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Contact State: Social Media Ads Are Coming Under the Regulatory Spotlight for All the Right Reasons

Major online platforms have traditionally been a happy hunting ground for digital ad scammers and fraudsters. Home Office stats say these platforms account for 86 per cent of all fraud in the UK. While regulatory bodies and Google have recently collaborated to address deceptive search engine ads, social media advertising has gone largely unregulated.

Thomas Brett, Head of Mortgage and Lending at Contact State
Thomas Brett

But in 2022 we can expect to see social media ads come under regulatory scrutiny, particularly in the financial services sector, explains Thomas Brett. The onus will be on lead buyers to check for regulatory compliance before they purchase or partner with a lead generation provider.

Brett is the Head of Mortgage and Lending at Contact State, a certification and compliance platform that helps companies buy compliantly, profitably and confidently from Europe’s best and most trusted lead generation firms.

Prior to his current standing at Contact State, Brett was extensively involved within the realms of mortgages, lifetime mortgages and the brokering of later life loans. He has extensive knowledge within lead generation, and has previously supported the efforts of Responsible Life.

In August 2021, the FCA and Google attempted to clean up search engine ads by introducing new verification requirements for lead generation organisations to comply with before being permitted to advertise financial services. But social media platforms remain relatively unregulated – opening up a ‘wild west’ for nefarious cowboy lead-gen firms and online fraudsters.

Social media ads in the regulatory crosshairs

Based on its own research, the consumer watchdog Which? found that across 43 million UK social media users, 3.8 million people may have lost money to a scam advert that appeared in their social timelines. In fact, only around a third of surveyed consumers said they trust adverts that appear on social platforms. More worryingly, over 40 per cent of consumers said they didn’t know if they could tell whether a social media ad was legitimate or not.

As a result, going forward we will see social media ads come under the regulatory microscope from bodies such as Advertising Standards Authority (ASA) and particularly the FCA. That means you can expect real action rather than simply discussing what has been a pervasive issue for much too long.

Social media giants begin to get on board

The issue is now being recognised by the social platforms themselves, thanks to some very high-profile cases, particularly regarding financial services and insurance ads.

Meta (previously Facebook) has recently been under fire due to ‘clickbait-style’ funeral adverts that it struggled to control. An older user demographic, cheap digital media prices and outrageously large commissions created a perfect industry storm for some ‘cremation cowboys’ to create an unsustainably low barrier to entry for what was in effect a savings product.

Three tech giants have now made plans to change the way they manage the advertising process. Twitter, Meta, and Microsoft have all shared commitments to bring in a tighter vetting process for advertisers. These plans will mean UK-regulated financial services advertisers will have to be authorised by the FCA.

The compliance burden will be felt by lead buyers

With all this regulatory pressure, lead buyers who use social media ads as part of their lead-gen strategy need to sit up and take notice. As well as stopping fraudulent adverts, these rules are also about gathering a digital information trail on who was buying media and where leads were being sent.

If the FCA follows a similar approach to its Google search engine clamp-down, then it will rely on obtaining the FCA numbers for accredited financial services firms associated with the ad. Even if an organisation has allowed a third-party lead-gen firm to use its FCA number to generate leads, it will not be immune to prosecution.

Ultimately, the message will be that if you are the lead buyer, you will still be held responsible for whatever adverts are used to generate new prospects.

Technology lets you check and safeguard

The whole lead generation ecosystem is rightly being forced to clean up its act and become much more visible and transparent in its processes, way before a consumer picks up the phone or fills out a form to make an enquiry.

This is one of the key reasons why Contact State recently launched its Partner Directory, a dedicated private listings platform for lead buyers to connect with innovative, legitimate, and compliant lead generation firms. The directory enables clients to quickly and easily review the regulatory and financial details of companies that they have identified to research and connect with as part of their lead generation process.

Old habits should die hard in the new era of transparent social media advertising

The wild west days of social media advertising are drawing to a close in the financial services sector. Fraudulent sellers are being targeted on both fronts by the muscle of regulatory bodies and the might of social media platforms themselves.

But legitimate lead buyers need not worry, as long as they can point to complete transparency across their lead-gen processes. Those who can’t need to assess their strategy during the year ahead, or face potential exposure as shady practices come under the compliance spotlight.

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