On Friday, October 30, 2015, the Federal Trade Commission hosted a full-day public workshop to explore consumer protection issues raised by online lead generation, with a special focus on the education and lending industries. The program brought together various stakeholders in the lead generation arena, including publishers, advertisers, consumer advocates, lead verification firms, and regulators. With some exceptions, the consensus was that third-party lead generators can provide an efficient and cost-effective method to develop qualified prospects, but that the growth and integrity of this medium has been stymied by unscrupulous companies that seek to deceive consumers in the process of developing (and using) leads.

The workshop participants were primarily concerned by the lack of transparency in the lead generation process, particularly where leads are generated through various layers of affiliates and subcontractors. Advertisers that use lead generators for their expansive publisher networks may initially know where their ads will be placed and how their ads will look. But upon entering the publisher ecosystem, an originally approved ad can change in form and content and appear on sites that may be inconsistent with the advertiser’s goals, or worse, could embarrass and tarnish the advertiser’s brand.

Several panelists expressed concern with the number of parties that have access to a lead, what they do with and how long they keep a lead, and the accuracy of the information in a consumer’s profile. These issues were primarily expressed by the FTC and consumer advocates because these actions are not transparent to consumers and could result in greater harm than a merely deceptive ad.

The workshop concluded with several stakeholders discussing current and proposed industry self-regulation programs and the technology-based compliance solutions that are available in the marketplace. While these efforts are laudable, commented one advocate, the fact remains that the third-party lead generation business is inherently flawed and subject to fraud, and until a perfect solution is developed to prevent deceptive ads and provide full and clear transparency into data collection, storage and use practices, consumers will continue to be harmed.

The lead generation business raises many important issues. Companies that buy leads need to know the origin of the lead, in what context the lead was generated, and what rights they have to contact the consumer. Failing to address and understand these issues can cause companies to contact a consumer who did not understand what he or she was signing up for, or worse, not obtaining the appropriate level of consent if the consumer provided a mobile number to be called. On this issue, several industry participants spoke of the Telephone Consumer Protection Act liability that buyers face when they call consumers on their mobile phones or place pre-recorded calls to landlines without the appropriate level of consent. These risks are significant since the unlimited statutory damages available under the law provide an attractive incentive for plaintiffs. Therefore, buyers must conduct extensive due diligence before buying and using a purported “opt-in” list to ensure that the list was developed in accordance with applicable TCPA regulations. Otherwise, buyers are well advised to eliminate the use of autodialers or to scrub the list against reliable mobile databases.

Lead sellers may also incur liability under various other laws, such as the Telemarketing Sales Rule, when they “knew or should have known” that their customers would use their lists in violation of law. The FTC provided examples of several cases it has brought against lead generators and list brokers who should have been tipped off to their client’s misuse of consumer information when they reviewed phone scripts or when they received consumer complaints.

The workshop may have “generated” more questions than answers, but the overall message was clear: everyone in the lead generation ecosystem must be aware of and take responsibility for their actions and at all times place the consumer’s interests above all else.