Is a Direct Mail Crackdown Looming?

The announcement last week that New York State Attorney General Andrew Cuomo had expanded his investigation of predatory college loan providers into deceptive, possibly illegal direct marketing practices came at a time when the Direct Marketing Association is focusing on the issue of responsibility. Indeed, with investigations into direct marketing practices of mortgage lenders underway in Ohio and New York and Do Not Mail bills under consideration in at least 10 states, the industry might appear to be under siege.

However, some observers caution against using these developments to draw conclusions about the state of the industry, or looking at the three events in unison. Legal experts said that the student loan and mortgage investigations can be traced back to improprieties in those industries.

"These things always have political overtones, and you're going to see a lot of political activity now as it relates to the subprime mortgage mess," says Andy Lustigman, principal at Olshan, a legal practice that specializes in marketing issues.

Jerry Cerasale, SVP of government affairs at the DMA, agrees. "One of those issues is stemming from all the foreclosures happening today, and the other is from the federal investigation into student loans and the payments made to colleges," he says.

As for the Do Not Mail bills, Lustigman is quick to write those off as the efforts of "a green movement that essentially is trying to motivate people to deal with [environmental issues]." That may all be true, but the fact remains that direct marketing tactics, by coincidence or not, are now at the center of legal actions across the country. They are throwing a harsh spotlight on direct mail in general. For direct marketers, this means that it's a good time to take stock of your practices.

"All companies in these industries really need to carefully double-check their marketing activities to make sure they are above reproach," said Lustigman, suggesting that self-policing could go a long way. For example, government pressure on Kellogg's and other makers of sugary cereals was significantly reduced earlier this year when those companies volunteered to stop using their cartoon icons to target kids.

It's also a good time to invest in your customer service, said Cerasale.

"One of the ways to counteract this [bad publicity] is to have great customer service," he said. "Any time you make a sale there are people who aren't necessarily satisfied, and you have to have good customer service to respond to that. That builds trust and makes people happy and breeds confidence to buy."

Few would disagree that this is a time of evolution in direct marketing. The near ubiquity of global high-speed Internet access presents unlimited opportunity to reach consumers in new and compelling ways; it also opens the door to scam artists of every stripe from every country. It's perhaps inevitable that an industry in such a state of change would draw attention from politicians. Whether that spells hard times or prosperity for the industry perhaps depends most on how its practitioners react.