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FTC Gets Green Light to Shutter Debt-Relief Sites

(CN) - A federal judge pulled the plug on a series of debt-relief websites that the Federal Trade Commission says falsely suggest government affiliation.

The FTC claims San Antonio resident Christopher Mallett violated the Federal Trade Commission Act with his network of websites that offered aid to visitors looking for debt, tax and mortgage relief. Visitors that give their contact information often later heard from third parties regarding debt-relief services, the complaint says.

Mallett allegedly misled visitors by incorporating deceptive language and images, including the FTC seal, to suggest that his websites have some connection with the federal government.

U.S. District Judge Colleen Kollar-Kotelly granted the FTC's unopposed motion for a preliminary injunction on Oct. 13. The Washington judge's decision came 23 days after the FTC served Mallett with notice of the motion.

"In this case, the FTC has made an uncontested showing that Mallett's websites falsely represent that the websites, and the organizations advertised on those websites, are associated with the federal government," the judge wrote. She goes on to find that the FTC adequately supported its motion.

"The court pauses to observe that its finding is merely preliminary; whether or not the representations appearing on Mallett's websites were likely to mislead reasonable consumers is ultimately a factual question that will require further development of the record," Kollar-Kotelly notes in the 15-page opinion.

"The public interest in ensuring the enforcement of federal consumer protection laws is strong, and Mallett's pattern of cycling through websites, shutting down some while opening others, evidences that similar conduct is reasonably likely to recur in the future," Kollar-Kotelly wrote.

The judge explained the FTC's request as follows: "Distilled to its essence, the preliminary injunction proposed by the FTC would (1) preliminarily restrain Mallett from making materially false or unsubstantiated representations in connection with the marketing of debt-, tax-, and mortgage-relief services to consumers, (2) require the removal of public access to any websites used by Mallett to advertise such services, (3) ensure the preservation of evidence relevant to the prosecution of this action, and (4) direct Mallett to provide an accounting of his present financial condition."

Kollar-Kotelly made two adjustments before approving the proposed injunction.

"First, the FTC has proposed unreasonably tight deadlines for compliance for Mallett and third parties, including internet service providers hosting Mallett's websites," the opinion states. "The court shall issue a preliminary injunction providing Mallett and third parties with a reasonable amount of time to comply with the terms of the injunction."

"Second, the FTC asks this Court to authorize it to record any oral communications with Mallett or Mallett's employees, agents, or representatives for the purpose of monitoring compliance with the preliminary injunction," according to the opinion.

Kollar-Kotelly emphasized that the commission must abide by the law to make such recordings. "If, for example, the FTC seeks to record a conversation in a jurisdiction that does not permit 'single party consent,' and if the laws of that jurisdiction are in fact applicable to the FTC and the FTC's conduct, then the court expects the FTC to comply with any applicable law," she wrote.

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