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With the Federal Trade Commission (FTC) promising to begin enforcing the "Red Flags Rules" on May 1, the FTC launched on Thursday a website aimed at helping entities adhere to the requirements. The rules, designed to reduce identity theft, requires that creditors and financial institutions create and implement an identity theft prevention program. The website describes the entities covered by the rule and provides information, articles and guidance to help entitles develop ID theft prevention programs, the FTC said in a news release. One of the resources on the site is a how-to guide that provides tips for identifying and stopping ID theft. The rules became effective Nov. 1 but will not be enforced by the FTC until May 1. Last October, the FTC extended the original Nov. 1 enforcement deadline because many companies were not prepared to meet the original requirements, the FTC said. Eduard Goodman, general counsel and chief privacy officer for vendor Identity Theft 911, told SCMagazineUS.com Friday that the FTC has been tight-lipped about how the rule is going to be enforced -- likely because they don't want companies looking for ways to get around it. Goodman said that based on his conversations with those in the industry, the FTC will likely enforce the rule on a case-by-case basis. The FTC maintains a database that tracks all identity theft cases reported to the agency. If they hear of instances of identity theft associated with a company, the FTC may ask for a copy of the company's identity theft prevention program, if any, Goodman said. If the entity has a program in place, the FTC will make a determination of whether it's adequate. The May 1 enforcement deadline extension applies to entities under the FTC's jurisdiction, which includes state-chartered credit unions. The extension did apply to the the majority of the estimated 11 million businesses that must comply with the requirements, Goodman has said

Physician groups press FTC for exemption from Red Flag Rules With a May 1 deadline for compliance looming, the American Medical Association (AMA) has asked the Federal Trade Commission (FTC) to suspend the application of the Red Flag Rules to physicians and publish a new rule so that physicians have an opportunity to provide comments. In a March 9 letter to the FTC, AMA Executive Vice President Michael D. Maves wrote that the AMA "strongly believes that the FTC did not provide physicians with an opportunity to review and comment on this Rule." Controversy. Under the Red Flag Rules, which were finalized in October 2007 under the Fair and Accurate Credit Transactions Act (FACTA), financial institutions and creditors must develop and implement written identity theft prevention programs. FACTA provides a broad definition of "creditor" as "any entity that regularly extends, renews or continues credit." The FTC has interpreted this definition to include health care providers and physicians. The AMA and several other medical trade associations have taken the position that physicians were not intended to be subject to the Red Flag Rules, but the FTC has held firm in its interpretation, in spite of the objections. In a Feb. 4 letter to the AMA, the FTC reiterated its position that "the plain language and purpose of the Rule dictate that health care professionals are covered by the Rule when they regularly defer payment for goods or services." The FTC also has taken the position that application of the Red Flag Rules to physicians will reduce the incidence of medical identity theft and will not impose a heavy burden on health care professionals. Rulemaking process. In addition to its claim that health care providers should not be classified as creditors, the AMA also has argued that the physician community was not informed that it would be subject to the Red Flag Rules.

Online ad industry will probably continue to be a hot-button if FTC Commissioner Jon Leibowitz is named chairman. The Federal Trade Commission may strengthen its focus on online advertising and privacy if, as is expected, current FTC Commissioner Jon Leibowitz is named chairman of the agency. "He would certainly keep privacy and online advertising as a focus of the FTC, so I think [his potential appointment] does matter," said Mike Zaneis, VP of public policy at the Internet Advertising Bureau. Reports indicate Leibowitz will be named as head of the commission, replacing William Kovacic. Kovacic replaced former Chairman Deborah Platt Majoras in March 2008, when she left to join the private sector as VP and general counsel of Procter & Gamble. "A kind of privacy switch is going to go on at the FTC [once the new chairman is named] and they're going to engage in this issue in a much more serious way," said Center for Digital Democracy Executive Director Jeff Chester. "Under a Leibowitz regime we would get the kind of serious industry analysis that so far has been lacking from the Bush era approach." "Leibowitz has been a leader on privacy issues," said Zaneis, who expects a Leibowitz-run FTC to continue along the agency's current path of pushing for industry self-regulation, rather than creating new regulations for online advertisers. As a commissioner, Leibowitz, a Democrat, has not ruled out FTC regulation of things like behavioral targeting. During a two-day FTC forum held in Washington, D.C. in 2007, Leibowitz noted, "The marketplace alone may not be able to solve all problems inherent in behavioral marketing." He revealed his sense of humor, adding, "If we see problems...the commission won't hesitate to bring cases, or even break thumbs."

