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Brokers use ‘billions’ of data points to profile Americans Brokers use ‘billions’ of data points to profile Americans
(about 5 hours later)
Data brokers that quietly gather billions of pieces of data on Americans should be required to operate more openly, so that those categorized as “financially challenged” or possibly suffering from serious medical conditions have the ability to check and challenge those characterizations, a federal report said Tuesday. Are you a financially strapped working mother who smokes? A Jewish retiree with a fondness for Caribbean cruises? Or a Spanish-speaking professional with allergies, a dog and a collection of Elvis memorabilia?
The data broker industry, which is lightly regulated, develops profiles of hundreds of millions of people using online and offline sources, such as magazine subscriptions, visits to Web sites, posting on social networking services and purchase histories, the Federal Trade Commission reported. The information sold to marketers can list race, income and homeownership. All this information and much, much more is being quietly collected, analyzed and distributed by the nation’s burgeoning data broker industry, which uses billions of individual data points to produce detailed portraits of virtually every American consumer, the Federal Trade Commission reported Tuesday.
Categories used to label consumers include “Bible Lifestyle,” “Smoker in Household” and “New Age/Organic Lifestyle,” the report said. One category, called “Rural Everlasting,” describes people of retirement age who have “low educational attainment and low net worths.” The FTC report provided an unusually detailed account of the system of commercial surveillance that draws on government records, shopping habits and social media postings to help marketers hone their advertising pitches. Officials said the intimacy of these profiles would unnerve some consumers who have little ability to track what’s being collected or how it’s used -- or even to correct false information. The FTC called for legislation to bring transparency to the multi-billion-dollar industry and give consumers some control over how their data is used.
FTC officials, who based their report on documents gathered by issuing subpoenas to nine data brokers in December 2012, expressed concern about how the data is collected, how it’s used and the potential for making errors that are kept secret from the consumers themselves. The portraits provided by data brokers feature traditional demographics such as age, race and income, as well as political leanings, religious affiliations, social security numbers, gun ownership records, favored movie genres and gambling preferences (casino or state lottery?). Interest in health issues, such as diabetes, HIV infection and depression, can be tracked as well.
“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.” With potentially thousands of fields, data brokers segment consumers into dozens of categories as “Bible Lifestyle,” “Affluent Baby Boomer” or “Biker/Hell’s Angels,” the report said. One category, called “Rural Everlasting,” describes older people with “low educational attainment and low net worths.” Another, “Urban Scramble,” includes concentrations of Latinos and African-Americans with low incomes. One company had a field to track buyers of “Novelty Elvis” items.
No evidence of illegal activity was described in the report, though the FTC cited the potential for abuse when data brokers gather information about health-related issues. Among the health data collected, the report said, was whether a household contained an allergy sufferer or a person concerned about weight loss or cholesterol. One category was “Diabetes Interest.” “The extent of consumer profiling today means that data brokers often know as much – or even more – about us than our family and friends,” said FTC Chairwoman Edith Ramirez in a statement. “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.”
Stuart P. Ingis, general counsel for the Direct Marketing Association, which represents nearly 2,000 companies that collect and distribute consumer data, said that the FTC investigation failed to reveal actual cases of abuse of personal information. “You’d think if there was a real problem, they’d be able to talk about something other than potential.” Data brokers gather the information from public records and private sources, such as advertising networks that follow a consumer’s online activities, traditional media companies that record a subscriber’s billing history or the loyalty programs that track a shopper’s purchases at a grocery store.
The report included several legislative proposals intended to help Americans learn what information has been gathered about them and to correct errors. Consumers, under the FTC proposals, also would have the right to opt-out of data gathering about themselves. Such information is widely used by digital advertisers to improve the targeting of their marketing messages. Officials from that industry have long said that such advertising pays for the free services — such as e-mail, videos and social networking — that consumers have come to expect. The individual profiles are largely sold to marketers, determining what ads and offers consumers see online, or to banks which use the data to verify the identity of customers. Laws prohibit using such information to set insurance rates, make job offers or measure credit worthiness, though the FTC expressed concern about potential abuses.
Ingis said that the FTC’s proposals, such as a requirement for a centralized portal for consumers who want to know what information data brokers collect, are unnecessary and cumbersome. “I’m not sure that there’s a problem that requires a law here,” Ingis said. FTC officials, who based their report on documents gathered by issuing subpoenas to nine data brokers in December 2012, found “a fundamental lack of transparency” in the industry but no evidence of illegal activity. Ramirez said the FTC did not know how many data brokers exist.
