The provision of mortgage leads over the internet is big business for lead generation companies. Much has been written about these companies and their activities but there are some basic principles to remember when looking to buy mortgage leads. The first thing to consider is that selling leads is not a regulated activity but the promotional activity required to generate them is. This promotional activity comes under the terms of the Financial Promotions Order.The financial promotions regime is complex and the definition of a financial promotion is wide. The regulations are there to ensure promotional material is fair and transparent for consumers. They apply to all promotions including off the page, direct mail and the internet. Virtually any form of mortgage marketing is caught and the rules apply to all methods of promotion in the same way. But only directly authorised entities can issue financial promotions or approve them. Networks are responsible for the promotions of their appointed representatives. Unregulated lead generating operations must have their promotions approved by a regulated entity. The most difficult area is the promotion of adverse or sub-prime mortgages. Under MCOB 3.6.17 and MCOB 3.6.23, a company must ensure that if a financial promotion makes reference either explicitly or implicitly to the availability of credit for customers who might otherwise consider their access to credit restricted, the promotion must carry an APR and that APR must be at or below which at least 66% of customers responding to the promotion would be charged. This makes it difficult to produce a compliant promotion targeted at enquirers who have had difficulty obtaining a mortgage due to County Court judegments, arrears and defaults. The intention behind this regulation is to protect a vulnerable group from being enticed by promotions that promise a low APR but don’t deliver. For an intermediary or a lead generator it presents a difficulty in promoting the marketing message to their target group. If an unauthorised introducer uses a financial promotion to persuade or incite somebody to contact a particular authorised person for mortgage services, this will also be caught by the Financial Promotions Order. It will depend on the type of promotion, what it says and the context in which it is presented, but a breach of the regulations is a criminal offence and any transactions entered into as a result of an unauthorised promotion may not be unenforceable. Potential borrowers also have to know in advance who will be contacting them and will have to give their approval for the call or this will fall foul of the ban on cold calling. In the light of this it may be better for some intermediaries to consider building their own internet sites and using the same techniques to drive traffic to their sites that the lead generators do, such as pay per click and website optimisation. I will be returning to this subject in the coming months.
Frank Eve is Managing Director, Frank Eve Consulting