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1
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SWINDLE DISSENTING STATEMENT
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EXTRACTED KEY WORDS
PRACTICE CONSUMERS COMPLAINT PRETEXTING COMMISSION DEFENDANTS DECEPTION DEPOSITORS FTC ACT BANK REASON STANDARD GRAMM-LEACH-BLILEY ACT DISSENT UNFAIR FACTS CONGRESS REPRESENTATION SUBSTANTIAL INJURY MISREPRESENTATIONS CUSTOMERS DECEPTION STATEMENT VIOLATION ALLEGE POLICY OMISSION PRIVATE SUPPORT MISLEAD |
Dissenting Statement of Commissioner Orson Swindle
In the Matter of
Touch Tone Information, File No. 982-3619
_________________________________________________________________
In this case, the Commission voted to file a complaint in federal
district court alleging that the defendants engaged in deceptive acts
or practices in or affecting commerce in violation of Section 5 of the
FTC Act by pretending to be individual depositors in order to obtain
information from banks about the accounts of those depositors -- a
practice called "pretexting." The complaint further alleged that
defendants engaged in unfair acts or practices by selling information
obtained in this fashion. I voted against the complaint, not from any
belief that pretexting is an acceptable way to gather information, but
because the facts presented by this case did not give me 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. Fortunately, 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. However, because the Commission's complaint was based
solely on alleged violations of the Federal Trade Commission Act, and
because the Gramm-Leach-Bliley Act does not apply retroactively, I
dissent from the settlement for the same reasons that led me to
dissent from the complaint.
I voted against filing this complaint with great reluctance because I
believed that the government should take steps to prevent the
defendants' acts and practices. Although I was unwilling to permit
this hard case to make bad law, I am pleased that Congress acted to
restrict pretexting. 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 our long-standing
interpretation of deception in an attempt to stop a practice that
falls outside the reach of the FTC Act. Notably, the
Gramm-Leach-Bliley Act does not bar pretexting in all circumstances;
it expressly permits private investigators to engage in pretexting as
an aid to collecting child support payments. This provision represents
the type of policy choice that Congress must make.
I dissent.
______________
Endnotes:
In 1983, the Commission issued its Deception Statement, which set
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2
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PITOFSKY STATEMENT
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EXTRACTED KEY WORDS
CONSUMERS COMMISSION COMPLAINT ACT FTC PRACTICE FINANCIAL INFORMATION REASON CHALLENGING VIOLATES COURT ACCOUNT HOLDER BANK ALLEGATIONS UNFAIR STATUTORY AUTHORITY PARTY THIRD PARTIES MANUFACTURERS MISREPRESENTATIONS BUSINESSES INSURANCE COMPANIES DEPARTURE MISLEADING MATERIALS PRIVATE FINANCIAL INFORMATION PRINCIPLES MANDATE INJURING |
Statement of Chairman Pitofsky and
Commissioners Anthony And Thompson
In the Matter of
Touch Tone Information, Inc. File No. 982-3619
_________________________________________________________________
We have voted to file the complaint in the Touch Tone Information Inc.
matter because we find reason to believe that Section 5 of the Federal
Trade Commission Act has been violated. 15 U.S.C. § 45. The case is to
be litigated in the United States District Court for the District of
Colorado, and that Court will have to determine whether, in its view,
Section 5 has in fact been violated. Because our colleague has issued
a statement asserting that this action is a departure from FTC policy
and should be handled in an administrative proceeding, a response is
warranted.
As Commissioner Swindle notes, the Commission's 1983 Deception
Statement, which was incorporated into the Commission's decision in In
re Cliffdale Associates, Inc., 103 F.T.C. 110, 174-84 (1984), sets
forth a three-part test for deception: (1) there must be a
representation, omission, or practice that is likely to mislead the
consumer; (2) the misleading nature of which is examined from the
perspective of a consumer acting reasonably under the circumstances;
and (3) the representation, omission, or practice must be material.
Id. at 175. As explained in the Statement, previously decided cases
were reviewed "to synthesize the most important principles of general
applicability" in an attempt "to provide a concrete indication of the
manner in which the Commission w(ould) enforce its deception mandate."
Id. Our vote to file the complaint in this case does not depart from,
or expand the reach of, the Deception Statement, because we found
reason to believe that the alleged facts of this case - an information
broker's impersonation of an account holder to obtain private
financial information from a bank - satisfy the three-part test.
First, we find it difficult to imagine a more cognizable deceptive act
or practice under Section 5 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). We find that
simple proposition fits comfortably within the purview of the
Deception Statement and the plain language of Section 5.
