by James Glave
 
   3:30pm  25.Jun.98.PDT -- In testimony to the House Commerce
   Committee today, a leading Federal Trade Commission
   official said that the agency is taking a multipronged
   approach to fighting online fraud. But one consumer            Zulu-Tek
   watchdog group said that the commission isn't doing
   everything it can to head off the problem of identity
   theft, especially with its hands-off approach to the
   consumer data industry.
 
   Eileen Harrington, associate director of the commission's
   Consumer Protection Bureau, said that the agency has
   prosecuted more than 35 alleged Net scam cases and has
   launched campaigns to make both consumers and entrepreneurs
   aware of the fraud issue.
 
   As part of its effort, the commission has set up 11 Web
   sites that purport to offer get-rich-quick schemes,
   complete with testimonials. When visitors drill down far
   enough on the site, though, they are greeted by an FTC
   fraud warning.
 
   Harrington said many of online scams are merely rehashed
   versions of old standbys like pyramid schemes.
 
   "There is nothing new about most types of Internet fraud
   the commission has seen to date," said Harrington. "What is
   new, and striking, is the size of the potential market and
   the relative ease, low cost, and speed with which a scam
   can be perpetrated."
 
   Harrington said the trade commission has created an online
   database that uses the Net to give more than 150 US and
   Canadian law-enforcement agencies access to consumer fraud
   complaints. The system, Consumer Sentinel, contains records
   of 110,000 complaints relating to offline fraud, including
   direct mail and telemarketing, as well as Net-based
   schemes.
 
   Consumer advocates, however, told the panel the agency has
   done too little to fight scams such as identity fraud.
 
   "The FTC is schizophrenic on this issue, and we have been
   very concerned ... that the information that comes from the
   individual-reference services industry leads to fraud,"
   said Ed Mierzwinski, consumer program director with the US
   Public Interest Research Group.
 
   Following a consumer privacy summit last year, the trade
   commission allowed the individual-reference services
   industry to self-regulate. The industry is comprised of a
   group of companies that deal in highly detailed and highly
   personal profiles of millions of Americans, and the FTC's
   hands-off approach drew fire from consumer privacy activist
   groups such as the Electronic Privacy Information Center.
 
   "On the one hand, the agency wants to support strong
   measures against identity theft and has taken a pretty
   aggressive stance toward consumer education ... but it is
   also allowing companies to traffic in social security
   numbers, and that leads to fraud," Mierzwinski said.
 
   In her testimony, the agency's Harrington outlined some
   recent incidents that the agency has investigated or
   prosecuted, including a notorious "modem hijacking" scam
   last year. In that scheme, unwitting visitors to a
   pornography site allegedly were tricked into downloading a
   Trojan horse program that silently disconnected their modem
   and dialed a long-distance number. Victims incurred
   long-distance charges payable to those allegedly running
   the scam. The case is still in litigation, but the
   commission believes that 30,000 consumers collectively lost
   US$3 million to $4 million dollars in the incident.
 
   Harrington also said that the agency was monitoring spam
   and had investigated a number of fraudulent email come-ons.
   "The commission has taken action against junk emailers
   engaged in fraudulent business opportunities and
   credit-repair schemes ... and additional investigations are
   underway," Harrington said.
 
   John Mozena of the Coalition Against Unsolicited Commercial
   Email, said that the FTC means well in its efforts on the
   spam front, but added he believes the agency is way out of
   its depth in dealing with the problem. He pointed to a
   survey from last year in which the FTC looked at 280 spams
   and found that only three were not obviously fraudulent
   commercial offers.
 
   "You would be hard-pressed to argue against the FTC
   cracking down on people who are trying to defraud others,"
   said Mozena. "But we are concerned that the nature of the
   Internet and the cheapness that one can send messages makes
   for a much larger enforcement problem than that FTC has
   encountered, and we don't think they understand exactly how
   many resources they'd need to throw at the issue -- of not
   only fraudulent messages, but the whole regulation of spam
   itself."
 
   Related Wired Links:
 
 
   FTC Scans Horizon for Scams
   15.Apr.97
 
   FTC Hosts Spam Roast
   12.Jun.97
 
 
 
 
 
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