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Financial Services Law Insights and Observations


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  • FTC alleges company misrepresented the quality, source of leads

    Federal Issues

    On March 11, the FTC issued an administrative complaint against a Colorado-based digital marketplace company (defendant) alleging it used deceptive and misleading practices in selling home improvement project leads to service providers. The complaint alleges that since 2014 the defendant has made false, misleading, or unsubstantiated claims regarding the quality and source of the leads it sells to service providers, such as general contractors and small lawn care businesses. The complaint alleges, among other things, that the defendant told service providers that its leads resulted in actual home improvement jobs at rates higher than its own data supported, and that the defendant misled service providers about the cost of an optional one-month subscription to a software platform that it sold with its leads and the cost of the optional one-month help desk subscription. The defendant’s actions allegedly resulted in service providers, many of whom operate in the gig economy, spending time following leads below the promised quality and seeking refunds for those leads. The FTC’s Director of Bureau of Consumer Protection stated, “Today’s administrative complaint against [the defendant] shows that the FTC will use every tool in its toolbox to combat dishonest commercial practices.”

    Federal Issues FTC Enforcement Lead Generation

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  • FCC proposes record $45 million fine against robocaller

    Federal Issues

    On February 18, the FCC released a proposed $45 million fine against a lead generator accused of conducting an illegal robocall campaign that made false claims about the Covid-19 pandemic to induce consumers into purchasing health insurance. This is the FCC’s largest ever proposed robocall fine to date. According to the FCC, the lead generator violated the TCPA by placing 514,467 robocalls to cellphones and landlines without subscribers’ prior express consent or an emergency purpose. The Florida-based lead generator allegedly purchased lists of phone numbers from third-party vendors and acquired phone numbers from consumers seeking health insurance quotes online, “without clearly disclosing that, by providing contact information, the consumers would be subject to robocalls.” It then left prerecorded voice messages marketing insurance plans sold by companies that had hired the lead generator. Many of these robocalls, the FTC claimed, were also unlawfully made to consumers on the Do Not Call Registry. FCC Chairwoman Jessica Rosenworcel issued a statement announcing that, in addition to the record fine, the Commission also established a new partnership with 16 state attorneys general in order to share information and resources to mitigate robocalls.

    Federal Issues FCC Enforcement Robocalls TCPA Lead Generation State Attorney General State Issues

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  • DFPI reports significant decline in payday lending during pandemic

    State Issues

    On July 22, DFPI reported that California payday lenders made fewer than 6.1 million loans during the Covid-19 pandemic—a 40 percent decline from 2019. Key findings in the 2020 Annual Report of Payday Lending Activity Under the California Deferred Deposit Transaction Law, include: (i) nearly 61.8 percent of licensees reported serving consumers who received government assistance; (ii) borrowers who take out subsequent loans accounted for 69 percent of payday loans in 2020; (iii) licensees collected $250.8 million in payday loan fees, of which 68 percent came from borrowers who made at least seven transactions during the year; (iii) 49 percent of borrowers had average annual incomes of $30,000 or less, and 30 percent had average annual incomes of $20,000 or less; (iv) online payday loans made up one-third of all payday loans (41 percent of borrowers took out payday loans over the internet); and (v) cash disbursement continued to decrease in 2020, while other forms of disbursement, such as wire transfers, bank cards, and debit cards increased. DFPI also noted that during this time period the number of payday loan borrowers referred by lead generators declined by 69 percent, and that the number of licensed payday lending locations also dropped by 27.7 percent. DFPI acting Commissioner Christopher S. Shultz commented that the decrease in payday loans during the pandemic may be attributable to several factors, “such as stimulus checks, loan forbearances, and growth in alternative financing options,” adding that DFPI continues to closely monitor financial products marketed to consumer in desperate financial need.

