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FCC Strengthens Rules For Phone Privacy

But Law Enforcement Gets Veto Power Over Consumer Notification

By Martin H. Bosworth
ConsumerAffairs.com

April 3, 2007

Calling Records • FTC Shuts Down Pretexting Operation • Phone Pretexters Get Off Cheap • Verizon Wireless Changes Customer Data Policy • FCC Strengthens Rules For Phone Privacy • House Tries Once More to Pass Pretexting Bill • Pretexting Bill: Pretense or Reality? • Hewlett-Packard Pays $14.5 Million to Settle Pretexting Suit • HP Scandal Ignites New Pretexting Battle In Congress • AT&T Sues Calling Record Brokers • Sprint Nextel Settles Case with Florida Data Broker • Feds Sue Calling Record Vendors • Illinois Lawsuit Charges Data Brokerages • Florida Judgment to End Data Broker's Business • Florida Investigates Fake Caller IDs • California Sues Data Trace USA for $10 Million • Missouri Sues Datatraceusa.com • Florida Sues Data Broker Over Sale of Phone Records • Texas Sues Companies Selling Telephone Calling Records • Websites Hawking Phone Records Shut Down • FTC Vows to Stop Illicit Sale of Cell Phone Calling Records • FTC Pledges "Vigorous" Pursuit of Cell Phone Record Sales • AT&T Accused of Eavesdropping, Calling Record Sales • Sprint Sues Cell Phone Record Brokers • Missouri Shuts Down Locatecell.com • Texas Probes Cell Phone Calling Record Sales, Missouri Files Suit • Illinois Sues Company Selling Cell Phone Calling Records • Outcry Over Sale of Cell Phone Calling Records

The FCC has issued new rules requiring passwords for customers who want to access their telephone records, in order to limit "pretexting," the practice of obtaining calling records under false pretenses.

Under the new FCC rules, issued yesterday, telephone carriers will also be required to notify customers if any of their personal information is changed or updated. The rules also mandate disclosure requirements for law enforcement and customers in case of a breach of personal information.

"Today, the Commission significantly strengthens the Commission’s existing safeguards and takes a strong approach to protecting consumer privacy," FCC Chairman Kevin Martin said in a statement accompanying the new rules. "Compliance with our consumer protection regulations is not optional for any telephone service provider."

The law enforcement disclosure requirements caused dissent among the five FCC commissioners. Under the new rules, agencies such as the FBI and Secret Service are informed of privacy breaches before customers are, and the interval between informing law enforcement and affected customers is open-ended.

Commissioner Jonathan Adelstein called the law enforcement delay requirement "granting the FBI a blank check to delay notice to customers."

"I can understand the need for delay in extraordinary circumstances identified by law enforcement, but automatic delays coupled with unlimited and unchecked extensions are not appropriate," Adelstein said. "Particularly given that timely notice to consumers may be essential for those customers to take protective action, I must dissent from this portion of the Order."

Telecom companies predictably objected to the ruling, claiming that the new requirements would inhibit companies from selling services to customers through marketing partners. Walter McCormick, president of the United States Telecom Association, called the new rules an "extremely anti-consumer outcome."

"[T]he FCC is taking an overly broad approach far beyond protecting the legitimate privacy interests of call detail information to preventing any marketing of new services, bundled offerings and new applications -- using joint venture partners or independent contractors -- that can save consumers money," McCormick said in a statement.

FCC chair Martin said that the current process of "opting in" customers to third-party marketing offers by default placed too much of the burden on them to protect their information. "The 'opt-in' approach adopted in this order clearly is supported by the record, is consistent with applicable law, and directly advances our interest in protecting customer privacy," he said.

The current rules require approval by the White House's Office of Management and Budget (OMB), a process that could take several months. Companies are required to comply with the law six months after the approval process is complete.

Pretexting's Path

Pretexting first became a public issue when newspapers like the Chicago Sun-Times and blogger John Aravosis of AMERICAblog exposed companies that would buy customer calling records from phone companies and resell them. Aravosis was able to buy the phone records of retired Army general and former Presidential Candidate Wesley Clark for $89.95.

The scandal led to a flurry of lawsuits by phone companies and state Attorneys General against companies such as Locatecell.com and Celltolls, shutting the majority of them down. But Congressional legislation designed to outlaw pretexting stalled when it was revealed that many local, state, and federal law enforcement agencies utilize pretexting to gain information on criminal suspects or engage in domestic surveillance. The original anti-pretexting bill passed the House of Representatives on a 409-0 vote, but then disappeared.

Pretexting came back into the limelight when investigators hired by Hewlett-Packard to track the sources of corporate leaks utilized pretexting to get information on members of HP's board, as well as several reporters for CNet's News.com news service.

The resultant scandal caused the resignations of several high-ranking HP employees, including former chairwoman Patricia Dunn. Although Dunn, who is suffering from advanced ovarian cancer, was charged with fraud in California, a judge later dismissed the charges and sentenced the investigators to community service.

The HP scandal caused a renewed push to pass legislation criminalizing pretexting, and Congress finally pushed through a bill that would make pretexting a federal crime punishable by a jail sentence of up to 10 years, which President Bush signed in January 2007. The new law exempted law enforcement from any restrictions on using pretexting.

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