MAUREEN ELLIOT
Spam ‘a nuisance’

Anyone with an e-mail address can attest to being inundated with junk messages, commonly known as spam. The subject lines advertise a variety of services and, while many people simply delete the generic messages, sometimes an offer looks so good the recipient follows the link instructions in the e-mail. And sometimes, the disastrous results have nothing to do with computer viruses; spam often equates to scam.

One topic that frequently shows up in e-mail subject lines is mortgage lending and, just as legitimate lenders are becoming more alert to the practice, Attorney General Tom Reilly has initiated the first state lawsuit against a mortgage spammer.

On July 1, Reilly sued DC Enterprises, an unincorporated business, and company principal William T. Carson of Weston, Fla., for sending thousands of unwanted electronic messages offering “pre-approved mortgage rates even with bad credit” to Massachusetts consumers. The e-mail included a link to a loan application where applicants are asked to provide personal and financial information.

More than 27 complaints against DC Enterprises have been filed with the Attorney General’s Office, the Federal Trade Commission and the Federal Bureau of Investigation’s Internet Fraud Complaint Center.

According to Reilly’s lawsuit, the company sent thousands of “misleading” e-mail messages from DC Enterprises, Paragon Towers, 233 Needham St., Suite 300 in Newton. Upon further investigation, the attorney general discovered the business had no physical presence in Newton.

Reilly’s complaint also states that DC Enterprises failed to include an opt-out provision, which allows consumers to decline future e-mails. When consumers clicked on the “opt-out” link at the bottom of the application, it failed to work. The messages also allegedly were not identified as advertisements and used a non-functioning sender address when disseminating messages.

“This is exactly the type of unwanted, misleading and annoying spam that Internet users in Massachusetts and around the country complain about and for good reason,” said Reilly. “We expect e-mail marketers to live up to both Massachusetts law and the new federal spam law, and if they don’t, we’ll take action. This company falsely tried to give its offers credibility by including a Massachusetts business address, which is an insult to the thousands of legitimate companies that call Massachusetts home.”

Reilly’s complaint also states that DC Enterprises took part in mortgage brokering services without a license and gave recipients a false impression that anyone would qualify for a loan in violation of Massachusetts regulations covering the advertising of mortgage loans.

‘Bad Name’ for Industry

Spammers gather e-mail addresses from newsgroups and Web pages. Because spammers don’t know exactly who they are sending messages to, spam can end up in anyone’s e-mail inbox.

James Madigan, president of Leader Mortgage in Arlington, said even he receives mortgage offers in his work e-mail.

Maureen Elliot, executive vice president at Gateway Funding in Woburn, experiences the same thing. On one recent morning, Elliot said within one hour she had already received two e-mails offering mortgage rates as low as four percent.

“It’s more of a nuisance than anything else,” said Elliot.

While it seems illogical that mortgage industry insiders would receive mortgage e-mail spam, Dean Caso, president of Homevest Mortgage in Needham, reasons that he and other lenders receive these e-mails because they visit mortgage Web sites.

Although frequent and annoying, spam e-mail has become common in almost everyone’s inbox and Madigan said most people know to delete it.

“It’s almost like getting junk mail at home,” said Madigan.

Kevin Cuff, executive director of the Massachusetts Mortgage Bankers Association, said mortgage spam, especially from subprime lenders, has definitely picked up speed.

And while often unwelcome, not all of it is fraudulent.

“Mortgage marketing through e-mail has become more and more prevalent as online banking and mortgage banking has become more and more prevalent. It is broad-based in its targeting efforts,” said Cuff. “But it is being conducted more by alternative lending products. It is conducted because it has a proven success strategy that mirrors consumer choice away from phone or face-to-face contact and toward a less invasive approach.”

However, spam can become dangerous when it carries a legitimate company name without approval of the company. Madigan said Leader has received some complaints from consumers who have closed loans with them. Some have received e-mail offering life insurance from Leader Mortgage.

Leader Mortgage does not sell insurance, nor does it sell customer information. But some mortgage information is public allowing spammers to get access. Madigan said they warn borrowers upfront about the prospect of receiving spam mail.

He said it’s a frustrating phenomenon in the industry and makes people look negatively at mortgage companies.

“It certainly doesn’t help the industry,” said Madigan.

Elliott agrees the spam can make consumers wary.

“It gives lenders a bad name,” said Elliott. “I don’t think it helps.”

Elliott said the e-mails are geared towards any and all consumers, while Caso and Madigan added that the subprime borrower is clearly a target for e-mail spammers. Caso said a borrower with bad credit may be so desperate to close a loan, they will go to anyone for help, even if the lender is not legitimate.

The creation of the federal “Do Not Call” telephone registry is one reason the Internet has become a new medium for marketing, Caso said. For mortgage lenders and brokers who generate business via advertising, the ban on telemarketing has taken a toll. Caso said some companies then go to direct mail initiatives or the Internet. Because direct mail is costly and more time-consuming, Caso reasons that it is easier for marketers to “blast” the messages out via e-mail.

He calls the influx of mortgage e-mail spam a “direct response” to the “Do Not Call” list and said such e-mails have tripled in volume since the inception of the telemarketing ban.

Caso said government regulations on spam may be the only way to stop the annoying messages.

“They [spammers] are forcing us into [promulgating spam regulations],” said Caso

Cuff said regulations targeting all types of spam are the only answer.

“Most e-mail marketing is increasingly annoying, but probably no more so than pharmaceutical products or other consumer products,” he said. “Hence, unless there was far-reaching FCC [Federal Communication Commission] regulation attacking all spam, it might be difficult and we might ultimately have a problem with any enforcement of industry-specific regulation.”

The federal Can Spam Act of 2003 went into effect on Jan. 1, 2004, and prohibits practices that include fraudulent or deceptive subject lines or return addresses and makes it illegal to send messages to e-mail addresses that were harvested from Web pages.

The act allows state attorney generals to sue for $250 per illegal e-mail with a maximum of $2 million.

Efforts to contact Carson of DC Enterprises were unsuccessful.