On September 15, the Federal Trade Commission published a staff paper providing its perspective on the lead generation business.  Although the FTC recognized some of the advantages of lead generation, the paper was a clear warning to “unscrupulous actors in the lead generation industry” of potential consequences.  The staff paper signals that the FTC is focusing on the industry, and in particular on the quality of disclosures to consumers and use of information collected by lead generators from consumers.

Lead generation is the process of identifying and cultivating individual consumers who are potentially interested in purchasing a product or service.   As consumers increasingly research and shop for products online, lead generation has become more sophisticated, rapid, and data-intensive, said the FTC.  While this can benefit interested consumers by connecting them with merchants quickly and efficiently and can have positive benefits on price and competition, the FTC noted several potential areas of concern for consumers:

(1)    Complexity and Lack of Transparency – The FTC paper notes that consumers who fill out forms online may not be aware that the forms are operated by lead generators who may sell and re-sell the consumers’ information multiple times.  The FTC recommends that “[c]ompanies should disclose this information to consumers clearly and conspicuously to add transparency to the lead generation process.”

(2)    Aggressive or Potentially Deceptive Marketing – Participants in an FTC workshop noted that some lead generators may use aggressive or deceptive marketing tactics to entice consumers to fill out web forms.  One company, for example, allegedly misrepresented to consumers that they were applying for job openings when in fact the company was selling the consumers’ personal information to schools and career training programs.

(3)    Potential Misuse of Sensitive Consumer Information in Payday Lending Lead Generation – The FTC noted that online lead generators for payday lenders typically collect sensitive financial information, including Social Security numbers and bank account information, from consumers.  Lead aggregators should take care to ensure that the companies that buy their leads do not use this information for unauthorized or other unlawful purposes, recommended the FTC.

The FTC concluded its staff paper by noting its “ongoing law enforcement work” in connection with lead generators.  In light of the FTC’s focus on the lead generation business, all companies within that realm should take heed of the FTC’s guidance.