Critical Lead Generation Marketing Agreement Provisions

By Richard NewmanSeptember 13, 2017

Lead generation marketing agreements are critically important documents between lead generators, aggregators, call centers and end-buyers. These agreements should include basic provisions covering issues such as, without limitation, what constitutes a “lead” (e.g., consumer data, telephone calls, telephone call transfers, etc.), what constitutes a valid lead, price, payment terms, term and termination, warranties, disclaimers and limitations of liability, indemnification, confidentiality, recordkeeping and dispute resolution.  

What follows is intended as a brief overview of best practices for drafting responsible data use restrictions within lead generation marketing agreements. It is written from the perspective of lead generators and aggregators.

Of paramount importance is that lead generation marketing agreements are often reviewed by regulators during the course of investigations as one of many means by which to assess whether a lead generator or an aggregator has taken reasonable steps to prevent “data abuse” and protect consumers’ personally identifiable information. In fact, the FTC is presently engaged in an aggressive campaign of issuing Civil Investigative Demands focused upon related issues.

While lead generation marketing agreements will vary a bit depending upon the type of relationship and vertical, there are several legal considerations and provisions that companies should consider.

Careful attention should be paid to consumer-protection related contractual issues, including, without limitation, responsibility for advertising content, whether consumer information is transferrable and, if so, under what conditions. The purposes for which leads may or may not be used should be designated with reasonable particularity and should reflect consumers’ legitimate expectations.

Circumstances permitting the transfer or assignment of leads should be clear and limited to those which consumers have provided consent. Where transfer to a third-party is reasonable and lawful, lead generation marketing agreements should also account for how consumer information may and may not be used by third-party recipients and liability apportioned, appropriately.

Specific terms and warranties governing whether telemarketing is permissible and what compliance protocols must be followed are critical, including, but not limited to, the type of permissible telemarketing, applicable technologies and suppression list management.  

Reasonable restrictions and obligations imposed upon lead buyers and third-party transferees are only half of the battle. Regulators also want to see that reasonably diligent efforts are employed by all those in the stream of commerce to ensure that contractual covenants, representations and warranties are actually adhered to by the appropriate parties.

Ensure that marketing partners expressly agree to comply with applicable laws, rules and regulations, and that any/all licenses are secured. Require disclosure of past or pending litigation/regulatory matters that are reasonably related to the purpose of the marketing relationship. Also, require disclosure of such matters in the event that they arise during the contract term.

If leads are seeded, the failure to take reasonable steps to inquire how they are being used may draw the ire of a regulator.

If the transfer of leads is lawful and contractually permissible, require marketing partners to covenant that they will demand stringent restrictions upon third-parties, that they will exercise reasonable care in determining that third-party transferees are properly licensed and have been vetted, and that third-party transferees will not (with limited exception), in turn, re-transfer consumer data.

In short, if a lead originates or passes through your company, you are responsible for taking reasonable steps to ensure that any/all uses thereof comply with the restrictions and limitations consumers expected when the lead was initiated.

Representations, warranties and covenants will vary depending upon the situation, including whether there is an intermediary involved. Consult with experienced legal counsel for assistance preparing responsible and defensible lead generation marketing contracts that contain terms reaching both the buyer and permitted third-party transferees.

Always account for your marketing partners’ implementation of administrative, physical and technical security measures, policies and procedures that ensure the secure handling, transmission, storage and disposal of any/all consumer information. Ensure that marketing partners implement reasonable measures to protect against any threats or hazards to the security and integrity of consumer information.

Takeaway: Engaging in the sale of consumer data raises the compliance stakes. Issues such as authorized data use, unauthorized data use, and restrictions and parameters on transferability should be deliberately addressed and implemented. Lead generation regulatory guidance is clear and professionally drafted marketing agreements can be an “ace in hole” in the face of a subpoena from the Federal Trade Commission, the Consumer Financial Protection Bureau or a state Attorney General. 

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