Wave Internet Leads Good-Bye

The FCC rules apply to all lead publishers, like LendingTree, Credit Karma, Money.com, and other comparison shopping sites. They also apply to all lead-buying businesses using auto-dialers for robo texts or robocalls. However, the new rules are not applicable to trigger leads sold by the major credit bureaus, Experian, Transunion, and Equifax. Still, trigger leads are threatened with extinction if Congress passes the final version of the National Defense Authorization Act (NDAA), which contains a bill to ban their use.

Experts in digital marketing, lead generation, and TCPA compliance are concerned that the new rules will disrupt lead economics in a major way. In anticipation that consumers won’t spend the extra time consenting to many lenders, the experts are forecasting a significant reduction in lead supply as an inevitable consequence of one-to-one consent.

Michael Eshelman, founder of Next Percent, a mortgage consulting company, said “When [consumers] have to select which individual lenders they wanna speak with, we’ll find out, are they going to select lenders that they have heard of before? Are they going to decide not to select anyone? Because now it’s just another hurdle that they have to cross.”

Not only must consumer consent be given individually, but exclusively, too. That means the lead buyer cannot resell a lead to any other person or company — a common practice in the industry.

Other requirements under one-to-one consent are that all calls between the lead buyers and consumers must be “logically and topically” related to the transaction that prompted consent. Also, lead buyers are required to maintain documentation of the consumer’s consent and cannot rely on lead publishers to maintain it, adding to their compliance burden. To boot, the new rules extend the Federal Do Not Call (DNC) registry protections to text messages.

“This is a big deal and is going to have a major impact on mortgage lending and advertising,” wrote Josh Friend, founder and CEO of InSellerate, in a LinkedIn post. “A lot of lenders don’t yet understand the impact but they will when the rates drop and they want leads. Or their online purchase leads go away.”

Impact On Auto Dialers

The famous Ricky Bobby quote from Talladega Nights, “If you’re not first, you’re last,” is, essentially, the golden rule to buying leads off the internet, considering 88% of homebuyers either go with the first or second lender that calls. It was the same 20 years ago when Eshelman was a loan officer calling on leads that were fed to him by his company, but the competition has gotten a lot stiffer since many lenders now use auto dialers to get ahead.

“Part of marketing operations is being able to configure a dialer to place phone calls as quickly as possible, or the follow-up calls as strategically as possible to maximize your performance,” Eshelman said. “Using an autodialer [and] being able to schedule exactly when to place phone calls when a lead comes in would move the needle on conversion rates.”

Grand View Research, a market research company, reports that auto dialers can generally increase talk times by 200%, make up to 200 calls per hour, and increase contact rates by 20-50% compared to manual dialing.

Since it’s nearly impossible to compete without an auto-dialer, many companies in the lead-buying market use them, Eshelman explained, and must abide by the new rules.

However, companies that do not use auto dialers are still likely to be impacted by the new consent rules. Because those companies have a weaker conversion rate on internet leads, Eshelman said some will try to make a profit by reselling the lead to businesses offering different services, such as home insurers, attorneys, travel agents, and more. But, since consent is exclusive, lenders won’t be able to resell those leads without the consumer’s one-to-one consent.

Then again, Eshelman said those companies that manually dial leads might end up doing better if the new TCPA rules restrict auto dialers to oblivion.

“You have a lot of smaller independent loan officers or mortgage companies who are buying leads that don’t use automated dialing technology. My understanding is they won’t need one-to-one consent, which is an interesting dynamic,” Eshelman said. “It could change some originations dynamics where … a growing percentage of originations move towards the wholesale channel.”

Who Are Your LOs Texting?

Friend, in the midst of preparing InSellerate clients for the big adjustment, said that many CEOs aren’t aware that the FCC rules apply to their business or to what extent.me fate may be true for warm transfer leads, where the lender doesn’t buy the consumer lead, but buys a call that gets transferred to their loan officers. Essentially, an outside call center dials the consumer, gets them on the phone, asks them a couple of questions, and then transfers them to a loan officer at a different company, Eshelman explained.

“A lot of lenders still rely on the originator to get their own business. And so they’re not really paying attention to how they’re getting that business,” Friend said.

As an example, Friend said that many Customer Relationship Management (CRM) software systems don’t support text messaging, so lenders tell originators that the company doesn’t use text to engage with customers.

