TCPA changes are a win-win for consumers and innovative lenders

If you've been sourcing leads from aggregators, you need to pay close attention, because the FCC is sharpening its claws.

In January, the commission shored up the Telephone Consumer Protection Act (TCPA) with a final rule that closes what it refers to as the "lead generator loophole" for telemarketing calls and texts. For lenders of all types that purchase leads as part of their business model, it's a seismic change. Under the new rule, consumers must provide "one-to-one" consent for contact by a single lender each time. That means consumers have to knowingly give permission to a specific lender to receive solicitations, and those permissions cannot be moved horizontally among lenders without the express approval of the consumer. These changes empower consumers to dictate their availability for phone calls and decide when to consent to prerecorded calls, auto-dialed calls and text messages.

Key provisions go into force March 26, and the requirement to collect written one-to-one consent from each consumer goes into effect Jan. 27, 2025.

For the many lenders that formerly relied on aggregators to deliver thousands or tens of thousands of leads each month, these changes are massive and disruptive — even though those leads probably converted to loan applications less than 1% of the time. Gathering personal information on consumers who may have just been curious about homes in their area for sale or rent and selling it to a lender without express one-to-one consent from the consumer will soon be illegal. Additionally, the law could render lenders unable to remarket to their own past customers unless they happen to have collected and documented the customer's express written consent in the highly specific way the new rules require.

Non-compliance is not an option. This law has teeth, and if past cases are any indication, there will be lawsuits and stiff penalties for violators after the grace period ends. Consumers will be able to report receiving an illegal call or text, and consumers, states and/or the FCC can take legal action against violators, with fines starting at $500 and going up to $1,500 per violation.

Beyond paying legal fines, lenders not in compliance will be spending time and money preparing for and dealing with regulatory audits, even if no penalty or legal action results. Eventually, though, examples will need to be made, with offenders facing harsh sanctions and possibly losing their business licenses.

Let that harsh reality sink in and if you'll be in noncompliance soon, take action now. For many lenders, this will mean looking for a new source of leads — or better yet, an entirely fresh approach to customer acquisition that connects lenders with high-intent consumers who already know their borrowing power and are ready and willing to share the data required for underwriting.

An online marketplace would benefit buyer and seller

The lending industry can probably take a cue here from other industries where "marketplaces" like Amazon, CarMax and Etsy have reinvented the end-to-end retail experience by empowering consumers to shop on demand in an ecosystem they trust and request certain products or services they need.

Marketplaces are not new. Open-air marketplaces thrived in Babylonia in ancient times and continue today in many communities as farmers' markets or craft fairs. If the banking industry were to tap into the idea of having a safe online marketplace where consumers could browse various financial services while still having complete control over who receives their information and how it's used, that would allow lenders to receive those leads and reach back to qualified customers, while operating well within the bounds of TCPA.

In this scenario, everyone would bring value to the table. A consumer would be asked to "self-assess" their financial readiness for a particular product or service like a car loan or a mortgage. Their financial data and contact permission could be stored safely in an encrypted packet, accessible to their lender of choice. Lenders would review and select the customers they intend to serve based on their business objectives and requirements. Lenders would then be able to contact pre-qualified and highly motivated consumers ready to buy their loan product or service.

An online marketplace like this will bring together consumers ready to commit to a loan with lenders looking for qualified customers who have provided their permission to be contacted one-on-one by the lender.

The entire consumer lending industry benefits

Instead of casting a wide net around dubious leads, this online marketplace would be filled with qualified buyers who have put themselves in the market for loans. Prospecting here would save lenders time and money and boost the likelihood of leads turning into applications. Because applicants are verified to be creditworthy, even underwriting and processing the loan would be smoothed, streamlining transactions and performance analytics.

This model would allow lenders to compete against one another on what matters — their true differentiators, such as a superior customer service experience or more favorable loan terms — rather than which lender can purchase the most leads, robocall the most prospects or air the most Super Bowl ads.

In addition to improving profitability, this online loan marketplace would be inherently scalable, enabling lenders to manage the current cycle and environment without wide hiring or production swings. You connect with as many customers as your business can handle at that time, knowing your pull-through rate will be substantial.

As an added benefit, alternative methodologies for calculating default risk could be built into the consumer assessment model to make the qualification pool for loans more inclusive. While traditional credit scores will continue to tell part of the story of a consumer's creditworthiness, not every marketplace visitor will have a credit score and may have a thin credit file. The marketplace would be a fertile environment to augment the traditional credit scoring model with other models like cash-flow analytics, residual income and rent payment history to assess additional dimensions about a consumer's creditworthiness, so lenders could extend offers to those outside the traditional credit "box."

Meeting the future of FCC-compliant lead acquisition head-on

While many lenders are anxious right now as they adjust to new modes of customer acquisition, and understandably so, I applaud the FCC for taking steps to protect consumers and limit their exposure to unwanted solicitation and harassment from lenders they may ever have heard of and don't need.

A modern, streamlined, transparent, collaborative and more inclusive loan marketplace eliminates the need to cast wide nets for borrowers who may not be ready or qualified for a loan and lets you focus on those who are. At the same time, you're always in full compliance with the TCPA.

With the internet making it easier than ever to make meaningful connections online with customers, the time has come to adjust the financial industry's business-acquisition model to safeguard the consumer's privacy while also making it easier for them to do business with us. Use this grace period to your advantage. Educate yourself on your lead-acquisition and consumer opt-in practices and make proactive changes to stay in full compliance.