Unpacked: What brands should know about the FCC’s new rules on lead generation

The rule attempts to close a loophole for robocalls and robotexts that saw lead generators obtaining a consumer’s phone number and using it for multiple companies or services. The practice was often seen in comparison shopping websites, like those designed to let customers see multiple pricing options for car loans, travel or health care. But moving forward, companies will have to obtain consent for just one seller at a time. 

“Our rule does not prohibit websites from obtaining leads and merely codifies reasonable limits on when those leads allow sellers to use robocalls and robotexts to reach consumers,” the order says. 

Some lawyers anticipate that the new rules could lead to more litigation, as plaintiffs’ attorneys and consumer advocates have ramped up TCPA-based actions. The number of TPCA cases filed in 2023 through November was up about 9% year over year, according to WebRecon. In Pennsylvania, the Office of Attorney General has sued multiple websites for lead generation tactics that required consumers to fill out a survey that would equal consent to be contacted by marketing partners. 

Daniel Blynn, a partner at Steptoe who focuses on false advertising and telemarketing issues, said the minimum damages in a TCPA case can start around $500 per call or text and are not capped – meaning damages in a class action could amount to millions of dollars.

“One bad telemarketing campaign can lead to a bankruptcy decision,” Blynn said.

Here’s a breakdown of what’s changed, and what brands should know. 

What is the lead generation loophole?

Lead generators are third-parties that brands and companies can use to help locate and secure potential customers. The services request phone numbers and/or email addresses, which the company can in turn use for outreach. And they’ve been quite common in service providers that look to help people comparison shop for products like car loans or health insurance. While many brands in the e-commerce world use inbound strategies to collect first-party data, some may use a third-party lead generator to provide a list of additional potential customers.

Sulina Gabale, partner at law firm Orrick who specializes in cyber, privacy and data innovation, said this way of doing business had become an industry standard. And while it could provide a benefit to consumers in the form of getting multiple price informations, they could also “receive thousands of calls and texts from numbers they didn’t recognize or anticipate when they gave their initial consent.” 

Gabale said there may have been companies that were ‘trying to comply” by putting in hyperlinks or fine print to indicate that the shopper was consenting to hear from more than one company. 

What’s changing? 

Until December, the FCC had been silent on this form of multi-party consent, Gabale said. But this area of TCPA has been under increased scrutiny, as the loophole has given rise to lawsuits as well as the annoyance of millions of customers who may be receiving calls and texts they didn’t anticipate.

The regulatory change makes it clear that asking for a phone number used for robocalls or robotexts must be a “one to one” request. The rule also says that the nature of the call or text is “logically and topically related” to the interaction that prompted the consent, though it does not give an exact definition.

“What the FCC is really getting to here is the result of the floodgate opening that was not in line with that individual’s reasonable expectation when they gave that consent,” she said.

Published in December 2023, the law will take effect in about 12 months, giving companies time to prepare for any changes they may want to make to their practices. Gabale said the industry can expect to see other clarifications related to the order coming out this year.

How can brands stay compliant? 

The rules still leave plenty of room for brands to use third-party lead generation. But experts say the best practice for phone and text messaging marketing moving forward will be “one to one” consent, or a clear indication of who the customer is consenting to contact them. 

“You want to make sure that your own digital priorities have the proper consent language,” Steptoe’s Blynn said, “but if you are working with lead generators, you now need to make sure that your lead generators identify you and only you in the lead form so that a consumer understands the consequences of their actions by completing and submitting a lead form.”

Blynn said that it’s also important for companies to keep records of consent to minimize legal risk. In the event of a lawsuit, the company would have the burden of proving that they correctly obtained consent. 

“Anyone who communicates with customers should understand the TCPA and have a compliance program in place to avoid the bankrupting litigation that follows,” he said. “This is an area where the platiniff’s bar is very active.” 

In addition to strong record keeping, Gabale said she advises brands to pay attention to customer complaints as a way to check in on whether practices are causing concern.

There are also ways for companies to obtain consent for robocalls and robotexts from multiple sellers, like a checkbox list that allows customers to proactively opt-in to which companies they want to hear from. The form could also provide a clickthrough link to another business that asks for specific consent. A lead generator could also still use a contact for multiple companies if they are not using an automatic robocall or robotext service, as the new rule does not apply to manually dialed telemarketing calls.

“They need to get creative thinking through alternative means of facilitating that consent for multiple parties,” Gabale said.

Some concern about overreach 

Before passing the order, the FCC did receive some public comment warning that the proposal overstepped.

In a partial dissent, FCC Commissioner Nathan Simington said that the FCC went too far in using “one to one” consent for texts. Rather, he said, it would make sense to allow robotexts for messages that are “logically and topically related,” meaning someone who gives consent to receive texts about car insurance offers would be able to receive multiple robotexts from multiple services about it. 

“There is, possibly, a way to accomplish 1-to-1 consent that doesn’t break the backs of American small businesses that rely on lead generation,” he said.

Future action

With the growing ubiquity of direct marketing and an influx of TCPA-based class action lawsuits, future changes are possible. The FCC is looking for more feedback on ways to stop unwanted or illegal texts — and it’s implementing other “cleanup” regulations as well.

The December order also included elements aimed at curbing robotexts. The FCC can “red flag” numbers that mobile carriers will have to block texts from. And it also confirmed that the Do-Not-Call registry applies to texting as well as phone calls.

”The fact that the FCC even released this is a huge step, because the FCC hasn’t spoken about TCPA in quite some time substantively,” Orrick’s Gabale said. “It’s meaningful that they’re clarifying and cleaning up and modernizing the TCPA.”

FCC Chairwoman Jessica Rosenworcel, in supporting the lead generation change, also called out the need for future updates. “We need to find every way we can under the law to stop these junk robocalls and robotexts from reaching us on our devices,” she said. “And because scam artists are nimble — during the holidays and throughout the year — we need to regularly update our policies to stop this stuff from coming over the line.”