FTC Takes Legal Action Against First Round of Pretexters
The FTC Wed. filed federal court complaints against 5 web-based data brokers that sell confidential telephone records to 3rd parties, charging them with violating federal law. FTC sought a permanent halt to the sale of the records and asked the courts to order the data brokers to give up the money they made through the illegal operations. The FTC voted 5-0 to lodge the complaints.
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The companies charged are: 77 Investigations; AccuSearch, doing business as Abika.com; CEO Group, doing business as Check Em Out; Information Search; and Integrity Security & Investigation Services. “Trafficking in consumers’ confidential telephone records is outrageous,” said Lydia Parnes, dir.-FTC Bureau of Consumer Protection: “It robs consumers of their privacy and exposes them to everything from snoops to stalkers. We intend to put a stop to it.”
Rob Douglas, an information security consultant who has testified at Congressional hearings on the sale of phone records, called on the FTC to deepen its investigation. Douglas told us the defendants named “are mostly middlemen resellers” and “not the inner core of those who actually steal” phone records. “The FTC’s action today is a good but very small first step,” Douglas said: “There are hundreds of companies selling phone records and thousands of buyers. Until the FTC goes after those buyers, the black market for Americans’ private information will thrive.”
Betsy Broder, asst. dir.-Div. of Planning & Information of the FTC Bureau of Consumer Protection, which filed the complaints, told us the cases will help FTC learn more about how these data brokers operate. More cases are possible, but the 5 cases should serve as a deterrent to others, she said. “These are 5 solid targets and we've just filed the cases, we haven’t even begun discovery,” Broder said: “During discovery we hope to learn more about how these individual defendants operated and how they obtained their information, to pursue those cases vigorously. At the same time we're concerned about companies that remain sellers of confidential phone records… If there was any ambiguity before about the illegality of this practice, we've clarified that the FTC considers it a violation of law to sell consumers records without their knowledge and consent.”
Broder said the number of data brokers selling phone records on the Internet has declined in recent months. But, she said, the FTC is concerned that other data brokers may be driven deeper underground: “We will vigorously investigate this industry.”
While the FTC isn’t advising the FCC on the need for additional rules for carriers to protect phone records, the FTC believes legislation pending in Congress will be helpful if it gives the FTC civil penalty authority. “What we can do in a case like this is ask the court to stop them from engaging in the practice and we can get consumer redress… or we can get disgorgement,” Broder said: “Civil penalties are supposed to have a deterrent effect and sometimes what we can get from disgorgement is not sufficient to deter either that particular business or someone else who engaged in this business.”
CTIA Pres. Steve Largent said Congress should pass legislation targeting pretexting and send it to President Bush before the summer recess. “These offenders are sophisticated data thieves who will only stop their illegal behavior when confronted with strong criminal penalties,” Largent said: “We hope this sends a clear message to individuals and companies who seek to illegally obtain and market call record information.”