FTC Cracks Down on Digital Detectives

A settlement against three information brokers highlights a federal crackdown on the illegal practice of gathering someone else's private financial information, a spokesperson for the U.S. Federal Trade Commission says.

The practice, known as pretexting, involves tracking down an individual's personal financial information, such as bank accounts, mortgage records, and mutual fund accounts, for anyone who is willing to pay to get that information. Both the person who hires the firm and the firm that conducts the search are violating the Gramm-Leach-Bliley Act and are subject to civil and criminal prosecution, said Brad Blower, assistant director for the FTC's bureau of consumer protection.

Charges won't be filed against the people who hired the three firms named in the FTC investigation--Information Search in Baltimore; Smart Data Systems in Staten Island, New York; and Discreet Data Systems in Humble, Texas, Blower said. "This is a pretty pervasive practice, and we have to be selective," he said.

When someone gathers private information about another individual, there is a danger of identity theft, and the victim can be severely hurt financially.

On Friday, Information Search, Smart Data Systems, and Discreet Data Systems all agreed that they illegally gathered private information. According to FTC documents, Discreet Data and Smart Data will pay $2000 in penalties. Information Search was ordered to pay $15,000, but the charge was suspended because the company didn't have the money. If the FTC finds that Information Search misrepresented its financial statements, the company will be required to pay the full amount, the FTC said.

Keeping Watch

Under the terms of the agreement, the FTC will monitor the records of the three companies over the next several years to ensure that they no longer engage in the practice, Blower said.

The companies were targeted by the FTC after they gathered private bank account information for an undercover investigator. Blower said the investigator set up a fake bank account and then approached each company and told them that she was about to get married but was not sure her fiancé was telling the truth about his finances.

"In a matter or hours, they had the bank account balance," Blower said.

The FTC filed civil suits against the three companies in federal courts in Texas, Maryland, and New York. At the time the suits were filed, the commission was split on whether it should pursue the cases. Commissioners Orson Swindle and Thomas Leary voted against the suit. However, on Friday, all five commissioners voted in favor of accepting the terms of the suit.

Blower said he couldn't comment on the commission's deliberations or what turned the opinions of the two dissenting members.