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FTC Ad Lawyer Authors Article on Lead Generation Compliance for National Law Review

FTC Settlement Includes Lead Generation Compliance Warnings


The FTC recently announced a $30M settlement with an operator of several post-secondary schools to resolve charges of deceptive lead generation activities.  Lead generators and those that purchase leads from them should take note of their compliance responsibilities.

The Allegations


According to the FTC, Career Education Corporation, American InterContinental University, Colorado Technical University and related defendants alleges they used illegal game plans to lure consumers to their post-secondary and vocational schools.  The FTC alleges that lead generators duped consumers into divulging personal information under false pretenses on bogus websites and via telemarketing.

The FTC says CEC should have known that the leads had been acquired through deception.  The agency says that companies cannot just turn a blind eye to their lead generators’ practices.  And the complaint says that CEC did – or didn’t do – much more than that.

For example, the FTC says that CEC did not alter the fundamentally deceptive misimpression that the sites were for military recruiting or employment.  And the FTC alleges CEC even approved telemarketing scripts that included flat-out falsities – for example, scripts that told telemarketers to identify themselves in voicemail greetings as working at “Military Verification Services.”

The complaint charges that the illegal tactics persisted during the calls.  The lawsuit alleges they used high-pressure sales tactics to get consumers to enroll in its schools, even when the school did not offer the course of study the person wanted to pursue.

The complaint against CEC alleges violations of the FTC Act for numerous alleged misrepresentations made by the company’s lead generators.  In addition, the lawsuit challenges multiple violations of the Telemarketing Sales Rule, including calling numbers on the National Do Not Call Registry.

In addition to a $30 million financial judgment, the settlement requires CEC to review materials that lead generators use to market on its behalf and to refrain from using or buying leads that were obtained illegally.

Proactive Compliance Monitoring


The settlement is a reminder for companies that extract personal information from consumers under false pretenses and then sell that data as leads.  The CEC settlement focuses on businesses that use those leads.  The case illustrates the importance of monitoring what others – including lead generators – are doing on your behalf and the need to respond forcefully in the face of misleading claims or conduct.

Advertisers should take the lead in ensuring the leads they use weren’t the product of deception, including, without limitation, implementation strong lead vendor management systems, ensuring that disclosures comply with FTC advertising compliance requirements, bolstering marketing contracts and solidifying recordkeeping/audit protocols.

This article was originally published in National Law Review, August 30, 2019.  See the original here. 

Richard B. Newman represents digital marketers in advertising substantiation proceedings and investigations conducted by the Federal Trade Commission and state attorneys general.

Informational purposes only. Not legal advice.

Please contact us at (212) 756-8777, via email to [email protected] or via our Online Case Submission Form.    

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