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FTC wants more transparency for data brokers

Thursday - 5/29/2014, 1:40am  ET

JENNIFER C. KERR
Associated Press

WASHINGTON (AP) -- Companies are collecting billions of pieces of information about consumers to create individual profiles to more effectively target individuals for coupons or product offers, decide whether a would-be buyer gets a car loan or help people check out a potential mate.

The Federal Trade Commission wants more transparency in this data broker industry, allowing people to see who is gathering personal information on them and giving them more control over what is collected.

"You may not know them, but data brokers know you," FTC Chairwoman Edith Ramirez said as the commission released a report Tuesday on the industry. "They know where you live, what you buy, your income, your ethnicity, how old your kids are, your health conditions, and your interests and hobbies."

Five things you need to know about data collection:

MASSIVE AMOUNTS OF DATA COLLECTED

The nine data brokers studied by the FTC were: Acxiom, CoreLogic, Datalogix, eBureau, ID Analytics, Intelius, PeekYou, Rapleaf and Recorded Future.

Of the nine, the report said, one data broker's database had information on 1.4 billion consumer transactions, such as any purchase made with a credit card or with a customer loyalty card.

The broker then peeled it down further, storing over 700 billion aggregated data elements -- information such as how many times a consumer called customer service, or something as simple as what kind of toothpaste that consumer buys.

WHERE BROKERS FIND THEIR INFORMATION ON YOU

All over. They cull information on you from government, commercial and other publicly available sources.

For example, the report said, they use Census Bureau information about the demographics of your neighborhood -- income, education level, commute times. Federal courts provide information on bankruptcies or local agencies offer information on real estate and the value of people's homes.

The commission report said some brokers get information by crawling social media sites like LinkedIn, where people may not have changed their privacy settings to restrict access. Other brokers get information on purchases from retailers and catalog companies. Some obtain information from magazine publishers about the types of subscriptions sold.

THE GOOD AND THE BAD

First, the good.

Data broker products can help prevent fraud. Some brokers offer identity verification products, where a client can see if a Social Security Number is associated with someone who is dead, or whether the address used by the consumer is a prison address, the FTC said. The information gathered can also improve the kinds of product offers consumers get either online or in the mail.

Now, the bad.

A consumer, for example, may be prevented from completing a purchase based on bad, incorrect or outdated information collected by a data broker. The report said brokers could also draw conclusions about consumers that might seem innocuous but could be used in a negative way.

For example, a person classified as a "biker enthusiast" might get coupons from motorcycle dealers but also could see higher insurance if the information is used to conclude the person engages in risky behavior, said the commission study.

WHAT COULD BE DONE TO HELP CONSUMERS

The FTC recommends that Congress consider legislation to require the creation of a central database where people could see who the data brokers are and descriptions of the information they collect. It also says consumers should be allowed to opt-out of the collection.

The report also recommends that brokers be required to disclose the names and categories of their data sources so people could correct faulty information.

WHAT OTHERS ARE SAYING

Senate Commerce Committee Chairman Jay Rockefeller: "The new FTC review of data broker practices reflects growing consensus that this industry sorely lacks transparency and accountability."

The Direct Marketing Association's Peggy Hudson: "One interesting thing about this report is that after thousands of pages of documentation submitted over the two years of thorough inquiry by the FTC, the report finds no actual harm to consumers, and only suggests potential misuses that do not occur."

Consumer Federation of America's Susan Grant: "Individuals must have the right and the means to know which data brokers have information about them for marketing purposes, see what the data is and how it is categorized, correct the data if necessary, and exercise reasonable control over its collection and use."


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