This is an article I wrote about the Internet phenomenon, As explained in the article, I'm summarizing arguments with which I don't necessarily agree. I invite you to visit the website described in the article and judge for yourself. The required ID and password are given at the end of the article.


A Modest Proposal:

The Story of,

as retold by Edward Samuels*


     This past April 1, a group of four students at New York Law School launched a new website that took even the overhyped Internet by storm. Within two months, without a single paid advertisement (but a cascading wave of emails and listserv postings), the site received so many "hits" that the Law School had to shut it down. The school's servers were simply overwhelmed by the demand. Within another three weeks, the students received an infusion of cash from an anonymous supporter (read potential shareholder), and were back in business using a server located on the formerly obscure island of Pobango. The website has been shut down, and relocated to other servers, at least four times since its debut in April. Although the primary site is thus something of a floating crap game, at last count there were over sixty-eight “mirror” sites up and running.


     What the site offers is credit card numbers that can be used to charge items on the Internet for free. Not free as in no interest charge, but free as in no charge whatsoever--the chance to acquire goods and services without the obligation of ever paying for them.On April 28, 2001, the National Associaton of Banks ("NAB") obtained a temporary injunction requiring that the site be shut down. But in a surprise to many in the legal community, the Court of Appeals has granted a stay from the injunction pending a hearing that is scheduled for next month.


     In order to avoid too rapid expansion, the authors of the site coded it so that it would not be picked up by any of the traditional web search engines. Access required a password, which was not publicly disseminated (but which I reveal at the end of this article). The authors intended to make the service initially available for beta-testing by only a few friends, with a gradual rollout of services. Yet, two of the friends sent email notices to some of their friends--and you can guess the rest. It took all of about three weeks for the site to cascade out of control. Since the sites are not indexed by the major Internet search engines, the exact number of hits is not known; but it’s been estimated that the site became the number one Internet destination within only a few months of its introduction. The greatest success seems to be around college campuses, where traffic to the site has been so great that service to other Internet sites has been, in some cases, reduced to a crawl, even over high-speed connections.


     Freeferme currently offers several levels of service. The most basic “Level A” service allows users to download a short program to generate fake credit card numbers that will be accepted by online merchants about 60-70% of the time. For a modest service fee, freeferme will send you a plastic card onto which you can print a name of your choice and a generated credit card number for use with “terrestrial merchants.” (freeferme advises that you not use your own name.)


     “Level B” service gives users credit card numbers of real people. These numbers are given out to many users. The acceptance rate is very high initially; but, once the real person gets billed and reports the problem, or once the credit card company discovers unusual activity on the account, the number will be cancelled. The service indicates the date when the number was first released, and advises that users not use the number after ten days. Freeferme assures users that, under current law, the actual people will not have to pay for the charges, which will presumably be absorbed instead by the credit card company.


     Best of all is a premium “Level C” service. Using this service, users are given a credit card number of a real person, which is not disclosed to anyone else. Freeferme suggests that the number can be used for up to several weeks if credit use is limited to small purchases, but should be used no more than five days for large “blowout” purchases. Since the number of such Level C accounts is, of necessity, limited, freeferme auctions off the numbers to the highest bidders. It is this service that freeferme hopes will make it money; so far, the available Level A and Level B services are supplied without any charge or profit by freeferme, while it builds up its customer base.


     Not surprisingly, the credit and banking industries, primarily through the National Association of Bankers (“NAB”), have complained that the freeferme service is nothing more than outright theft and fraud, and that the site should be shut down and its creators prosecuted. NAB has so far gotten the federal and state authorities to jail two of the creators of freeferme; and initiated civil lawsuits against the service providers for 16 of the mirror sites, as well as against 49 users who have bought products using credit card numbers supplied by freeferme (although it’s not clear whether these are Level A or Level B users), as well as against 122 sites that have linked to freeferme or one of its mirror sites.


     Several law professors, however, have argued that freeferme, as a burgeoning service on the Internet, should not be shut down. The freeferme service has, in the words of one professor, “caught the credit industry with their pants down,” proving that there is a vast pent-up demand for such a service. Some of these professors have formed a “freeferfreeferme” committee (the “FFFFM Committee”), which will defend the creators of freeferme and seek legislative solutions to “take advantage of the new paradigm that the Internet technology has made possible.”


     I don’t subscribe to the arguments that the FFFFM Committee has proposed; but the arguments are intriguing, and raise several key policy considerations that deserve to be aired. Accordingly, without endorsing or condemning them, I summarize the arguments here. I believe that they are quite relevant to the topic that I do generally write about, copyright, particularly as it pertains to the Internet. I suggest that you visit the website at and decide for yourself whether the site should be praised or condemned.


     Any analysis must begin with an appreciation of how banking law is made in this country. Basically, competing interest groups (the commercial, savings, credit, insurance, and securities industries) work out deals that divvy up the profits of the national banking pie amongst themselves. While the public interest used to be represented in the national debate, not since Andrew Jackson or William Jennings Bryan have consumer advocates really had much influence at the national level. Not surprisingly, the resulting law has been anything but pro-consumer. Remember usury laws? For those of you under the age of forty, here’s what they said: it was illegal to charge anything more than about 10% interest for the privilege of borrowing money. That’s it, end of analysis. Such laws existed for hundreds of years, in most countries of the world, until the banking lobbies got so strong in the latter part of the twentieth century that they were able to essentially wipe out such laws at the international, federal and state levels.


