CONSUMER NEWS RECALLS COMPLAINT FORM SCAM ALERTS
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CONSUMER NEWS RECALLS COMPLAINT FORM SCAM ALERTS |
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FTC Sues Web Sites
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April 18, 2001
Obtaining consumers' private financial information under false pretenses - a practice known as "pretexting" - violates federal law. The FTC asked the courts to halt the illegal practices permanently, freeze the defendants' assets pending trial, and order them to give up their ill-gotten gains. In each of the three cases the courts temporarily enjoined the defendant from continuing the illegal practices and imposed a partial freeze of assets pending a hearing. The Commission has been actively involved in the fight against pretexting since April 1999, when it filed suit against Touch Tone Information Systems, Inc., alleging that pretexting is deceptive and unfair in violation of the Federal Trade Commission Act. Subsequently, Congress enacted the Gramm-Leach-Bliley Act, which specifically prohibits obtaining another person's financial information by making false, fictitious or fraudulent statements to financial institutions. In January 2001, the Commission announced the kickoff of "Operation Detect Pretext." As part of this effort, FTC staff, after screening 1,000 Web sites and reviewing more than 500 print media advertisements, identified approximately 200 firms that offered to obtain and sell asset or bank account information to third parties. The Commission sent notices to these firms and published a Consumer Alert titled "Pretexting: Your Personal Information Revealed." The three suits filed this week represent the Commission's latest efforts to stop pretexting. In documents filed with the courts, the FTC charged that the defendants maintained Web sites where they advertised that they could obtain non-public, confidential, financial information -- including such things as checking and savings account numbers and balances, stock, bond and mutual fund accounts and safe deposit box locations -- for fees ranging from $100 to $600, depending on the information sought. In sting operations set up by the FTC in cooperation with local banks, investigators set up dummy bank accounts in the names of cooperating witnesses and then called defendants posing as purchasers of pretexting services. In one case, an FTC investigator posed as a consumer seeking account balance information on her fiancé's checking account. The investigator provided limited information about her "fiancé's" account to the defendant. The defendant called the bank, identifying himself by the name of the supposed "fiancé," and asked to check his balance. He later provided the account balance information to the FTC investigator. The FTC charged that the defendants use false pretenses to steal consumers' private financial information and sell it. The FTC complaints allege that these practices violate the FTC Act and the Gramm-Leach-Bliley Act. The Commission alleged that the sale of financial information by pretexters is also likely to injure consumers by invading their financial privacy and exposing them to the risk of economic harm and financial fraud because their information could be disclosed to individuals who might use it to deplete a bank account or liquidate a stock portfolio, or to steal an identity. The Commission complaints name Information Search, Inc., of Baltimore, Maryland; Smart Data Systems of Staten Island, New York; and Discreet Data Systems of Humble Texas. The cases were filed under seal in U. S. District Courts for the District of Maryland; the Eastern District of New York; and the Southern District of Texas. |
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