“Well, but they do,” Friend said. “It’s just their loan officers use their cell phones instead. And then that becomes really non-compliant because you’re not managing opt-in at all. How you text, how you opt-in for text messaging, [and] having the ability to opt-in for text separate from email [and] from call — that’s all gonna be really important.”

Although the changes are expected to have a dire impact on small lenders, Friend said the biggest consumers of online leads are among the nation’s top 10 lenders — some of which are on the Insellerate platform. He explained that one particular client of InSellerate, a big retail lender, must reconfigure the core functionality of their point-of-sale (POS) solution. The company’s current POS solution has the customer opt-in for calls, texts, and emails altogether. But, because the FCC extended DNC protections to texts, the opt-in for text must be separate from the opt-in for calls and the opt-in for emails.

“Because we have a text platform, we’re having phone carriers say, ‘Hey, that lender of yours is no longer compliant. We can’t text for them because they don’t have a separate opt-out. It’s a singular opt-out [for texts, calls, and emails all together] and that’s non-compliant.’ So it’s already causing some issues,” Friend said.

For that reason, Friend recommends that lenders with a POS solution use a 2-factor authentication method where the consumers can opt in or out of texts, emails, and calls separately.

“Tech providers are gonna have to really start looking at this,” Friend warned. “Because what’s gonna happen is their lenders will potentially start getting sued.”

Lawsuits For Lenders

As chief strategy officer at Verisk Marketing Solutions, Eli Schwarz helps lenders comply with TCPA regulations with their technology and data solutions. Still, throughout his 10-year career, Schwarz has witnessed many lenders get dragged to court by consumers claiming they’ve been contacted without proper consent. Typically, he sees a surge in those lawsuits after there’s a change to TCPA rules.

Previously, leads were generated and distributed with “implied consent,” meaning consumers who submitted their phone numbers with their information on the lead publisher’s website implied their consent to be contacted. In 2013, the FCC began requiring consumers “expressed written consent,” so lead publishers implemented a disclaimer that stated consumers are agreeing to receive telemarketing phone calls from multiple lenders by submitting their information.

“Those calls may come from up to five different mortgage lenders or any of their marketing partners and mortgage lenders with a hyperlink that would link out to a list of dozens of companies,” Schwarz said.

But, Schwarz explained that if a third-party lead provider did not include the disclaimer and sold that lead to dozens of companies, it’s the mortgage lender that’s more at risk, not the lead provider.

“Even when everything was done in a completely compliant way, it created this kind of cottage industry of plaintiffs’ attorneys who were looking for ways to sue lenders and try to generate TCPA lawsuits or get lenders to settle with them before a lawsuit ever came forward,” Schwarz said.

Schwarz believes the likely reason consumers file suit even after consenting to the disclaimer is that they don’t notice or click on the hyperlink that contains a long list of additional advertisers, such as home insurers, attorneys, and other entities not related to mortgage.

“They’re expecting a couple of lenders to contact them. But what often happens is those couple of lenders are gonna contact them a lot,” Schwarz said. “Also, their information or that lead might be sold to multiple other lead aggregators or marketing partners who are also gonna try to contact the consumer and turn it into another lead that they can sell to another lender.”

Although disclaimers with hyperlinks are currently considered TCPA compliant, Schwarz said lenders have continuously been dragged to court over it, despite having no control over the website or consumer experience.

Now Schwarz is expecting the same slew of lawsuits to come in 2025, saying “Any consumer or plaintiff could say to a mortgage lender, ‘You made telemarketing calls to my mobile phone, but you don’t have consent to do that. So you’re liable for $500 to $1,500 in penalties per call.’”

Diminishing Lead Supply

As the founder of a marketing consulting firm that centers around digital marketing, lead generation, and mortgage technology, Eshelman admits that the current business model of lead publishers and buyers “creates a terrible customer experience.” But, he acknowledges that limiting the spread of consumer information or internet leads among companies will disrupt the entire business model of lead publishers, reducing the faucet of lead supply to a mere trickle.

In current agreements between lead publishers and lead buyers, it stipulates that the publisher can sell the same lead up to four times — four being the industry standard, Eshelman explained. So, if it costs $50 for a lead seller to generate a lead, and it sells that lead four times for $20, making $80 in revenue, that creates a decent profit margin.

