Legal Compliance & Regulatory Requirements for Lead-Generating Businesses

4 min read
6/10/24 12:46 AM

The most successful companies maintain full sales pipelines at all times, actively courting and nurturing leads. In fact, lead generation is so pivotal that it has become an industry unto itself. Those who are gifted in sales and digital marketing may consider launching lead-generation businesses of their own.

As with any industry, lead generation comes with its share of legal requirements. First and foremost, starting a lead generation business means choosing a particular legal structure; for example, you may choose to launch an LLC in Texas or simply operate as a Sole Proprietorship.

From there, there are plenty of other laws and regulations that lead-generation businesses should be aware of. In this post, we’ll take a closer look at the nature of legal compliance as it applies to this industry in particular.

Which Regulatory Bodies Oversee Lead Generation?

To begin with, it may be helpful to have a basic sense of how expansive the regulatory environment is. There are a number of regulatory bodies that have jurisdiction over lead gen, including:

  • Federal Trade Commission (FTC)
  • Consumer Financial Protection Bureau (CFPB)
  • Office of the Inspector General (OIG)
  • State-level financial service regulators

When launching a lead generation business, it’s vital to understand the high level of scrutiny you’re under, making regulatory compliance a top priority.

What are Some of the Top Regulatory Concerns Facing Lead Gen Businesses?

That brings us to some specific laws and regulations that might affect businesses in the lead gen sphere. Consider just a few of the most prominent, noteworthy examples.

Privacy Laws

Lead generation is all about harvesting information from potential customers and clients. Naturally, this gets into some of the current conversations regarding online data privacy, security, and consent.

Today’s lead generation companies must follow the lead of big enterprises like Apple and Google, opting for information tracking programs that don’t rely on “cookies” or other non-consensual third-party data aggregation tools. A general knowledge of online privacy and piracy laws is important, too.

Child Protection

Beyond a general awareness of online privacy concerns, lead-generation businesses should pay special attention to any potential interactions with minors.

To provide just one example, the Children’s Online Privacy Protection Act (COPPA) requires lead generation companies to post privacy notices on their websites, and to ensure that they maintain parental consent before collecting any personal information from kids or adolescents.

Vigilance when it comes to children’s privacy and protection is a huge concern for lead gen companies everywhere.

Laws Concerning Testimonials

Lead generation companies operate under scrutiny from the FTC, which means they are bound by the commission's online advertising guidelines. In particular, lead generation businesses should know about the FTC’s stipulations regarding consumer testimonials and product claims.

Basically, any product claim must be substantiated with clear research and data. And for any consumer testimonials used, it’s important to seek written approval from the client in question.

Lead generators naturally want to highlight the value of the product or service they are offering, yet it’s critical to do so in an honest, ethical, and legally compliant fashion.

Email Compliance

Much of the work done by lead generation companies is conducted via email, which introduces a whole new set of regulatory issues.

For example, lead gen businesses must be careful to comply with the CAN-SPAM Act, which basically means that customers should always be given a clear option to unsubscribe from email lists they’re on. This applies not just to bulk emails but to any marketing emails that are sent.

In addition, marketing or lead gen emails must always provide clear and accurate subject lines, as well as a valid physical mailing address.

This is just one example of the types of email-specific laws under which lead generation companies need to operate.

Affiliate Nexus Tax Laws

Also note that many states have passed some version of a nexus tax law, sometimes known as an Amazon tax law. Basically, these laws can compel online retailers to collect sales taxes from in-state customers.

These pseudo sales tax laws can apply to affiliate sales, which can directly impact those working in the lead generation field. It may be valuable to talk with a tax attorney to ensure full compliance with these regulations.

What are the Best Ways to Maintain Legal Compliance?

There are obviously a lot of regulations for lead generation companies to bear in mind, and this list is just a sampling. This raises a question: What practical steps can companies take to erect legal protections?

Consider a few basic recommendations:

  • Seek the guidance of a business attorney. Given the volatility of the regulatory environment and the high stakes for lead generation companies, it’s wise to consult with an experienced attorney before setting up shop.
  • Avoid buying leads. Many of the FTC’s guidelines boil down to the issue of buying versus earning To avoid any issue, it’s best to always avoid acquiring leads through any kind of duplicity.
  • Choose the right legal structure. For most lead gen companies, the LLC structure is the safest solution, as it provides personal liability protections that can keep your personal assets safe from any legal peril.
  • Stay up to date. Finally, make sure you remain vigilant about any new or amended laws that could affect the industry. The regulatory environment is ever-changing, and to avoid unforced errors, it’s wise to do some ongoing due diligence.

For Lead Generation Businesses, Regulatory Compliance is Key

Lead generation companies face intense legal scrutiny, but with the right strategy and the best advisors, it’s possible to remain fully compliant. Make sure you have the right legal safeguards in place for your lead gen company.

Author Bio

Amanda Clark

Amanda E. Clark is a contributing writer to LLC University. She is a graduate of Eastern Michigan University and holds degrees in Journalism, Political Science, and English. She became a professional writer in 2008 and has led marketing and advertising initiatives for several Fortune 500 companies. She has appeared as a subject matter expert on panels about content and social media marketing. She regularly leads seminars and training sessions on trends and tactics in professional writing.

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