The 10 Biggest Legal Hazards for Lead-Generation Marketers

Lead generation is a process that places marketers in a field filled with legal snares ready to bite. This means that lead-gen marketers who choose to ignore the potential legal and regulatoery ramifications of their actions are essentially opting to blindfold themselves as they traverse these dangerous pastures. If, however, a lead-gen marketer wants to actually see what they’re navigating through, understanding the legal and regulatory issues can be a no-brainer — it may even save you a lot of money — and help you to increase volume and sales of leads.

This is where people like Jonathan L. Pompan come into play. Pompan is an attorney with Venable LLP, and he boiled down some keen, relevant insights into the 10 biggest legal pitfalls for lead-generation marketers at LeadsCon East back in July.

Based on his presentation, here are the top 10 legal pitfalls to watch for:

1. “Failing to consider the legal implications of a particular advertising campaign”: Marketers need to pay attention to the Federal Trade Commission Act, state “mini-FTC acts,” medium-specific statues (e.g., CAN-Spam Act), FTC guidance (regarding endorsements and testimonials, for example) and the new Consumer Financial Protection Bureau. This isn’t even to mention copyright and trademark ownership/infringement, along with terms of social media and online platforms. Verticals, like debt relief and payday, fall under state and federal laws and regulations. Sweepstakes, contests and other promotions are also under unique laws and regulations.
2. “Ignoring the basics of advertising law”: Lead-gen marketers should take time to understand the basics of the Federal Trade Commission Act. For instance, Sections 5 and 12 offer insights into “deceptive” and “unfair” advertising. Deceptive advertising occurs “if it contains a representation or omission of information that would be material to consumers and would mislead consumers acting reasonably under the circumstances,” according to Pompan. Unfair advertising occurs “if it is likely to cause substantial consumer injury [physical or economic] that is not reasonably avoidable by consumers themselves and is not outweighed by benefits to consumers or competition.” Marketers also should note that all express or implied claims that a reasonable consumer would take from an ad must be truthful and not misleading. Advetising claims in some verticals, like health and beauty and children’s advertising get special treatment.
3. “Not recognizing the legal risks and consequences of noncompliance”: The consequences of unfair and deceptive advertising and marketing practices can be costly and include lawsuits, cease-and-desist orders with 20-year reporting requirements, refunds for customers, bans on certain conduct, and bonds, and information remedies (e.g., corrective advertising). The FTC and state attorneys general are focusing their efforts on malicious affiliates and misrepresenting paid-loan-modification services. Lead generation has been cited by various state AGs, which should be a warning sign to merchants, affiliates and/or networks that might have a foot on the wrong side of the line.
4. “Ignoring the law specific to the vertical”: A number of verticals have specific rule and best practices that are relevant to marketers of those products and services. For example, if you’re a marketer in debt-relief services, you should be aware that the FTC has a target on those doing bad things in your field. Marketers in the mortgage vertical should know the Real Estate Settlement Procedures Act, new Mortgage Assistance Relief Services Rule, along with the State Mortgage Foreclosure Consultant Acts. Education, payday-lending, health and beauty/nutritional-supplement, auto-service warranties, insurance, and other marketers also should keep themselves educated about the laws governing their specific vertical.
5. “Not knowing your lead source”: Pompan stresses the importance of knowing your lead source. Marketers should question the qualification of vendors and customers by asking questions like: Who are you buying from? Who are you selling to? Where did the lead originate from? What was said to solicit the lead? Marketers are encouraged to develop due diligence and qualification procedures.
6. “Calling a consumer on the ‘Do Not Call’ list without permission”: Unless you have an established business relationship (EBR) with the person on the National Do Not Call Registry, you’re violating the Telemarketing Sales Rule by calling them. The EBR can depend on the actions of the lead generator.
7. “Upsells/cross-sells and negative-option marketing require careful planning”: Marketers should understand the laws for advance-consent marketing (“marketing plans where the consumer gives consent to receive and pay for goods or services in the future on a continuing or periodic basis, unless and until the consumer cancels the plan”) and negative-option marketing (“offer or agreement to sell or provide any goods or services, a provision under which the customer’s silence or failure to take an affirmative action to reject goods or services or to cancel the agreement is interpreted by the seller as acceptance of the offer”) are under close watch by the Congress, FTC and state AGs.
8. “Contractual relationships”: Pompan asks, “Have you considered what you’re contractually liable for in the event of a dispute or a government investigation/enforcement action?” Ownership, exclusivity, payment, terms and legal liability are usually hashed out in written lead contracts, which can sometimes be rigid. Nevertheless, there are key provisions that can be negotiated to work in everyone’s favor.
9. “Failure to protect and safeguard private information”: This is something that the everyday consumer is familiar with nowadays, thanks to the likes of Facebook and, more recently, Gawker. Purchasers should be aware of all promises made to consumers regarding their personal information throughout the lead-generation process. Personally identifiable information should typically be encrypted to industry-level standards, and disposal issues should not be ignored. ValueClick paid dearly for their failure to protect this information in 2008.
10. “Endorsements and testimonials require caution”: Advertisers are on the hook if a consumer endorsement doesn’t reflect an experience representative of what consumers will generally achieve, unless there’s disclosure of generally expected performance or a clarification regarding the limited applicability of the endorser’s experience. Endorsers are also potentially liable for these misleading experiences, and must disclose material connections with an advertiser. It’s the advertiser’s onus to monitor endorsers’ statements to make sure they are in compliance.