A controversial marketing technique that invites direct mail recipients to send back "lead cards" has resulted in a rash of lawsuits brought by State Attorneys General and the American Association of Retired People (AARP).

The "Lead Card" technique was created after the wildly popular National Do Not Call Registry in 2003 gave Americans an easy and enforceable way to block unwanted telephone calls. The lead cards, which typically target older Americans, entice them to respond by sending in cards indicating an interest in personal finance, health, sweepstakes or other matters.

By sending off replies requesting information, recipients waive their do-not-call rights. The cards often falsely imply an affiliation with the federal government or with advocacy groups such as AARP. Complaints are mounting from seniors that responding has exposed them to hard-sell pitches from the insurance industry. Many of the cards also fail to mention that replies will be turned over to insurance salespeople. Accordingly, several of the lawsuits against the practice focus on deception.

When Naomi and Horace Williams, an 83-year-old retired factory worker, got a postcard warning that estates of older Americans could be wiped out by taxes unless they moved quickly, they believed it came from AARP, and returned the card, according to the Oct. 26th Wall Street Journal, which broke the story. As it turned out, the actual sender of the card had been America's Recommended Mailers Inc., a company housed in a Lewisville, Texas, strip mall that provides leads to insurance agents nationwide. They received a call and a visit from an insurance agent to their home in Morganton, North Carolina, who used high-pressure sales tactics to convince them to switch to a product which was far less beneficial. The marketer and the insurance agent worked for American Family Prepaid Legal Corp., an Irvine, Calif., living-trust provider.

The Williams filed suit in state Superior Court in Raleigh, a move that helped the couple recover its $179,000 nest egg. Meanwhile, the Texas attorney general is suing America's Recommended Mailers for alleged misrepresentations in its pitches. The company disputes the allegation, saying it merely quoted AARP. Nonetheless, it said it was revising its cards, the Journal reported.

Attorneys general in Illinois, Pennsylvania and Texas have taken legal actions against a total of seven lead generators, charging them with falsely suggesting endorsements by the government or AARP. Regulators in about 20 States have opened fraud investigations into lead generators, according to a court filing by the Texas attorney general's office in one of the cases. State regulators say insurers are using the cards to peddle investments unsuitable for seniors, including so-called living trusts that may provide no benefit and annuities that come with steep surrender charges and lengthy payout deferrals.

Minnesota Attorney General Lori Swanson filed suit against American Family in March, accusing it of selling living trusts and annuities that are unsuitable for older adults with modest savings. Attorneys general in North Carolina and Pennsylvania have filed similar suits against American Family, which has 10 offices around the country. American Family denied the attorney general's allegations but in July agreed to shut down in Minnesota.

In April 2006, AARP won a permanent injunction in U.S. District Court in Jacksonville, Fla., prohibiting a company owned by ChoicePoint Inc., of Alpharetta, Ga., from referring to AARP on its lead cards and from using a Washington, D.C., return address unless it had an office there. In a settlement, ChoicePoint also agreed to destroy lead cards violating the injunction and paid an undisclosed sum to AARP.

ChoicePoint internal emails used as evidence in the case showed it was mailing more than a million lead cards a year and charged insurers as much as $35,000 per order for the mass mailings, including one in 2003 alerting older adults to a "new" AARP study on probate taxes. The study was then actually 14 years old, was done before a change in federal probate laws and, according to AARP, no longer represented its views. In internal emails, ChoicePoint employees attributed the cards' success in generating responses to their "fear factor" and described response rates that "tumbled" when AARP's name was temporarily removed from mailings, the Journal reported. ChoicePoint's spokesman told the Journal that the "business practice" described in the settlement began before ChoicePoint bought its lead-generator unit in 2003, and that ChoicePoint stopped using AARP references after last year's settlement.

AARP has a similar complaint pending against America's Recommended Mailers and American Family Prepaid in U.S. District Court in Durham, N.C. AARP alleged that America's Recommended Mailers uses cards that appear to come from AARP to generate leads sold to American Family and others. America's Recommended Mailers has denied the claim. American Family said in a court filing that it bought lead cards on a "good faith" belief that the cards didn't violate laws.

From the Privacy Times

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