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The statements from the Federal Trade Commission (FTC) surrounding the release of its long-awaited data broker industry reportData Brokers: A Call for Transparency and Accountabilityhave been relatively strident. “We want to lift the veil of secrecy that shrouds the data broker industry’s practices,” FTC Chairwoman Edith Ramirez told journalists.

“If data broker profiles are based on inaccurate information or inappropriate classifications, or used for inappropriate purposes, the profiles have the ability to not only rob us of our good name,” wrote FTC Commissioner Julie Brill in a concurring statement accompanying the report, “but also to lead to lost economic opportunities, higher costs and other significant harm.”

Yet the industry response to the FTC’s call for legislation to address their numerous concerns has been mostly a shrug of the shoulders.

“We generally agree with the FTC report observations about the industry whichfor the most partcalls for practices that have been part of our codes of conductas well as the industry code of conductsfor many years,” said Jennifer Barrett Glasgow, CIPP/US, Chief Privacy Officer at Acxiom, one of the nine data brokers who contributed information to the report. “The report essentially calls for them to be embodied in law.”

Similarly, in a statement posted to the Digital Marketing Association’s (DMA's) blog, Peggy Hudson, DMA senior VP of government affairs, said, “We appreciate the commission’s ongoing interest on these issues. The calls for notice, choice and transparency are consistent with existing hallmarks of the ethical standards for our industry, which DMA has produced and enforced for more than 40 years.”

Stuart Pratt, president and CEO, of the Consumer Data Industry Association (CDIA), is right there, too: “We live in a world of laws,” he said of his members, the credit bureaus who provide information about consumers. Between GLBA, FCRA, Section 326 of the PATRIOT Act and so on, credit bureaus are well used to verifying the sources of information and how the information they pass along is used.

Further, he noted, the types of products credit bureaus deliver “are not built around the same big data sets … it’s not that kind of data, at least on the fraud prevention side.” Your geographic location, or the websites you’ve visited, are not going to be factors. Rather, it’s going to be a database of known, confirmed fraudulent transactions, or concrete financial data of some sort, already regulated by law.

That has Pratt somewhat confused by the FTC’s discussion of risk-mitigation firms, of which many would be CDIA members.

“There’s this description of those that might be used to stop a transaction,” he said, “and that contrasts with how we talk about our members’ products. Our members create leading fraud prevention products … and they’re used to inform a transaction, not stop it.

“In order to prevent identity theft, anyone would expect my bank, etc., to take steps to make sure I am who I am, considering all the remote transactions where I’m not standing in front of you. So the products our members create might raise a yellow flag, and that empowers the business to come back to the consumer and say, ‘Let’s make sure we know who you are.’”

That might be irritating, he argued, but where’s the harm? “The (FTC) recommendation seems to think that it might stop a transaction,” but nothing not already covered by FCRA would do that, he said.

The lack of identified harm is where the DMA pointed fingers, as well. “One interesting thing about this report is that after thousands of pages of documentation submitted over the two years of thorough inquiry by the FTC,” said the DMA’s Hudson in the statement, “the report finds no actual harm to consumers and only suggests potential misuses that do not occur.”

Commissioner Brill, in a further interview with the IAPP, wasn’t content to wait for the potential abuses to come to pass, however. While Acxiom and the DMA may say there are ethical best practices already in place, “we do highlight that there are more aggressive players out there,” she said, and she pointed to the FTC’s enforcement against Spokeo, a relatively large player that agreed to change its business practices.

“The entire industry has work to do,” Brill said. Whether some of the practices are actionable or not, the FTC still needs to investigate, but she acknowledged that some of the practices the FTC has identified are neither necessarily unfair or deceptive, but troubling from a consumer privacy standpoint, which lead to the call for legislative and industry action. “The kinds of things that we’re calling for, those are going to have to come through more proactive efforts on the part of industry,” she said.

Further, it’s the pipeline of information coming into the broker databases that’s of concern as well, Brill said.

“We want companies to take a hard look at the information they’re providing, as well as the notices they’re giving to customers,” Brill said, “and to figure out whether there’s more that can be done to monitor where this information is flowing.”

“There are clearly products and issues that ought to be treated in a more sensitive way,” she noted. How are customers buying over-the-counter health products given notice in any way that their information might be shared with a third party?

“Consumers don’t think at that moment that the piece of information will become one of the droplets that flows into the river of information that flows into a profile that a data broker has on them,” Brill said. “And because the information is being taken out of context and used for a different purpose, that’s why I think that notice needs to happen at the source.”

Yes, recommending that companies alert customers their data might be resold is a way to make the data broker industry more transparent, but that point of sale, that transaction point, is “where the switch gets turned on,” she said. “That’s where it moves from in-context to out of context.”

Written By

Sam Pfeifle

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