"Data broker ChoicePoint, the victim of a 2004 data breach affecting more than 160,000 U.S. residents, has agreed to strengthen its data security efforts and pay a fine for a second breach in 2008, the U.S. Federal Trade Commission said Monday. ChoicePoint, now a subsidiary of Reed Elsevier, will pay US$275,000 to resolve the newest FTC complaint. The FTC accused the company of failing to implement a comprehensive information security program to protect consumers' personal information, as required by the agency after the 2004 breach. The April 2008 breach compromised the personal data of 13,750 people, the FTC said in a press release. ChoicePoint turned off a "key" electronic security tool used to monitor access to one of its databases, and failed to detect that the security tool was turned off for four months, the FTC said. For a 30-day period, an unknown hacker conducted thousands of unauthorized searches of a ChoicePoint database containing sensitive consumer information, including Social Security numbers, the FTC said. After discovering the breach, the company notified the FTC. If the software tool had been working, ChoicePoint likely would have detected the intrusions "much earlier," the FTC said. "

Better to settle with the FTC than get your company's reputation as consumer-friendly (deserved or not) dragged through the court of public opinion.

Sears Holdings has agreed to settle allegations it collected personal data from customers without adequate disclosures, the Federal Trade Commission said on Thursday. The FTC had accused Sears Holdings, created in 2005 with the merger of Sears and Kmart, of paying online customers $10 to allow the company to track their online browsing. But the FTC said Sears also collected information on non-Sears sites, such as online bank statements, drug prescription records and emails. "The software would also track some computer activities that were not related to the Internet," the FTC said in a statement. Sears did disclose all it would monitor in a lengthy user license agreement, but the FTC argued it was not enough. "The complaint charges that Sears' failure to adequately disclose the scope of the tracking software's data collection was deceptive and violates the FTC Act," the FTC said in a statement. Sears did not immediately reply to two telephone calls and one email seeking a comment. Under the settlement, Sears is required to destroy the data collected and make future disclosures more prominent.

"On October 6, 2009, the Federal Trade Commission ("FTC") announced proposed settlement agreements with six companies over charges that they falsely claimed membership in the U.S. Department of Commerce Safe Harbor program. In six separate complaints, the FTC alleged that ExpatEdge Partners LLC, Onyx Graphics, Inc., Directors Desk LLC, Collectify LLC, and Progressive Gaitways LLC deceived consumers by representing that they maintained current certifications to the Safe Harbor program when such certifications had previously lapsed. The terms of the proposed settlement agreements prohibit the companies from misrepresenting their membership in any privacy, security or other compliance program. The six enforcement actions are significant as they mark a considerable uptick in the FTC's enforcement related to the Safe Harbor program. The FTC recently brought its first enforcement action relevant to the program, which is detailed in our post titled FTC's First Safe Harbor Enforcement Action. The European Union Data Protection Directive requires EU Member States to implement legislation that prohibits the transfer of personal data outside the EU unless the EU has made a determination that the laws of the recipient jurisdiction are substantially equivalent to those of the EU, and thus provide "adequate" protection for personal data. Because the EU has determined that laws of the United States do not meet its adequacy standard, the U.S. Department of Commerce and the EU developed the Safe Harbor Framework, which went into effect in November 2000. The Safe Harbor Program allows participating U.S. companies under the jurisdiction of the FTC or the U.S. Department of Transportation to transfer personal data lawfully from the EU. To join the Safe Harbor, a company must self-certify to the U.S. Department of Commerce that it complies with seven principles that have been deemed to meet the EU's adequacy standard. To maintain its certification to the Safe Harbor

