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Information brokers who used deceptive methods to obtain private financial data about consumers and then sold the data through their Web site without the knowledge or consent of the consumers have agreed to settle Federal Trade Commission charges that their scam violated federal law. The settlement will bar the deceptive practices in the future and impose a $200,000 suspended monetary judgment representing the defendants' unlawful gains.

In April 1999, the FTC alleged that James J. Rapp and Regana L. Rapp, doing business as Touch Tone Information, Inc., lied to financial institutions about their own identity - a practice referred to as "pretexting" in the information brokerage industry - to obtain private financial information about individual consumers. The defendants might claim to be the consumer about whom they were seeking information, and claim, for example, that they were calling the bank because they had forgotten their checkbook and needed information about their account. Information brokers have often marketed pretexting services via the Internet to anyone willing to pay. The FTC alleged that the pretexting was deceptive and that Touch Tone's disclosure and sale of consumers' private financial information obtained by pretexting without consumers' knowledge or consent was an unfair act in violation of the FTC Act.

Settlement of the charges prohibits Touch Tone from pretexting, except where permitted by the Gramm-Leach Bliley Act, and from selling private financial information obtained through pretexting. In addition, the settlement imposes a $200,000 judgment, which represents the amount of the defendants' unlawful gains. Based on defendants' sworn statements and financial disclosures, the judgment has been suspended. If it is determined that the defendants misrepresented their finances, the settlement requires immediate payment of the $200,000 judgment. The settlement also requires that the defendants post a privacy policy on their Web site that discloses the types of personal identifying information they are collecting; how the data will be used; and the consumer's ability to 'opt-out' of particular uses, such as transfers to third parties; the means by which a consumer may access and review his or her personal information, and; the means by which a consumer may modify or delete personal information on file. The defendants are further required to establish and maintain reasonable procedures to protect the confidentiality, security and integrity of personal information collected from consumers. The settlement also contains record-keeping provisions to allow the FTC to monitor compliance with its order.

The Commission vote to accept the stipulated final judgment and order was 4-1, with Commissioner Orson Swindle issuing a dissenting statement.

Commissioner Swindle explained that he had reluctantly voted against the complaint in this matter last year, not from any belief that pretexting is an acceptable way to gather information, but because the facts presented by this case did not give him reason to believe that these defendants violated the Commission's long-standing deception standard or the unfairness standard established by Congress in Section 5(n) of the FTC Act. He added that Congress took up the issue of pretexting shortly thereafter and, in Section 521 of the Gramm-Leach-Bliley Act of 1999, prohibited pretexting under certain circumstances. Because the Gramm-Leach-Bliley Act gives the Commission authority, independent of Section 5, to proceed against pretexting in the future, there will be no need to distort the Commission's long-standing interpretation of deception in an attempt to stop a practice that falls outside the reach of the FTC Act. However, because the Commission's complaint was based solely on alleged violations of the FTC Act, and because the Gramm-Leach-Bliley Act does not apply retroactively, he dissents from the settlement for the same reasons that led him to dissent from the complaint.

NOTE: Stipulated final judgments and orders are for settlement purposes only and do not constitute an admission by the defendant of a law violation. Stipulated final judgments have the force of law when signed by the judge.

Copies of the complaint and settlement 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. Consent agreements subject to public comment also are available by calling 202-326-3627. To find out the latest news as it is announced, call the FTC NewsPhone recording at 202-326-2710.

Contact Information

Media Contact:
Claudia Bourne Farrell,
Office of Public Affairs
Staff Contact:
David Medine or Laura Mazzarella
Bureau of Consumer Protection
202-326-3025 or 202-326-3424