“That’s their business model,” Eshelman said. “[But] if the consumer is in charge of selecting who they’re gonna get matched up with, what’s gonna happen to pricing? What if the consumer only selects one? What if they don’t select any? That’s gonna change the economics to where now maybe lead sellers are gonna have to start charging more for when a consumer does select them.”

Yet, Eshelman also said that limiting the supply of those leads makes them more exclusive and, therefore, higher quality. If consumers only give consent to one or two lenders, on average, then those lenders no longer have to compete against dozens of companies and increase their chances of converting that lead to a funded loan. Some lead publishers, like Bankrate, already have a business model in which it only sells exclusive leads, but for a higher price.

Though that may not be an issue for big lenders, the words ‘exclusive’ and ‘expensive’ are alarming for smaller lenders and most brokers that lack the capital and brand recognition of their larger competitors. Not only would those companies be priced out from buying leads, but if most consumers choose lenders they’re familiar with, as Eshelman suggested, smaller companies will have a hard time winning the consumer’s consent.

Additionally, a lot of smaller lead publishers that exclusively participate in lead arbitrage would be directly impacted by the new consent rule. That’s when a smaller company generates a lead, but instead of selling that same lead to four different lenders, it sells it to one lender and the other three are sold to a larger lead publisher/seller. The larger lead seller may buy those leads for $30 and sell them to three lenders for $60. However, the consumer and original company that generated the lead have no idea who the other buyers are going to be.

“So lead arbitrage, which historically has been a decent part of the industry, goes away,” Eshelman predicted.

The same fate may be true for warm transfer leads, where the lender doesn’t buy the consumer lead, but buys a call that gets transferred to their loan officers. Essentially, an outside call center dials the consumer, gets them on the phone, asks them a couple of questions, and then transfers them to a loan officer at a different company, Eshelman explained.

“That will probably go away because the consumer didn’t give consent to that telemarketing company that’s auto dialing them [and] will then sell it to another lender,” Eshelman said.

Small Business Impact

Smaller businesses and brokers that buy or sell leads are expected to face the brunt of the impact from the new rules. For that reason, the FCC reluctantly accepted the Small Business Administration’s request to seek commentary on the new rules to mitigate the potential economic impact. Among those that responded was LendGo, a comparison shopping site and mortgage lead publisher, which stated that not every lender will survive the new rules, and any that do will pass down the higher costs to the consumer.

In its letter to the FCC, the company said that the new rules will lead to at least a 25% reduction in consumer journey completions. In turn, the company anticipates cost increases of more than 25% for businesses that rely on comparison sites for lead acquisition. But, consumers will ultimately pay the price by taking on higher costs and having fewer options available due to companies going out of business.

“Closing the ‘lead generator’ loophole and asking consumers for one-on-one consent will greatly affect the online user journey and user experience of legitimate comparison websites,” LendGo stated. “In addition, it will adversely affect the performance metrics of these user journeys which will likely wipe out several small- and mid-tier businesses.”

Karen Lawes, owner of Burst Marketing, a lead publisher connecting homeowners and businesses with home improvement services, said the new rules would “significantly disrupt” her business model and force her to close down.

“Requiring one-to-one consent would mean contacts would have to actively opt-in for each vendor,” Lawes said. “This extra friction means fewer leads and significant revenue loss. This would also significantly increase my operating expenses.”

Other small lead publishers responded in a similar vein. The Astoria Company, which sells home insurance, mortgage, and auto leads, told the FCC that it does not have the marketing budget to cover the significant expenses of implementation.

The Astoria Company also stated in its comment to the FCC that, “The bigger companies immediately gain market share dominance, while small companies, individual agents, and minority businesses will lose and suffer big time.”

One Door Closes, Another Opens

Given the implications that sources have mentioned, including more compliance, more legal risks, and more cost burdens, the FCC’s new rules sound like all-around bad news for smaller lenders and brokers that rely on internet leads. But, one broker-owner pointed out, any company that relies on just one method of lead generation was in trouble from the start.

Joseph Shalaby, founder and CEO of EMortgage Capital says marketing is a table, and if you only have one leg or one strategy for acquiring leads, how stable is your table?

“If you’re doing social media, and you’re buying leads, and you have trigger campaigns, and you have automation campaigns, and you’re building relationships with realtors … your table becomes unshakeable,” Shalaby said.