Last week, the government took another step toward closing a legal loophole in federal privacy and security rules for emerging Health 2.0 information technology applications by issuing proposed rules aimed at covering an estimated 900 companies and organizations offering personal health records and electronic systems connected to them. The Federal Trade Commission was careful to point out its new interim proposed rule on federal breach notification requirements for the developers of electronic PHR systems did not apply to covered organizations or their business associates as defined by the Health Insurance Portability and Accountability Act of 1996, heretofore the key federal privacy and security regulation. The FTC, operating under new authority given it by the American Recovery and Reinvestment Act of 2009, noted that its new rule seeks to cover previously unregulated entities that are part of a Health 2.0 product mix. FTC staff estimates that about 200 PHR vendors, another 500 related entities and 200 third-party service providers will be subject to the new breach notification rule. The staffers estimate that the 900 affected companies and organizations, on average, will experience 11 breaches each per year at a total cost of about $1 million per group, per year. Costs include investigating the breach, notifying consumers and establishing toll-free numbers for explaining the breaches and providing additional information to consumers. Pam Dixon, founder and executive director of the World Privacy Forum, said that this isn't the first involvement of the FTC in healthcare-related regulation, noting the consumer protection agency joined with the Food and Drug Administration in a joint statement on the marketing of direct-to-consumer genetic tests. The FTC also has worked in the field of healthcare competition. She noted the compliance deadline with the FTC's "red flag rules" on provider organizations that provide consumer credit to patients for installment payment

Federal Trade Commission staff today issued a report describing its ongoing examination of online behavioral advertising and setting forth revisions to proposed principles to govern self-regulatory efforts in this area. The key issue concerns how online advertisers can best protect consumers' privacy while collecting information about their online activities. Over the last decade, the FTC has periodically examined the consumer privacy issues raised by online behavioral advertising - which is the practice of tracking an individual's online activities in order to deliver advertising tailored to his or her interests. The FTC examined this practice most recently at its November 2007 "Behavioral Advertising" Town Hall. The following month, in response to public discussion about the need to address privacy concerns in this area, FTC staff issued a set of proposed principles to encourage and guide industry self-regulation for public comment. Today's report, titled "Self-Regulatory Principles for Online Behavioral Advertising," summarizes and responds to the main issues raised by more than 60 comments received. It also sets forth revised principles. The report discusses the potential benefits of behavioral advertising to consumers, including the free online content that advertising generally supports and personalization that many consumers appear to value. It also discusses the privacy concerns that the practice raises, including the invisibility of the data collection to consumers and the risk that the information collected - including sensitive information regarding health, finances, or children - could fall into the wrong hands or be used for unanticipated purposes. Consistent with the FTC's overall approach to consumer privacy, the report seeks to balance the potential benefits of behavioral advertising against the privacy concerns it raises, and to encourage privacy protections while maintaining a competitive marketplace. The report points ou

"Recently, the Federal Trade Commission (FTC) has gotten tough with US companies that have not lived up to their own privacy promises to European consumers. In particular, it has filed complaints against seven US companies that claimed that they were adhering to the European Union's Safe Harbor Program, but allegedly were not. (The FTC issues or 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 complaints themselves are not a finding or ruling that the named parties have violated the law.) By taking action, the FTC has shown that the Safe Harbor program, as applied to US companies, is not a set of empty promises. Rather, the FTC is keeping watch over businesses and will sanction those that misrepresent their own policies. In this column, I will explain how the Safe Harbor program works, and also discuss the recent FTC enforcement actions."

As if you needed another sign that times are tough, here's a fairly reliable measure: The number of cases handled by the advertising industry's best-kept secret -- self-regulation -- are on the rise. Last year the National Advertising Division of the Council of Better Business Bureaus handled 214 cases, up 22% from 2007. And in 2008 ad challenges, in which one advertiser challenges a competitor's claim, rose 31% to 81 cases. Why the increased activity? It's a deadly fight for share of market out there, and in down times advertisers tend to revert to hard-hitting comparative advertising. NAD's purpose is to substantiate these kinds of attack ads, and it can do it faster and cheaper than litigation can. The Federal Trade Commission seems to like the idea of letting advertisers settle their own disputes. When the National Advertising Review Council, the body that sets the policies and procedures for the NAD to enforce, started 38 years ago, then-FTC Chairman Bob Pitofsky wasn't an early convert. "If the truth be known," he said 10 years ago, "there was some skepticism about how the whole thing would work. The FTC had been burned time and time again by unkept promises of self-regulation by other industries. But this group has proved the skeptics wrong. Today, advertising has the best self-regulatory system of any industry in the country." The outgoing chairman of the FTC, William Kovacic, is also a fan. But the current crop of FTC commissioners don't seem as convinced, although they seem somewhat willing to give self-regulation a chance. In issuing guidelines for online behavioral advertising, FTC Commissioner Jon Leibowitz said the industry needs to do a better job of "meaningful, rigorous self-regulation, or it will certainly invite legislation by Congress and a more regulatory approach by our commission."A joint industry task force quickly seized on that statement as an endorsement for self-regulation, and said it supported FTC's goal of a "comprehensive and eff

