A Recent ruling on Lead Generation Fees - and what it means for you
A recent High Court judgment shows what can go wrong when lead generation arrangements blur into regulated intermediary activity. If your financial services business uses "lead generators" or "marketing agents," you need to be very careful about how your contracts are structured.
The court made it clear that simply labelling a contract as a "Lead Referral Agreement" will not protect you from the law. The courts care about how the arrangement actually works in practice.
In the recent case of Raspberry Academy v Oaksure, an unregistered lead generator sought R1.2 million in commission it said it was still owed. The court refused to grant the claim, finding that the underlying agreement was itself unlawful.
Why did the claim fail? The referrer was getting paid a percentage of the client's premium for as long as the policy remained active. According to the law, paying someone based on the success of a policy makes them a financial "intermediary," not just a lead generator. Because they did not have the proper legal licensing to act as an intermediary, the agreement was thrown out.
How to Legally Pay for Leads (The Do's)
To make sure your referral agreements stay on the right side of the law, keep these rules in mind:
Pay for the introduction: Pay only for the act of generating the lead, not the final sale.
Use flat fees: Pay a fixed amount per lead rather than a percentage.
Keep it basic: The referrer’s only job should be passing on contact details or doing general marketing.
Keep pricing reasonable: Ensure the fee is fair and not just a disguised way to share regulated commissions.
Red Flags to Avoid (The Don'ts)
Your agreement is likely illegal if it includes any of these features:
Paying a percentage: Do not pay based on statutory commissions or a percentage of the premium.
Success-based payments: Do not wait to pay the referrer until a policy is finalized or a premium is received.
Ongoing payments: Do not pay the referrer continuous "trail" fees for the lifespan of the policy.
The Bottom Line
If your business model requires you to pay someone based on successful sales or ongoing premiums, you cannot treat them as a simple lead generator. You must bring them inside the legal net by officially appointing them as a representative or ensuring they are a licensed Financial Services Provider (FSP).
Please reach out to our team if you have any questions, we are here to help.
This blog is for informational purposes only and does not constitute legal or regulatory advice.
