In late October 2015, the FTC hosted a workshop on lead generation entitled “Follow the Lead,” which sought to explore the growing use of online lead generation in various industries, including education.
According to the FTC:
Lead generation is the practice of identifying or cultivating consumer interest in a product or service, and distributing this information to third parties. For example, as consumers search the Internet for all kinds of goods and services, they may express interest in or make an inquiry regarding specific products or services, such as educational programs, mortgages, or small-dollar loans, by submitting their personal information online. These consumer “leads” sometimes contain sensitive personal and financial information that may travel through multiple online marketing entities before connecting with the desired businesses.
The workshop consisted of opening remarks from Jessica Rich, Director of the FTC’s Bureau of Consumer Protection, five panel discussions, one of which focused specifically on lead generation in the education sector, and closing remarks from Malini Mithal, Acting Associate Director of the FTC’s Division of Financial Practices. The panel discussion regarding education focused on “how lead generation works in the education marketplace, similarities and differences from lending and other verticals, and consumer protection issues related to education marketing by lead generators.”
Concerns Raised by Workshop
While lead generation can facilitate comparison shopping and promote efficient connection of brands and consumers, the FTC is becoming increasingly concerned about the potential for lead generation to involve the use of deceptive business practices and the misuse of consumers’ sensitive personal information. The main concerns raised by the FTC and panelists during the workshop included:
- How leads are generated and sold to brokers, advertisers, or other third parties
- Whether the leads are accompanied by valid consent, and whether consent is limited by the context of data collection and consumer’s expectations
- Whether it is clearly disclosed to consumers what the information will be collected for, how it will be used, and how it will be shared
- How lead generators and/or lead purchasers/re-sellers are acting to protect the sensitive consumer information they collect
- What are companies doing with “remnant data”
- How are companies monitoring lead generators and lead buyers
The above listed concerns denote the complexity of the lead generation process, and highlight how each player in the lead generation cycle, from lead generator, to lead purchaser, to the ultimate seller of a product, must perform their due diligence to ensure that they are not misleading consumers or otherwise participating in unfair business practices.
Other FTC Lead Generation Enforcement Actions
Even though the FTC’s focus on lead generation in the education sector appears to be a new focus for the Commission in 2016, the FTC has been engaged in enforcement actions against lead generators and associated companies for some time now. For instance, in 2008, the FTC announced that two payday loan lead generators had agreed to settle charges with the FTC “that their Internet advertising stated payday loan costs and repayment periods without disclosing annual percentage rate (APR) information as federal law requires.” Specifically, the FTC alleged that We Give Loans, Inc. and Aliyah Associates, LLC, d/b/a American Advance, were lead generators based in Minnesota and Arizona, respectively, which advertised payday loans on their Web sites and collected information from consumers through their online applications. They then sold their “lead” information to lenders that ultimately offered payday loans to consumers.
In 2011, the FTC announced a settlement with three debt relief companies and their owner, who the FTC alleged “falsely claimed they could help consumers quickly eliminate their credit card debts and stop calls from debt collectors.” According to the FTC’s complaint, the defendants, doing business as The Hermosa Group and Financial Future Network, deceptively advertised debt relief services, in English and Spanish radio and television ads, claiming that consumers could pay thousands less than what they owe on credit cards. The defendants themselves did not provide any debt relief services. Instead, the advertising was meant only to generate sales leads – the names and phone numbers of consumers who called the defendants’ toll-free number – which the defendants sold to debt relief providers or other sales lead generators.
Then, in March 2014, the FTC announced a settlement with a Massachusetts-based home security company that illegally called millions of consumers on the FTC’s National Do Not Call Registry to pitch home security systems. According to the FTC, Versatile Marketing Solutions, under the guidance of its owner, Jasjit Gotra, called millions of consumers whose names and phone numbers Versatile Marketing Solutions bought from lead generators. The lead generators claimed that those consumers had given Versatile Marketing Solutions permission to contact them about the installation of a free home security system, but in reality, they had not.
Also in 2014, the FTC announced two additional settlements with mortgage lead generators that the FTC charged with deceptively advertising mortgage refinancing and mortgage rates. The first settlement involved GoLoansOnline.com, which the FTC had alleged offered low-interest-rate mortgages as “fixed,” when it knew that rates were adjustable and could increase. GoLoansOnline.com also allegedly failed to include important disclosures, such as the annual percentage rate, amount of down payment, and repayment terms that figure into the advertised payment amounts and interest rate.
The second settlement involved Intermundo Media Services, LLC, who used the name “Delta Prime Refinance.” In that case, the FTC alleged that Intermundo deceived consumers with ads that falsely claimed they could refinance their mortgages for free. According to the complaint, the company ran these ads on Google, Microsoft, AOL, and Yahoo, as well as on its own websites. When consumers clicked on the ads, they were sent to a landing page where they provided contact information, which was ultimately passed on to providers of mortgage refinancing.
Upstream Companies Should Heed Warning Provided by Versatile Settlement
Even though a majority of the FTC’s enforcement actions up to this point have involved just the lead generators themselves, cases like the one involving Versatile Marketing Solutions offer insight into how the FTC intends to go upstream and charge more than just the lead generators themselves. As a result, companies buying leads, or otherwise utilizing leads to advertise/sell their products to consumers, would do well to monitor the lead generation process from beginning to end to ensure that only quality leads are generated and that consumers are not deceived about the lead generation process or the product being advertised/sold.