Mortgage Tech Series: Breaking the rule of silence

AlainDesmier (pictured)from Contact State discusseshow scamsareimpacting thelead generationindustryand how tostay vigilantas new FCA regulation comes into force.

Finding the best rates on the market can be as simple as a Google search. Type in a simple key word such as ‘bad creditremortgage’ or ‘remortgage for unemployed’ and you canfind a series of websites quoting the best deals fora particular product. This can be helpful, particularlyif you are looking for a rate in a hurry. However, not everything can be as it seems.

Unfortunately, some landing pages can be misleadingor,even worse, can be impersonating ahousehold namein order toattract interest. This fraudulent activity becomes more problematic aslead generation is not understood by many – evenregulators have remained silent on the issue until a recent consultation by the FCAunveiled that there is soon to be anew regulatory framework on financial promotions,which has been described as a “gamechanger”by experts in the field.

One such expert is AlainDesmier, founder ofaward-winningContact State.Contact State was founded in 2019byDesmierand his business partner Mike Lamingand sets out tohelp companies“buy compliantly, profitably and confidently”from Europe’s best and most trusted lead generation firms.

Desmierand Laming saw a gap in the market, with many lead generation firms using fraudulent tactics such as misleading advertising and resellingofconsumer data. Much of thisbehaviourwas not mandated, meaning largeintermediariesand insurer partners becamemore at risk of being investigated byregulatorybodies such as the Information Commissioner’s Office(ICO)throughclaims being made by lead generators.

Using their expertise, Contact State has set out to break the rule of silence and introduce transparency into what is a convoluted sector of the market. AlainDesmierspoke toMortgage Introducerabout how his businessis helping manyandisbringing these dangerous practices into thespotlight.

The origins of Contact State

Desmier’scareer began at a Californian lead gen firm, with a lot of his experience being in America. Afterfour years at the firm,Desmierbegan acompanywithabusiness partner in 2011 which he describes as being a “classic lead gen” companybut was directlyauthorised. This venture was successful,but after 15 years in lead generation,Desmierwas looking for a change. “Irealisedthat everywhere in the world, there was this struggle between genuine lead generators andfraudulent ones, similarly there were genuine buyers and fraudulent buyers,” he says. “It was almost impossible to determine which was which.”

It was this observation that laid the foundations for Contact State. The business is integrated with both the sellers and buyers of leads, makingit easier to work with legitimate buyers and sellers; giving everyone the tools to do their own due diligence on either side. “One of my driving ambitions when I started this business,was to be a helpful tool. I saw a wave of regulation coming,” he says.“We are seeing how privacy laws are changing even now,withconsumers having much more control about what they share.”

Contact State aims to bring light to the huge amount of fraud going on in the lead generationspaceandraise thestandard of lead generation as a whole to a point where the regulatory requirements are as strong as they are for brokers, intermediaries and banks. This in time,Desmierstates, will“lift” the quality of financial advertising and the consumer will easily be able to decipher the difference between a fraudulent lead and alegitimate one.

The FCA’s approach

Thousands of mortgage businesses are currently buying leads with no ideaof where theyare coming from.In an attempt tocombat this, the FCAlast yearrevealed that it is changing the waythatregulated firms approve financial promotions, making the buyer liable for the leads theyobtain.

This,Desmierclaims, is a “gamechanger” and means that regulation begins at the first click ofalead rather than further into the process.This is different to the way regulation works in this field in America,which puts the onus on the source of the lead, and even allows for legal action if the consumer did not provide consent.Europe is set to follow suit and enforce similar regulations. “It is only a matter of time until abigmortgage businessgets pulled up by the ICO for buying fraudulent leads and being fined for doing so,”Desmierpredicts.

Putting the onus on thelead buyermay appear as a strange concept, howeverDesmierexplains that this area has been misunderstood by the regulator to date and this latest consultation is an attempt for the industry to regulate itself. “This isn’t a bad idea,”Desmierexplains. “But what is most important here is for there to be a level playing field. If you are going to expect one sector to adhere to the rules, the mortgage brokers for example, you should expect the lead generators to also be directlyauthorised.”

This regulation is a stepforward butmay not be completely necessary.“You don’t need to take significant pieces of regulation to try and fix the current problems,”Desmiersays. “What you need to dois change the way that data is exchanged. When someone buys a lead from a lead generation website, they shouldunderstandthat it complies withtheGDPR.”

Veil of secrecy

As a former lead generator whoran a directlyauthorisedlead generation firm for eight years,Desmierunderstands the need for change in lead generation and financial promotion more than most. “A lot of thinking behind Contact State comes from the factthat I was a lead generator that tried to do things properly,”Desmiersays. “We were the first directlyauthorisedlead generation businesswho worked with up to 2,000 mortgage brokers at one stage. From working internationally and across Europe, I found that there was almost an unwritten rule that fraudexistedbut no-one wanted to talk about it.” To solve this,Desmierset out to create a level playing fieldand take down what he calls the “veil of secrecy”.

Unfortunatelyit is so simple for fraudulent activity to occur in lead generation.Desmierexplains that one can simply buy a URL, build a website with the various providers available to do so at low cost, put a Google advert upfor the ‘cheapest remortgage rates’and just like that you can be sellingleadsto a variety of regulated businesses. This can all be done with no checks orarequired license. “It is insanewhen we are talking about what is at stake,”Desmierargues.“What Contact State does is due diligence checks on lead generators that are interested in working with one of our clients.”

One of the most common scams of fraudulent leads in the mortgage sector is tricking consumers into thinking they are buying into awell-knownbanksuch as Santander or Barclays. These landing pages will beformattedto look exactly like the bank’smainwebsiteand can be dangerous for those looking to save time without taking the necessary due diligence.There is an argument to say that the big banks have a duty to monitor these websites fraudulentlypublicisingleadsandtaking action, butDesmierexplains it is not that easy.

“Big banks should be more proactive in taking down and challenging websites that impersonate them,” he says. “It is more complicatedin the sense thatleadgenerators that do this often sit off-shore. They make it extremely difficult to shut these websites down because they sit outside the UK’s jurisdiction. Thereis avacuumthat has appeared where even the big banks are unable to take action.”

It is this lack of transparency and inability to take action that will cause unsuspecting mortgage brokers in the future to fall for these scamsand receive calls from the regulatorquestioning why they are buying fraudulent leads. This,Desmierexplains, is why staying alert and conducting theappropriatedue diligence is becoming increasingly important.

The future in uncertain times

The plans for Contact State in 2021isto work with the lending sector. They have been making a big impact in the insurance space, butDesmierbelieves that in this time of economic crisis, the lending market needs to be their next step. “We will begin to see an increasing amount of short-term lending and distressed lending as an inevitable recession bites from COVID-19,” he says.“It is an obvious place for us to work with.”

With plans to hire and expand their growing client base in 2021, it is set to be an interesting future for Contact State, particularly as the new regulation from the FCA isset to beenforcedin the next 12 months.Desmierhopes that soon, hiring a lead generator will become as “meticulous a process as it is to hire a new member of staff”.

Alain’s top tips to avoid lead generation scams to help protect yourself against any future liability:

1. Take the time to do extra due diligence into the company directors
2. Work with directly authorised lead generation firms
3. Review the actual landing pages that will be used and mystery shop the proposed customer journey
4. Invest in a lead generation contract that clarifies what you require in terms of customer consent and advertising
5. Work with a third-party certification platform to build a real-time audit of the leads you are buying