So a common phrase is bad? Tom, "Richard" and Harry is a common phrase and isn't rude, and it isn't swearing so it doesn't break rule A2 because it isn't swearing, and the filter is only there to "substitute the letters of swear words" so no, it's not against the rules. It's a case of the filter is filtering a word which isn't a swear word, it's filtering a phrase.
Also, people are posting swear words and possibly unfiltering them themselves because it is allowed in the feedback forum within reason, they are just going through a funny way of doing that.
FURTHERMORE it hasn't been mentioned anywhere that LM*AO is a bad word, because the swearing rules says "and other similar variations which are allowed, even though one of the letters in the word is filtered" so technically you can't pass judgement when the A word shouldn't be filtered (unless Habbox filter that word, which would be one of the silliest things ever to happen on Habbox.com). Because, as you mentioned, you are not in the position to deal with swear words because you're only a moderator, so that abbreviation could be seen as appropriate, because it is appropriate on Habbox.com otherwise it would not of appeared.









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