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A Communications Workers of America
.M October 2012
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OFFSHORING AMERICAN
CALL CENTERS:
The Threat to Consumers,
Communities, and
. National Security
EXECUTIVE SUMMARY
I
n recent years, u.s. companies exported more than
500,000 call center jobs to India, the Philippines,
Egypt, Mexico, Honduras, and other developing na-
tions.' Call centers are a valuable source of jobs in the
United States, employing as many as five million Amer-
icans-nearly four percent of the U.S. workforce.' Re-
cent technological advances have made it easier to
transfer these jobs overseas to lower-paid, less regulated
workers, a trend that increases risks for consumers and
devastates communities nationwide.
The off shoring trend has evolved into a crisis for con-
sumers, with fraud and identity theft becoming a multi-
million-dollar business. For example, in one widely
reported scam, criminals used foreign call center workers
to make 2.7 million calls and collect some $5.2 million
through threats and intimidation, alleging that innocent
consumers owed money for past loans.
3
In the current economic landscape, with millions un-
employed and the recovery shaky, U.S. workers and the
communities in which they live need these call center
jobs. In response, the U.S. Congress is talting action.
Both the House of Representatives and the Senate are
reviewing bills to keep call centers in the United States
and to end federal rewards and incentives for off shoring.
At least seven state legislatures are moving forward on
similar legislation.'
The Consequences of Offshoring
Federal action is essential because the consequences of
off shoring are destructive on many levels, devastating
individuals, commWlities and the nation.
1
Consumers' financial and medical data become vul-
nerable to theft and misuse by poorly regulated con-
tractors overseas.
Communities that subsidized call center expansion
a few years ago are devastated by the sudden loss of
jobs and revenue.
Laid-off workers and their families join the rolls of
the unemployed and often lose their sense of inde-
pendence along with their paychecks.
National security may be threatened as more finan-
cial, medical, and personal data about American cor-
porations and ci tizens falls into the hands of
contractors in less stable nations.
Despite such clear vulnerability to fraud, four large
banks - Bank of America, J.P. Morgan Chase, Wells
Fargo, and Citigroup - have recently moved call center
operations to the Philippines, a country that lacks even
the most basic safeguards for security, privacy, and legal
accountability.S
In addition to the threat to consumers' wallets, off-
shoring presents a threat to civil liberties. Once data is
moved overseas, Fourth Amendment protections from
warrantless searches disappear.
Finally, given the instability of some new offshoring sites, .
data security must be given even more serious scrutiny.
Egypt, which recently experienced an unexpected polit-
ical upheaval during the "Arab Spring," is rapidly be-
coming one of the most popular locations for new call
centers.
Bi-partisan Support from Congress and
the Public
Legislation now pending in both the House and Senate
addresses the multiple threats posed by increased off-
shoring of call centers. Both the House bill (H.R. 3596)
and the Senate bill (S.3402) are designed to keep jobs
in the United States and improve protections and service
for conswners.
Ie
"PROJECTION ;t,.!!: Si'3/IG2

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Voters across the political spectrwn support legislation
to keep call centers at home. An August 2012 survey of
likely voters nationwide fowld that the vast majority
strongly support proposals to limit the off shoring of call
center jobs. According to the survey, 90 percent support
proposals that would give customers' the right to request
transfer to a U.S.-based customer service agent. An over-
whelming number of respondents support prohibitions
against giving federal loans (81 percent) and grants (75
percent) to companies that send call center jobs overseas.
Three-quarters (78 percent) rated overseas c.-ill centers
negatively, including 79 percent of Democrats, 75 per-
cent of Republicans, and 78 percent ofIndependenrs.
6
BREAKING DOWN THE
CALL CENTER THREAT
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aboutthe scenario, you heave
away from tlie

2
M
any U.S. companies are taking advantage of
cheaper labor cosrs by relocating facilities to
the developing world. India is the most well-
known magnet for call centers, but last year the Philip-
pines surpassed India with some 400,000 workers
devoted to answering Americans' calls.? Companies also
are moving quickly into China, Saudi Arabia, Egypt,
Mexico, and the Czech Republic, among other sites. The
result for conswners:
Lack of security for private records-including fi-
nancial and medical records.
