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How Overseas Call Centers Threaten U.S. Jobs, Consumer Privacy, and Data Security
Call centers are a valuable source of jobs in the United States, employing as many as four million Americans—nearly four percent of the U.S. workforce. Yet, in recent years, U.S. companies have exported hundreds of thousands of call center jobs to India, the Philippines, Egypt, Mexico, Honduras, Panama, China, and other developing nations.
U.S. corporations are sending call center jobs overseas in a relentless drive to lower labor and other business costs. Offshoring represents a classic “race to the bottom” that harms U.S. workers and the economy, lowers standards for call center workers everywhere, and puts U.S. consumers’ personal data at risk.
The consequences of offshoring are destructive in many ways, devastating individuals, communities, and the nation.
Offshoring leads to:
Job Loss. When companies shut down call centers and export call center jobs, laid-off workers and their families join the ranks of the unemployed.
Wasted Taxpayer Subsidies. Communities that subsidize call center expansion are devastated by the sudden loss of jobs and revenue.
Consumer Privacy and Data Security at Risk. Consumers’ financial and medical data become vulnerable to theft and misuse by poorly regulated contractors overseas.
Offshoring Jobs and Cheating Communities
U.S. banks, telecom carriers, IT firms, airlines, insurance companies, and others have moved hundreds of thousands of customer service jobs overseas. A 2013 study of “back office” support jobs, including call centers, estimated that within the next four years, North America and Europe will lose 3.7 million jobs, primarily as a result of offshoring.
The Philippines has now surpassed India as the top destination for offshoring of call center work, with more than 400,000 call center and another 240,000 back office business processing jobs. Low wages, weak enforcement of data security, and other consumer protections are a draw for U.S. companies. Filipino call center workers’ average annual earnings of $4,932 are a small fraction of the average U.S. call center workers’ wage of
$33,110.
Offshoring Leads to Devastated Families, Communities, and Wasted Taxpayer Subsidies
Call centers are economic lifelines in many communities. Local governments commit millions in tax dollars to fund incentives that lure companies, only to watch those companies offshore jobs a few years later, leaving devastated communities behind. For example:
JPMorgan Chase closed an Albion, New York, call center in September 2013, laying off 400 workers. JPMorgan Chase operates call centers in the Philippines and India.
Hewlett-Packard (HP) shifted 500 call center jobs out of Conway, Arkansas in July 2013, after accepting some $43 million in state and local incentives. HP’s call center locations now include Costa Rica and India.
T-Mobile closed seven U.S. call centers—putting 3,300 employees out of work—in 2012 after accepting $61 million in state and local subsidies. T-Mobile opted to shutter U.S. workplaces and move jobs to Honduras and the Philippines.
Wells Fargo laid off hundreds of workers in Florida, California, and Pennsylvania in 2012 and moved operations to the Philippines. The banking giant, which received more than $25 billion from the federal Troubled Asset Relief Program, is tripling the number of its Filipino employees and has asked some U.S. employees to train their own replacements.
Ohio lost more than 1,100 jobs when Bank of America closed mortgage service centers in Cleveland, Cincinnati, and Independence. Bank of America later shuttered centers in Upper St. Clair, Pennsylvania, and Fresno, California, laying off 700 workers. Bank of America operates call centers in Costa Rica and the Philippines.
Sykes, a company that handles support and technical calls, took millions of dollars in loans and tax breaks from small towns in Oregon and Florida, where it located new call centers. Just a few years later it relocated operations to Asia.
Risky Calls: The Dangers of Offshoring Our Data
In the United States, the Federal Trade Commission, as well as state agencies, investigate and prosecute cases of fraud and identity theft. However, in many other countries, particularly in the developing world, data protections laws are weak or non-existent, and there are rarely consumer protection agencies to catch violators.
When corporations offshore their call centers, they frequently transfer large volumes of highly sensitive personal information about customers, such as bank records, medical histories, payroll and benefits information, social security numbers, and credit reports. In the digital age, a few numbers in the hands of the wrong person can ruin lives, and if those numbers are in the hands of employees in countries beyond the reach of U.S. consumer protection laws, then civil and criminal prosecution can be difficult.
There are significant gaps in enforcement when U.S. officials confront foreign call centers and other back office operations. U.S. law may protect data when it crosses our borders, but if that data is lost or stolen abroad, consumers face huge challenges.
In 2012, a California-based company, American Credit Crunchers, LLC. launched a massive scam operation using call centers in India to place 2.7 million calls to at least 600,000 U.S. consumers and collected more than $5.2 million. Callers threatened to have children taken away if consumers did not pay debts they did not owe.
