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 press release outlining a settlement between a lead gen operation and the FTC.1 And, as it turns out, this particular case dates back to December 20142 but is based on a much earlier case from 2009 (according to the December 2014 press release). These cases provide a good case study of 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 a page dedicated to it.3 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 press release says “up to $100 or more” per lead.4)
- The other 95% were sold to non-lenders for $0.50 each. So the “payday loan” sites used here were actually lead-gen sites. This is actually something that I describe in “The Story of Jimmy Walker.”5
- Some of that data was bought by one company, which used it to actually steal from consumers already hurting for money (because who else 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.”6
- 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 responsible for the 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.
Footnotes
- US Federal Trade Commission, Data Broker Defendants Settle FTC Charges They Sold Sensitive Personal Information to Scammers | Federal Trade Commission, FTC Press Releases (2016), https://www.ftc.gov/news-events/news/press-releases/2016/02/data-broker-defendants-settle-ftc-charges-they-sold-sensitive-personal-information-scammers (last visited Feb 22, 2016). ↩︎
- US Federal Trade Commission, FTC Charges Data Broker with Facilitating the Theft of Millions of Dollars from Consumers’ Accounts, FTC Press Releases (2014), https://www.ftc.gov/news-events/news/press-releases/2014/12/ftc-charges-data-broker-facilitating-theft-millions-dollars-consumers-accounts. ↩︎
- US Federal Trade Commission, What To Know About Payday and Car Title Loans, Consumer Advice (2023), https://consumer.ftc.gov/articles/what-know-about-payday-and-car-title-loans. ↩︎
- US Federal Trade Commission, FTC Charges Data Brokers with Helping Scammer Take More Than $7 Million from Consumers’ Accounts, FTC Press Releases (2015), https://www.ftc.gov/news-events/news/press-releases/2015/08/ftc-charges-data-brokers-helping-scammer-take-more-7-million-consumers-accounts. ↩︎
- Mickey Chandler, Looking at a Spam Stream: The Story of Jimmy Walker – Spamtacular, (Nov. 8, 2013), https://www.spamtacular.com/2013/11/08/looking-spam-stream-story-jimmy-walker/. ↩︎
- US Federal Trade Commission, supra note 4. ↩︎
About the Author
Mickey Chandler is a Consultant & Attorney with over 28 years of experience in Email Deliverability & Privacy Law. He has a strong background in email authentication infrastructure (SPF, DKIM, DMARC), ISP and mailbox provider relations, anti-spam policy and compliance, CAN-SPAM and state anti-spam law gained through overseeing the Abuse & Compliance team at Salesforce Marketing Cloud, originating the ISP relations role at Informz (now part of Higher Logic), and working in the fight against spam since 1997. He holds a B.A. in Government, a B.S. in Computer Information Systems, and a J.D. from the University of Houston Law Center. He is a certified CIPP/US professional and a certified CIPM professional.
