People will sometimes ask me why I hate the Lead Generation (lead gen) and Payday Loan industries. Ultimately, it’s because they have such deep problems that I don’t think that any self-respecting ESP should take them on as a client.
This morning, I saw a [acp author=”United States Federal Trade Commission” id=”FTC-01″ title=”Data Broker Defendants Settle FTC Charges They Sold Sensitive Personal Information to Scammers” year=”2016″ month=”February” day=”18″ year_access=”2016″ month_access=”February” day_access=”22″ url=”https://www.ftc.gov/news-events/press-releases/2016/02/data-broker-defendants-settle-ftc-charges-they-sold-sensitive”]press release[/acp] outlining a settlement between a lead gen operation and the FTC. And, as it turns out, this particular case dates back to [acp author=”United States Federal Trade Commission” id=”FTC-02″ title=”FTC Charges Data Broker with Facilitating the Theft of Millions of Dollars from Consumers’ Accounts” year=”2014″ month=”December” day=”23″ year_access=”2016″ month_access=”February” day_access=”22″ url=”https://www.ftc.gov/news-events/press-releases/2014/12/ftc-charges-data-broker-facilitating-theft-millions-dollars”]December 2014[/acp], but is based upon a much earlier case that dates back to 2009 (according to the December 2014 press release. These cases provide a good case study in the problems that these industries face.
First, let me stipulate that I’m really only talking about the online payday loan industry. I’m of the opinion that just about any payday loan that isn’t made between friends is probably usurious and, therefore, bad. But, this is a blog about spam and the policy issues that surround it. So, we’ll limit our consideration to just the online stuff. And it’s bad. It’s bad enough that the FTC has [acp author=”United States Federal Trade Commission” id=”FTC-03″ title=”Online Payday Loans” year=”2013″ month=”February” year_access=”2016″ month_access=”February” day_access=”22″ url=”http://www.consumer.ftc.gov/articles/0249-online-payday-loans”]a page[/acp] dedicated to it. And the truth of the matter is that most “payday loan websites” that you see are actually lead gen websites. So, we’re combining our consideration.
Now, with that out of the way, let’s look at the facts of this case:
- In its complaint, the FTC alleged that the defendants collected hundreds of thousands of “loan applications” submitted by people to payday loan sites.
- Some 5% of the “applications” were submitted to lenders for rather large sums of money. (One related [acp author=”United States Federal Trade Commission” id=”FTC-04″ title=”FTC Charges Data Brokers with Helping Scammer Take More Than $7 Million from Consumers’ Accounts” year=”2015″ month=”August” day=”12″ year_access=”2016″ month_access=”February” day_access=”22″ url=”https://www.ftc.gov/news-events/press-releases/2015/08/ftc-charges-data-brokers-helping-scammer-take-more-7-million”]press release[/acp] says “up to $100 or more” per lead.
- The other 95% were sold for $0.50 each to non-lenders. So, the “payday loan” sites used here were actually lead gen sites. This is actually something that I describe in [acp author=”Mickey Chandler” id=”Chandler-01″ title=”Looking at a spam stream: The story of Jimmy Walker” year=”2013″ month=”November” day=”8″ year_access=”2016″ month_access=”February” day_access=”22″ url=”http://www.spamtacular.com/2013/11/08/looking-spam-stream-story-jimmy-walker/”]“The Story of Jimmy Walker”[/acp].
- Some of that data were bought by one company which used the data to actually steal from the consumers who were already hurting for money (because who else actually gets payday loans?). And notice how crafty they were about it, too:
“To avoid losing merchant accounts due to high return rates, the defendants allegedly took multiple unauthorized debits of a few pennies each, and then immediately refunded them before making a larger debit of about $30. By doing so, they inflated their total number of debits and reduced their return rate.”
- And there really could be no mistaking what was going on, because at one point the lead gen company hired as its CMO a key executive from the company making fraudulent debits.
The company that was making fraudulent debits got about 15% of its leads from this lead gen company. That same data would have been sold to other groups as well, and each of those would have then sold the data down the line.
So, when you ask why I don’t like lead gen or payday loans, this is why. The industries are notoriously dirty, they share/sell data, and even the players are pretty much interchangeable.
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