Loss of millions of dollars to fraud.
Violation ofFourthAmendinent protections against
warrantless search and seizure.
Hundreds ofThousands of Security
Breaches
Threats to consumers' private data are not new. For at
least a decade) security breaches in overseas call centers
have been reported in the U.S. and European press. For-
eign call center workers have peddled customers' finan-
cial and health information to criminals, defrauded
conswners of millions of dollars by posing as debt col-
lectors, and stolen hundreds of thousands of dollars from
bank customers.
The U.S. Federal Trade Commission haS been investi-
gating scams defrauding Americans. For example,
Citibank customers in the United States lost more than
$400,000 to Indian call center scams.' British bank cus-
tomers have also lost hundreds of thousands of pounds,
and journalisrs have gained access to private bank ac-
CotUlt records.
9
In 2012 a call center ring based in India scammed con-
swners by impersonating workers from Microsoft and
Apple, gaining access to personal information by offer-
ing to do security checks.
lo
In the Philippines and India,
call center employees have been arrested for a variety of
schemes to steal consumer financial data and make off
wirll thousands of dollars from American Citibank and
HSBC.
ll
-- :,.:ti:{
f CAltlJouglllndia is--more advanced
deveipjlir;g nations in terms of technology and -;', t' ,'tN
"security,1t has yet to be approved by-the EU a-
safe" nation,European companies
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steps to
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3
Companies are understandably reluctant to report secu-
rity breaches, fearing negative publicity. But one smdy
of the problem completed in 2005 found that 83 per-
cent of Indian outsourcing companies had experienced
information security breaches.
12
Overseas call centers have not only defrauded companies
and stolen from consumers, they've also used health
records as blackmail tooJs against management, stolen
valuable data from tech company databases, and at-
tempted to sell trade secrets from American software
companies to Indian compecitors.
13
The Indian government is not taking measures to ad-
dress the problem. The Indian parliament passed a new
data privacy law in 2011, but outsourcing companies
were specifically exempted from the regulations."
lax laws and Even More lax Security
In foreign countries, background checks of employees
that measure up to u.s. standards are difficult and ex-
pensive, but they are clearly necessary. Up to one-fourth
of all call center applicants outside the Uniced States pro-
vide false information on applications. IS
For the most part, there are no central criminal databases
in developing countries, and credit rating agencies are
relatively new. Therefore, background checks are most
often done in person, a time-consuming and invasive
process, costing $30 to $1,000 per employee. In the
United States, a more thorough vetting usually costs less
than $100 per employee.
16
Investigators face several obstacles when seeking informa-
tion about potential employees, including the lack of per-
manent 10 numbers, such as social security cards, to help
track workers. Many police departments in developing
nations do not store or organize criminal records carefully.
More Call Centers,
less Security in the Philippines
In 2011, the Philippines surpassed India as the main
destination for offshore call centers. But the Philippines
has even Jewer legal protections to stop data breaches
than does India.
More than 400,000 Filipinos work in call centers for
companies as diverse as T-Mobile, JP Morgan Chase, and
Expedia. There are
currently no regu-
lations in the
Philippines gov-
erning data pro-
rection, although a
law is under con-
sideration to make
the country COffi-
pliant with Organization for Economic Cooperation and
Development (OEeD) standardsY
Clearly, the strict security measures followed by U.S. com-
panies are simply absent in many other cDunu'les. And
once a crime has been committed at an offshore call cen-
ter, a complex variety oflaws and legal systems frequently
thwarr attempts to identifY and prosecute the culprits.
Warrantless Surveillance:
Bypassing the Fourth Amendment
Threats to data security in foreign call centers can come
from another-perhaps unexpected-source. As a resulr
of off shoring, U.S. consumers' personal and financial
data is subject to warrantless federal sw"Veillance.
