Yes, lead generation is legal because it's a significant part of the digital marketing industry. Statista reports that the US digital lead generation market has reached $3.2 billion. Major companies like Google and Facebook offer various tools and platforms that facilitate lead generation. 91% of marketers claim that lead generation is their most important business goal. This is why many B2B and B2C companies partner with legal lead generation companies to acquire pre-qualified leads.
Industries like insurance, real estate, and home services rely on leads to drive sales and business growth. Popular apps like Uber consider themselves a lead generation service since they provide leads to freelance drivers. Lead generation is an important part of the economy because it connects customers to businesses that can solve their needs.
This article will answer why lead generation is legal. It provides guidance on how to generate leads without breaking any laws. I'll also explain the 5 laws that affect businesses that generate leads online.
5 Laws that Affect Businesses That Generate Leads Online
There are tons of ways to generate leads, such as rank and rent, email marketing, and search engine optimization (SEO). All of these are legal, so as long as they abide by five common laws: General Data Protection Regulation (GDPR), Controlling the Assault of Non-Solicited Pornography and Marketing Act (CAN-SPAM), Telephone Consumer Protection Act (TCPA), Fair Credit Reporting Act (FCRA), and the Real Estate Settlement Procedures Act (RESPA).
1. General Data Protection Regulation (GDPR)
The General Data Protection Regulation (GDPR) started in Europe in 2018. This law mandates that businesses must get clear consent from individuals before using their personal data. Users need to give their explicit agreement to a company to use their data when they sign up for a product or service.
The GDPR requires businesses to be transparent about their data usage. They must inform individuals about the data collected, the purpose of collection, and the duration of storage.
Users may access their data, request corrections, or ask for data deletion under the under GDPR's Legitimate Interest Clause. Businesses must facilitate these rights and also ensure robust data security. Lead generation companies need to comply with these aspects of the GDPR to avoid legal issues and data breach penalties.
2. CAN-SPAM Act
The Controlling the Assault of Non-Solicited Pornography And Marketing (CAN-SPAM) Act of 2003 is a US law that sets guidelines for email marketing.
Businesses using email marketing don't need prior permission to send emails. However, if someone wants to stop receiving these emails, the business must include an easy opt-out option and honor it promptly within 10 days. This ensures that recipients can easily stop unwanted emails.
Email content under CAN-SPAM must be honest. Companies must not use misleading subject lines and should clearly mark their emails as advertisements. They must also include the business's physical postal address to ensure transparency. Companies should follow these rules even if they outsource email marketing. Non-compliance can lead to fines.
3. Telephone Consumer Protection Act (TCPA)
The Telephone Consumer Protection Act (TCPA) of 1991 is a U.S. law that protects people from unwanted marketing communications. Businesses are mandated to obtain explicit permission from individuals before sending marketing calls or texts, especially if they are automated. This permission must be explicit and cannot hide in fine print.
The TCPA respects the National Do Not Call Registry. This means businesses cannot call numbers on this list for marketing unless they have a prior relationship with the individual or have received explicit consent.
There are also rules for when businesses can make marketing calls. The TCPA limits marketing calls to between 8 a.m. and 9 p.m. local time of the recipient. Callers must also identify themselves, stating their name, the business they represent, and their contact information.
4. Fair Credit Reporting Act (FCRA)
The Fair Credit Reporting Act (FCRA) is crucial for lead generation businesses if they get an individual's credit information, like credit scores or financial history. This law was enacted in 1970 to ensure that a person's financial information is used responsibly by a third party.
Under the FCRA, businesses must have valid reasons to use someone's credit report. For instance, if the person gave them permission to make special offers based on their credit score.
Businesses are required to maintain the accuracy of credit information and keep it secure. It's the business' responsibility to correct any errors and safeguard this sensitive data from unauthorized access.
5. Real Estate Settlement Procedures Act (RESPA)
The Real Estate Settlement Procedures Act (RESPA) of 1974 provides consumers transparency in real estate transactions so buyers and sellers understand all the costs involved.
Under RESPA, unfair referral fees are not allowed. Real estate agents, brokers, and companies can't pay or receive payment just for referring a client unless they provide a real service. This stops lead generation services from paying for referrals if they're not adding value to the business.
RESPA is also strict about secret payments or kickbacks in real estate transactions. This means businesses can't have under-the-table deals for exchanging leads. Following RESPA to avoid legal issues ensures that all fees and costs are openly communicated, and no illicit payments are made.
Is It Legal to Sell Leads?
Yes, it's legal to sell leads as long as you follow specific regulations and ethical guidelines. Compliance with data protection laws like the GDPR in Europe and the CAN-SPAM Act in the US is important in running a legal lead generation business. These laws mandate getting explicit consent from individuals for the use of their personal data. It requires businesses to be transparent about their data collection and usage practices.
