Consumers are being warned about selling a refurbished iPhone due to data protection fears.

Website engadget.com has found that the restore feature on the phone may not in reality wipe all the personal data. The reset option was originally designed to remove existing personal data and restore the device to its initial factory settings.

It reports that the contents of the flash are not erased, meaning that "data is available to anyone with the proper tools until it is overwritten".

To ensure personal data is erased, it is recommended that the restore function is used but then the device is filled with new data. This method will overwrite the inactive but still accessible older files.

The website reports that an Oregon State Police detective managed to find files, emails and screenshots on a refurbished iPhone that was sent direct from Apple.

ZDnet reports that AT&T is selling refurbished eight and 16 GB iPhones with $150 dollars off regular prices, which has sparked rumours that the release of the new 3G iPhone is imminent.