QUESTION
We have an affiliate marketing program. Recently, we had it evaluated
by a risk management firm such as yours. In the findings, we learned that our
policies and procedures did not account for how to establish and identify
pre-existing business relationships. What is a pre-existing business
relationship in an affiliate marketing program?
ANSWER
A “pre-existing business relationship” with a consumer is given an
exemption in an affiliate marketing program, where the parties to the
relationship are a person (i.e., entity) or a person’s licensed agent and a
consumer, based on the following requirements:
1) A financial contract between the person and the
consumer that is in force on the date a solicitation covered by the affiliate
marketing provisions is sent to the consumer;
2) The consumer’s purchase, sale, or lease of the
person’s goods or services, or a financial transaction (including holding an
active account or a policy in force or having another continuing relationship)
between the person and the consumer during the eighteen-month period
immediately preceding the date a solicitation covered by the affiliate
marketing provisions is sent to the consumer; or
3) An inquiry or application by the consumer
regarding a product or service offered by the person during the three-month
period immediately preceding the date a solicitation covered by the affiliate
marketing provisions is sent to the consumer. [16 CFR § 680.3(j)]
Take note, also, that affiliate marketing program rules of the federal
financial regulators, as well as the FTC, contain examples of when there is and
when there is not a pre-existing business relationship. [Idem]
Jonathan Foxx
President & Managing Director
Lenders Compliance Group