     In theory, the national banking system is based upon a set of contractual obligations in which the banks and other companies bargain with their customers to establish the rights and obligations of the parties. But have you ever tried to negotiate credit terms? Let’s say you object to paying 21% interest for the privilege of borrowing money. Just cross out 21% and write in “2%,” and see how far you get. And what about that $30 fee for a bounced check? Or the $30 charge in addition to the added interest if a payment is even a day late? The effective interest rate on that one-day-late payment can be hundreds or thousands of percent a year! If the industry weren’t immunized by the banking regulations that were originally intended to protect the consumer, but now protect the industry, that would be considered fraud. Did you really agree to that; did you have any choice?


     There are thousands of banking and credit institutions, so you would think that competition should bring down the price of credit. But in fact, the credit industries are so entrenched that hardly anything would induce them to lower their rates and cut their profits. The Fed lowers national interest rates to a few percent a year in order to stimulate the economy; yet the credit card companies still get away with charging what can only be considered usurious rates.


     The federal law on the subject of credit card numbers is contained in section 1029 of title 18 of the criminal code. That provision makes it illegal to knowingly “traffic in” a counterfeit “access device.” From the language, you probably picture some large illegal counterfeit machine that shouldn’t cross state lines. But, lo and behold, an “access device” includes an “account number, electronic serial number” or “personal identification number” that can be “used to . . . obtain money, goods, services, or any other thing of value.” So under this section, the federal government can and has arrested people who do not in fact sell any counterfeit devices, or themselves use such devices to obtain any gain. What has happened here is that a statute designed to make it illegal to sell things has been interpreted to make it illegal to simply convey information. Freeferme doesn’t sell any material thing; what it makes available is not some “device,” but pure information. (If you want to consider a blank piece of plastic a “device,” freeferme has offered to stop making pieces of plastic available under its Level A service. But the plastic it supplies is blank, containing no information when it is sent to users.)


     So what we have here is a statute, apparently targeted at counterfeit devices, being used to regulate pure information. Given the incredible power of the banking and credit lobbies in Congress, it’s no surprise that the statute contains language that would cover the broader activities the industries are trying to stop. But information is speech, and the First Amendment says that Congress can’t regulate speech. Accordingly, to the extent that the statute might be interpreted to regulate pure speech–the dissemination of pure information–then the courts should declare the statute unconstitutional. How far does the NAB plan to go? Am I to be thrown into jail for giving the url address of, or linking to, the freeferme Website? That’s exactly what they seek in their legal action against 122 sites that do nothing more than link to the freeferme site.


     The credit system is complicated. Try explaining to a child why it is logical to have to pay 15% or 20% interest for the privilege of borrowing money. Or for that matter, try explaining it to the consumer in the street. It just doesn’t make any sense. As argued by the FFFFM Committee, if you can’t explain a complicated law to a large number of people that it is designed to regulate, then there’s something wrong with the law.


     Finally, let’s face reality. You simply can’t regulate the flow of information on the Internet. It was designed to withstand nuclear attack. It treats any attempt at regulation as damage to the system, and simply routes around it. Even if you could jail everyone involved with freeferme, you couldn’t stop the dissemination of information on the Internet. To the extent that freeferme provides a central system that can be attacked by the government and NAB (although with all the mirror sites, even that may prove fruitless), the new peer-to-peer systems will be even harder to track down and control. What are they going to do? Monitor everyone’s email and instant messages to see if we are distributing the type of information the banks are trying to block? It can’t be done.


     Indeed, if the industries put freeferme out of business, the activity they’re trying to monitor will simply be driven further underground. Therefore, rather than try to stop freeferme in its tracks, the banking and credit industries would be better advised to deal with the one entity that represents their last best chance of working out some sort of compromise. Freeferme has proven that there is another model, another paradigm, for providing credit to those who need it. This is a huge untapped market. Rather than stamp it out, the industries should be figuring out how to tap that new market.


     What will the new paradigm look like? It’s too early to tell. But this isn’t the first new technology to open up new markets. The radio and television markets were first considered a threat to the music and movie industries, but those older industries finally realized that they had better come to terms with the new technologies or risk being put out of business themselves. With the introduction of the Internet, if the older industries don’t come to terms with the startups, the startups will grow up and trounce them. So the word from the FFFFM Committee is, stop trying to stifle the new technology, and try figuring out how to deal with it. “Business as usual” won’t work anymore.


* As should become evident as you read this article, any similarity between the persons and events described herein, or in the website, and any actual persons or events is unlikely. The only "truth" in this article is the insight to be gleaned by thinking about the arguments made in support of, and comparing these arguments to others you might see elsewhere in print or on the Internet.


    By the way, the freeferme site is At the initial screen, when asked for your password, type "givitoomee" as your name, and “parroty” as your password. 


The original website for has been shut down.


A mirror site from the last date that the website was up can be found at freefermemirror   


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