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The Federal Trade Commission today announced that it had charged an "information broker" with illegally obtaining and selling consumers' private financial information. The case against Touch Tone Information, Inc. represents the first federal action against an information brokerage agency engaged in such practices. The Commission alleged that Touch Tone obtains consumers' information by "pretexting." As the Commission testified at Congressional hearings last summer, pretexting is a term of art coined by the private investigation industry to describe the practice of getting personal information about others under false pretenses. The case, filed April 21 in federal court in Colorado, seeks an injunction and all illegally gained profits.

"Touch Tone's pretexting is a particularly pernicious invasion of consumers' privacy -- using deception to gain access to sensitive, private financial information," said Robert Pitofsky, Chairman of the FTC. "This case should send a strong message to information brokers that the FTC will pursue firms that use false pretenses to profit at the expense of consumers' privacy and also create opportunities for economic injury to consumers by, for example, making consumers more vulnerable to identify theft."

According to the Commission, the type of pretexting done by Touch Tone involves calling banks and using deceptive means to obtain a consumer's private financial information. Often the caller will impersonate the account holder by providing the account holder's name, address, date of birth and Social Security number and then lie about the circumstances of the inquiry -- e.g., by claiming to have forgotten their checkbook and asking about made-up deposits to the account. Information brokers often market pretexting services via the Internet to anyone willing to pay.

The FTC's complaint outlining the charges alleges that Touch Tone's practice of pretexting is a deceptive act in violation of the FTC Act. Pretexting is deceptive, the agency said, because it involves a material representation that is likely to be misleading. The complaint also alleges that Touch Tone's disclosure and sale of consumers' private financial information obtained by pretexting without consumers' knowledge or consent is an unfair act or practice in violation of the statute. Touch Tone offers to sell this information, which includes current bank or brokerage account numbers and specific balances on its Web site at: (no period).

According to the complaint, the private financial information that Touch Tone obtains and sells is confidential, and account holders reasonably expect that such information will not be disclosed without their consent.

The agency's complaint was filed April 21 in United States District Court, District of Colorado. The defendants are James J. Rapp and Regana L. Rapp, individuals residing in Colorado who currently do business as Touch Tone Information, Inc. According to the complaint, Touch Tone has been doing business in Denver, Colorado, since at least January 1997.

The Commission vote to authorize the staff to file the complaint was 3-1, with Commissioner Orson Swindle dissenting. Chairman Robert Pitofsky and Commissioners Sheila F. Anthony and Mozelle W. Thompson issued a statement in response to the dissent, stating that they found "it difficult to imagine a more cognizable deceptive act or practice under Section 5 [of the FTC Act] than this where a material and false statement to one entity (the bank), has the likely effect of injuring that entity as well as another (the account holder) ... Indeed, if the allegations in the complaint are found true, we would be hard-pressed to account for inaction."

Commissioner Swindle stated that he was not suggesting that the Commission take no action against pretexting but that the facts presented by this case did not provide reason to believe that these defendants violated the Commission's long-standing deception standard or the unfairness standard set forth in Section 5(n) of the FTC Act. Specifically, he urged the Commission to bring this case as an administrative proceeding in order to develop and articulate a reasoned explanation for departing from the well-established requirements of the deception standard, noting "I find it troubling to face a Hobson's choice, that is, either silently disregarding long-standing precedent or letting likely culpable defendants off the hook." He also expressed concerns about the unfairness allegation, observing that "[w]e have never held that the mere disclosure of financial information, without allegations of ensuing economic or other harm, constitutes substantial injury under the statute," and that this case may represent "a foray into broader privacy regulation."

Pitofsky, Anthony and Thompson further responded to Swindle's concerns by noting that the Commission has on prior occasions "recognized that the misuse of certain types of private financial information can be 'legally unfair' ... it seems hardly a strain to posit that substantial consumer injury could flow from the use of false pretenses to obtain the unauthorized disclosure of private financial information." They also noted that "the Commission cannot be precluded from challenging new techniques by dishonest actors if the act itself satisfies general controlling principles." The FTC Act has a flexible standard so that the Commission may react to changes in the marketplace, they added.

NOTE: The Commission files a complaint when it has "reason to believe" that the law has been or is being violated, and it appears to the Commission that a proceeding is in the public interest. The complaint is not a finding or ruling that the defendant has actually violated the law. The case will be decided by the court.

Copies of the complaint and news release are available from the FTC's web site at: and also from the FTC's Consumer Response Center, Room 130, 600 Pennsylvania Avenue, N.W., Washington, D.C. 20580; 202-FTC-HELP (202-382-4357); TDD for the hearing impaired 1-866-653-4261. To find out the latest news as it is announced, call the FTC NewsPhone recording at 202-326-2710.


(File No. 9823619)

Contact Information

Media Contact:
Victoria Streitfeld
Office of Public Affairs
Staff Contact:
David Medine
Bureau of Consumer Protection

Jonathan A. Smollen
Bureau of Consumer Protection