FTC Calls for Consumer Disclosure by Data Brokers

May 28, 2014 by Alina Selyukh

Companies known as data brokers collect and sell information about “nearly all” U.S. consumers, drawing potentially harmful conclusions about them largely without their knowledge, U.S. regulators said on Tuesday.

The Federal Trade Commission called on Congress to pass legislation that would enable consumers to learn more easily how data brokers collect, use and sell their data, to correct it or to opt out of the process, especially when it comes to sensitive information such as about their health status.

The commission’s report relied on information shared by nine data broker companies, which do not interact directly with consumers but collect data to inform other companies’ marketing efforts, to verify consumers’ identity or to detect fraud.

The companies were Acxiom Corp., Corelogic Inc., Datalogix, eBureau, ID Analytics, Intelius, PeekYou, Rapleaf, and Recorded Future.

“You may not know them, but data brokers know you. 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,” said FTC Chairwoman Edith Ramirez.

“This is an industry that operates in the dark… The sheer magnitude of what’s taking place I think is quite astonishing.”

The review did not find illegal activity from the brokers but raised concerns about the scope of collection, the way brokers segment consumers into broad racial, socio-economic and even political categories, and how those “troubling classifications” could harm consumers.

The FTC found that data brokers collect and sell – to advertisers and each other – billions of data points about nearly every U.S. consumer, gathered through retailers, social media, Census figures, magazine subscriptions and other sources.

Through this vast trove, consumers are classified by race, income, age, health conditions and other categories like “financially challenged,” which include single parents; “rural everlasting,” which are single people over the age of 66 with “low education attainment and low net worth”; or “urban scramblers,” which include a high concentration of low-income Latinos and African Americans.

While such data can help advertisers better target potential buyers, it could also prompt discrimination by directing some consumers to inferior customer service or offering different prices for the same goods, the FTC said.

For instance, such categories could lead to some consumers seeing ads for subprime loans while others see ads for credit cards, or insurance companies could use marketing categories like “bike enthusiast” or “diabetes interest” to screen consumers.

Democratic U.S. Senators Jay Rockefeller of West Virginia and Edward Markey of Massachusetts in February introduced a bill that seeks to give consumers more control over data collection.

Ramirez said the FTC would work with Rockefeller and others to pass legislation on brokers’ transparency, long urged by consumer advocates but resisted by data-driven industries that oppose new regulations and legal requirements.

(Editing by Ros Krasny and Eric Walsh)

The FTC report can be found below.

http://www.scribd.com/doc/226740481/FTC-Data-Broker-Report

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