FTC Lifts the Veil on Companies That Sell Your Data

A new FTC report says the data-broker industry collects troves of personal information about nearly all Americans.

A man surfs the internet in Beijing on June 15, 2009. The designers of controversial Internet filtering software that China has ordered shipped with all new computers said they were trying to fix security glitches in the programme in the latest blow to the plan to include the filtering software with all PCs sold in China from July 1, which has been criticised overseas and even in China as a bid at mass censorship and a threat to personal privacy. Researchers at the University of Michigan who examined the software last week said it contained serious security vulnerabilities that could allow outside parties to take control of computers running it via remote access. Chinese authorities have a history of blocking sites that feature porn or politically unacceptable subjects such as the brutal crackdown on Tiananmen pro-democracy protests in 1989 and the banned spiritual group Falungong.
National Journal
Laura Ryan
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Laura Ryan
May 27, 2014, 9:15 a.m.

Do data brokers know more about you than your own moth­er?

The Fed­er­al Trade Com­mis­sion thinks they might, and the agency re­leased a re­port Tues­day ur­ging Con­gress to push for more trans­par­ency and ac­count­ab­il­ity for the com­pan­ies that har­vest and sell con­sumer in­form­a­tion.

“The ex­tent of con­sumer pro­fil­ing today means that data brokers of­ten know as much — or even more — about us than our fam­ily and friends, in­clud­ing our on­line and in-store pur­chases, our polit­ic­al and re­li­gious af­fil­i­ations, our in­come and so­cioeco­nom­ic status, and more,” said FTC Chair­wo­man Edith Ramirez in a state­ment Tues­day.

Data brokers are com­pan­ies that ag­greg­ate in­form­a­tion from a vast range of on­line and off-line sources, such as so­cial me­dia and re­tail­ers, to com­pile and sell con­sumer pro­files to mar­keters and oth­ers for vari­ous pur­poses, from per­son­ally tailored ad­vert­ise­ments to fraud pre­ven­tion.

The FTC re­search found that data brokers are col­lect­ing troves of per­son­al in­form­a­tion about “nearly every U.S. con­sumer,” largely with a “fun­da­ment­al lack of trans­par­ency,” and that the in­form­a­tion could be used in ways that are dam­aging to con­sumers.

Among the fed­er­al agency’s re­com­mend­a­tions is the cre­ation of a “cent­ral­ized portal,” a one-stop shop for con­sumers to ac­cess in­form­a­tion about data brokers’ data-col­lec­tion prac­tices, as well as tools to ac­cess their data pro­files.

The FTC’s in­vest­ig­a­tion in­to nine of the ma­jor data-broker com­pan­ies, launched in 2012, found that these com­pan­ies are ana­lyz­ing bil­lions of data points to make in­fer­ences about cus­tom­ers, from the be­nign, like “Dog Own­er,” to the po­ten­tially dam­aging cat­egor­ies that high­light sens­it­ive health, age, or so­cioeco­nom­ic in­form­a­tion, ac­cord­ing to the re­port.

The risk is that com­pan­ies could use this data to tar­get vul­ner­able cus­tom­ers or of­fer vary­ing prices. For ex­ample, someone iden­ti­fied as a “Dia­betes In­terest” could re­ceive ads for sug­ar-free products, but an in­sur­ance com­pany could use that same data to clas­si­fy such a per­son as high-risk, ac­cord­ing to Ramirez. 

“Does it mean many among us will be cut off from be­ing offered the same goods and ser­vices, at the same prices, as our neigh­bors?” Ramirez asked in a state­ment Tues­day. “Will these clas­si­fic­a­tions mean that some con­sumers will only be shown ad­vert­ise­ments for subprime loans while oth­ers will see ads for cred­it cards?”

The data-broker­age in­dustry dates back to mail-or­der cata­logs in the 1950s, but the in­dustry has trans­formed in the di­git­al age. As con­sumers’ con­duct more and more of their lives on­line, data brokers have an un­pre­ced­en­ted amount of in­form­a­tion at their fin­ger­tips, along with the power­ful tech­no­logy to ana­lyze this in­form­a­tion and piece it to­geth­er like nev­er be­fore.

With the ex­cep­tion of a few in­dustry-spe­cif­ic rules to safe­guard sens­it­ive fin­an­cial data, health data, and data about chil­dren, the in­dustry is un­reg­u­lated. That is why the FTC is call­ing on Con­gress to en­act le­gis­la­tion that would in­crease trans­par­ency in the in­dustry and give con­sumers more con­trol over the data col­lec­ted about them.

The FTC’s re­port fol­lows an­oth­er on the data-broker in­dustry re­leased earli­er this year by Sen. Jay Rock­e­feller, which raised sim­il­ar con­cerns about the secrecy of the in­dustry and the risks it poses to con­sumers. Rock­e­feller also in­tro­duced le­gis­la­tion, with Sen. Ed­ward Mar­key, that would en­act trans­par­ency re­quire­ments on data brokers and al­low con­sumers to cor­rect their in­form­a­tion.

Rock­e­feller and Mar­key both praised the FTC’s re­port, say­ing that it un­der­scores the need for le­gis­la­tions. 

“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.”

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