Banks and mortgage companies continue to embrace cutting- edge marketing techniques, but a recent lawsuit may make them think twice about hiring outside marketers.
CTX Mortgage, the lending arm of home-building giant Centex Corp., was hit with a $6 million suit this week charging it with violating a law against so-called spam, or junk e-mail.
The suit alleged that CTX distributed at least 5,800 pieces of spam advertising its mortgage products.
The unsolicited e-mail caused an Internet service provider, Connect Northwest, to crash, according to a complaint the company filed Monday in Washington state's Skagit County Superior Court.
Dallas-based Centex said the e-mail was "part of an isolated incident involving an outside vendor."
The lender said it has not seen a copy of the suit and is doing an internal investigation.
This is the first anti-spam suit targeting a Fortune 500 company, said the plaintiff's law firm, Fremont Law of Mount Vernon, Wash.
The unnamed outside marketer hired by CTX allegedly used a computer program to generate probable e-mail addresses, adding Connect Northwest's domain to the end of each. The e-mail carried a false Hotmail account return address, so Connect Northwest's attempts to return unreceived e- mails to the sender made the system crash, the suit alleged.
The subject line on the e-mail promised recipients "a gift for you," the complaint said.
State law in Washington prohibits companies from sending commercial e- mail that hides the sender's identity, distributes misleading information on the subject line, or uses a third party's e-mail address or domain without permission, the plaintiff's attorney said.
CTX's campaign is "insidious," said Brady Johnson, the Fremont Law attorney representing Connect Northwest. The lender violated almost every aspect of the state law, he said.
Violators are subject to fines of $1,000 per incident.
Connect Northwest president Alex Free said he contacted CTX on April 8 after service was disrupted for some of his customers. Mr. Free quoted CTX's legal counsel as saying he "didn't see any problem" with the lender's campaign.
"We have news for him," said Mr. Free in a written statement. "There is something wrong with these massive spam campaigns, and we are going to make that abundantly clear to him."
CTX said it "takes anti-spamming laws seriously" and that it has stopped the activity.