Lead Generation: An Excerpt from the Advertising Law Tool Kit

By Jonathan L. Pompan & Ari N. Rothman

Join us as we spotlight select chapters of Venable’s popular Advertising Law Tool Kit, which helps marketing teams navigate their organization’s legal risk. Click here to download the entire Tool Kit, and tune in to the Ad Law Tool Kit Show podcast, to hear the authors of this chapter dive deeper into the issue of lead generation in this week’s episode.

In the evolving world of lead generation and performance-based customer acquisition, the quest for profits can lead to big legal risks, some of them too large for advertisers that buy leads through third parties. Advertisers that harness the power of lead generation should consider the best practices listed below to mitigate legal risk.

Lead generation best practices:

Understand basic advertising law. Advertising must be truthful and not misleading. Marketers and lead generators should understand what can make an advertising claim “deceptive,” as well as the appropriate use of disclaimers.

Understand laws regulating communications with leads. The Telephone Consumer Protection Act, CAN‑SPAM Act, and state laws regulating commercial emails, such as California Business & Professions Code Section 17529, all regulate how advertisers can communicate with leads they purchased via outbound phone calls, text messaging, and commercial email.

Recognize the risk of noncompliance. The Federal Trade Commission (FTC) is cracking down on deceptive practices by affiliate marketers and lead generators. State attorneys general are examining the roles affiliates, merchants, and/or networks play in knowingly facilitating unfair and deceptive practices. On top of this, the Consumer Financial Protection Bureau (CFPB) is scrutinizing lead generation for consumer financial services. The consequences for noncompliance can include mandatory refunds, costly fines and civil penalties, consent orders with 20‑year reporting requirements, and/or outright bans from a specific practice. Likewise, private class action plaintiffs are pursuing costly money judgments for consumers nationwide, mostly relating to how lead purchasers are communicating with the leads they purchased.

Stay on top of online contract formation best practices. Website and app terms and conditions act as a legally binding contract with users and can include important defenses for lead generators (e.g., arbitration agreements and class waivers). Online contracts with consumers—including the “call to action” and how consumers manifest assent—should be considered when designing lead generation campaigns.

Understand vertical-specific laws. Debt relief services, mortgage assistance relief services, mortgage companies, small-dollar lending, auto service warranties, insurance, health and beauty, education, and other industries are subject to numerous industry‑specific laws and regulations. Marketers in these verticals should understand the applicable law, as should anyone selling leads to those marketers.

Know your leads. Know whom you are buying leads from and whom you are selling them to. Understand how the leads originated and were solicited. Developing qualification programs and standard operating procedures can help mitigate legal risks.

Comply with DNC. Calling a number on the Do Not Call Registry is forbidden unless an established business relationship exists. Whether such a relationship exists may require specific actions by the lead generator.

Be careful with upsells, cross-sells, and advance consent. These areas are favorite targets of regulators and class action plaintiffs. Know the federal and state laws and regulations governing these practices and stay up to date as they evolve.

Establish vendor contractual protections. Make certain written agreements are very clear regarding ownership, exclusivity, payment, terms, and liabilities in the event of a legal dispute or a government investigation/enforcement action. They also should clearly state the nature of the leads and whether they meet the specific requirements for which they are purchased (prior express written consent to text, for example).

Protect and safeguard private information. Understand the promises about personal information made to consumers throughout the lead generation process and abide by those promises.

Watch endorsements and testimonials. Endorsers and marketers may be held liable for statements made by endorsers. Advise endorsers of their disclosure obligations. Monitor endorsements to ensure compliance with FTC guidance and take corrective action if needed.

To learn more about lead generation, contact Jonathan Pompan or Ari Rothman. For more insights into advertising law, bookmark our All About Advertising Law blog and subscribe to our monthly newsletter.