    State Issues State Regulators DFPI Payday Lending Covid-19 Lead Generation

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  • CFPB takes action against student debt-relief operation

    Federal Issues

    On July 13, the CFPB filed a complaint in federal district court against a nationwide student loan debt-relief business—consisting of two companies, their owners, and four attorneys—for allegedly charging thousands of customers approximately $11.8 million in upfront fees in violation of the Telemarketing Sales Rule (TSR). According to the complaint, filed in the U.S. District Court for the Central District of California, the companies would market its debt-relief services to customers over the phone, encouraging those with private loans to sign up with an attorney to reduce or eliminate their student debt. The attorney agreement typically provided for “a fee, typically 40 [percent] of the outstanding debt, to be paid by monthly installments, along with a processing fee that costs an additional $10 per month.” The business allegedly charged the fees before the consumer had made at least one payment on the altered debts, in violation of the TSR’s prohibition on requesting or receiving advance fees for debt-relief service or, for certain defendants, the TSR’s prohibition on providing substantial assistance to someone charging the illegal fees.

    On August 17, the court approved stipulated final judgments with four of the defendants (one company owner and three of the attorneys, here, here, and here). The company owner is permanently banned from providing debt-relief services or engaging in telemarketing of any consumer financial product or service, and is required to pay $25,000 in partial satisfaction of a suspended $11.8 million in redress. Similarly, the three attorneys are each banned from providing debt-relief services and required to pay $5,000, $21,567, and $30,000 each in partial satisfaction of various redress amounts. Additionally, the judgments impose a civil money penalty of $1 against each defendant.

    Federal Issues CFPB Debt Relief Lead Generation Enforcement Courts Student Lending Consumer Finance TSR

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  • FTC settles deceptive ranking charges with lead generator

    Federal Issues

    On February 3, the FTC announced a settlement with operators of a lead generator website (respondents) that compares and ranks consumer financial products such as student loans, personal loans, and credit cards. According to the FTC’s complaint, the respondents violated the FTC Act by allegedly making false representations to consumers that their rankings were objective, honest, accurate, and unbiased, when in fact, the defendants allegedly offered higher rankings to companies that paid for placement. In addition, the complaint alleges that certain highly ranked companies dropped placement spots after refusing to pay for their positions. The complaint further contends that the respondents allegedly claimed that customer reviews were impartial, but in reality most reviews were written by company employees or their family friends, or others associated with the company, or by fabricated consumers. Without admitting or denying the allegations, the respondents have agreed to pay $350,000 under the terms of the proposed settlement, and are prohibited from making future misrepresentations connected with the “advertising, promotion, offering for sale, or sale of any product or service.”

    Federal Issues FTC Lead Generation UDAP Deceptive Enforcement FTC Act

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  • FTC settles with lead generator

    Federal Issues

    On August 27, the FTC announced a settlement with an Illinois-based educational services company and its subsidiaries (defendants) to resolve deceptive marketing allegations in violation of the FTC Act and the Telemarketing Sales Rule. In the complaint, the FTC claimed the defendants used third-party lead generators that posed as military recruiters or job-finding services to encourage consumers to provide contact information via websites. The websites did not clearly inform the consumers that the personal information entered into online forms might be sold or used in training or educational programs. Rather, the FTC asserted that the lead generators falsely informed consumers that their information would not be shared. According to the FTC, the defendants then purchased these leads to call consumers in an attempt to enroll them in post-secondary schools, with many of these calls made to consumers on the National Do Not Call Registry. While the defendants did not carry out the deceptive practices to generate the leads, the FTC stated that the defendants established control over the marketing materials and reviewed telemarketing scripts that allegedly directed lead generators to falsely identify themselves as military recruiters. The FTC’s press release emphasized that “[t]his case demonstrates that the FTC will seek to hold advertisers liable for the deceptive or illegal practices of their affiliates, publishers, or other lead generators. We expect companies purchasing leads to implement strong vendor management programs and stay on the right side of the law.” Under the terms of the settlement, the defendants are: (i) ordered to pay $30 million; (ii) required to implement a system to review any marketing materials used by lead generators; (iii), prohibited from calling numbers on the National Do Not Call Registry without obtaining written consent; and (iv) banned from falsely stating that they represent the military or prospective employers.

