FTC Issues Paper on Lead Generation, Recaps “Follow the Lead” 2015 Workshop

On September 15, the FTC issued a paper summarizing the insights garnered through its October 2015 “Follow the Lead” workshop on lead generation. As previously covered in InfoBytes, the workshop focused on lead generation issues in the mortgage and education lending space. The FTC paper “detail[s] the mechanics of online lead generation and potential benefits and concerns associated with lead generation for both businesses and consumers.” The paper provides a synopsis of payday lenders’ role in the lead generation industry by describing their use of the “ping tree,” an automated process that enables aggregators to sell consumers’ personal information to lenders or other aggregators. Although the paper acknowledges that lead generators provide potential benefits to consumer, including the ability to offer competitive prices in the mortgage lending space, it never-the-less identifies the following key areas of concern: (i) complexity and lack of transparency surrounding industry policies and processes; (ii) the use of potentially aggressive or deceptive marketing techniques; and (iii) the potential misuse and mishandling of consumers’ personal information in the payday lending space.


BuckleySandler Workshop Recap: FTC Holds Workshop on Online Lead Generation

On October 30, the FTC hosted a workshop on online lead generation titled “Follow the Lead.” The workshop focused on lead generation in the mortgage and education lending space and consisted of a number of discussion panels composed of industry representatives, consumer advocates, and FTC regulators.

The first panel was primarily an overview of how web-based advertising is executed and how leads are generated using a variety of methods. Also discussed were the data analytics used to validate and assign value to the data collected. It was also noted that large media companies, such as Google and Facebook, have enacted policies restricting advertisements by participants in certain industries.

The second and third panels focused on online lead generation policies and practices in consumer and education lending, respectively. Industry participants and consumer advocates discussed varying policy viewpoints with respect to the practice of buying and selling data of consumers viewing a particular type of website to participants in a different industry. For instance, lead generators gathering data from consumers searching for jobs and then selling that data to providers of educational services. The panelists generally agreed that this practice was not inherently abusive, but could be harmful when implemented with intent to mislead. All generally agreed that guidance from the FTC and other government agencies would be useful to the extent that standards of conduct and transparency could be more clearly proscribed. Read more…


FTC Announces Agenda, Panelists for Lead Generation Workshop Addressing Consumer Protection Issues

On October 19, the FTC announced the agenda for its upcoming workshop entitled, “Follow the Lead: An FTC Workshop About Online Lead Generation.” As consumers search the internet for goods and services, they are often times asked to provide sensitive personal and financial information that a lead generator may then subsequently transfer to third-party marketing companies. The workshop will examine consumer protection issues raised as a result of the practices of the lead generation industry, and is scheduled to host the following panels in Washington, DC on October 30: (i) Introduction to Lead Generation Marketplace and Mechanics; (ii) Case Study on Lead Generation in Lending; (iii) Case Study on Lead Generation in Education; (iv) Overview of Consumer Protection Concerns and the Legal Landscape; and (v) Looking Ahead – Protecting and Educating Consumers.


Illinois AG Licensing Enforcement Actions Target Payday Loan Lead Generator, Lenders

On April 7, Illinois Attorney General (AG) Lisa Madigan sued a payday loan lead generator to enforce a 2012 cease and desist order issued by the state’s Department of Financial and Professional Regulation. The regulator and the AG assert that the state’s Payday Loan Reform Act (PLRA), which broadly defines “lender” to include “any person or entity . . . that . . . arranges a payday loan for a third party, or acts as an agent for a third party in making a payday loan, regardless of whether approval, acceptance, or ratification by the third party is necessary to create a legal obligation for the third party,” required the lead generator to obtain a license before operating in Illinois. The AG claims that the lead generator violated the state’s Consumer Fraud and Deceptive Business Practices Act by offering and arranging payday loans in knowing violation of the PLRA’s licensing and other requirements. The suit also alleges that the lead generator knowingly matched Illinois consumers with unlicensed members of the generator’s payday lender network. The AG is seeking a permanent injunction and a $50,000 civil penalty. On the same day, the AG also announced it filed suits against four online payday lenders for failing to obtain a state license, making payday loans with interest rates exceeding state usury caps, and otherwise violating state payday loan limitations. Those suits ask the court to permanently enjoin the lenders from operating in Illinois and declare all existing payday loan contracts entered into by those lenders null and void, with full restitution to borrowers.


New York Targets Lead Generators In Expanded Online Payday Lending Investigation

On December 3, New York Governor Andrew Cuomo announced that the state Department of Financial Services (DFS) sent subpoenas to 16 online “lead generation” companies as part of its expanding investigation into online payday lending. The DFS alleges the target companies are engaged in deceptive or misleading marketing of illegal, online payday loans in New York, and claims lead generation companies offer access to quick cash to encourage consumers to provide sensitive personal information and then sell that information to, among others, payday lenders operating unlawfully in New York. The DFS publicly kicked off an investigation of online payday lending earlier this year when it sent letters to 35 online lenders, including lenders affiliated with Native American Tribes, demanding that they cease and desist offering allegedly illegal payday loans to New York borrowers. Under New York law, it is civil usury for a company to make a loan or forbearance under $250,000 with an interest rate exceeding 16% per year, and a criminal violation to make a loan with an interest rate exceeding 25% per year. The DFS cites as part of the basis for its expanded investigation consumer complaints about false and misleading advertising (including celebrity endorsements), harassing phone calls, suspicious solicitations, privacy breaches, and other issues.