Data Broker Industry Needs Legislative Action, FTC Says
Posted at 2:34 p.m. on May 27, 2014
A new report from the Federal Trade Commission says consumers are out of the loop about the information that data brokers collect about them and how they use this information. Lawmakers should look at enacting legislation to boost transparency and give consumers reasonable access to their information, the report says.
“You may not know them, but data brokers know you,” said FTC Chairwoman Edith Ramirez in a call with reporters. “This is an industry that largely operates in the dark.”
From the report:
Data brokers acquire a vast array of detailed and specific information about consumers; analyze it to make inferences about consumers, some of which may be considered quite sensitive; and share the information with clients in a range of industries. Much of this activity takes place without consumers’ knowledge. In light of these findings, the Commission unanimously recommends that Congress should consider enacting legislation that would enable consumers to learn of the existence and activities of data brokers and provide consumers with reasonable access to information about them held by these entities.
Some of the report’s legislative proposals for brokers that sell marketing products:
- Creation of a centralized online portal where data brokers would describe the information they collect and give consumers ways to opt out.
- Requiring entities that directly interact with consumers to notify them that they share information with data brokers and provide ways to opt-out and also get consent from consumers before sharing sensitive information with data brokers.
- Requiring data brokers to enable consumers to access their data.
The report looked at nine data brokers and found that:
Of the nine data brokers, one data broker’s database has information on 1.4 billion consumer transactions and over 700 billion aggregated data elements; another data broker’s database covers one trillion dollars in consumer transactions; and yet another data broker adds three billion new records each month to its databases. Most importantly, data brokers hold a vast array of information on individual consumers. For example, one of the nine data brokers has 3000 data segments for nearly every U.S. consumer.
It also found that data brokers make inferences with the data they collect, placing them into categories – some innocuous like “Dog Owner” and some potentially sensitive, like those that “primarily focus on ethnicity and income levels, such as ‘Urban Scramble’ and ‘Mobile Mixers,’ both of which include a high concentration of Latinos and African Americans with low incomes.”
It also laid out some benefits of what data brokers do, like fraud prevention, and risks:
For example, if a consumer is denied the ability to conclude a transaction based on an error in a risk mitigation product, the consumer can be harmed without knowing why.
On the Hill, Democrat Jay Rockefeller, who heads the Senate Commerce, Science and Transportation Committee, is interested in the issue. His panel released its own report late last year and he has a bill that would let consumers access and correct their data.
“With the release of today’s report, which is supported by Democratic and Republican FTC Commissioners, our conclusion is stronger than ever — big data practices pose risks of consumer harm including discrimination based on financial, health, and other personal information,” Rockefeller said in a statement. “Congress can no longer put off action on this important issue.”
Software & Information Industry Association says legislation is unnecessary and would hold back innovation.
“We share the Commission’s goal to enhance the level of transparency and accountability of data brokers,” said the group’s president Ken Wasch in a statement. “This can – and should – be done without new legislation or regulation. SIIA and industry leaders are committed to building on current best practices to ensure consumer trust and confidence in the marketplace. On the contrary, burdensome new legal requirements threaten to impede data-driven innovation and hurt the ability of U.S. companies to create jobs and drive economic growth.”