FTC sues to stop gathering of personal data

The U.S. Federal Trade Commission (FTC) today announced that it has filed lawsuits aimed at halting the operations of three online "information brokers" that offer to locate personal financial information such as bank balances in return for fees.

The FTC is accusing the three data brokers of obtaining the information under false pretenses, an illegal practice known as pretexting. The suits, filed in various federal courts, come three months after the commission warned companies to comply with regulations that ban impersonation and other forms of pretexting.

However, the FTC voted to approve the filing of the suits by only a 3-2 margin. Commissioner Orson Swindle issued a dissenting statement, saying that he "reluctantly" opposed the legal actions, while Commissioner Thomas Leary said in a separate statement that he concurs with part of the decision but doesn't think there's sufficient grounds for all the claims made by the FTC.

Being targeted in the suits are the owners of Information Search Inc. in Baltimore, Smart Data Systems in Staten Island, N.Y., and Discreet Data Systems in Humble, Texas. The FTC said the cases are the result of an ongoing investigation into thousands of Web sites and print advertisements that offer to find personal data for a fee.

David Kacala, the owner of Information Search, today said his firm doesn't engage in pretexting while looking for information on deadbeat parents or people who have legal judgments against them. "We don't do those searches; we just farm them out to a vendor," Kacala said. He added that the vendor, a law firm in California, is responsible for obtaining the information.

Victor Guzzetta of Smart Data Systems declined to comment on the FTC's suit against his firm when contacted today, while the owner of Discreet Data Systems couldn't be reached. A Web site using that company's name as its URL has a notice saying the domain "has been disabled by the systems administrator."

The suits filed by the FTC allege that the three data brokers fraudulently obtained personal information at the request of FTC investigators who were posing as clients. The FTC said it worked with banks to set up dummy accounts and then asked the brokers to get confidential data about the accounts.

In one sting operation, for example, an FTC investigator posed as a woman who was seeking information about her fiance's bank balance. The data broker called the bank and identified himself as the supposed fiance in order to get the requested data, the FTC said.

In the suits, the commission asked the courts to permanently halt the alleged illegal practices by the brokers and to freeze their assets "and order them to give up their ill-gotten gains." According to the FTC, the judge in each case issued a temporary injunction against the defendants and imposed a partial freeze on assets pending a hearing on the charges.

Copyright © 2001 IDG Communications, Inc.

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