A consent farm is a website that is designed only to gather personal information, which is then sold as leads to third party businesses. The business concept is not illegal, but how such a model is executed may be.
Response Tree provides a good lesson on activities to avoid in this type of business. Its business crash burned, and the FTC referred its final order on the matter to the DOJ on January 2, 2024, which included a $7 million judgement.
Response Tree operated more than 50 websites offering to provide quotes for mortgage refinancing, in exchange for consumers’ consenting to receive marketing call from third parties. Hence, the reference to “consent farm.” Such a business model, if done correctly, is 100% legal.
Response Tree was selling an average of 10,000 leads per day, and on occasion 50,000 leads in a single day.
However, here’s where Response Tree went off the rails:
- The lead information was often not used for providing refinancing quotes, but instead was sold to companies offering a myriad of different products, such as solar panels, hearing aids and extended auto warranties.
- The consent that Response Tree obtained was defective under the Telemarketing Sales Rule (TSR) and therefore did not qualify for making marketing and robocalls to numbers on the National Do-Not-Call Registry.
- Response Tree sold some lead data, representing that it was obtained on its websites, but was actually obtained elsewhere and repurposed to appear like lead data from its websites.
- The button that Response Tree sites used in conjunction with allegedly obtaining consumer consent read “Get Your Fast Free Quote” which does not seem to provide required express consent.
- The websites woefully failed to obtain express consent for reselling the consumer information for a wide variety of products from third parties.
- The approach of Response Tree falls under the category known as “dark patterns” that basically serve to confuse and dupe a consumer to provide consent.
- The actual “disclosures” on the site were in “small text that was barely legible to the naked eye” and included hyperlinks that led to multiple documents with more confusing and inconsistent terms.
- Response Tree misrepresented to the buyers of these leads that it had obtained valid consent for the consumers to be contacted via pre-recorded messages.
The bottom line is that consent for use of consumer information needs to be clear and conspicuous. The TSR requires that “the seller has obtained the express agreement, in writing, of such a person to place calls to that person. Such agreement shall clearly evidence such person’s authorization that calls made by or on behalf of a specific party may be placed to that person, and shall include the telephone number to which the calls may be placed and the signature of that person.” 16 C.F.R. § 310.4(b)(1)(iii)(B)(1).
It’s interesting to note that there is no mention of action taken against the third party marketers. Even though Response Tree represented to the buyers that it had obtained consent, the FTC could hold third party marketers responsible for not doing some reasonable due diligence to verify the veracity of such representation, especially when it is possible that many consumers may have responded to the third party marketers that they never gave such consent.
The proposed order bans Response Tree and its owners from making or assisting others to make telemarketing robocalls and from selling consumer lead information. The order imposes a judgement of $7 million on the defendants, which is suspended due to the defendant’s inability to pay based upon financial information provided. So it appears, that when all is said and done – you see that crime does not pay.