Second, whether we analyze the deception count from the perspective of
the bank or the bank account holder as the "consumer," the Deception
Statement is not an impediment to the filing of the complaint. By its
very terms, that Statement was not issued by this agency to serve as a
straitjacket for Section 5's deception authority. See Cliffdale
Associates, Inc., 103 F.T.C. at 175. This Commission has never so
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3
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COMPLAINT
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EXTRACTED KEY WORDS
FTC ACT BUSINESS DEFENDANTS RELIEF PRACTICES ACCOUNT RAPP VIOLATIONS FEDERAL TRADE COMMISSION DISTRICT COURT PLAINTIFF EQUITABLE RELIEF CONSUMERS COLORADO SELLS DISCLOSURE UNITED STATES JAMES REGANA INJUNCTIVE RELIEF BROKERAGE FINANCIAL INSTITUTIONS HOLDER OBTAINING JURISDICTION DISGORGEMENT RAPP DIRECTS TRANSACTS BUSINESS |
UNITED STATES DISTRICT COURT
DISTRICT OF COLORADO
Civil Action No. 99-WM-783
FEDERAL TRADE COMMISSION, Plaintiff,
v.
JAMES J. RAPP and REGANA L. RAPP, individually and doing business as
TOUCH TONE INFORMATION, INC., Defendants.
COMPLAINT FOR
INJUNCTION AND OTHER EQUITABLE RELIEF
DEBRA A. VALENTINE
General Counsel
JONATHAN A. SMOLLEN
LAURA MAZZARELLA
Federal Trade Commission
600 Pennsylvania Avenue, N.W.
Washington, D.C. 20580
(202) 326-3457; -3424
Attorneys for Plaintiff
Plaintiff, the Federal Trade Commission ("Commission"), for its
Complaint alleges:
JURISDICTION AND VENUE
1. This is an action under Section 13(b) of the Federal Trade
Commission Act ("FTC Act"), 15 U.S.C. § 53(b), to secure permanent and
preliminary injunctive relief and other equitable relief, including
disgorgement, against defendants for violations of Section 5 of the
FTC Act, 15 U.S.C. § 45(a), which prohibits unfair or deceptive acts
or practices in or affecting commerce. This Court has subject matter
jurisdiction over plaintiff's claims pursuant to 28 U.S.C. §§ 1331,
1337(a), and 1345, and 15 U.S.C. §§ 45(a) and 53(b).
2. Venue in this district is proper under 28 U.S.C. § 1391(b) and 15
U.S.C. § 53(b).
THE PARTIES
3. The Commission is an independent agency of the United States
government created by statute (15 U.S.C. § 41 et seq.) with
headquarters located at 600 Pennsylvania Avenue, N.W., Washington,
D.C. 20580. The Commission is charged with enforcing Section 5(a) of
the FTC Act, 15 U.S.C. § 45(a), and is authorized under Section 13(b)
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4
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STIPULATED CONSENT AGREEMENT
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EXTRACTED KEY WORDS
COMMISSION FINANCIAL INFORMATION RAPP BUSINESS ACT FTC DISCLOSING DIRECTORS MATERIALS COMPLAINT PRIVATE FINANCIAL INFORMATION COURT JAMES REGANA CONSUMERS PURPOSES JUDGEMENT DISTRICT FEDERAL TRADE COMMISSION MATTER JURISDICTION SALE ALLEGES MISLEADING EMPLOYEES PERSONNEL REPRESENTATIVES COMPLIANCE WEB SITE |
UNITED STATES DISTRICT COURT
DISTRICT OF COLORADO
Civil Action No. 99-WM-783
FEDERAL TRADE COMMISSION, Plaintiff,
v.
JAMES J. RAPP and
REGANA L. RAPP, individually and doing business as
TOUCH TONE INFORMATION, INC., Defendants.
STIPULATED CONSENT AGREEMENT AND FINAL ORDER
Plaintiff, the Federal Trade Commission ("Commission"), filed its
complaint for a permanent injunction and other relief in this matter
on April 21, 1999, pursuant to Section 13(b) of the Federal Trade
Commission Act ("FTC Act"), 15 U.S.C. § 53(b), against defendants
James J. Rapp and Regana L. Rapp, individually and doing business as
Touch Tone Information, Inc. The Complaint alleges that defendants
violated Section 5 of the FTC Act, 15 U.S.C. § 45(a), by obtaining the
private financial information of consumers through misleading and
false statements, and by disclosing or selling such information
without consumers' knowledge or consent.
The Commission and the defendants, by and through their counsel, have
agreed to settlement of this action upon the following terms and
conditions, without adjudication of any issues of fact or law.
IT IS THEREFORE ORDERED, ADJUDGED, AND DECREED as follows:
FINDINGS
1. This Court has jurisdiction over the subject matter of this case
and has jurisdiction over defendants. Venue in this district is
proper.
2. The Commission has the authority under Section 13(b) of the FTC
Act, 15 U.S.C. § 53(b), to seek the relief it has requested.
3. The Complaint states a claim upon which injunctive relief may be
granted against the defendants under Sections 5(a) and 13(b) of the
FTC Act, 15 U.S.C. §§ 45(a) and 53(b).
4. Defendants' activities as alleged in the Commission's Complaint are
in or affecting commerce, as defined in 15 U.S.C. § 44.
5. Defendants waive all rights to seek judicial review or otherwise
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