FTC Settles With Seller of Phone Records

The U.S. Federal Trade Commission has settled a complaint with a Web-based company it accused of selling people's telephone records without permission, the agency said today.

The settlement with CEO Group, doing business as Check Em Out, bars the company and its operator Scott Joseph from marketing or selling phone records, and it requires the company to give up $25,000 of its profits from selling phone records. Selling phone records to third parties is illegal under federal law, the FTC had charged.

The FTC in May 2006 filed complaints in U.S. court against five Web-based companies that obtained and sold confidential phone records to third parties. In addition to the settlement with CEO Group, the FTC has settled two other cases and obtained a default judgment against a fourth company. The complaint against the fifth company is still active.

The FTC's complaints came after complaints from privacy groups and members of the U.S. Congress about pretexting, when someone obtains a telephone customers' records without permission under false pretexts. In many cases, companies offering phone records over the Internet were calling telephone carriers and pretending to be the targeted customer. In September 2006, Hewlett-Packard revealed it had been spying on some of its board members and journalists in an attempt to uncover the source of boardroom leaks, and HP officials later said their investigators had used pretexting to obtain phone records.

The Telecommunications Act of 1996 prohibits customers' phone records from being disclosed unless "upon affirmative written request by the customer." The FTC charged the five Web-based companies of engaging in unfair business practices.

The settlement with CEO Group prohibits it from obtaining, marketing or selling consumer phone records or other consumer personal information except where allowed by law, the FTC said in a news release. The settlement, approved by the U.S. District Court for the Southern District of Florida, includes a judgment of $222,381, the amount the company earned by selling phone records, but the defendants said they were able to pay only $25,000. If the court finds that the defendants misrepresented their finances, the entire amount will be due, the FTC said.