Mortgage Lead Generator Busted by FTC

The Federal Trade Commission and the Attorney General of California announced they filed the lawsuit against a Temple City, Calif.-based operation run under the corporate names of Optin Global Inc. and Vision Media Limited Corp. and their principals. In addition to requesting the freeze on assets pending trial, the agencies asked the judge to order a permanent halt on the illegal spamming and require them to turn over to computer records related to their operation.

The 13-count complaint alleges the operation uses third-party affiliates or “button pushers” to send spam pitching mortgage loans and other products and services. The hyperlinks in the spam take consumers to Web sites operated by Optin and the related businesses. Consumers fill in data that is then passed to lead companies and by them to lenders.

One mortgage broker sought, and was reportedly given, assurances by the operation that they were complying with provisions of the CAN-SPAM Act, or the Controlling the Assault of Non-Solicited Pornography and Marketing Act of 2003, which took effect Jan. 1, 2004.

However, “most of the 1.8 million e-mail messages sent to the FTC by the public demonstrate that they were violating almost every provision of the act,” the commission said.

The complaint alleges that since March 2004, the FTC has received from consumers over 1,870,000 commercial email messages that advertise Web sites of the California-based operation, while the attorney general’s office has received 1,000 of such e-mails since January 2004.

“Spam ranks as one of the major consumer and business protection problems of our generation,” said Attorney General Bill Lockyer in an announcement. “It clogs our email boxes, invades our privacy, serves as a gateway to consumer fraud and costs our businesses billions of dollars.“

John Chu, the attorney who represented the operation in today’s court hearing, said he was called in on an emergency basis this morning to help the operation respond in court to papers that were served onto it at 10 p.m. Tuesday.

“From what I’ve seen so far the defendants do want to comply with CAN-SPAM Act,” Chu said. “If there were prior violations before 2004 they haven’t been intentional.”

Chu noted he has not had opportunity to review or investigate Optin and may only be the temporary attorney. He said because Optin is “a small company run by a couple of individuals who haven’t been hiding,” he finds it “sort of strange that there would be this kind of effort [from the government] — the press, the lawsuit, the emergency action, no opportunity to respond” — without them first sending a cease and desist letter to let the operation know they’d take action if the alleged violations were not stopped.

“Its like a large-scale ambush and I don’t know why,” Chu said.

The agencies charged Optin with violation of the CAN-SPAM Act by using false or misleading e-mail header information in the “from” or “reply to” lines; using deceptive subject headings; failing to notify consumers that they had a right to opt out of receiving the e-mail; not providing an opt-out mechanism; failing to honor consumers’ opt-out requests; failing to identify e-mail as an advertisement; and not providing a valid physical postal address.

The commission and California seek “damages, disgorgement of ill-gotten profits, and immediate and permanent injunctive relief to prohibit further violations of the law,” according to the attorney general office. “For violations of California law, Lockyer seeks civil penalties of $2,500 per violation, actual damages, and liquidated damages of $1,000 per illegal email, up to $1 million per incident.”

The Wall Street Journal reported last night that a San Francisco judge halted the alleged e-mail spam operation.