In June 2011, consumers brought a class-action lawsuit
against American Express, charging that the company's
customer calls are routed to foreign call centers without
the callers' permission or knowledge. This subjects con-
sumers to intrusive and warrantless investigations by the
federal government. A similar lawsuit was brought
against Bank of America two montl" later.
18
The root of these breaches of citizens' fourth Amend-
ment protections is the transfer of financial and other
data overseas. Once information is at a foreign call cen-
ter, and as long as one individual's data is not specifically
targeted, that data legally can be collected and analyzed
by U.S. federal agencies without a warrant.
4
Offshoring Harms
American Communities
Call centers have become economic lifelines in many
American communities over the past 20 years, as U.S.-
based manufacturing jobs have disappeared. Local gov-
ernments have committed millions in tax dollars to fund
incentives to lure companies, only to watch those com-
panies offshore call center jobs a few years later, leaving
their citizens unemployed and disillusioned.
This year, T-Mobile closed seven U.S. c.-u[ centers, put,
ring 3,300 employees out of work-after accepting $61
million in state and kea! subsidies. I' Instead of closing
some of its call centers in Honduras or the Philippines,
T-Mobile prefers to shutter U.S. workplaces.
Wells Fargo followed a similar route-laying off hun-
dreds and moving operarions to the Philippines, while
workers in Florida, California, and Pennsylvania were
lefr jobless. The banking giant, which received more
than $25 billion in federal TARP money during the
darkest days of the recession, is tripling tl,e nwnber of
its Filipino employees and has asked some U.S. employ-
ees to train their own replacements.
2o
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 lo-
cated new call centers. Just a few years later it relocated
operations to Asia. Town leaders pleaded with the com-
pany; citing enormoUS investments of taxpayer money-
but Sykes lefr anyway, and hundreds of workers lost their
jobs.'!
A depressed town in a small southwest Virginia COWlt}'
lost 250 desperately-needed jobs when Travelocity shut
down a call center and moved to India.21
When a call center closes in a small or medium-size
community, the result is a major blow to the economy.
Retail businesses are shuttered when paychecks disap-
pear. The devastation of so many communities during
the continuing recession is indefensible.
Consumers and National Security
A new trend in off shoring may mean even greater risk
fQ! American conswners' money and sensitive informa-
tion. Call centers are now locating in a broader variety
of developing nations with lower wages-and less stable
political regimes.
In the final years of the Mubaralc regime, Egypt beeame
a major site for new call centers. Egypt actively sought
subcontracting from India, hoping to gain a foothold in
the industry with its multilingnal workforce.
Today Microsoft, Ericsson, Vodaphone, and Aleatel all
have call centers in a "smart village" in Egypt. Yet the
new regime is still a major unknown and lacks 'the sta-
bility that can ensure the safety and security of sensitive
financial and personal data.
23
Quality Customer Service

As overseas call centers take over customer service func-
tions, U.S. COl1swners often meet fiustratioll, delays, and
roadblocks as they seek information. U.S. call center em-
ployees have a better understanding of anAmerican caller's
langnage and cultural and typically are more
highly-trained and experienced in answering questions.
u.s. call center employees receive more training and have
more experience on the job than overseas call center work-
ers.'Rvo-thirds (62 percent) ofIndian call center employ-
ees have less than one year job tenure, compared to nine
percent at U.S. based union-represented call centers,14
Some employers, recognizing that high quality service
improves their bottom line-are bringing offshored
work back to the United Srates. AT&T, for example,
transferred 5,000 DSL tech support jobs to American
workers, and U.S. Airways returned reservation agents
to three U.S. call centers in 2011.2'
5
HOW H.R. 3596 and
S. 3402 WILL HELP
lJ
" egislation now before both Houses of Congress
(S. 3402 and H.R. 3596) takes aim at the prob-
em of offshore call centers-sometimes referred
to as modern-day sweatshops-that exploit foreign
workers, traffic in identity theft and ftaud, and regularly
mishandle sensitive personal data.
