Who's Reading Your Bills?

By Daniel Eisenberg

It's enough to make the most gregarious gabber think twice before picking up the phone again. What if the record of all your personal calls--whom you're talking to, when and for how long--were being sold to the highest bidder, by none other than your very own telephone company? Every time you dial up your shrink for a quick calm-me-down, for instance, that history could be sold to a pharmaceutical firm ready to pitch you on the benefits of tranquilizers.

A telemarketing nightmare, perhaps. But if a recent federal court decision is any guide, that kind of invasion of privacy could become policy, at least according to an outraged William Kennard, chairman of the Federal Communications Commission. Last week the FCC noisily announced that it would appeal a 10th Circuit Court of Appeals ruling, handed down in Denver, two weeks ago, that it claims gives telephone companies the right to peddle data on customers to a third party without their permission. "We tried to give consumers a meaningful cloak of privacy," said Kennard. "But what we have today is nothing more than a fig leaf."

Although the case involved a phone company's effort to broaden its right to circulate information among its own divisions, the decision hit a raw nerve--the one that jangles with every telemarketing call. True, all manner of corporations are already trading your personal details in an estimated $3 billion-a-year data market. Most websites are collecting your browsing preferences on the sly, many banks are selling account records on the open market, and sensitive medical files remain vulnerable to snooping. "Americans have little clue about what happens to their personal information," says John Featherman, president of Privacy Protectors, a consumer-consulting firm.

But as people start to realize what's going on, more and more of them are wondering if any part of their personal lives is off-limits. That's one reason the FCC is objecting so loudly. As part of the 1996 Telecommunications Act, the FCC established strict "opt-in" privacy provisions, under which a consumer has to give his consent before his calling data can be made part of marketing campaigns for additional services or products. Not surprisingly, the telcos and other businesses prefer the "opt-out" approach, which costs less and bears more fruit. It gives companies the right to exchange the valuable information--both internally and with third parties--unless consumers expressly forbid it.

The plaintiff, U S West, argued successfully that the more burdensome opt-in method was an abridgment of its First Amendment right to free commercial speech. In a 2-to-1 decision, the appeals panel wrote, "Although we may feel uncomfortable knowing that our personal information is circulating in the world, we live in an open society where information may usually pass freely."

Many privacy advocates are worried that the ruling could set a bad precedent for all kinds of privacy protections. "The court [in the Denver case] doesn't think privacy alone is enough," notes Deirdre Mulligan, staff counsel at the Center for Democracy and Technology. "They think an invasion of privacy has to lead to something else" before the government can intervene.

There's no trouble on the line, insist the Baby Bells; they merely want to define their rights regarding the sharing of data internally. They've never hawked privileged information, nor does the ruling, in their view, give them the freedom to start, they say. "There is no reason to push the privacy panic button," declares BellSouth spokesman Bill McCloskey. At the very least, the Bells add, they will always use the opt-out rules. In fact, they characterize the ruling as a victory for consumers. U S West attorney and constitutional scholar Laurence Tribe argues, "The irony now is that there will be less marketing calls interrupting dinnertimes because companies can tailor their efforts."

Others think the temptation to sell out will be hard to resist. Says Democratic Congressman Ed Markey of Massachusetts: "We used to think of the phone company as a privacy keeper, but now we think of it as a peeper, and a reaper of profit."

Is there anything legally wrong with that? The answer, which may surprise people who think of privacy as an inalienable right, is probably no. The Bill of Rights has no explicit privacy clause. A patchwork of state laws governs how businesses handle customer information, but there is no overriding federal statute. At this point, because of a law passed in the '80s, your video-rental log may be better protected than your bank or health records.

The pressure for more protection may come from consumers. Late last week, online mega-merchant Amazon.com responding to criticism, modified its new Purchase Circles feature, which lets surfers find out which books, music and videos are most popular at different companies, universities, organizations and geographic regions. And Comptroller of the Currency John D. Hawke Jr. has noted a rise in complaints about banks selling confidential customer data and he called on the industry to clean up its act. "There's mounting evidence of an increase in banking practices that are at least seamy, if not downright unfair and deceptive," Hawke said. Some banks heard him. Chase has begun a moratorium on working with third-party telemarketers to pitch nonfinancial products. Bank of America and Wells Fargo have followed suit.

Soon enough they may not have a choice in the matter. Bank-reform legislation pending in Congress would require companies to give customers the chance to opt out of joint marketing programs, though this would apply only to information shared with outside firms. So a soup-to-nuts financial behemoth like Citigroup could pass on your data from its brokerage to mortgage officers to insurance salesmen without your approval. Federal efforts to pass a universal medical-privacy act have moved at a snail's pace; Congress just missed a self-imposed deadline to enact a law. When it comes to privacy, whether it concerns your bank account or your phone records, keep this in mind: it's on hold.

--With reporting by Sally B. Donnelly/Washington and Richard Woodbury/Denver

With reporting by Sally B. Donnelly/Washington and Richard Woodbury/Denver