To help parents better understand their childrens' online privacy rights, the Federal Trade Commission has developed a new article, Protecting Kids' Privacy. The article is posted at OnGuardOnline.gov, a Web site sponsored by the federal government and the technology industry to help users stay on guard against Internet fraud, secure their computers, and protect their personal information. Parents can learn what Web sites must do to protect the privacy of kids younger than 13 under the Children's Online Privacy Protection Act (COPPA). For example, with very few exceptions, sites must get parents' permission if they want to collect or share their kids' personal information. Parents also will find tips for talking to their kids about online privacy, knowing what their kids are doing online, reporting a Web site that may be violating COPPA, and more. To learn more about online privacy for kids, view this article on OnGuardOnline.gov at www.OnGuardOnline.gov/topics/kids-privacy.aspx or view it as an FTC Facts for Consumers publication at http://www.ftc.gov/bcp/edu/pubs/consumer/tech/tec08.shtm. The Federal Trade Commission works for consumers to prevent fraudulent, deceptive, and unfair business practices and to provide information to help spot, stop, and avoid them. To file a complaint in English or Spanish, visit the FTC's online Complaint Assistant or call 1-877-FTC-HELP (1-877-382-4357). The FTC enters complaints into Consumer Sentinel, a secure, online database available to more than 1,500 civil and criminal law enforcement agencies in the U.S. and abroad. The FTC's Web site provides free information on a variety of consumer topics.

To address important consumer privacy concerns associated with online behavioral advertising, the staff of the Federal Trade Commission today released a set of proposed principles to guide the development of self-regulation in this evolving area. Behavioral advertising is the tracking of a consumer's activities online - including the searches the consumer has conducted, the Web pages visited, and the content viewed - in order to deliver advertising targeted to the individual consumer"s interests. For more than a decade, the FTC has engaged in investigation, law enforcement, studies, and other privacy developments to protect consumers' privacy online. Concepts used to develop the principles emerged from the agency's longstanding privacy program and, more recently, from two conferences hosted by the FTC. In the fall of 2006, a three-day public hearing, "Protecting Consumers in the Next Tech-ade," examined technology developments that could raise consumer protection policy issues, including privacy, over the next decade. This past November, building on the Tech-ade hearings, the FTC hosted a Town Hall entitled "Ehavioral Advertising: Tracking, Targeting, and Technology," to focus in on privacy issues raised by behavioral advertising. "The purpose of this proposal is to encourage more meaningful and enforceable self-regulation to address the privacy concerns raised with respect to behavioral advertising. In developing the principles, FTC staff was mindful of the need to maintain vigorous competition in online advertising as well as the importance of accommodating the wide variety of business models that exist in this area," according to its proposal "Behavioral Advertising: Moving the Discussion Forward to Possible Self-Regulatory Principles." The proposal states that behavioral advertising provides benefits to consumers in the form of free content and personalized advertising but notes that this practice is largely invisible and unknown to consumers. To address the

"Today, the Federal Trade Commission opened new areas of a "virtual mall" with content that will help kids learn to protect their privacy, spot frauds and scams, and avoid identity theft. The FTC Web site, www.ftc.gov/YouAreHere, introduces key consumer and business concepts and helps youngsters understand their role in the marketplace. The FTC is the nation's consumer protection agency. "YouAreHere presents practical lessons about money and business in a fun and familiar setting," said David Vladeck, Director of the FTC's Bureau of Consumer Protection. "The new content takes kids behind the scenes to raise their awareness of advertising and marketing, pricing and competition, fraud and identity theft. At the FTC's online mall, visitors play games, watch short animated films, and interact with customers and store owners. They can design and print advertisements for a shoe store, investigate suspicious claims in ads and sales pitches, learn to identify the catches behind bogus modeling schemes and vacation offers, and guess the retail prices of various candies based on their supply, demand, and production costs. At the Security Plaza, visitors can build a social networking page and see the unintended consequences of posting personal information. They also get tips on how to keep their computers safe while they're online. In the arcade, visitors can play Info Defender 3 and protect Earthlings from Cyclorian invaders who would steal their identities. The game teaches the importance of protecting personal information, including Social Security numbers. For parents and teachers, the site offers detailed fact sheets with ideas for related activities. Teachers can use the site to complement lessons in consumer economics, government, social studies, language arts, and critical thinking. The National Council for Economic Education has developed a lesson plan that prominently features YouAreHere; it is available on the Parents and Teachers page. "