The Bottom Line: U.S. Taxpayer Money
Should Not Support Offshoring Jobs
In recent years, more than a half million call center jobs
have been off shored. In these difficult economic times,
the notion that the federal government is supporting
companies that move jobs overseas makes no sense, par-
ticularly when conswners, communities, and national
security all suffer as a result of off shoring.
The bills before the U.S. House and Senate now will go
a long way toward stopping the flow of jobs overseas and
bringing them back to American dries and towns to
support middle-class families. II
Endnotes
1 Data from the U.s. Bureau of Labor Statistics and American Teleservlcs ASSOciation, as cited by Congressman TIm Bishop (DN'1), "BIshop Urges White House
Action on Call Center lnsourc1ng," Jan. 11,2012 (http://timbisho p.house.gov/latest-news/bishop.urge"s.whlte.house.action-on-cal!-center-!nsourdng!)
1 American Teleservlces Association, (http://'t/w\'I,ataconnect.org/pdfs/usmap.pdf). According to the U.s. Bureau of Labor Statistics. there are 2,5 mnllon em
ployees In various customer service occupations In the U.S" including customer service reps, account derks, collections reps, reservation agents, telemar-
keters, order clerks, credit authorizers telephone operators, and switchboard clerks. Bureau of labor Statistics, Occupational Employment Statistics, May
2011. (\w/IIJ.bls.gov/oes/oes_dLhtm)
3 Federal Trade CommIssIon News. Halts AUeged Fake Debt Collector Calls from India, Grants FTC Requestto Stop Defendants Who Posed as Law En
forcers," April 11, 2012
Legislation has been Introduced in California, New York, Florida, Maryland, New Jersey, West Virginia, and Arizona. See, for example: The New York State As
semblytext of the Save NewYorl< Call Center Jobs Act of 2012, http://assembly.state.ny.us/leg/?sh'''printb1U&bn=A09809&terrn'" Metro News, "Another Try
for Call Center 8ill," (http://www.\wmetronews.com/lndex.cfm?func=dlsplayful1story&storyld=S3lj8lj&type); Text of California Bill
http://leglnfo.leglslature.ca.gov/faces/billAna[ysisCllent.xhtml; CWA, LegIslative Team Helps VOfln ProtectIons AgaInst Offshoring," http://www.c.va
unlon.org/news/entry/d213_leglslative .team_helps_win_protectlons_againscoffshorlngJn_marylandlt.UHMOaDnrBll ; Loeb & Loeb, LLP, "States Intra
duce Bills PenalizIng Overseas Call Centers," http://\wlW.loeb.com/stateblllspenallzlngoverseascallcenters/
5 U.s. Banks that operate call centers in the PhilippInes include 8ank of Amerfca, (http://w ....lW.motherjones.com/polltics/2012/0S/bankofamericaoutsoure
Ingcall-center-ph1l1pplnes)j J.P. Morgan Chase (http://w\';'W_nytlmes_com/2011/11/26/buslness/phllfpplnes-overtakesjndiaas-hub-ofcall
eenters.htmILr"'O)j Wells Fargo
(http://technews.tmcnet.com!call-eenter-outsourclng/toplcs/call-center-outsourcing!artlcles/275750-weltsfargoexpandcallcenteroutsourclngfaclllty
the.htm); and Citlgroup (http://usatodaY30.usatoday.com/money/world/2011-0110callcentersl0_CV_N.htm)
Lake Research Partners, "Voters give near universal support for antr'offshoring Survey of 805 likely voters, July 26-31, 2012
