FTC Settles with Telemarketer Who Threw Customer Data into Dumpsters

On September 29, 2011, the U.S. District Court for the District of Maryland approved stipulated injunctions against a debt relief group and a mortgage relief group to settle an FTC enforcement action for deceptive marketing practices, violations of the Telemarketing and Consumer Fraud and Abuse Act (TCPA), and violations of the Telemarketing Sales Rule (TSR). The FTC alleged that the defendants deceived financially distressed homeowners in order to sell them debt and mortgage assistance relief services by, among other things, making false statements about their ability to produce results, using false testimonials, and pretending to be a federal agency. In addition, the FTC complaint alleged that the defendants' practice of disposing materials containing the personal information of their customers, including social security number and financial information, in unsecured, publicly accessible dumpsters, constituted unfair and deceptive trade practices and violated defendants' privacy policy, which promised to restrict access of personal information. The injunctions, in addition to imposing financial penalties of $11 million dollars and requiring other remedial steps, prohibit the defendants from failing to properly dispose of customer information and requires them to take reasonable measures to protect against unauthorized access to the information such as by burning, pulverizing or shredding any papers and erasing or destroying electronic media within 30 days. The injunctions also prohibit the defendants from using, benefiting from, or disclosing customer information.

TIP: Companies should ensure that they are taking reasonable steps to protect their customer's data from disclosure and that such steps are consistent with their posted privacy policy. These steps should include methods for the secure destruction and disposal of customer data, especially sensitive financial information.