But FTC Commissioner Julie Brill urged Congress to act, and for Americans to learn more about how their data is collected and used. “We want to provide more tools and more options for how their information is used in the data broker ecosystem,” she said. “Consumers can’t manage this process by themselves. It’s too big. It’s too complex. There are too many moving parts.” The profiles they produce could impact what products get offered to consumers and how well they are treated by customer service, officials said. A “financially challenged” couple, for example, might see ads for sub-prime loans while their affluent friends get offered premium credit cards and vacation options. One consumer might face long waits when they call companies with complaints, while another receives speedy, responsive service.
The collection of data about health-related issues also concerned the FTC. Brokers had categories for people concerned about weight loss or high cholesterol. One tracked whether consumers preferred brand-named drugs or looked for medical information online.
Stuart P. Ingis, general counsel for the Direct Marketing Association, which represents nearly 2,000 companies that collect and distribute consumer data, said the industry helps prevent consumer fraud while also improving the effectiveness of online advertising — the main revenue source for free services, such as e-mail and social networking services.
He said the FTC’s inability to find documented abuse of personal information suggested that data brokers should continue operating through self-regulation rather than new government intervention. “You’d think if there was a real problem, they’d be able to talk about something other than potential” abuses, Ingis said.
The report included several legislative proposals intended to help Americans learn what information has been gathered about them and to correct errors. Consumers, under the FTC proposals, also would have the right to opt-out of data gathering about themselves.
Ingis said that the FTC’s proposals, such as a requirement for a centralized portal for consumers who want to know what information data brokers collect on them, are unnecessary and cumbersome. “I’m not sure that there’s a problem that requires a law here,” Ingis said.
The Software & Information Industry Association, whose members in some cases collect and share personal data, endorsed the FTC’s call for greater transparency but warned that new legislation would struggle to keep up with the pace of innovation online. “It just gets very challenging because of the dynamic nature of data,” said David LeDuc, senior director of public policy for the group.
But FTC Commissioner Julie Brill urged Congress to act, and for Americans to learn more about how their data is being collected and used. “Consumers can’t manage this process by themselves,” Brill said. “It’s too big. It’s too complex. There are too many moving parts.”
The data broker industry typically has no direct dealings with the public, relying on third-party sources or trading information with each other. Of the nine companies subpoenaed by the FTC — Acxiom, CoreLogic, Datalogix, eBureau, ID Analytics, Intelius, PeekYou, Rapleaf and Recorded Future — seven share information with one another, the FTC report said.
Among the most striking findings in the reports, officials said, was the extent that data brokers connect the online and offline behaviors of consumers. This process called “onboarding” allows markets to store offline information — from magazine subscriptions, store loyalty cards or government records — into cookies that digital advertisers use to identify individual consumers for pitches. Cookies, which are a small bit of computerized code stored in a computer’s browser, allow advertisers to feature a single product across many different Internet services.
The issue of data collection has generated increasing attention in recent years — and especially since former National Security Agency contractor Edward Snowden revealed how information collected by the private sector gets vacuumed up by intelligence agencies. The White House issued a report on the collection and use of Big Data on May 1.The issue of data collection has generated increasing attention in recent years — and especially since former National Security Agency contractor Edward Snowden revealed how information collected by the private sector gets vacuumed up by intelligence agencies. The White House issued a report on the collection and use of Big Data on May 1.
Yet privacy advocates see little hope of legislative action on Capitol Hill. “There’s no political pressure on Congress, really, to act. The data broker lobby is in­cred­ibly powerful,” said Jeffrey Chester, executive director of the Center for Digital Democracy. Sens. Edward Markey (D-Mass.) and John D. “Jay” Rockefeller IV (D-West Virginia) proposed legislation in February that largely tracks with the FTC’s goal of greater transparency for the data broker industry.
Yet privacy advocates see little hope of action on Capitol Hill. “There’s no political pressure on Congress, really, to act. The data broker lobby is in­cred­ibly powerful,” said Jeffrey Chester, executive director of the Center for Digital Democracy.
He noted that political campaigns routinely use information collected by data brokers to tailor their election and fund-raising messages to targeted groups. “They’re not going to vote against their political self-interest.”He noted that political campaigns routinely use information collected by data brokers to tailor their election and fund-raising messages to targeted groups. “They’re not going to vote against their political self-interest.”
The ACLU said in a statement, “This report’s intentions are good, but waiting for Congress to pass new regulations isn’t going to help protect Americans’ privacy rights anytime soon. The FTC needs to start using its existing authority to root out bad practices now.”
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