Marketing

Senate Data Broker Report: Huge Data Collection Under 'Veil' of Secrecy

Little Federal Regulation on Books; Major Telecoms, Communications Companies among Clients 12/18/2013 11:02 AM Eastern

 

A Senate Commerce Committee report on online data brokers concludes that they are collecting a lot of info on a lot of people, with some of that targeted to exploiting financial vulnerabilities. It also finds these companies are operating behind a veil of secrecy and with little federal regulation to constrain them as they provide info to clients, including most of the top media/telecom companies.

The report, the product of a year-long investigation at the direction of Commerce Committee chairman Jay Rockefeller (D- W. Va.), was released in advance of a hearing on data brokers in the subcommittee Wednesday (Dec. 18).

It is more of a summary of the state of the industry rather than a call for regulation.

The bottom line is a buyer-beware message about what brokers are doing and the lack of federal law preventing them from doing it.

What those brokers do, according to the report, is: 1) "collect a huge volume of detailed information on hundreds of millions of consumers"; 2) "sell products that identify financially vulnerable consumers"; 3) "provide information about consumer offline behavior to tailor online outreach by marketers"; and 4) "operate behind a veil of secrecy" and perpetuate that by contractually limiting disclosure of data sources.

Among the categories brokers have come up with for the profiles they build more targeted marketers includes "ethnic second-city strugglers," "burned by debt singles," and "fragile families."

Among the clients for data broker info are "eight of the top 10 telecom/media companies" as well as major banks, health insurance providers, and credit card companies. In fact, 47 of the top 100 companies.

Data brokers have been around for decades, compiling info for direct mail solicitations and catalogs, tapping public records, surveys and sweepstakes entries to build their profiles.

The new wrinkle is the increased volume and quality of digital data available for analyzing, storing, and mining.

Combine that with the fact that "many of their practices lie outside the ambit of federal consumer protection laws," and you have Rockefeller's ongoing concern about data broker online collection and targeting.

A GAO report released in September concluded that consumers have very few protections under federal law.

"[U]nder current law," said GAO, according to the report, "consumers have no federal statutory right to know what information data brokers have compiled about them for marketing purposes, or even which data brokers hold any such information. Further, with the exception of information used for pre-screened offers of credit and insurance, consumers generally do not have the right to control what personal information is collected, maintained, used, and shared about them – even where such information concerns personal or sensitive matters about an individual’s physical and mental health. In addition, no federal law provides consumers with the right to correct inaccuracies in the data or assumptions made by data brokers on their own profiles."

The report was based on responses, to greater and lesser degrees, from nine companies that "that collect and sell consumer information": Acxiom, Experian, Epsilon, Reed Elsevier, Equifax, TransUnion, Rapleaf, Spokeo, and Datalogix.

The lesser degrees, the report suggested, were Acxiom, Experian, and Epsilon, which did not identify specific data sources, instead generalizing them as “surveys” or “public records.”

The information being collected from hundreds of millions of consumers includes "names, addresses, telephone numbers, e-mail addresses, gender, age, marital status, presence of and ages of children in household, education level, profession, income level, political affiliation, and information about their homes and other property."

The Direct Marketing Association, whose self-regulatory efforts the report acknowledged, took issue with the report and said that if data sharing were limited, it would be a big economic hit.

“Our industry has been around and successful for 100 years – because we put the needs of consumers first," said Direct Marketing Association President Linda Woolley in an e-mailed statement. "It is disappointing that after a year and a half of cooperation from industry, a report from the Senate Committee charged with advancing U.S. commerce fails to recognize the tremendous value provided to consumers and the U.S. economy by the data-driven marketing industry," she said.

"A recent study entitled, The Value of Data: Consequences for Insight, Innovation & Efficiency in the U.S. Economy, which was commissioned by DMA’s Data-Driven Marketing Institute and conducted independently by Professors John Deighton of Harvard Business School and Peter Johnson of Columbia University, revealed that the Data Driven Marketing Economy (DDME) generated $156 billion in revenue to the United States economy and fueled more than 675,000 jobs in 2012 alone.  The study estimated that 70% of the value of the DDME – $110 billion in revenue and 475,000 jobs nationwide – depends on the ability of firms to share data across the DDME. If this ability to share data were curtailed, those jobs and revenue would be impacted and the U.S. economy would be much less efficient.”

 

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