(http://cwafiles.org/natlonal/News/Misc/Poll!ngResullsMem081412.pdflj "Americans Support legislation to limit Call Center Offshoring, Contact Center So
lutlons, Aug, 16, 20 12 (http://calkenterinfo.tmcnet.com/Analysis/articles!303623cwa-says-americanssupportleglslatl on-lImltcall-eenter.htm)
7Vikas Bajaj, New Capital of Call Centers," New York Times, November 26, 2011 (http://vNNI.nytimes_com/2011/11/26/business/phHippinesovertakes-
Indla-ashubofcallcenters.html?pagewanted"'all)
a "2 Indian Americans held in U.S. far defraudIng hundreds ofS400,000," The Indian Express, June 9, 2012, (httP:]/I'NNJ.indlanexpress.com/news/2rndian
am e ri can $. held In -u s-for .. defrau dlng .. hund redsof .. 400000 /9 597831 )
9 Chlrtra Somayaji, "HSBCWorkerln IndIa Charged for ASSisting Fraud," Bloomberg News, June 28, 2006
(http://wvNI.bloomberg.com/apps/news?pfd ... newsarchlve&sld=anmGQS5neXDk&refer<;uk)j Soutlk 81SVlas, "How Secure Are IndIa's Call Centres" BBC
News June 24, 2005 (http://news.bbc.co.uk!2/hl/south_8sla/4619859.stm)
lTom Bristow, "Trading Standards warning over Asian call centres targeting Norfolkhomes every day with computer 'fault' scam," EOP 24, February 7, 2012
(http://vNNI.edp24.co.uk/nev/s/crime/tradlnR..standards_warnlng_over_aslan_caILcenlres_targetinR..narfoILhomes_every-day_with30mputecfaulCsca
m_l_1201408)
11 Sarlth Ral, "Fraud Reports Worry India Outsourcing Firms," October 4, 2006 (http://wiw/.nytimes.com/2006/10/04/business/worldbuslness!04Iht
expose.3031987.htmILr"'0)j Sufla TIppu, "Employee Fraud at HSCB 8P in 8angalore, !TWlre, June 28, 2006 (http://IINNI.1twlre,com/lt-lndustrynews!mar
ket/4 781-e m ployee-fraud -athsbcbpoln -bangalore)
12 Pricewaterhousecoopers study referenced in "India Fortifies Its Data Security," Washington TImes, May 27, 2005
(http:// ....,r,wl.wash I nglo ntimes .com/news /2005 / may /27/2005 a 5 2 7103942313 2r /? page=>alO
tl David lazarus, "Extortion Threat to Patients' Records," San Francisco Chronicle April 2, 2004 (http://vNIW_sfgate_com/news/article/Extortion-threat-to-pa-
tientsrecordsClIents2771918.php); K. V. Subramanya, "HSBC Scam," The Hindu June 30, 2006
(http://www.hfndu.com/2006/06/30/stories/2006063002920700.htm); Sonia 8aldia, "Offshoringto India: Are Your Trade Secrets and Confldent!allnfor
matlon Adequately Mondaq.com March 26, 2010 (http://w ...NI.mayerbro ....m.com/files!PubUcation/c432183Bf2ec4feS990d
lea497a7398b/Presentatlon/PubUcationAttachment/5a87579c8d2b469d-ad3dbb95435fe6ff/ART_OFFSHORINGTOINOIA_0308.PDF)
14 "Government Relents, New IT Security Rules Exempt BPOs," The Times of India August 26, 2011 (http://artic\es.t1mesofindla.lnd!atimes.com/201108
26/ outsou rein g/2 9 9313 26_1_bpos-sec u rity-ru lessecu rity-practi ces )
Zubalr Ahmed, "Outsourcing exposes firms to fraud," BBC News, June 16, 2005 (http://news.bbc.co.uk/2/h!/business/lj09lj894.stm)
6
16 Karen Schwartz, "The BackgroundCheck Challenge," Information Week, July 18, 2005 (httP:/}'lI'NwJnformatfonweek.com/thebackgroundcheck
chaUenge/165702657?pgno='<1 )
