This post is the second in a series we’re writing on the FTC’s workshop on online lead generation entitled Follow the Lead. In our first post, we explored how online lead generation works. Here, we will discuss two fundamental questions surrounding the role that disclosures can and should play in the industry: What should be disclosed to consumers? What’s the best way to ensure disclosure?
What should be disclosed?
As to the first question, the workshop panelists pointed to several facts that they believed were inadequately disclosed to consumers. Chief among them was the fact that lead generators are distinct from the lenders, retailers, employers, or other entities that they may serve. Participants also faulted some lead generators for failing to disclose the nature of the products. A few pointed to the example of a lead generator for online payday loans that “disguised itself” to look like an online job application. Another key theme was that lead generators often failed to adequately disclose how widely the data that consumers submit to them may be disseminated. Of course, most lead generators don’t engage in these practices. Yet, because this market has heretofore been largely unregulated, it should not be surprising that some bad actors have thrived.
What disclosures can’t accomplish?
Panelists also discussed how disclosures can be structured so they accomplish their primary purposes – to help consumers understand the implications of their actions and make decisions accordingly. Central to this discussion was whether a subsequent disclosure could cure an initial deception. To take the loan-disguised-as-job-application example above, the question was raised: Could a disclosure on the landing page cure the deception caused by including a link to a loan application among a list of job openings? The answer that the panelists reached, and with which we agree: probably not.
Is a “reasonable expectation of consumers” standard the answer?
Looking at this problem, one panelist suggested that no amount of disclosure could cure the “fundamental” deceptiveness of the lead generation market because the website’s use of the information, among other practices, did not comport with the “reasonable expectations of consumers.” It’s unclear what the panelists that used this phrase meant. But, if it was more “know-it-when-you-see-it” regulation, many industry members believe that’s not the answer.
According to industry members, a “reasonable expectations” standard, while reasonable-sounding, is likely to be unreasonable and unworkable in practice for several reasons. Over time, it would likely devolve into a “least sophisticated consumer” standard. Under that standard, if any consumer misunderstands a product or service, however willfully blind he or she may be to obvious signposts, the business is liable for having violated UDAAP. This creates uncertainty and increases costs for consumers and businesses alike. Such a standard may also lead businesses to chase their tails over issues that are exceedingly unlikely to ever cause a problem.
To its credit, the FTC opened the workshop by discussing a study finding that the ability to sell consumer information led to lower costs for consumers and higher quality financial products being offered. So, the destructiveness that a “reasonable expectations standard” may have on the marketplace is real and has the potential to deprive consumers of the benefits of this valuable service.
Industry Suggestions for Achieving Appropriate Disclosure
How then do we ensure appropriate disclosure? It’s a difficult question, especially given two facts that other panelists pointed out: First, consumers don’t generally read existing disclosures. Second, the industry is fragmented, making regulation of the whole process exceedingly difficult. While there are no easy solutions to this problem, panelists suggested that there are some commonsense readily-available tools that industry and government can use to dramatically improve the lead generation marketplace for consumers and businesses alike:
- One Step Up and One Step Down: Each player in the lead generation process can take the time to look upstream and downstream to see, for example, from whom they are purchasing leads and to whom they are selling leads. They can take the time to audit the affiliate websites of the sellers and the buyers. For the affiliates from whom they purchase leads, they can ask to see copies of their websites and review the content periodically. For sellers who are lenders, check licenses, check websites and disclosure forms, and check loan terms, among other things. A panelist from Lending Tree described the company’s efforts in this regard as being remarkably successful.
- Let Consumers Help: Most websites already contain “report abuse” or “flag problem” boxes or general complaint portals. Web advertisers such as job posting sites can monitor these responses and make changes to posts that consumers actually find to be misleading. This gets around the problem of constantly getting into consumers’ heads and guessing about whether they were deceived. Instead, let’s focus on what they actually find to be problematic.
- Standardized Disclosures: From a regulatory perspective, government can work with industry to develop standardized plain-language disclosures, as exists with nutrition labels, tobacco warnings, or TILA interest rate disclosures. That way, both consumers and businesses could enjoy certainty and the efficiencies and cost-savings that would follow. When it comes to privacy disclosures, better yet would be a government-approved menu of form disclosures that a business could choose from, to provide the clarity and flexibility needed to make the marketplace work effectively.
To go back to our main theme, none of the problems that the panelists identified are caused by lead generation in and of itself. The deception is caused by a combination of bad actors and consumers who aren’t devoting full attention to the road. Many in the industry believe that it would be better to structure the solution around those problems: let the government create a few standardized “bright light” disclosures about the key issues that consumers care about to keep them alert; require industry participants to take reasonable steps to make sure they aren’t benefitting from reckless conduct; and keep consumers behind the wheel of deciding what works best for them.
In our next post, we’ll discuss the allegation that lead generation is “inherently deceptive” and contrast it with the FTC’s own findings that the ability to sell data results in better financial products at lower prices for consumers.