ICT and Big Data

FTC Calls for More Transparency from Data Brokers, Giving Consumers Greater Control Over Their Personal Info

A report issued last week by the Federal Trade Commission (FTC) recognizes that data brokers operate with a fundamental lack of transparency. The Commission is therefore recommending that Congress consider enacting legislation to rectify this and to give consumers greater control over the immense amounts of personal information about them collected and shared by data brokers.

By Sustainable Brands | Published 10 years ago | About a 5 minute read

Data Brokers: A Call for Transparency and Accountability is the study of nine data brokers, undertaken by the FTC to shed light on the data broker industry. Data brokers obtain and share vast amounts of consumer information, typically behind the scenes, without consumer knowledge, and sell this information for marketing campaigns and fraud prevention, among other purposes. Although consumers often benefit from data broker practices — which, for example, help enable consumers to more easily find their preferred products and services — these practices also raise privacy concerns.

“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. “It’s time to bring transparency and accountability to bear on this industry on behalf of consumers, many of whom are unaware that data brokers even exist.”

Data brokers collect and store billions of data elements covering nearly every US consumer. Just one of the brokers studied holds information on more than 1.4 billion consumer transactions and 700 billion data elements, and another adds more than 3 billion new data points to its database each month.

John C. Havens — who asserts the importance of consumers taking back control of their personal data in his recent book, Hacking H(app)iness — said he is "thrilled" with the FTC's call for more transparency from data brokers.

"Beyond issues of privacy, the data broker industry is ripe for disruption because of the opaque nature of how they collect and sell information," Havens said in an email. "By definition, they act as an interloper between an individual and a brand or organization, increasing data error and a spirit of distrust among the central actors in any transaction. The evolution of Big Data and emerging personal cloud technology will allow for direct, P2P interactions between people and organizations they trust. In this respect, beyond any issues of privacy, data brokers' days are numbered."

Among the report’s findings:

Data brokers collect consumer data from a variety of sources largely without consumers’ knowledge, ranging from purchase data, social media activity, warranty registrations, magazine subscriptions, religious and political affiliations, and other details of consumers’ everyday lives.
Consumer data often passes through multiple layers of brokers sharing data with each other. In fact, seven of the nine brokers in the FTC study had shared information with another data broker in the study.
Data brokers combine and analyze data about consumers to make inferences about them, including potentially sensitive inferences such as those related to ethnicity, income, religion, political leanings, age and health conditions. Potentially sensitive categories from the study are “Urban Scramble” and “Mobile Mixers,” both of which include a high concentration of Latinos and African-Americans with low incomes. The category “Rural Everlasting” includes single men and women over age 66 with “low educational attainment and low net worths.” Other potentially sensitive categories include health-related topics or conditions, such as pregnancy, diabetes, and high cholesterol.
Some uses for data pose risks to consumers, such as unanticipated uses of the data. For example, a category such as “Biker Enthusiasts” could be used to offer discounts on motorcycles to a consumer, but could also be used by an insurance provider as a sign of risky behavior.
To the extent data brokers offer consumers choices about their data, the choices are largely invisible and incomplete.

To help rectify a lack of transparency about data broker industry practices, the Commission is encouraging Congress to 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.

For data brokers that provide marketing products, Congress should consider legislation to require:

the creation of a centralized mechanism, such as an online portal, where data brokers can identify themselves, describe their information collection and use practices, and provide links to access tools and opt-outs;
brokers to give consumers access to their data, including any sensitive data, at a reasonable level of detail;
opt-out tools;
data brokers to tell consumers that they derive certain inferences from raw data;
data brokers to disclose the names and/or categories of their data sources, to enable consumers to correct incorrect information with an original source;
consumer-facing entities — such as retailers — to provide prominent notice to consumers when they share information with data brokers, along with the ability to opt-out of such sharing; and
further protection of sensitive information, including health information, by requiring retailers and other consumer-facing entities to obtain affirmative express consent from consumers before such information is collected and shared with data brokers.

For brokers that provide “people search” products, legislation should:

Require data brokers to allow consumers to access their own information, opt-out of having the information included in a people search product, disclose the original sources of the information so consumers can correct it, and disclose any limitations of an opt-out feature.