11V!kas BaJaj, "A New Capital of Call Centers," New York TImes, November 26, 2011 (http://wv .. w.nytlmes.com/2011/11/26/business/phllipplnes-oYertakes-
Ind i aas-h u b-of-ca ll-centers,html?_r=l )
18 Zoe Tillman, "Bank of America sued for outsourcing customer calls overseas," National law Journal,August 4, 2011
(http:}/bghllp.com/yahoo_slte_admln/assets/docS}20 I1B oASu ItPrintl PagebyPage,26317 5 511, pd
19 Nat levy, "Protesters decry TMobile's decisIon to dose call centers," Bellevue Reporter, April 6, 2012
(http://VJ\WJ,bellevuereporter.com/news/147682735.html?moblle'''true) ; Good Jobs First, Moneyon the LIne report September 2011, (httP:/{vJ\w/.goodjob
sfl rst.arg / sltes/ d efault/Rles 1 docs 1 pdf /tmo blle_sep 20 11.pd f)
10 "Wells Fargo sets up BPO in PH, H Asian Journal, March 14, 2012 {http://W..WI.aslanjoumal.com/datelinephilippines/headlines/15162-wellsfargo-sets-up-
bpo'in-ph.htmO; Mary Ann Milbourn, "Wells Fargo Banklayfngoff315 in O.c.," Orange County Register March 20, 2012
(http://economy.blog,ocregister.com/2012/03/20/wellsfargobank-!ayfng-off315-ln-oc/l06102/); Alex Ferreras, "Wells Fargo to Shed 300 Jobs, Close
lake Mary Call Center, as itTrims 4% of its Florida Workforce,"loansafe.org, September 22, 2011 (http://W'o'JI.'1.loansafe.org!wellsfargotoshed300jobs
doselakemarycall-center-as!ttrims4ofi!sflorldaworkforce); Lynn Olanoff, "Wells Fargo Cutting Jobs In Bethlehem, Moving Jobs from Allentown," lehIgh
YaUey LIve, March 4, 2011 (http://vJ\'JI.'1.lehlghvalleylive.com/bethlehem/index.ssF/2011/03/wells_farg03uttin!L1obs_in_be.html)Kari Rusnak, "Taxpayer
DoUars Funding ForeIgn Worker Training, Economy In Crlsls,Apri! 20, 2012 (http://economyincrlsis.org/content/amerlcan-taxpayer-dollarsare-fundingfor
elgn-workertraining)
21 Scott Barandk, "Small Towns lose After Gamblingon Sykes Jobs,n St. Petersburg TImes, March 27, 2004,
ness/SmaIUownsJose_afte.shtmOj Scott Barandk, "Call Centerto Close Soon," St. Petersburgllmes July 10, 2004
http://,,,,,w/.sptlmes.com/2004/07/1 0/ n ews_pf / BusIness/ Ca lLcenteUo_close_.shtm I
11 David Streitfeld, "A Town's Future Is Leaving the Country," Los Angeles TImes, March 28, 2004 (http://articies.\atimes.com/2004/mar/2B/business/fi-out
source2B)
JJ "The Next Outsourdng Hot-Spot," Oxford Business Group, August 8, 2007 http:/ hWNI.oxfordbuslnessgroup.com/economlcupdates/next-outsourdoghotspot
H Rosemary Batt, Virginia Doellgast, and Hyunl1 Kwon, The U.S. Call Center Report 2004 National BenchmarkIng Report Strategy, HR Practices & Performance"
2005 (http://works.bepress.com/rosemary_batt/3); David Holman, Rosemary Batt, and Ursula Holtgrewe. "The Global Call Center Report: International Per-
spectives on Managementand Employment" 2007 (htlp://works.bepress.com/rosemary_balt/18).
Ii "CVlA Contract Returns 400 Outsourced U.s.Alf'I'Iays Call Center Jobs," (http://i'l\w/.cwa
un lon.org! n ewsl entry/ cwa_contracUeturn s_ 400_outsourced_u s_alf'l'lays_caILcen .UH QIMzn rBII )j "Ground breaking Pact Brin gs Back AT&T Jobs,"
(http://W'.wJ.Cwa-unlon.org!news/entry/groundbreaklng,,pacCbrlngs_bac1<-atLjobs)
CWA
Communications Workers of America
October 2012
7