By Alina Selyukh

WASHINGTON (Reuters) - The U.S. National Security Agency's bulk collection of phone records provides only minimal benefits to countering terrorism, is illegal and should end, a federal privacy watchdog said in a report released on Thursday.

The watchdog's report could further complicate efforts by both President Barack Obama and Congress to come up with reforms to NSA eavesdropping programs, which have been under harsh scrutiny for their scope in the wake of revelations by former contractor Edward Snowden.

The report was a result of a vast review of the phone data collection program, based on public and classified briefings and documents, conducted by the Privacy and Civil Liberties Oversight Board at the request of Obama and lawmakers.

The board, formed at the recommendation of the 9/11 Commission in 2004, is an independent government agency within the executive branch that advises the president and Congress on how to ensure that counterterrorism operations also protect Americans' privacy.

In Thursday's report, the board's three-member majority called on the government to end the NSA program that collects bulk telephone records and to purge the data it had collected, adding ammunition to efforts by privacy advocates to win new restrictions on government surveillance programs.

"The Section 215 bulk telephone records program lacks a viable legal foundation under Section 215, implicates constitutional concerns under the First and Fourth Amendments, raises serious threats to privacy and civil liberties as a policy matter, and has shown only limited value," it said.

The board's majority argued that the NSA improperly relies on a statute meant to give the FBI access to phone records. It also questioned the relevance of collecting metadata - records of U.S. phone calls, their length and time - in bulk and its routine reauthorization by a secretive surveillance court.

The board said other existing laws could be used to access phone records if needed.

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"It's time to push the reset button" on the program, said board member James Dempsey, public policy vice president at privacy advocacy group Center for Democracy and Technology.

Federal district courts recently issued conflicting rulings on the legality of collecting Americans' phone records.

CONFLICTING VIEWS

Based in part on classified briefings and documents, the board found no terrorist attacks thwarted or previously unknown terrorist plots discovered through the program in the previous seven years.

By concluding that NSA's bulk collection of Americans telephone metadata lacks legal grounding, the board goes further than both the president and an ad hoc panel he created to review NSA eavesdropping activities.

Two of the board's Republican members - Rachel Brand, former lawyer at the U.S. Chamber of Commerce and the Justice Department, and Elisebeth Collins Cook, former assistant attorney general at the Justice Department - voted against the recommendation to end the NSA's bulk record collection.

"I'm concerned the report gives insufficient weight to the need for a proactive approach to combating terrorism," said Brand during the public presentation of the board's report.

Congress is already sharply divided over what to do with the telephone metadata collection program, which collects data on millions of phone calls made in the United States but not the content of the calls.

Intelligence committees in both Houses recommend that current collection and storage arrangements be maintained, while Judiciary committees have recommended that such collection be outlawed.

Obama, in his own speech on NSA reforms on Friday, did not call for an outright halt to the collection of phone metadata by the NSA, although agreed that the storage of telephone metadata should be moved out of government and should not be searched without judicial approval.

All five board members said simply moving the storage of routinely collected bulk data from the NSA to a third party would not eliminate the privacy concerns at stake.

Board Chairman David Medine, former official at the Security and Exchange Commission and the Federal Trade Commission, said the panel stood ready to work with Obama and lawmakers to improve the current bulk collection program if the government chooses to not eliminate it and expected to testify about the report in Congress.

The board is working on a separate report on the NSA's Internet surveillance, due in coming months.

(Reporting by Alina Selyukh, additional reporting by Eric Beech, Steve Holland and Mark Hosenball; Editing by Cynthia Osterman)