Privacy Advisor

Experts Explore Impact of New Federal Pretexting Law During IAPP Audio Conference

May 1, 2007

Ann E. Donlan, CIPP

The Federal Trade Commission (FTC) promises to continue its aggressive enforcement of deceptive and unlawful efforts to obtain consumers' private telephone records, according to an agency official.

"The FTC has been concerned with the issue of pretexting since before the passage of GLBA (Gramm Leach Bliley Act)," said Angela Ball, an attorney with the FTC's Division of Privacy and Identity Protection, Bureau of Consumer Protection. "We will continue our enforcement efforts aggressively."

Ball was one of three experts the IAPP tapped for a recent audio conference, "Pretexting: New Laws, New Challenges, New Expectations." Joining Ball were Agnes Bundy Scanlan, CIPP, Counsel, Goodwin Procter LLP and Matthew Leonard, CIPP, Senior Fellow, The Ponemon Institute.

The audio conference is available for purchase at a price of $159 for members and $179 for non-members. More information is available at www.privacyassociation.org.

The experts were commenting on the impact of the new pretexting law, the Telephone Records and Privacy Protection Act of 2006, which President Bush signed in to law on Jan. 12, 2007.

The new law, according to Bundy Scanlan, mandates a maximum 10-year prison term for anyone convicted of using fraudulent tactics to obtain telephone records. Bundy Scanlan said the pretexting scandal related to HP's efforts to pinpoint the source of boardroom leaks "proved that the law needed to be more specific in terms of obtaining non-public personal information" about individuals and the penalties that pretexters should face for their actions. She added that there are enhanced penalties for aggravated cases that involve more than $100,000 or more than 50 customers, and when the information is used to further certain other criminal offenses.

Bundy Scanlan noted that GLBA, since it was signed into law in 1999, "is a huge step in terms of protecting consumer privacy by way of financial statements." She added that GLBA "served its purpose," but Congress determined that there was a need to update the law around the practice of pretexting.
Bundy Scanlan's comments also detailed the elements organizations should include on an "investigative checklist" that should be drafted and in place before a pretexting incident arises.

Ball added that while GLBA's Section 521 (a) "had some specific anti-pretexting provisions," the FTC also used its unfair or deceptive practices section of federal law to pursue pretexting cases on behalf of consumers.

In its experience, FTC investigators found that "Web operators and loosely organized data brokers" were providing disclosures that purported to be mindful of GLBA.

"We found that a lot of them misconstrue the exceptions under GLBA," Ball said, adding: "If there is no good assurance that the information is being obtained through lawful means, then it is likely that it is not being obtained through lawful means."

Ball noted that a pretexting bill currently pending in Congress, the Prevention of Fraudulent Access to Phone Records Act, would allow the FTC to impose civil fines on those who use deceptive methods to obtain consumers' telephone records. 

She detailed the agency's most recent pretexting enforcement efforts, including five cases in federal district courts the agency filed in May 2006 against sellers of telephone records. Of those, two cases have settled and three are pending. In February, the FTC filed a case in federal court in Florida against a group of defendants who allegedly engaged in telephone records pretexting.

"We are moving forward with our enforcement efforts and we are looking to see those folks brought to justice," she said.

Leonard, of The Ponemon Institute, wrapped up the discussion, with a focus on the important role Chief Privacy Officers play in promoting a business culture that values honesty. Leonard also emphasized the need for CPOs to identify departments or groups within the organization that are collecting data - outside of the typical marketing or human resources areas - places within the enterprise "where we get blind-sided" by privacy blunders.

Leonard stressed that in many businesses, "there is sort of a culture of deception to win in business." For example, "creative impersonation" to get in to see a client "becomes part of the mythology in the sales force." He urged CPOs to "help people make ethical decisions" to thwart the "culture of deception. … At the end of the day, we're asking our employees to be honest."

Corporate policies and procedures are critical, said Leonard, who added that "privacy guidance needs to be appropriate to the group."

By identifying potential areas where problems could arise, privacy pros "can help the business do better, not just avoid trouble. It should be our job to think those things through. It's an opportunity for us to do something right in our organization."

This audio conference is now available for purchase. Order now at www.privacyassociation.org/index.php?option=com_content&task=view&id=8&Itemid=70.