Is It Illegal to Buy Leads?
No, it’s not illegal to buy leads if the process complies with relevant data protection and privacy laws. These laws ensure that businesses acquire leads lawfully and with the consent of potential customers. The legality also depends on the source of the leads and their ethical acquisition. You need to ask your lead generation service about their methods to make sure they respect individual opt-out requests and avoid deceptive practices.
How to Perform Lead Generation Legally?
1. Build a Compliant Opt-In Process
Creating a compliant opt-in process involves clear communication and respect for user privacy. Start by designing your sign-up forms to specify what subscribers are opting into. Separate the opt-in consent from other agreements, so it's clear to users that they're agreeing to exchange their data.
Use double opt-in methods. This is where a user must confirm their subscription via email, which serves as an additional verification of their intent and interest.
2. Obtain Explicit Consent
Gaining explicit consent means that users are fully aware of what they're agreeing to. Your consent form should be free from complex terminology. Outline the user's consent to collect and use their personal information.
Users should be able to choose which types of communication they wish to receive. Acknowledge their right to withdraw consent or opt out at any time.
3. Transparent Data Collection and Processing
Transparency is key to building trust with users. It is important to be upfront about the personal information you collect, how you will use it, and who you will share it with.
This information should be provided at the data collection point, such as in the privacy notice or directly on data collection forms. Update these disclosures as new data processing activities are introduced or as laws change to maintain transparency.
4. Regularly Update Privacy Policies
Keep your privacy policy current by reviewing and revising it to reflect any changes in data protection laws or your data practices. This document should be easily accessible to users. Changes should be communicated through website updates or direct notifications.
Follow geotargeting restrictions if you're using local lead generation so you stay within your target area. Conducting regular marketing data audits also helps.
5. Stay Informed About Changes in Regulations
Seek information and updates related to data protection laws. This can involve subscribing to legal newsletters, attending webinars, and engaging with professional networks. Keeping ahead of these changes helps your lead generation practices remain within legal bounds.
Case Studies: 3 Real Examples of Illegal Lead Generation
Example #1: ITMedia
ITMedia Solutions LLC was involved in illegal activities by soliciting consumer loan applications and sharing their sensitive personal information to companies who were not making loans. This conduct violated the Fair Credit Reporting Act (FCRA).
The company has agreed to pay a $1.5 million penalty to settle the Federal Trade Commission (FTC) charges in 2022. The settlement also imposes strict limitations on how ITMedia can handle and distribute consumer data in the future.
Example #2: HomeAdvisor
HomeAdvisor settled with the Federal Trade Commission (FTC) for $7.2 million in January 2023 over allegations of using deceptive and misleading tactics to sell home improvement project leads to service providers.
The FTC claimed that HomeAdvisor falsely promised service providers with leads that matched their services and preferred geographic area. It misled them about how often leads would convert into paying customers. There were also misrepresentations regarding a free one-month help desk subscription. This settlement is part of the FTC's broader initiative to protect individual consumers and small businesses in the gig economy.
Example #2: Fluent
Fluent LLC and its subsidiaries allegedly used deceptive promotional offers like Amazon and Walmart gift cards to collect personal information from consumers. Fluent then sold this data to telemarketers. This led to millions of unwanted telemarketing calls to Pennsylvania residents, some of whom were on the "Do Not Call" registry.
Fluent LLC was ordered to pay $250,000 to the Office of the Attorney General. The company must adhere to several restrictions to prevent future violations, including a prohibition on selling data that would result in pre-recorded messages to consumers.
Is Lead Generation Legit?
SUMMARY
Yes, lead generation is legit. This business model uses targeted outreach to find prospects who are interested in a product or service. Lead generation companies make $5 to $1,000 for every lead. Ranking and renting a lead gen site can earn you $500 to $2,000 per month. Many online entrepreneurs use lead generation because it's a recession-proof business with consistently high demand.
How Does Lead Generation Work?
Lead generation works by identifying potential clients for a business. Lead generation companies collect information from potential customers interested in a particular service. These companies use methods like online marketing, advertising, and outreach programs to attract prospects. Once they gather information like contact details or specific interests, the lead generation companies categorize and qualify these leads based on how likely they are to purchase. The lead generation companies pass on this information to the business, who then reach out to these potential clients with targeted marketing efforts to convert them into paying customers.
What are Common Lead Generation Methods?
The common lead generation methods are:
What is Legal Lead Generation?
Legal lead generation is a business model that introduces potential clients to legal services. Law firms do this through SEO, which helps them show up when prospects search for legal help online. SEO is just one version of legal marketing. Legal marketing is the process of promoting a legal service to potential clients, and can also include paid advertising and website optimization. After all, according to Juris Page, 94% of law firms in the US have a website but most of them are not user-friendly for potential clients.