A consumer reporting agency that failed to properly screen prospective customers and, as a result, sold at least 318 credit reports to identity thieves, has agreed to settle Federal Trade Commission charges that it violated federal law. Under the settlement, the company and its principal must ensure that they provide credit reports only to legitimate businesses for lawful purposes, use a comprehensive information security program, and obtain independent audits every other year for 20 years. The settlement also imposes a $500,000 penalty but suspends payment due to the defendants' inability to pay. According to the FTC, the defendants use sensitive financial data from other consumer reporting agencies to create reports that landlords use to assess potential renters. These reports contain consumers' names, Social Security numbers, birth dates, bank and credit card account numbers, credit histories, and other personal information. The Commission alleges that the company failed to properly screen new customers. The company allegedly requested only publicly-available information from applicants seeking credit reports, and it did not request supporting documentation to establish that an applicant was actually a landlord renting property. As a result, identity thieves posing as property owners were given an account with unlimited online access to credit reports, and the account was used to access at least 318 reports containing sensitive personal information. The FTC charged the defendants with violating the Fair Credit Reporting Act (FCRA) by furnishing credit reports to persons who did not have a permissible purpose to obtain them, and by failing to maintain reasonable procedures to prevent such impermissible disclosures and to verify their customers' identities and how they intended to use the information. The agency also charged them with violating the FTC Act by failing to employ reasonable and appropriate security measures to protect sensitive consumer inform

On November 1 and 2, 2007, the Federal Trade Commission will host a Town Hall entitled "Ehavioral Advertising: Tracking, Targeting, and Technology." The event will bring together consumer advocates, industry representatives, technology experts, and academics to address consumer protection issues raised by the practice of tracking consumers' activities online to target advertising - or "behavioral advertising." The Town Hall is a follow-on to a dialogue on behavioral advertising that emerged at a November 2006 FTC forum, "Tech-Ade," which examined the key technological and business developments that will shape consumers' core experiences in the coming ten years. In addition, several consumer privacy advocates, as well as the State of New York, recently sent letters to the FTC asking it to examine the effects of behavioral advertising on consumer privacy. The Town Hall will explore how the online advertising market, and specifically behavioral advertising, has changed in recent years, and what changes are anticipated over the next five years. Among other things, it will examine what types of consumer data are collected, how such data are used, what protections are provided for that data, and the costs and benefits of behavioral advertising to consumers. The Town Hall will also address what companies are disclosing to consumers and what consumers understand about the online collection of their information for use in advertising. In addition, the Town Hall will look at what regulatory and self-regulatory measures currently govern the practices related to online behavioral advertising, as well as anticipated changes in the behavioral advertising space in the future. The Commission invites interested parties to submit requests to be panelists and to recommend other topics for discussion. The requests should be submitted electronically to behavioraladvertising_requests@ftc.gov by September 14, 2007. The Commission asks interested parties to include a stat

Enforcing Privacy Promises: Section 5 of the FTC Act A key part of the Commission's privacy program is making sure companies keep the promises they make to consumers about privacy, including the precautions they take to secure consumers' personal information. To respond to consumers' concerns about privacy, many Web sites post privacy policies that describe how consumers' personal information is collected, used, shared, and secured. Indeed, almost all the top 100 commercial sites now post privacy policies. Using its authority under Section 5 of the FTC Act, which prohibits unfair or deceptive practices, the Commission has brought a number of cases to enforce the promises in privacy statements, including promises about the security of consumers' personal information. The Commission has also used its unfairness authority to challenge information practices that cause substantial consumer injury.

