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Screen crime: Spam texts foil regulators, lure class-action attorneys

By: Amy Karon, [email protected]//August 20, 2012//

Screen crime: Spam texts foil regulators, lure class-action attorneys

By: Amy Karon, [email protected]//August 20, 2012//

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Junk emails crowd inboxes.

Robo-callers seem to know just when families are sitting down to dinner.

And now, unsolicited text messages drain data plans, chiming people awake in the middle of the night.

“Give us your biggest, coolest, most amazing idea and Red Bull could Give YOU Wings,” promised a text that included a web address link. It made the rounds this year.

If consumers click on that link, or even just reply “STOP,” their numbers could be sold and resold, triggering a barrage of unwanted texts. Worse, web links embedded in some text spam solicit personal information such as bank account numbers. It’s a scheme called “smishing.”

“The Internet makes it very easy for a criminal to do this,” said Sandy Chalmers, an administrator in the state Department of Agriculture, Trade and Consumer Protection. “Anybody with a pre-paid cell phone or some memory cards and a computer can send tens of thousands of text messages a day from their basement.”

Federal and Wisconsin laws prohibit most unsolicited texts and other promotional messages. But so far, regulators have failed to reverse the boom in text spam, leading frustrated cell phone owners to file a slew of class-action lawsuits.

Recent defendants include high-profile companies such as Red Bull North America Inc., Taco Bell Corp. and Google Inc.

Both the 2003 Can Spam Act and the 1991 Telephone Consumer Protection Act outlaw text spam.

The TCPA prohibits using an autodialer to make calls except for emergencies or with recipients’ express prior consent. In 2003, the Federal Communications Commission expanded the law and, along with the Federal Trade Commission, created the national Do Not Call list. In 2009, a federal appeals court ruled for the first time that unsolicited text messages could violate the TCPA.

But despite regulations, Americans received about 4.5 billion unsolicited texts last year, compared with 2.2 billion in 2009, according to the communications analysis firm Ferris Research. More than 28 million cell phone owners receive spam texts at least weekly, based on 2012 survey data from the Pew Internet & American Life Project.

“The scammers are doing everything in their power to hide their identity,” said Christine Todaro, one of 33 attorneys with the FTC’s Division of Marketing Practices. “Those tools are making it increasingly difficult for us to identify who’s sending the messages.”

The FTC received 2,600 complaints about spam texts in 2011, but so far only has brought one case against a text spammer.

Sandy Chalmers, an administrator with the Wisconsin Department of Agriculture, Trade and Consumer Protection, stands near a sculpture Aug. 7 outside her Madison office. DATCP has received 24 complaints about text spam this year, which is three times more than in 2011, Chalmers said. (Staff photo by Kevin Harnack)

The agency also has not tracked trends in spam text complaints, Todaro said. Neither Todaro nor FTC spokeswoman Claudia Farrell would disclose what would trigger the agency to do so or how many complaints it is investigating.

“The FTC might investigate for any wide variety of reasons,” Farrell said. “We don’t feel we have to disclose those reasons, even to reporters. And our investigations themselves are nonpublic.”

The FTC filed its single lawsuit against a text spammer in February 2011, when the agency alleged Phillip Flora sent more than 5.5 million text messages in 40 days, as many as 85 a minute. Most texts advertised a mortgage modification website where recipients were prompted to enter personal information. The defendant settled in September 2011 for $32,000 and agreed to stop sending the texts.

Wisconsin, too, has been slow to act on the problem of text spam. It wasn’t until April that the state expanded its telemarketing law to prohibit sending unsolicited texts to the approximately 2 million numbers on Wisconsin’s Do Not Call list.

That change gave DATCP statutory authority to investigate complaints about text spam. The state agency has received 24 complaints so far this year, Chalmers said, three times more than in 2011. But, she added, investigations of complaints can take months, and the agency hasn’t filed a case.

Although the federal Can Spam law provides no private right of action for individuals, the TCPA does. That provision has let private attorneys outpace regulators in bringing cases against text spammers.

EDITORIAL: A FAILURE TO ENFORCE SPAM TEXTS

Class-action lawsuits have proliferated since 2009, when the 9th Circuit Court of Appeals ruled that publishing company Simon & Schuster Inc. violated the TCPA by allegedly sending spam texts promoting a Stephen King novel.

TCPA cases attract class-action attorneys for several reasons, said Robert Katerberg, a lawyer with Washington, D.C.-based Arnold & Porter LLP. Violations carry a flat damages provision, so there’s no need to delve into individual circumstances for each plaintiff. Plus, the evidence needed in court is straightforward — a consumer either did or did not receive an unsolicited advertisement through text, fax or phone call.

It doesn’t hurt that the TCPA carries a minimum penalty of $500 per illegal communication or that fines can be trebled if the spammer is found to have willfully broken the law. Simon & Schuster settled for $10 million.

Jay Edelson is a managing partner in Edelson McGuire LLC’s Chicago office. The firm, which has offices in four states, brought the Simon & Schuster case and, he said, now has 15 class-action lawsuits related to spam texts in the courts.

That includes one against shoe manufacturer Steve Madden Ltd., accused of sending thousands of unsolicited promotional texts. In a proposed settlement filed in a federal district court in August, the company agreed to establish a $10 million fund for class members and to pay $2.5 million to plaintiffs’ attorneys.

Achieving class certification for spam text cases isn’t always easy, Edelson said. Attorneys must show text messages were unsolicited and track down the sender.

Even unsolicited texts from bona fide companies often come through second- or third-party marketers, making it hard to identify all corporate players. What’s more, many mobile marketers now avoid using short text codes because those must be registered so consumers can look up who bought and used them. Instead, spammers use traditional 10-digit phone numbers, which are far harder to track.

“It takes a lot of legwork and a lot of research to try to figure it out,” Edelson said. “We’re not always successful. It took us a long time to get the expertise on how to do this.”

But Edelson’s firm usually won’t touch the most insidious text spammers. Those are the smishers.

Smishers might send links to websites that ask for personal information, which is resold to other advertisers or used to try to hack into email accounts, said Chalmers, of DATCP. Or they might direct recipients to websites that download malicious software. Keyboard trackers, for example, capture personal data such as credit card and Social Security numbers.

Smishers based overseas especially are hard for the FTC to find if local law enforcement authorities don’t cooperate with U.S. officials, said the FTC’s Farrell. And smishers are taking ever-more sophisticated measures to cover their tracks.

“There are ways you can bounce your signal off other people’s computers so your message gets rerouted through the computers of innocent bystanders,” Farrell said. “You can do that using dozens or hundreds of different computers.

“By the time a piece ends up on the desk of the FTC, it may take hours or it may be impossible to track it back to its origin.”

In February, the cell phone industry took its own steps to combat text spam, partnering with software manufacturer Cloudmark to launch a new spam reporting tool. Consumers can forward unsolicited text ads to 7726 to let carriers block the numbers. This might prove the most expedient, and cost-efficient, means for consumers to stop unwanted texts.

“People are incredibly upset by the invasion of unsolicited text messages,” Edelson said. “They have been adamant about protecting the sanctity of their cell phones.”

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