All of this is done to produce legal leads. A legal lead is a person or entity that has shown interest in the legal services offered by a law firm. Generating legal leads is important since 1/3 of potential clients start their attorney search online. Therefore, 65% of law firms spend most of their marketing budget online, according to Clio.
What Challenges Do Lawyers Face with Lead Generation?
Lead gen websites for lawyers don't violate the rules, but they must adhere to strict ethical and legal standards. The American Bar Association and state bar associations sets rules to ensure public protection against misleading legal information and maintain the integrity of the lawyer-client relationship.
Law firm websites must avoid direct solicitation, misleading endorsements, or guarantees about legal outcomes. Transparency about the qualifications of the listed lawyers is also important. Issues can arise if the website implies an endorsement or the referral system involves payment per client lead, which might be unethical unless approved by a state bar association.
What is Rank and Rent Lead Generation?
Rank and rent lead generation is a digital marketing strategy where you create and optimize a website for local search results. You rank the website in search engines and then rent it out to businesses looking for leads in that specific area.
This process uses search engine optimization (SEO) to attract visitors searching and then leasing the website's visibility and incoming traffic to a local business. It's a unique approach in lead generation that provides businesses with direct access to prospective clients actively searching for relevant local services. The site creator earns passive income from renting the website.
Is Rank and Rent Legal?
Yes, rank and rent is legal if it adheres to general legal principles of honesty and transparency in business. The strategy involves creating and ranking websites in search engine results for specific local services and renting out the site's visibility to local businesses. It's important to include website disclaimers and avoid niches requiring special licenses. The key is to use the rank and rent model in a straightforward and ethical way, providing a genuine service to both the website renters (local businesses) and the end-users (consumers seeking local services).
What are Some Rank and Rent Courses?
Some rank and rent courses are:
What are Good Rank and Rent Niches to Avoid Legal Issues?
Some good rank and rent niches to avoid legal issues are air duct cleaning, appliance repair, asphalt driveways, autoglass, and auto window tinting. These niches are usually less regulated and don't require special licenses, so they're suited for rank and rent strategies. These services have consistent consumer demand and are sought after in local searches. They attract a steady flow of leads without the complex legal requirements of highly regulated industries like healthcare, banking, and construction.
Which Type of Legal Lead Generation is the Best Way to Make Money Online?
Local lead generation is the best way to make money online in legal lead generation. This approach offers several advantages, such as the potential for passive income, scalability, and beginner-friendly. Local lead generation allows you to target specific geographic areas, reducing competition and increasing the relevance of the leads. Starting this business model requires minimal upfront expenses and can be gradually scaled. It's an accessible business model even to those new to online business. The passive income aspect comes from building and ranking websites that consistently generate leads, which can then be monetized through partnerships with local businesses.
A local lead generation agency focuses on generating leads for businesses within a specific geographic area. This model involves creating websites or using digital marketing strategies to attract potential customers in a particular locality. The agency then directs these leads to local businesses for a fee, helping these businesses connect with potential customers who are actively seeking their services.
It takes a few weeks to a month to make money from lead generation. It depends on factors like the niche, the effectiveness of your SEO strategies, and the demand for the services in the chosen locality. Building a successful lead generation site can take several months, but once it ranks and starts generating leads, it becomes a stable source of income. You can earn $500 to $2,000 per month from a rank and rent site with local lead gen. Consider local lead generation if you want to make money online.
Ippei, I'm taking a course in local lead gen right now and while searching for ways to get a Google My Business address in another city, I came across a Google blog that says people who sell local leads are basically scammers. I will post the link so you can read it in its entirety, but here's part of what it says:
"But occasionally, business scammers take advantage of local listings to make a profit. They do things like charge business owners for services that are actually free, defraud customers by posing as real businesses, and impersonate real businesses to secure leads and then sell them."
https://blog.google/products/maps/how-we-fight-fake-business-profiles-google-maps/
You said that "The key is to use the rank and rent model in a straightforward and ethical way, providing a genuine service to both the website renters (local businesses) and the end-users (consumers seeking local services)."
But I don't see how that's possible, especially since the rules regarding Google My Business state that you have to either have a storefront customers can visit or you have to be a business that travels to the customers' location. They don't let lead sellers create local business listings. Would you mind discussing this issue in one of your upcoming blogs? Because I don't want to break their rules and get sued by them. Thanks! P.S. Love your blog posts and YouTube videos!
Hey, Julie. If you don’t want to play in the grey zone, then you don’t have to build a Google map listing to get leads. You can be like yelp, just rank a website and generate leads if you want. But I will say we have a method of getting map listings without getting in trouble from Google for the last 10 years.