Federal regulators on Tuesday met to hear about whether the benefits of cloud computing justify increased regulation, as privacy activists claim, or whether such an approach would do more harm than good. "We need to be smarter about dealing with technology, and cloud computing is posing (a) risk for us," said Hugh Stephenson, deputy director for international consumer protection at the Federal Trade Commission's Office of International Affairs. The FTC convened the two-day meeting in its offices here, which follows a series of similar workshops held in previous years on topics like spam, privacy, and behavioral advertising. The agency may file lawsuits to halt "unfair or deceptive acts or practices," meaning that if cloud computing is not unfair or deceptive, the FTC would likely not have jurisdiction. To secure personal information on the cloud, regulators may have to answer questions such as which entities have jurisdiction over data as it flows across borders, whether governments can access that information as it changes jurisdiction, and whether there is more risk in storing personal information in data centers that belong to a single entity rather than multiple data centers. The current panoply of laws at the state, national, and international level have had insufficient results; FTC Commissioner Pamela Jones Harbour cited a 2008 PricewaterhouseCoopers information security survey (PDF) in which 71 percent of organizations queried said they did not have an accurate inventory of where personal data for employees and customers is stored. With data management practices that are not always clear and are subject to change, companies that offer cloud-computing services are steering consumers into dangerous territory, said Marc Rotenberg, executive director of the Electronic Privacy Information Center. Already, problems of identity theft are skyrocketing, he said, and without more regulation, data management services may experience a collapse analogous to that

The Federal Trade Commission (FTC) is planning to regulate online viral marketing that uses blogs and social networking sites. Marketers are spending billions worldwide to get the endorsements of key bloggers and groups on social networking sites. One tactic, used by Microsoft and others, is to send products to bloggers on 'long-term loans' on the understanding that they will comment about them on their sites. AdvertisementUnder the new regulations being proposed, such bloggers would be legally liable if they make untrue statements about the products or services. The companies too would face sanctions. "This impacts every industry and almost every single brand in our economy, and that trickles down into social media," Anthony DiResta, an attorney representing several advertising associations, told The Financial Times. This is the first revision of the rules on this kind of advertising by the FTC since 1980 and is needed, according to the organisation, because new forms of communication have opened up new fields to marketing. "The guides needed to be updated to address not only the changes in technology, but the consequences of new marketing practices," said Richard Cleland, assistant director for the FTC's division of advertising practices. " Word-of-mouth marketing is not exempt from the laws of truthful advertising." Advertisers are resisting the changes, however, which threaten a highly effective form of marketing new products and services. "Regulating these developing media too soon may have a chilling effect on blogs and other forms of viral marketing, as bloggers and other viral marketers will be discouraged from publishing content for fear of being held liable for any potentially misleading claim," Richard O'Brien, vice president of the American Association of Advertising Agencies, said in an advisory to the FTC.

Anatomy of a Data Breach Investigation: Alain Sheer, FTC Attorney February 17, 2009 The Heartland Payment Systems data breach is on everyone's mind, and the case is in the hands now of the Federal Trade Commission (FTC) if it chooses to investigate. While the FTC will neither confirm nor deny a Heartland investigation, staff attorney Alain Sheer does offer his insight on: How the FTC investigates data breaches like Heartland's; The timeline and milestones of such an investigation; Details of the CardSystems data breach - which closely resembles Heartland's.

"A privacy watchdog's criticisms of Facebook appear to have captured the attention of the Federal Trade Commission. In a letter dated Jan. 14, David Vladeck, head of the FTC's Bureau of Consumer Protection, told the Electronic Privacy Information Center that its complaint about recent privacy changes at Facebook "raises issues of particular interest for us at this time." Vladeck added that he has asked an official to arrange a followup meeting with EPIC, but also said he can't currently confirm or deny whether the FTC has opened an investigation. FTC investigations are not public until the agency either issues a complaint or closes the matter. The FTC's consumer protection chief also said in his letter to EPIC that the commission plans to focus on privacy issues raised by social networks at the next roundtable, scheduled to be held in Berkeley, Calif. on Jan. 28. "

FTC may investigate privacy issues on FaceBook? Equal bang for the buck by identifying and educating users who post way too much personal information.