    Federal Issues FTC Enforcement Lead Generation UDAP FTC Act Telemarketing Sales Rule

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  • CFPB settles with online lead aggregator for $4 million


    On March 28, the U.S. District Court for the Central District of California entered a stipulated final judgment and order resolving the CFPB’s allegations against a California-based company for allegedly buying and selling personal information from payday and installment loan applications without properly vetting buyers and sellers. As previously covered by InfoBytes, the CFPB’s December 2015 complaint alleged that, among other things, the company (i) knew or should have known that the lead generators in its network used false or misleading statements to obtain consumer information; and (ii) connected consumers with lenders that offered less favorable loan terms than were otherwise available, did not comply with state usury limits, or claimed they were exempt from state regulation and jurisdiction. The stipulated order requires the company to pay $1 million for consumer redress and $3 million in civil money penalties. Additionally, the company is banned from acting as a lead generator, lead aggregator, or data broker in connection with the offering of certain loans. The company neither admitted nor denied the allegations.

    Courts CFPB Settlement Civil Money Penalties Lead Generation Lead Aggregation

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  • FCC fines health insurance lead generator $82 million for spoofed robocalls

    Federal Issues

    On September 26, the FCC announced that it fined a telemarketer and associated companies more than $82 million for using allegedly illegal caller ID spoofing to market and generate leads for health insurance sales in violation of the Truth in Caller ID Act (the Act). The Act prohibits telemarketers from purposefully falsifying caller ID information with the intent to harm, defraud consumers, or wrongfully obtain anything of value. The FCC alleges that the telemarketer made more than 21 million robocalls with spoofed caller ID information, which makes it difficult for consumers to register complaints and for law enforcement to track and stop the illegal calls. According to the related Forfeiture Order (FCC 18-134), the FCC rejected the telemarketer’s argument that the value he received from the calls was not “wrongfully obtained,” concluding that the calls were placed without prior consent, including contacting consumers on the Do Not Call registry, and that the telemarketer knew the tactics he used to obtain the insurance leads were unlawful. The FCC also rejected the telemarketer’s request to reduce the penalty, stating “the proposed forfeiture of $82,106,000 properly reflects the seriousness, duration, and scope of [the telemarketer]’s violations.”

    Federal Issues FCC Robocalls Lead Generation Marketing Privacy/Cyber Risk & Data Security

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  • FTC Issues Paper on Lead Generation, Recaps "Follow the Lead" 2015 Workshop

    Privacy, Cyber Risk & Data Security

    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.

    FTC Payday Lending Student Lending Consumer Lending Lead Generation

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  • Buckley Sandler Workshop Recap: FTC Holds Workshop on Online Lead Generation

    Consumer Finance

    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.

    The fourth panel focused on consumer protections and the legal landscape of the lead generation industry. Consumer advocates noted that the process is often opaque and that consumers are generally unaware that their data may be sold multiple times and is often dispersed much further than they intended by seeking information about or applying for a specific product or service. It was also noted that consumer data is an asset for the entity that collected it and the pressure to monetize these assets results in the data being sold to anyone willing to pay for it, including those with an intent to commit fraud. Finally, the issue was raised that collected data exists forever, with the only restriction on the longevity of the information generally being that fact that information loses value as it becomes less current.

    The panelists generally agreed that more transparency about the policies of the information collecting entity would be beneficial, with one noting that consumers will not read long policy disclosures, and therefore short statements notifying consumers of the potential uses of their data be provided at the point that data is collected. The panelists also generally agreed that the sellers of data should more carefully vet the buyers of that data and, conversely, data buyers should also more carefully vet the sellers. All panelists repeated the general theme that more guidance from agencies such as the FTC with respect to lead generation and data collection policies and best practices would be welcomed.

    FTC Lead Generation

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