Opt-out data: Privacy Violating or Consumer Saving?

Recently, the FTC released an intense, day-long lecture series on different aspects of lead generation and distribution. Professors, scientists, and economists gathered to discuss the ins and outs of security, sales, marketing, and more. But watching 6 hours worth of lectures is asking a lot. For those who would rather get the short, sweet summaries, here you are:

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Today’s Topic

Associate Professor of Economics Liod Wagman gave a short lecture on a case study that highlighted the nuance of opt-in versus opt-out data, and how it affects sales & businesses in the mortgage market.

The Study

Wagman’s study looked at mortgage acceptance and foreclosure rates in 6 different California cities, based on whether the mortgage companies allowed their customers to opt-in to allow data selling, or if they had to opt-out. They found that this had substantial effects on not just supply of leads to sell, but also foreclosure rates and the general health of the mortgage industry in those areas.

What opt-in and opt-out means and its effect on data

When talking about whether people can opt-in or opt-out of data selling, what we’re really talking about is availability of data. Since consumers tend to stick with the default option, if data collection and selling is enabled by default (that is, it is an opt-out system), the companies are going to receive a lot of data. If data collection is disabled by default, or opt-in, the companies will be behind on data collection. Local and state laws can dictate which of these to use, but if there is a choice, it makes sense to choose an opt-out platform, not just for the mortgage company, but for the customers as well.

Opt-in, opt-out, and the mortgage market

In any lead system, the amount of information one receives is the supply. If demand is high and supply is low, prices increase. Basic economics. This means that, for consumers, an opt-in system is only able to sell a limited amount, and prices for the company, and thus, the consumer, will inevitably have to go up. This not only hurts the customer’s bank accounts, but actually increases foreclosure rates as well. This is because limited data means a higher approval rate and more lax guidelines. Customers who normally would be turned away are now struggling to pay off a mortgage above their price range, and this leads to higher foreclosure rates.

Opt-out provides mortgage companies with more data, thus they don’t have to charge as much – this is because the demand stays the same, but the supply increases. This can actually lead to a loop where the company has the lowest prices, thus they get more leads, so they can drop their prices a little more, etc. Because the company has so many leads, they can be more picky about who to provide services for, meaning higher quality and fewer foreclosures. They’re pretty much winning on every metric. It should be clear that opt-out is the superior data agreement method for businesses. This reduces costs across the board, improves statistics, and ultimately makes the market more beneficial for customers, as well.

Verticals besides mortgage

This doesn’t just apply to mortgage, but can also apply to verticals like credit cards or insurance leads. Any vertical that can operate on smaller, less specific sets of data is affected by the ability for that data to be sold. Whether buying up leads or trying to sell them off, knowing the ins and outs of opting is important.


We’ve alluded multiple times to the fact that in some areas, opt-out isn’t allowed. The reason for this is that some see opt-out as a violation of privacy; they propose that, by default, most people would prefer to keep their data between themselves and who they share it with, not with a larger network. Thus, they require opt-in permission for data selling. It forces us to ask the question, is it a privacy risk, or does it work to the benefit of the consumer? While they’re not mutually exclusive, we would lean more towards the latter. Opt-out improves the quality and price of the lead for the consumer, while still offering the option of exclusivity.

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Ultimately, the decision of whether a company can set up data collection as opt-in or opt-out depends on where the business is. But it should be clear that, if given the opportunity, being able to collect data with an opt-out data agreement leads to lower prices, lower foreclosure rates, and higher customer satisfaction.

Despite this, regulations on how data is collected and sold are only getting stricter. Local, state, and federal laws dictate many different aspects of data collection, so be sure to understand how your end-user agreements fit into the legal structure of your city and state.

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