FTC Testifies on the Sale of Consumers Phone Records

The Federal Trade Commission today told the House Committee on Energy and Commerce that the agency is currently investigating companies that offer consumer telephone records for sale, and plans to pursue the investigations vigorously. Commissioner Jonathan Leibowitz told the committee, “Companies that engage in pretexting – the practice of obtaining personal information, such as telephone records, under false pretenses – not only violate the law, but they undermine consumers’ confidence in the marketplace and in the security of their sensitive data.”

“While pretexting to acquire telephone records has recently become more prevalent, the practice of pretexting is not new,” the testimony states. “The Commission has a history of combating pretexting.” The first FTC law enforcement action targeting operators who used false pretenses to gather financial information occurred in 1999. The company offered to provide consumers’ financial records for a fee. The agency alleged the company’s employees obtained the records from financial institutions by posing as the consumer whose records it was seeking. The Commission charged that the practice was unfair and deceptive and violated the FTC Act, the testimony says.

Following passage of the Gramm Leach Bliley Act (GLBA), which specifically prohibits pretexting of customer data from financial institutions, the agency launched Operation Detect Pretext in 2001. “Operation Detect Pretext combined a broad monitoring program, the widespread dissemination of industry warning notices, consumer education, and aggressive law enforcement.” It followed up the first phase of Operation Detect Pretext with a trio of law enforcement actions against information brokers. “Because the anti-pretexting provisions of the GLBA provide for criminal penalties, the Commission also may refer pretexters to the U.S. Department of Justice for criminal prosecution, as appropriate. One such individual recently pled guilty to one count of pretexting under the GLBA,” the testimony states.

According to the testimony, an entire industry of companies offering to provide purchasers with the cellular and land line phone records of third parties has developed. The testimony notes that the agency could bring law enforcement actions against telephone record pretexters for deceptive or unfair practices under Section 5 of the FTC Act and that the FTC is currently investigating companies that appear to be engaged in telephone pretexting.

“Protecting the privacy of consumers’ data requires a multi-faceted approach: coordinated law enforcement by government agencies as well as action by the telephone carriers, outreach to educate consumers and industry, and improved security by record holders are essential for any meaningful response to this assault on consumers’ privacy,” the testimony says.
“The Commission has been at the forefront of efforts to safeguard consumer information and is committed to continuing our work in this area,” the testimony says.

The Commission vote to approve the testimony was 5-0.

Copies of the testimony are available from the FTC’s Web site at http://www.ftc.gov and also from the FTC’s Consumer Response Center, Room 130, 600 Pennsylvania Avenue, N.W., Washington, D.C. 20580. The FTC works for the consumer to prevent fraudulent, deceptive, and unfair business practices in the marketplace and to provide information to help consumers spot, stop, and avoid them. To file a complaint in English or Spanish (bilingual counselors are available to take complaints), or to get free information on any of 150 consumer topics, call toll-free, 1-877-FTC-HELP (1-877-382-4357), or use the complaint form at http://www.ftc.gov. The FTC enters Internet, telemarketing, identity theft, and other fraud-related complaints into Consumer Sentinel, a secure, online database available to hundreds of civil and criminal law enforcement agencies in the U.S. and abroad.