The industry blasting your phone with spam calls and texts is about to implode

If you’ve ever shopped for car or health insurance or compared credit-card rates, there’s a good chance the form you filled out didn’t actually belong to a big insurance company or bank. 

You likely fed your data to a “lead generator,” part of a sprawling, opaque network of companies and individuals that rake in billions of dollars a year by selling your data to the highest bidder. Sometimes that bidder is a major bank or insurer, but more often it’s an intermediary who, thanks to America’s loose privacy rules, can sell it to any number of buyers. That often leads to consumers receiving dozens or even hundreds of unwanted calls and solicitations.

For years, the FCC resisted calls from consumer advocates to strengthen its rules around lead generation, but last year, that changed. The agency released new guidelines on what marketing companies are allowed to do with the data they collect, placing liability on not only lead buyers but the generators themselves. 

As the industry braces for the rules to take effect next year, Americans could soon see a precipitous drop in the number of calls and spam texts they get.

How those forms turn your info into money

Every major seller of mortgages, insurance, and other consumer services has its own marketing department and spends big on advertising. But for years many of those companies have depended on another group of businesses to fill the top of the marketing funnel with lots of lower-quality leads. When Rocket Mortgage or Progressive Insurance, for example, need data to keep their call centers busy, they might contract with companies like LendingTree, NerdWallet, or Everquote.

These lead generators may advertise under their own brands, but their business models often depend on selling data to bigger brands. Advertising in a crowded market like insurance or mortgages can be expensive, so lead-generation companies turn to even smaller affiliates — brokers who are willing to sell them consumer data at cut-rate prices.

To give a sense of just how cheap these brokered leads can be, it may cost $20 or more to acquire a customer via social media or search advertising, whereas third-party brokers often sell leads for pennies on the dollar. At those prices, lead buyers ask few questions about the data’s provenance.

Fluent, one of the largest lead brokers, was sued in 2023 for running what the government called a “massive ‘consent farm’ enterprise” to collect nearly 1 million leads a day, which it sold to dozens or hundreds of buyers. The complaint said Fluent created thousands of fake websites advertising free services, job and housing opportunities, and other misleading offers. Once it had consent via a single checkbox on its website, Fluent sold the data to buyers hawking a wide array of unrelated goods and services.

The FTC estimated that Fluent sold more than 620 million leads in just under two years. It was one of dozens of companies collecting and buying lead data from across the internet, selling it on to some of the country’s biggest brands, and earning billions of dollars in the process.

In the settlement, Fluent was forced to delete all the consumer data it had collected over nearly a decade, as it was unable to prove consent to the FTC’s satisfaction on any of it. The agency also took the extraordinary step of warning any company that had bought data from Fluent to delete it, or face possible legal liability. 

This was an open admission from one of the biggest lead generators in the market that it had sold billions of leads in violation of the law. Fluent’s share price was over $30 in 2019, when the FTC alleges it was generating millions of leads with misleading advertisements. It is now below $4, after last year’s FTC settlement and with the FCC’s new rules looming at the end of the year.

Fluent and Everquote didn’t respond to requests for comment. 

Under the new FCC rules, a customer must approve each specific company that uses their data for marketing purposes. For instance, someone seeking a quote for car insurance would not only have to consent to being contacted by Progressive, but also Nationwide, Geico, and any other brand a lead generator might sell to. Businesses like Fluent can no longer opt consumers in to receive calls from a dozen companies with a single checkbox.

Additionally, a customer’s data can be used for only “logically and topically” related marketing, meaning that a request for auto insurance cannot be sold to debt or credit services, home warranties, or any unrelated products. 

The FCC also said SMS texts would now be treated the same as phone calls, including them in the “Do Not Call Registry,” to cut down on the number of unwanted texts from marketers who don’t have explicit consent. 

Here come the lawsuits

While the FCC has the ability to block unwanted spam at the carrier level, most enforcement against illegal use of lead data happens through lawsuits filed by private plaintiffs under the Telecommunications Consumer Protection Act (TCPA). Each instance of an unwanted call or text carries a fine of between $500 and $1,500, and there’s no cap on potential damages, meaning each additional call and text can ratchet up liability. One suit in 2015 netted a woman more than $200,000 for a barrage of robocalls. 

Filing such lawsuits has been difficult because it forced plaintiffs to work with lawyers to trace the source of each spam call, interrogate call-center representatives, and decipher who’s behind each call or text.

Thomas Alvord founded LawHQ in 2019 after a career in law and marketing. Unlike many TCPA-plaintiff lawyers who seek individual cash settlements on behalf of their clients, Alvord says his firm is “focused on stopping telephone spam,” much of which he says comes from a small number of bad actors.

“The majority of the top 15 SMS spammers are in the US,” Alvord said, in reference to a common belief that much of the uncontrolled telemarketing spam is from offshore entities able to dodge US regulations. Alvord believes these US-based text spammers account for about 50 billion unwanted SMS messages a year, or half of all spam SMS messages sent.

“A large portion of unwanted telephone spam is from ‘consent farms’ that sell data to hundreds of companies,” Alvord said. “We focus on the large firms.” Unlike many robocall- and SMS-blocking apps, LawHQ developed a reporting system through its app to allow its team of lawyers to research the spammers and the companies buying from them. 

Class actions against companies like Rocket Mortgage, Discover, and DirecTV have resulted in tens of millions of dollars for plaintiffs and their attorneys. Lead providers like Fluent, which have operated for years in a legal gray area, will now face the same vulnerability to class actions as their buyers.

The new rules mean lead buyers will no longer be able to plead ignorance or shuffle legal liability down to the marketers they buy from. It will give TCPA lawyers seeking individual or class complaints new tools to bring suits and assess damages. It will fundamentally change how companies regard lead generation as a marketing channel.

Currently, companies can pay TCPA settlements in the single-digit millions because the rules are unclear and the burden of proof is higher on plaintiffs. Next year, these same companies could theoretically face billions in legal liability if they don’t take decisive action to verify the leads they buy.

Where do lead generators go from here?

Two former Everquote employees I spoke with, who requested anonymity, described an internal team set up to deal with the challenges of the FCC guidance, and believed the company was taking the matter seriously. “They think it’s a win-win,” one former employee said. “If we take out a lot of the reselling, the hope is that carriers will be willing to pay more, and customers will have a better experience if they are only contacted by the carriers they want to do business with.”

The same employee estimated that the largest sellers in the space depend on third-party sources for up to 75% of the leads they sell to end buyers. For companies that bring in billions a year in lead generation, that’s a huge blow, potentially in the eight- or nine-figure range.

It remains to be seen whether lead generators can remain viable as businesses while adjusting their models to account for increased scrutiny on the integrity of their data. There’s no guarantee insurance carriers and credit-card companies will pay more for leads following the FCC guidance. End buyers of leads will also be forced to assign additional compliance and legal resources to inspect their relationships with lead generators.

“If that happens,” one former employee said, referring to the increased costs without an accompanying increase in the value of verifiable lead data, “it’s going to impact a large portion of the business of all these major lead generators.”

Lead generators with strong business relationships may survive, but the industry’s dependence on cheap leads without clear consent may soon be untenable. The buyers of cheap leads, too, will have to restructure their marketing plans to account for the loss of these data sources.

One winner will likely emerge: the American consumer. If Alvord’s prediction is correct and many US-based phone and text marketers are hobbled by the rule changes, our phones may get a welcome respite from what feels like a fire hose of spam over the past few years.

Colin Sholes is an entrepreneur who has worked in advertising and marketing. He writes A Scammer Darkly, a weekly newsletter about scams and fraud.