In what became known as the “scareware” case, in October 2012, six deceptive tech support scams operating from Indian and U.S. call centers contacted tens of thousands of consumers in the United States, Australia, Canada, and elsewhere, offering to remove nonexistent malware from their computers for fees ranging from $49 to $450.
In 2013, Ideal Financial Solutions billed thousands of U.S. consumers for more than $25 million without their consent from call centers in the Philippines and El Salvador, as well as in the United States.
INDIA: STILL NOT “DATA SAFE”
For years, India’s attempts to become “data safe” have consistently failed. In 2013, the E.U. Justice Department’s study of India’s data protection regulations suggested that the country would not be in compliance until local laws were revised.
In 2011, the Indian government specifically omitted outsourcing companies from data privacy laws. The Times of India reported that the government gave in to pressure from the multi-billion-dollar BPO industry.
THE PHILIPPINES’ SHAKY SECURITY FRAMEWORK
Cybercrime is a significant security challenge in the Philippines, yet the Philippines does not have a data protection agency comparable to our FTC. Although the Philippines passed a Data Privacy Act in 2012, which provided for the creation of a National Privacy Commission (NPC), a year later, the National Privacy Commission has not yet been formed, and the Data Privacy Act has not been implemented.
Equally troubling, the Data Privacy Act’s provisions place accountability on individuals—not corporations. Company policies and protocols for ensuring data protection are not liable under the law.
In addition, the Data Privacy Act’s provisions do not apply to personal information processed in the Philippines but originally collected from U.S. and other foreign countries. This exemption renders U.S. companies operating in the Philippines immune from data protections and enforcement, and appears to maintain the BPO industry’s exemption from government regulation and enforcement.
A recent survey undertaken for technology giant EMC revealed that the leading cause of data loss in the Philippines is lack of security, as evident by these cases of cybercrime:
In 2011, the FBI and Philippines’ police arrested four people who hacked into phone lines of various telecommunications companies—including AT&T— resulting in the loss of almost $2 million. The hackers were paid for their work by the same Saudi Arabia–based terrorist group responsible for funding the 2008 terrorist attack in Mumbai, India.
In August 2012, more than 300 people were arrested in the Philippines for cybercrime, including credit card fraud and human trafficking. The suspects set up an illegal call center in a private home and from there called victims alleging that their bank accounts were under investigation for money laundering and terrorist activities and ordering them to deposit money into a different “safe” account.
In April 2013, Philippines’ authorities arrested a group of 16 Taiwanese suspects who operated a fraudulent call center in which they posed as bank staff offering to help replace stolen credit cards in order to transfer victims’ funds to other accounts.
U.S. Companies Join Foreign Trade Associations that Lobby to Limit Regulation of Call Centers
To promote their interests abroad and at home, many U.S. firms join overseas trade associations that, among other things, lobby their own governments to limit regulations on the BPO industry.
In the Philippines, Citibank, FedEx, IBM, and Verizon are members of the Business Processing Association of the Philippines (BPAP).
India’s IT and BPO industry association is NASSCOM, and its membership rolls include such highprofile U.S. companies as Bank of America, GE, MetLife, UnitedHealth Group, and Wells Fargo.
U.S. corporations operating abroad often maintain an atmosphere of secrecy regarding their operations and employees. Some require their foreign partners to sign nondisclosure contracts to keep data regarding numbers of jobs transferred overseas confidential. By lobbying foreign governments via trade associations and maintaining a tight control on their own industrial data, companies leverage their economic power to tap incentives and subsidies and lower wages and working conditions.
The Need for Federal and State Legislation
Shutting down call centers in the United States and moving them offshore is weakening the economic recovery, harming workers and communities, and putting U.S. consumers’ data at risk. The situation demands federal and state action.
Members of Congress from both parties have introduced The United States Call Center Worker and Consumer Protection Act of 2013 (H.R. 2909 and S. 1565) to encourage U.S. companies to keep call centers in the United States and to end federal rewards and incentives for offshoring. Several state legislatures are considering similar legislation.
These bills include the following provisions:
Requires documentation of the extent of offshoring through a publicly-available list of employers that relocate call centers and the disclosure of their physical locations, with penalties for not doing so.
Prevents government from subsidizing the offshoring of good jobs by ending incentives such as grants and loans to offshoring companies, and giving employers that keep call centers in the United States preference in contract awards.
Requires employees overseas to disclose their location when asked and transfer consumers who request it to a U.S.-based call center.