At InSellerate, Friend is helping his lender clients that rely on internet leads explore possible alternatives, with the expectation that buying internet leads will become more scarce and costly next year. One client, for example, is doing their own digital marketing through Google.

Friend explained that lead publishers have historically dominated Google search results, so anytime a consumer went shopping for a mortgage online, typing “mortgage purchase rates” into the search bar, they were drawn to a lead publisher’s website. But once lead publishers can no longer sell to multiple lenders, Friend believes less lenders pay for their service, which creates an opportunity for lenders to try their own digital marketing.

“We have lenders that are doing that [and] they’re being effective,” Friend said. “If they’re marketing to local areas, it’ll do that more effectively because they’re not gonna have these out-of-market providers trying to come in and market to their customers.”

Friend also said lenders typically use lead publishers once rates have dropped to find customers looking to refinance. In the event that rates drop next year, Friend warned, “If you don’t already have digital channels set up, you may not be able to go out and easily go buy leads.”

Any size lender can set up a digital marketing channel, Friend said. But, for those not ready to abandon internet leads completely, they must adjust to the changes in compliance and be prepared to stay on top of consent documentation per the FCC’s requirement.

 “If you’re a big company, you’re gonna spend money because you’re gonna have to manage it across organizations,” Friend said. “If you’re small, you’re gonna want to talk to an attorney and make sure what you’re doing is right. They’ll also have to manage it across their organization.”

Mega Broker Vs. “Small-Little-Tiny Broker”

While leaning into more digital advertising could be a cheaper alternative to generate leads, is it realistic that every company will be able to match the success they had with internet leads? Sometimes the truth is too hard to swallow, but Shalaby can be blunt.

“It’s going to weed out the weak. Is that a sad thing? I think it’s a fantastic thing,” Shalaby said. “I try to weed out the weak from our organization every single day. We have 900 loan officers, I’d like to get down to 500. I know that sounds shrewd, but it’s like, there’s just no time for the weak right now.”

EMortgage Capital, a national brokerage, is a big lead buyer as well as aggregator, Shalaby said. The company primarily buys leads from LendingTree and Bankrate to help branch managers across the country scale their business. But, as a larger company or “mega brokerage,” he’s not that concerned over the new FCC rules. In fact, he thinks having higher-quality and more exclusive leads in the marketplace will be a boon to his business.

“The long and short of it is the lead cost is gonna increase,” Shalaby said. “But short-sighted loan officers — loan officers who don’t have a lot of money [and] are just going for the cheapest lead — they’re gonna be phased out because the cost per acquisition is gonna go down.”

As Eshelman previously explained, making a shared lead exclusive makes it higher-quality and thereby more expensive. So a $15 shared lead that gets sold and resold becomes an $80 exclusive lead. But that’s not all.

“If you’re looking at the cost of leads, you’re looking at it all wrong,” Shalaby said. “You should be looking at the cost of acquisition, which is probably gonna decrease significantly.”

Buying a lead does not mean the lender has actually acquired that client, Shalaby explained, because six other lenders are also competing for that client. So the lender may buy 10 or 20 shared leads for $15 before acquiring a client, so the cost of acquisition is $150 or $300. But, the $80 exclusive lead is cheaper, less competitive, and requires fewer phone calls. So the cost to buy a lead goes up, but the cost of getting the customer goes down, Shalaby explained.

Still, he believes the industry is headed for more consolidation, saying, “It’s gonna boil down to the survival of the fittest.”

For any boutique broker shops that find themselves in hot water thanks to the FCC’s new rules, Shalaby recommends piggybacking off a larger brokerage, like his.

“We absorb a broker shop from one to 50 people,” Shalaby said. “They’re much better off piggybacking on an ecosystem like E-Mortgage Capital because I’m spending a million to $2 million a month on my ecosystem.”

Using a strategy reminiscent of the game Pac-Man, EMortgage Capital gobbles up boutique broker shops around the nation and absorbs them to create a larger, more powerful mega brokerage.

“Small brokers really should piggyback on us big brokers. There are five of us mega [broker] companies. They should be utilizing our resources because we’re mega and you just can’t compete with something like what we have in place,” Shalaby said. “I’m able to go in and cut awesome deals with my vendor partners that you can’t do as a small-little-tiny broker.”