The Metropolitan Police, Britain's biggest force, is taking details of phone calls, contacts and text messages from the handsets of those taken into custody.
Officers look at the details for evidence that could lead to a suspect being charged, but also to see if it may lead to "alternate lines of enquiry".
The data is then being stored indefinitely, regardless of whether or not the owner is charged with any crime.
Previously the Met had to send handsets off to forensic labs for analysis that could take months. But the process is becoming easier and quicker after the force acquired a new tool to download mobile phone information immediately in police stations.
A year-long trial of the computer system, which saves digital records of the content as well as producing a print-out of the data when a handset is plugged in, is being carried in 16 London boroughs. It could then be used by forces across the country.
Should the police be allowed to keep mobile telephone data of suspects who are never charged?
Privacy campaigners say that indefinite retention of sensitive information is illegal, and that data extraction is only meant to happen if it is suspected that a phone was used in criminal activity.
They have highlighted the parallels to the DNA records of 1million innocent people, which police forces were storing for the rest of their lives until the European Court of Human Rights ruled it was illegal. Under the recently passed Protection of Freedoms Act, genetic fingerprints of the innocent are to be deleted.
Emma Draper of Privacy International told the BBC: "We are looking at a possible breach of human rights law.
"It is illegal to indefinitely retain the DNA profiles of individuals after they are acquitted or released without charge, and the communications, photos and location data contained in most people's smartphones is at least as valuable and as personal as DNA."
Big Brother Watch said: "The courts have clearly said indefinitely retaining personal information is not acceptable and it appears the Met are flagrantly disregarding the law.
"Where someone is not convicted of a crime it is absolutely wrong for the police to hang onto the contents of their phone."
It has asked the Information Commissioner's Office, the data protection watchdog, to investigate the Met's policy.
The ICO said: "Any personal information taken from an individual's phone or other possessions and then held by the police during an investigation would have to comply with the Data Protection Act - including its requirement to process personal data fairly and lawfully, not hold excessive or irrelevant personal data or hold it for longer than necessary."
The Met insisted it was complying with search and evidence laws.
A spokesman said: "Data recovered from the devices is retained and handled in accordance with other data and information held by the MPS.
"This is the case whether the holder of a telephone is charged, bailed, or released with no further action."
