Less than a decade ago, lead generation sites preyed upon customers with financial difficulties by offering them subprime loans. This led to the 2008 U.S. financial meltdown. Fast forward to today… lead generation is a $1.7 billion industry in the U.S. Although “lead-gen” companies, as they’re commonly referred to, are not inherently deceptive, several have been in the spotlight for their ethically controversial ways of operating. Cinch has noticed some particularly surprising and troubling trends amongst some lead gen companies in the consumer credit space, one of our core areas of operation. Let’s dive into the topic so that you can learn how to protect yourself.
- Lead gen sites masked as information sites: Have you ever browsed a site that allows you to compare multiple credit cards? Maybe the site had a pop-up form asking you to input a few details about yourself? Although, these sites appear to be adding value to you because they’re informational, think twice before your enter any personal information. These companies often sell your data to lead gen companies. Consumers often think the two types of companies are one and the same, but they’re separate entities.
- Consumer data often auctioned: What happens after lead gen companies have your data? There are many potential ways your data can be used. Lead gen companies could sell your data to another lead gen company. They also often continue to collect data on you. They may be tracking information such as what websites you frequent, or they scrape the internet and match the current data they have on you with additional data that is of value to the companies they sell to. Next, your data might be auctioned off to a company that’s the highest bidder. The company is willing to pay for your information because they believe you’re a lucrative lead. In the consumer credit space, criteria to quality for a credit card is low meaning most people are potential leads. However, credit card companies consider lucrative leads to be those with future values — these are consumers they can convince to purchase more expensive products over time. The CFPB has pulled together several great resources to learn more about the lead generation process.
- Lead gen sites collect inaccurate data: The data that lead gen sites collect from consumers, particularly through websites is often incorrect data. These companies ask customers to enter their exact credit score, the interest rate on their credit cards, how much money they spend each month, or how much their credit card payment is each month. From internal work at Cinch, we’ve realized that customers often don’t know this information, and they end up sharing incorrect data.
- Inaccurate data yields poor credit card recommendation models: When customers self select cards, they usually choose products that aren’t right for them — for example, they might choose a new cash back credit card when they have credit card debt instead of choosing a balance transfer or a low-rate credit card. When companies use the inaccurate data from lead gen sites to build credit card recommendation models, the recommendations are often no better than if a customer were to self select a product. A good credit card recommendation model takes existing data on customers, narrows the focus to variables – such as your accurate credit score – that are most important in predicting an outcome – such as whether or not you’ll pay off your credit card – and uses machine learning to predict consumers’ future behavior – the outcome of whether you’ll pay off your credit card. If the data used in the model is inaccurate, the predictions made by the model will be inaccurate. As they say, garbage in, garbage out. In addition, the data lead-gens collect is minimal. They don’t collect any information on user behavior such as what motivates you to take action to pay down your debt for example, seasonal trends in your spending, your lifestage, and a host of other factors. Cinch collects these behavioral components in order to build models that provide true fiduciary recommendations.
- Misaligned interests of lead generation companies: Lead gen companies often optimize for the person paying for leads not the end user. As long as companies continue to buy data from lead gen companies, lead gens don’t have an incentive to ensure they’re collecting quality data on the consumers. In the example above, paying off a credit card in a timely fashion benefits the consumer because they won’t get slapped with high interest rates on the unpaid balance. Yet, lead gen companies have no incentive to ensure consumers are in fact presented with the best credit card option because the companies they work for want to profit off of the high interest rates.
All of the above, and more, is why I feel Cinch adds huge value to the consumer in an often predatory market. Cinch doesn’t believe in lead generation, advertising or spam. Instead, Cinch assesses behavioral data such as consumers’ spending patterns after their consent, and accesses consumers’ credit score reports after consent. After assessing data such as this, and the entire product universe, Cinch builds high-quality credit card recommendation models.
Cinch believes individuals deserve objective recommendations, and in a sea of noise created by unethical lead generation companies, consumers know they can count on Cinch. Does it get better than that?