Lead generators and buyers are vital to one another, especially in the contact center industry. Due to their reliance on each other, it is important for them to be aware of the laws and regulations concerning lead generation, lead sales/purchases, and the use of purchased leads.
This article covers what lead generation is, specifically as it relates to the calling industry, and provides an overview of some of the major laws and regulations lead providers and buyers should be aware of.
What is Lead Generation?
Lead generation is the act of identifying or cultivating consumer interest in specific goods or services. Lead generators (or providers) often use a number of different methods to identify consumer interest, such as television advertisements, online advertisements, radio advertisements, emails, and directly calling and texting consumers.
Lead generators’ advertisements will often direct consumers to websites where consumers can provide their contact information. The generators then sell the consumers’ information to one or more lead buyers. In the calling industry, buyers will typically then reach out to those interested contacts.
Some lead providers also perform “warm transfers.” This involves the provider directly calling or texting consumers, or consumers who call the provider. When the lead provider connects with a consumer, it may ask the consumer some qualifying questions, and then transfer them to a lead buyer that sells the goods or services in which the provider has identified the consumer’s interest.
Regulations Applicable to Lead Generators & Lead Buyers
Communications with Consumers
In the calling industry, for obvious reasons, the laws and regulations regarding communications with consumers are some of the most important and applicable to lead generation. Of those laws and regulations, the Telephone Consumer Protection Act (TCPA) and states’ equivalents (like Florida’s mini-TCPA) are the most relevant.
The TCPA, under the Federal Communications Commission (FCC), regulates businesses’ sales calls to consumers. If you are a lead generator or buyer that calls or texts consumers, it is important to be aware of and comply with the TCPA. We have a number of other articles that discuss various aspects of the TCPA in greater detail, including a Compliance Checklist.
While lead buyers are responsible for their own TCPA compliance, a lead generator’s TCPA compliance can be equally important to a lead buyer. Sometimes a lead generator’s failure to follow the TCPA or failure to obtain compliant leads can cause issues for buyers. The following are two examples.
National Do Not Call Registry
Subject to certain exceptions, the TCPA prohibits sales calls to residential telephone subscribers who have registered their residential telephone number on the National Do Not Call Registry (NDNCR). Often lead generators will text consumers, instructing them to call a certain number if they are interested in a particular good or service, such as real estate services. Then the consumer will call that number and the lead generator will transfer the call to a buyer that provides home-purchasing services.
For example, if the lead generator sent multiple such text messages to a consumer whose number is on the NDNCR, and none of the exceptions apply, those text messages may have violated the TCPA. In those circumstances, a consumer will often seek to hold the lead buyer they were transferred to liable through a legal theory called vicarious liability—despite the fact the buyer never called or texted the consumer.
Through vicarious liability, a principal can be held liable for the actions of its agents. Consumers often argue that the lead generator is the agent of the lead buyer, even when the buyer lacked any form of control over the generator (a principal’s control over its agent is a key factor in determining whether vicarious liability applies to that relationship).
Unfortunately, some courts have shown a willingness to completely ignore such lack of control and have found a lead generator to be the agent of a lead buyer. Those courts have then held the buyer liable for the generator’s TCPA-violating texts.
Autodialer & Precorded/AI Sales Calls
The TCPA prohibits autodialer and prerecorded/AI sales calls to cellular telephones and residential lines, among other phone types, without the called party’s prior express written consent. Some lead buyers that make autodialer or prerecorded sales calls will purchase leads from lead generators.
When those buyers then make autodialer or prerecorded sales calls to the purchased leads, they are reliant on the lead generators to have obtained the consumers’ valid prior express written consent for the buyers to contact the consumers using such technology.
If the lead generator failed to do so, or the user who originally consented has since relinquished that phone number and it has been assigned to a new user, then the buyer’s autodialer or prerecorded sales calls to the purchased leads likely violated the TCPA.
Called parties have a private right of action for certain TCPA violations, through which they can be awarded up to $1,500 per violation. Thus, in the calling industry, a lead generator’s ability to provide TCPA-compliant leads and warm transfers are some of the best ways to demonstrate value to buyers.
Consumer Privacy
States are increasingly concerned with protecting consumer’s personal information. Thus, they have begun enacting laws regarding the collection, sharing, sale, and use of consumer’s personal information.
For example, California has the California Consumer Privacy Act (CCPA). Under the CCPA, those collecting, sharing, and selling California residents’ personal information must do things like (but not limited to):
- disclose the categories and specific pieces of personal information collected about a consumer upon his or her request;
- give consumers the right to opt out of the sale or sharing of their personal information, and;
- implement reasonable security procedures to protect consumers’ personal information.
It is important for lead generators to be aware of and comply with such laws when they are collecting, storing, sharing, and selling affected consumer’s personal information to lead buyers. Likewise, lead buyers need to be aware of and comply with such laws when they are purchasing and storing covered consumers’ personal information and ultimately using that information to solicit consumers.
Complying with consumer privacy rules and ensuring consumers feel secure with their personal information in your possession is a great way to improve your reputation and build strong relationships with consumers.
Advertising
Lead providers and buyers advertising to and communicating directly with consumers must ensure they are advertising and communicating truthful and accurate information. The FTC Act specifically prohibits, and most states have comparable laws prohibiting, deceptive acts or practices, which includes false advertising.
The FTC’s Telemarketing Sales Rule (TSR) is one of the advertising regulations most relevant to the calling industry. Under the TSR, before completing a sale, sellers and telemarketers must disclose certain information, including the total cost of the relevant goods or service and the material terms of the seller’s refund policy or, if applicable, there being no refunds. The TSR also prohibits actions like making misrepresentations to consumers and using threats, intimidation, or profane or obscene language when communicating with consumers.
Complying with advertising laws and regulations is important to ensure you avoid penalties for violations. Establishing and maintaining a reputation for truth and honesty can also go a long way towards establishing strong consumer relationships.
Summary
In the calling industry, there are many laws and regulations applicable to lead generation, lead sales/purchasing, and lead use. While lead generators and buyers are each responsible for their own compliance with those laws and regulations, a lead provider working cooperatively and transparently with its buyers (or vice versa) can often be a great way to ensure compliance all the way around.
At the end of the day, it is best for all when a lead generator is able to provide compliant leads that buyers are able to convert into compliant sales.
This article is only offered for informational purposes; it is not legal advice. Please consult a qualified attorney for your specific compliance needs.
Joe Bowser
Joe Bowser is a partner at Roth Jackson. He has been practicing communications and marketing law for two decades. He advises and defends calling and SMS platform providers (like Readymode), carriers/VoIP providers, and heavy users of those services in their wide range of compliance needs. In his spare time, you can find him taking his boys to their sports, getting in a workout of his own, or catching an Arsenal match.
