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Question: We have an affiliate marketing program. Recently, we had it evaluated by a risk management firm such as yours. In the findings, we learned that our policies and procedures did not account for how to establish and identify pre-existing business relationships. What is a pre-existing business relationship in an affiliate marketing program?
A “pre-existing business relationship” with a consumer is given an exemption in an affiliate marketing program, where the parties to the relationship are a person (i.e., entity) or a person’s licensed agent and a consumer, based on the following requirements:
1. A financial contract between the person and the consumer that is in force on the date a solicitation covered by the affiliate marketing provisions is sent to the consumer;
2. The consumer’s purchase, sale, or lease of the person’s goods or services, or a financial transaction (including holding an active account or a policy in force or having another continuing relationship) between the person and the consumer during the eighteen-month period immediately preceding the date a solicitation covered by the affiliate marketing provisions is sent to the consumer; or
3. An inquiry or application by the consumer regarding a product or service offered by the person during the three-month period immediately preceding the date a solicitation covered by the affiliate marketing provisions is sent to the consumer. [16 CFR § 680.3(j)]
Take note, also, that affiliate marketing program rules of the federal financial regulators, as well as the FTC, contain examples of when there is and when there is not a pre-existing business relationship.
Jonathan Foxx is president and managing director of Lenders Compliance Group, Brokers Compliance Group, Servicers Compliance Group and Vendors Compliance Group, national companies devoted to providing regulatory compliance advice and counsel to the mortgage industry. He may be contacted by phone at (516) 442-3456, by e-mail at JFoxx@LendersComplianceGroup.com or visit LendersComplianceGroup.com.