Senate Committee Brings Data Brokers Into the Light
December 19, 2013
Senator Jay Rockefeller (D-W.Va.) blasted data brokers in a Senate Committee on Commerce, Science and Transportation hearing held on December 18, 2013. Witnesses were questioned on the practices of data brokers as the committee explored the need for more oversight, including new laws to govern and regulate the activity of businesses that aggregate and sell information about consumers for marketing purposes. The hearing followed the release of a scathing report by the committee’s Office of Oversight and Investigation.
The report, which can be found here, reaches a troubling conclusion that data brokers operate under a veil of secrecy, collecting large volumes of detailed information about hundreds of millions of consumers, identifying those who may be financially vulnerable, and allowing businesses to target products and services through tailored outreach both off and online.
Wanted: Data Brokers
Rockefeller opened the hearing with a statement that set the tone:
“Several of the largest data brokers — Acxiom, Epsilon, and Experian — are continuing to resist my oversight. To date, they have not given me complete answers about where they get their consumer data, and to whom they sell it. I am putting these three companies on notice today that I am not satisfied with their responses and am considering further steps I can take to get this information.”
Ouch. The lone data broker representative at the hearing, a representative from Experian, defended his company and the industry, stating, “Experian has made every effort to be forthcoming.” He pointed to the 3,000 pages Experian provided as a full account of its business practices. He testified that data driven marketing can benefit consumers, enhances economic productivity, and gives small business a leg up on larger competitors. He pointed out that companies like Experian are willing to come forward and unveil the curtain to improve the consumer experience. He also pointed to Experian’s high standards for qualifying and monitoring the activities of its clients.
Data Broker or CRA?
The focus of the hearing was on the use of consumer data for marketing purposes—a use that is not governed by the Fair Credit Reporting Act (FCRA). However, the conversation about data collection quickly spills over into areas handled by consumer reporting agencies (CRA’s) that are regulated by the FCRA, including employment, housing, and the extension of credit. To the frustration of many law abiding companies that conduct background checks, the distinction between data brokers and CRAs remains fuzzy. While many companies regulated by the FCRA are doing things right, and while marketing data that was the subject of the hearing is not used for employment purposes, some companies are causing confusion by not playing by the rules.
The Federal Trade Commission (FTC) Bureau of Consumer Protection Director, Jessica Rich, testified about the commission’s 2012 consent decree with online data broker Spokeo and its case against app developer Filiquarian. Both companies were selling data and information to employers (an activity governed by the FCRA) in violation of the FCRA requirements for consumer notifications and accuracy. Her testimony also mentions a recent undercover effort by commission staff to determine if data brokers who said they were not covered under FCRA were willing to sell information for FCRA-covered purposes. When data brokers cross over into the world of employment, the lines are blurred.
Rich’s testimony pointed out that the FTC prefers to focus on non-consumer facing companies because they are hidden and not as obvious. He explained that the FTC would continue the strategy set out in its 2012 report on privacy issues and a three-pronged strategy made up of enforcement actions, research and reports, and education for consumers and businesses. At the same time she urged the committee to introduce legislation that would give the FTC more tools for oversight and enforcement and provide consumers with greater transparency.
Let the Sunshine In
The report and the hearing are part of a larger trend: the increased awareness and concern about consumer information being collected, and the debate over whether consumers should have to sacrifice personal privacy as the cost of admission for a free internet. Senator Rockefeller and his committee are committed to “bring out into the sunlight what is going on” in order to expose the “dark underside of American life on which people make a lot of money and cause a lot of people to suffer.” We can only hope that those efforts take into account the different types of companies and the permissible use of information, and will not cross over into areas like employment or even fraud detection and identity verification—areas where there is already considerable regulation and oversight.
Latest posts by Angela Preston (see all)
- Federal Ban the Box Bill Introduced in Both Houses of Congress - October 12, 2015
- New York, New York Part II: The Stop Credit Discrimination in Employment Act - October 6, 2015
- NY, NY: If You Can Hire There, You Can Hire Anywhere (Part I, The Fair Chance Act) - October 5, 2015