commission and state attorneys general, commercial litigation, advising clients on promotional marketing programs, and negotiating and drafting legal agreements.

HINCH NEWMAN LLP. ADVERTISING MATERIAL. These materials are provided for informational purposes only and are not to be considered legal advice, nor do they create a lawyer-client relationship. No person should act or rely on any information in this article without seeking the advice of an attorney. Information on previous case results does not guarantee a similar future result.

Photo Credit: Joe The Goat Farmer via Compfight cc