Regulating Debt
Some say money is the root of all evil. Outside of love, directly and indirectly, money is probably one of the most written about topics. In our space, money isn’t necessarily the root of all evil, but the need to turn a profit on arbitraged media certainly leads us to take a myopic approach. It’s not necessarily money’s fault. The risks go part and parcel with the competitive nature of those in the performance marketing space. From advertisers to networks to arbitragers, most play to win, and they know they must have the best performing offer if they expect to compete. But, like any competition, there are rules; competitors routinely push the boundaries of those rules in order to push the boundaries of their performance. You want to break records. You don’t want to break the rules, though. More often than not, doing the former has people engaging in the latter.
In sports, athletes most commonly break the rules with performance enhancing drugs. The ad world’s version would be leveraging non-compliant, misleading, and often outright illegal text to enhance conversions beyond what those playing within the boundaries could achieve. We came across one such example recently:
The landing page is for debt reduction. Taking a page out of the flog handbook, this marketer found a relevant news segment and set it to autoplay. And they took it a step further by reading the IP address and customizing the landing page in several ways. They created an official looking seal with classic iconography putting the state next to it, used the state name in the title "New York Debt Assistance Program," and repeated that again. They also created a false sense of urgency by putting in an expiration date based on the current date. All quite clever. But, the most egregious activity comes in the form of what the average user would read as guarantees, namely the implied promise to "Reduce Your Debt by 50%." that claim, along with a similarly unsubstantiated claim exists on the landing page that users will become debt free in a matter of months. This affiliate, though, didn’t stray too far from the landing page the user goes to next.
At first glance, you might not think the jump page and the landing page differ, but there is at least one key difference. The landing page says "Our Services Could." They do not give the indication that they will. Another difference revolves around the use of disclaimers. While this page uses them only sparingly, they do have in small print that they are not associated with the government or the American Investment and Renewal Act. They don’t use disclaimers liberally, but in our non-legal opinion, they cover themselves enough that if pressure came, the enforcement body might work with them in a more cooperative manner than the initial.
The cynical marketer might look at either of the above and ask, "So what?" Unlike online education or insurance, there aren’t dominant brands in the debt space, and there certainly isn’t that dominate player in the online lead generation space. There is no shortage of companies who make money by generating leads for debt lead buyers, but there isn’t a Quinstreet, Nextag, or LowerMyBills of debt lead generation. You have to know the space to really know the big players. It’s a super fragmented market with a reputation not much different from that enjoyed by the payday loan space, i.e. not a good one. The thing is, it’s actually a really complex ecosystem. We’re talking about a macro economic trend (mounting consumer debt) and Fortune 500 companies (the credit card companies and other debtors to whom billions of dollars are owed). Yet, the people involved – both on behalf of the companies owed the money trying to collect it and their counterparts at companies working with consumers trying to reduce – are rarely held in high regards.
Despite the gruff reputation and the reputation that those buying the leads probably don’t care what the text of the ad says, so long as they can get a warm body with the right debt, those in the regulatory world do care. And, if the FTC’s Workshop on Debt Settlement last September is any indication, we could see changes impacting the debt settlement space sooner than later. That hey even held a workshop speaks both to potential issues as well as the general lack of understanding about the sector. That certainly applies to us. We couldn’t have explained the difference between a credit counseling agency and a debt settlement firm. Nor, could we have talked to the distinction between not-for-profit credit counseling agency’s versus for-profit ones or that the not-for-profit versions have in the past two years a new level of guidelines to follow in order to achieve tax exempt status, those specified under 501(q).
Having read through the transcript of the seminar, we look slightly less lost when discussions of credit counseling versus debt settlement take place. We at least understand the reason for so much attention being paid to debt settlement companies, and it stems from how the debt settlement space evolved. During the bursting of the internet bubble almost a decade ago, we didn’t see debt settlement companies. Instead, those advertising to consumers to help with their debt were credit counseling companies, the majority of whom enjoyed tax exempt status. But their methods came under intense scrutiny after consumer complaints and media attention, resulting in congressional hearings and ultimately a change to the process by which the IRS will designate a counseling firm as not-for-profit. That scrutiny paved the way for settlement firms who operated just different enough to fall outside of the regulations aimed at the counseling space.
Fast forward to today, and it is the debt settlement firms being viewed much like the counseling space in the period beginning eight years ago. We have (I believe) the highest levels of consumer debt in history, and it’s not going away any time soon. That makes a fertile ground for desperate consumers who can fall victim to those promising to help, who up until recently could operate without much regulation. It’s a natural cycle correcting itself. And, as the Chairman of the FTC said, it’s not as though debt settlement companies are going away. That’s not the goal. That’s good for those in debt settlement and those in performance marketing servicing them. What we learn though, and experience, is yet another case of unfettered growth being reigned in to create a level playing ground. For the marketers, the takeaways are relativey simple. You really should know something about the space you are promoting, and most important of all, the need to refrain from unsubstantiated claims. Just because a specific buyer might not care (most do) doesn’t exempt the affiliate from advertising something that the service ultimately being marketed can’t fulfill.
