Congress asks if data brokers invade consumers' privacy
By Tony Mecia | Published: August 1, 2012
Congress and regulators are taking a closer look at data brokers -- marketing companies that compile dossiers on consumers, including data culled from Internet browsing habits and purchases.
Most consumers know that advertisers target online ads to them based on websites they've visited. But experts say most people do not understand how extensively some companies mine for data, combining it with data from purchases and other offline activities and developing profiles of consumers. Those profiles help businesses in a variety of industries target ads to potential customers.
The companies compiling the information, known as data brokers, say they have appropriate privacy safeguards in place, and that their information helps businesses develop offers that are relevant to consumers. Critics, however, complain that the industry is too secretive about how it operates and is creating a world of haves and have-nots based on often-erroneous information.
"They are creating pictures of us without our knowing it, and they are using it in ways we really don't know," says Jospeh Turow, a professor at the University of Pennsylvania's Annenberg School for Communication who studies marketing and digital media. "The ways that people's profiles get constructed increasingly determine what kind of pictures of the world they get, and what kinds of opportunities they get. People who have better profiles will have better opportunities than people with lesser profiles."
Regulators and lawmakers are starting to notice, too. On July 24, eight members of the House of Representatives sent letters to some of the industry's top companies seeking answers on how they compile and use consumer information. The companies include two of the three major credit-reporting agencies. The bipartisan eight -- five Democrats and three Republicans -- asked for the companies to reply by Aug. 15.
|TRACKING THE DATA BROKERS|
A bipartisan group of eight members of Congress asked some of the leading data brokers to provide information on their data-gathering practices. They wrote that "large-scale aggregation of the personal information of hundreds of millions of American citizens raises a number of serious privacy concerns." The companies include:
In June, the Federal Trade Commission fined a data broker $800,000 after accusing it of selling consumer profiles as an employment-screening tool to job recruiters and human resources personnel without having the required legal safeguards under the Fair Credit Reporting Act
In March, the FTC released a report calling for new privacy laws and for the industry to become more transparent in the way it operates and to give consumers more control over their own data. In announcing the report, the FTC said: "Data brokers often buy, compile, and sell highly personal information about consumers. Consumers are often unaware of their existence and the purposes to which they use the data."
Most data brokers little-known
The typical consumer has probably not even heard of the companies that are compiling data on them -- companies with names such as Acxiom, BlueKai, DataLogix and Epsilon. They gather data from a variety of sources. Acxiom's Consumer Data Products Catalog, for instance, offers businesses access to a "comprehensive national database covering more than 144 million households" that starts with names and addresses from public records but improves upon that list by applying "extensive demographic, behavioral, lifestyle, financial and homeowner real property data." Some databases include "buying activity from multiple channels ... such as apparel and electronics purchases," as well as vehicles and real estate.
Another company, DataLogix, lists on its website several "success stories," such as a major toy retailer that had a strong customer database but was unsure whether former customers still had a toddler in the house. "While the client had lost visibility into those households' buying behavior, (DataLogix) had a very clear picture of their buying habits including whether or not they were continuing to buy in the toddler-aged children's category," the company says on its website. The result: The retailer was able to cut advertising costs by 70 percent by using the data to target customers more effectively.
The industry has built up an elaborate system to collect data on consumers, but they've done hardly anything to ensure that it's the consumer who makes the decision about what data is collected and how it can be used when it comes to financial transactions.
|-- Jeffrey Chester
Center for Digital Democracy
The company says it has data on "almost every U.S. household."
Acxiom and DataLogix, like other data brokers, have comprehensive privacy policies and say they follow all industry privacy guidelines. While acknowledging their databases contain personally identifiable information, they say they do not traffic in sensitive data, such as Social Security numbers and data on children under age 13.
Then there are companies that specialize in online tracking by installing "cookies" on your computer that give information on sites you visit. That can help businesses target online ads and provides Web publishers with needed ad revenue. Many other companies specialize in delivering targeted ads.
Alternate credit score?
Critics worry that technology has advanced to the point where companies can access reams of data on consumers from online and offline sources and use that information to make judgments not only on what ads to show but also on what kind of financial products to offer and at what price. They worry that companies could start using that data like an alternate credit score.
With credit scores, consumers have the right under federal laws to inspect the data and correct errors in it. Not so with the data mined by brokers.
WHO IS TRACKING ME?
WHAT DO THEY KNOW?
"The industry has built up an elaborate system to collect data on consumers, but they've done hardly anything to ensure that it's the consumer who makes the decision about what data is collected and how it can be used when it comes to financial transactions," says Jeffrey Chester, executive director of the Center for Digital Democracy, a consumer-protection nonprofit that follows the digital marketing industry.
Experts say it is not easy to keep yourself from being tracked. Basic parts of everyday life can yield clues to your behavior and interests, including using a loyalty card at a supermarket, filling out a product registration card, completing an online survey, "liking" a Facebook page, using a search engine and surfing the Internet or buying something with a credit card.
Most companies that have access to your data have privacy policies that detail the information they collect and how they share it, but few consumers probably take the time to read and understand them.
Limiting your personal data
There are ways to limit the personal data that companies are collecting. Internet browsers can be configured to eliminate cookies, and most data brokers and ad networks allow users to opt out of receiving Internet-based advertising.
But Jim Brock, founder of PrivacyChoice, a company that rates the privacy practices of data brokers and websites, says it's almost impossible to stop companies from compiling data. And many consumers might not want that, anyway.
"If you wanted to live your life in its entirety in a way that minimizes tracking, it would be a very different life," Brock says. "It would mean not going online, not using loyalty cards, not using coupons. Your life would probably be more expensive. That's a fact."
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