April 14th, 2015
US Senators Proposes New Privacy Bill to regulate Data brokers
By Luis Camargo
Link: http://www.pcworld.com/article/2893672/lawmakers-target-data-brokers-in-privacy-bill.html
It has been a long time since companies adopted targeted marketing as one of its most important commercial strategies. The idea is simple: the more you know about your client (or prospective client) the better you will be able to market your products and services.
Personal and individualized information have then suddenly become a very valuable asset. And naturally, it became clear that gathering and selling this is personal information could be a very profitable business. In this context, the so-called Data brokers were born.
It is important to note that Data brokers acts very differently than Credit Report companies. The latter are companies that routinely receives data from banks, credit card companies and others sources, and under the rules of the Fair Credit Reporting Act (FCRA), are responsible for the confidentiality and accuracy of the information, and sells the credit reports for specific uses allowed by the law, such as the application for credit, insurance, employment, or renting a home[1].
Data brokers, on the other hand, are companies that operates “collecting, analyzing and packaging some of our most sensitive personal information and selling it as a commodity…to each other, to advertisers, even the government, often without our direct knowledge[2]”.
Even though both credit reporting companies and data brokers basically gathers and sells personal information, the difference is evident: while credit reporting companies are regulated and obligated to grant consumers access and opportunity to dispute inaccurate information[3], data brokers act almost in the obscurity. There is no regulation, and many consumers have absolutely no idea of their existence. There is no clear information about how those companies collect data, what information is collected, and, more importantly, to whom this data is sold.
As already mentioned, the collection of consumer’s data is not something new. Consumers are used to give their names, telephone numbers, and other types of personal information to brick and mortar stores.
However, with the advent of the Internet this scenario became much more critical. It is not only easier to storage, organize and classify personal information contained in electronic files, but it is also easy to collect it from all our online activities.
The more we use Internet the more is likely that we are giving a surprising amount of information about ourselves. Today not only the information that we voluntarily provide in websites that we use is shared, but most importantly, there are countless applications in our cellphones that while we use them to avoid traffic, to order our favorite meal, or even to buy a ticket to watch the next Knicks game, valuable information (and probably the most desirable information for target marketing) is also been collected and gathered by data brokers.
On March 26, 2012 the Federal Trade Commission (“FTC”) issued the FTC Final Commission Report on Protecting Consumer Privacy[4], containing important rules “setting forth best practices for businesses to protect the privacy of American consumers and give them greater control over the collection and use of their personal data[5]”.
As a very important attempt to bring the attention for the necessity of a regulation for Data brokers, the FTC included a recommendation to the Congress to “consider enacting targeted legislation to provide greater transparency for, and control over, the practices of information brokers[6]”. “The proposed framework recommended that companies provide consumers with reasonable access to the data the companies maintain about them”, in a way that it would give more control about what and how information about them is used”[7]. In addition, FTC called on data brokers to make their operations more transparent by creating a centralized website to identify themselves[8].
FTC’s actions didn’t stop with the issuance of the Final Report on Protecting Consumer Privacy. In December 2014, FTC filed a complaint against data broker Leap Lab, for selling “sensitive personal information of … consumers – including Social Security and bank account numbers – to scammers who allegedly debited millions from their accounts[9]”. Even though it was an important way to call the attention of Data brokers that the FTC is actually aware of their practices, it is clear that FTC do not have substantial authority to properly and timely enjoin Data brokers abusive practices.
Therefore, as a response to FTC efforts and concerns about consumer privacy, “[f]our U.S. senators have resurrected legislation that would allow consumers to see and correct personal information held by data brokers and tell those businesses to stop sharing or selling it for marketing purposes”[10].
In a similar bill that failed to pass the Senate in 2014, the Data Broker Accountability and Transparency Act[11] was proposed last March, as a necessary solution for the regulation of data brokers.
The Bill has important provisions that address several of the problems raised by the FTC, aiming to assure the accuracy of the data collected, and more importantly, giving the right of the consumer to access the data collected and also to stop the Data brokers to share personal information for marketing purposes. Moreover, the bill grant jurisdiction to the FTC to “craft rules for a centralized website for consumers to view a list of data brokers covered by the bill[12]”.
Even though a similar bill had failed in the pass, it seems that it is time to Congress to impose regulation on data brokers to advance consumers’ information and privacy protection.
The article in discussion also brings negative comments about the bill, specially by the Direct Marketing Association (“DMA”), which represents the data broker industry.
The DMA claims that “[t]he legislation isn’t needed”, specially because Data brokers “are continually taking steps on their own to improve transparency to consumers” and arguing that the “kind of transparency is happening every day, in terms of self-regulation in the marketplace”[13].
Even though the alleged self-regulation could be argued as a solution for this industry, it is evident that this was something that the FTC has been promoting without success with the Final Commission Report on Protecting Consumer Privacy. The experience already proved that consumers are not protected without a law that would address the problem of transparency and consumer access of information.
Although there is a good incentive for data brokers to provide the most accurate information possible to its customers, a voluntary implementation of a system that would allow any person to consult and revises, or even block the use of her information could be so costly, that the data broker that legitimately cares about consumer privacy would never be able to compete with careless companies that would not give any importance to consumer privacy rights.
In conclusion, a new data broker data would be a fundamental instrument not only to protect consumer privacy, but also to level the playing field, imposing all the data brokers to give transparency and to allow consumer validation of the information the company is selling.
[1] Disputing Errors on Credit Reports [https://www.consumer.ftc.gov/articles/0151-disputing-errors-credit-reports]
[2] The Data brokers: Selling your personal information. [http://www.cbsnews.com/news/data-brokers-selling-personal-information-60-minutes/]
[3] Disputing Errors on Credit Reports. Id.
[4] FTC Issues Final Commission Report on Protecting Consumer Privacy [https://www.ftc.gov/news-events/press-releases/2012/03/ftc-issues-final-commission-report-protecting-consumer-privacy]
[5] Id.
[6] Id.
[7] Protecting Consumer Privacy in an Era of Rapid Change [https://www.ftc.gov/sites/default/files/documents/reports/federal-trade-commission-report-protecting-consumer-privacy-era-rapid-change-recommendations/120326privacyreport.pdf]
[8] FTC Issues Final Commission Report on Protecting Consumer Privacy. Id.
[9] FTC Charges Data Broker with Facilitating the Theft of Millions of Dollars from Consumers’ Accounts [https://www.ftc.gov/news-events/press-releases/2014/12/ftc-charges-data-broker-facilitating-theft-millions-dollars]
[10] Lawmakers target data brokers in privacy bill [http://www.pcworld.com/article/2893672/lawmakers-target-data-brokers-in-privacy-bill.html]
[11] http://www.markey.senate.gov/imo/media/doc/2015-03-04-Data-Brokers-Bill-Text-Markey%20.pdf
[12] Lawmakers target data brokers in privacy bill. Id.
[13] Lawmakers target data brokers in privacy bill. Id.