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Lead generation liability to hit brokers harder ahead of Consumer Duty

  • 03/10/2022
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Lead generation liability to hit brokers harder ahead of Consumer Duty
The lead generation market is under the spotlight ahead of new rules from the regulator that are set to shift more responsibility on to brokers for dubious data collection.

Finding business is part and parcel of a broker’s role, but it can be a minefield when using third parties.

The Financial Conduct Authority’s (FCA) Consumer Duty takes effect from next year and requires regulated firms to consider the needs and objectives of customers “at every stage of the customer journey”.

The mortgage journey starts for a consumer at the point of contact with a lead generator, and not necessarily when they first start talking to a broker.

There are many reputable lead generation companies that pass on quality leads to brokers.


‘Cowboys’ roping in leads

However, sources told Mortgage Solutions of ‘cowboy’ firms that collect lead information using misleading advertising.

For example, they may tell clients they can get a mortgage for which they ultimately wouldn’t be able to qualify.

For brokers who follow up and call consumers that were not expecting the call could be breaching rules.

Alain Desmier is managing director at Contact State. The firm aims to help lead buyers gain more oversight on where their leads are coming from and what they have consented to.

A broker should understand the source of every lead in every conversation, Desmier said.

But he is concerned that lots of lead generation firms sit offshore and therefore escape the remit of the FCA and Information Commissioner’s Office (ICO).

In some cases, he said consumers believe they are using mortgage calculators only to have their data harnessed.

He stressed that brokers are liable for where their lead came from and the messaging they have received.


‘Low quality leads’

Mark Robinson, managing director at Albion Forest Mortgages, described how he tried lead generation firms when starting his company.

He said: “The leads would be low quality, mostly due to the customer not expecting a call from you, as they didn’t enquire with you.”

And Gaurav Shuk, sales manager at, said he often gets automated messages from lead generators through LinkedIn but these leads are usually of poor quality.

Rhys Schofield, managing director of Peak Money, believes lead generation is a “mucky side of the industry that needs clamping down on”.

He added: “The amount of misleading ads on social media promising rates that don’t exist or pushing debt consolidation on to people is scary. God help the clients or brokers who are that desperate that they’re buying sketchy leads from iffy places on the internet. There is no reason I can think of that anyone non-regulated should be talking about regulated business.”


Do your diligence

Aside from the FCA turning the screw on this area of the market, financial advertising and lead generation is a high priority for the Advertising Standards Authority (ASA), which is seeking to crack down on false or misleading adverts. In some cases, buyers can be held accountable for the actions of lead generation firms.

The ICO are also focusing on lead generation and making sure that buyers have done due diligence in looking at where data has from, according to Desmier.

He pointed out there could be extra pitfalls within the equity release market where there are more vulnerable customers.

His firm Contact State gives buyers verification and a screen shot of where leads have come from – the cost works out at about £1-£2 a lead.


Cheaper and better ways to find clients

However, buying quality leads is typically one of the more costly ways of drumming up business. Critics say they are other cheaper and better ways to find new clients.

Emma Hollingworth, distribution director at MPowered Mortgages, said: “Lead generation from a web point of view is really expensive – the customer may have visited three of four sites – each capturing data and passing leads. This could mean the customer ends up getting called four times.”

She added: “If you’ve got your back book and are doing the right thing by those clients, it’s the least expensive and best conversion you’re ever going to get.”

Broker Mark Robinson said: “It may be slower, and require more effort, but generating local leads yourself either directly or via an introducer will always be a better lead source, and as you generate them they will in turn generate more through referrals.”

Gaurav Shuk said in many cases high lead costs means it makes sense for businesses to spend the money on their own advertising to raise brand awareness.


Staking your reputation

A spokesperson for the ICO said: “Often we find that data purchased from lead generation firms has not complied with appropriate privacy regulations and therefore the data is not fit for purpose.

“Organisations that wish to purchase data, to be used for electronic marketing, should carry out sufficient due diligence into the company it is sourcing the data from as well as assessing where the suppliers themselves have sourced the data from and the people behind those businesses.

“This may include looking at privacy policies and consent notices that are provided to individuals when their data is being collected, as on some occasions, the individuals are not told exactly what their data will be used for, by whom and for how long.

“All these factors would assist an organisation to determine whether or not it is worth their own business reputation to use data collected by these firms.”

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