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FTC: Data Brokers Lack Transparency

The Federal Trade Commission says data brokers operate with a fundamental lack of transparency and recommends that Congress step in to legislate basic consumer protections.

That is the takeaway from a just-released study, “Data Brokers: A Call for Transparency and Accountability,” that studied the practices of nine data brokers.

“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,” FTC chairwoman Edith Ramirez said in announcing the report’s release. “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.”

The FTC said it recognized the upside of data brokers, but the report focused on the other side of the massive compilation of data. Just one of the data brokers studied includes over 1.4 billion consumer transactions and 700 billion data points.

"Although consumers benefit from data broker practices which, for example, help enable consumers to find and enjoy the products and services they prefer," said the FTC, "data broker practices also raise privacy concerns."

Among the principal takeaways were that the brokers "unnecessarily store data about consumers indefinitely," which could be a security risk, often collect and store that data without consumers knowledge, and when consumers are given choices of how their data is collected and stored, it is "largely invisible and incomplete."

Another concern was profiling by marketing categories. For example, "a category like 'Biker Enthusiasts' could be used to offer discounts on motorcycles to a consumer, but could also be used by an insurance provider as a sign of risky behavior."

For those reasons and others, the FTC report encourages legislators "to consider enacting legislation that would enable consumers to learn of the existence and activities of data brokers and provide consumers with reasonable access to information about them held by these entities."

The legislative recommendations all talked about opt-out, rather than opt-in, regimes except where sensitive information was involved.

Among those recommendations were creating a centralized Internet portal where brokers could identify themselves, describe their practices and provide opt out; requiring brokers to give consumers access to data at a "reasonable" level of detail.

FTC Chair Edith Ramirez said in a press conference Tuesday that she hoped Sen. Jay Rockefeller (D- W. Va.) would be interested in legislating some of the report's recommendations given his long-standing commitment to the issue. She said she understood in the abstract what brokers were doing, but the breadth of the collection was "astonishing."

Rockefeller and Sen. Ed Markey have already introduced legislation on data broker transparency.

Rockefeller also held a hearing on data brokers last December and released his own report on their practices, over which he has lots of concerns.

Ramirez said of those already-existing legislative efforts that the FTC was building on those congressional efforts for greater transparency.

Ramirez said the report doesn't identify any unlawful activity, but that the FTC will continue to look "hard' at the industry, and to advocate for best practices and legislation.

“We appreciate the Commission’s ongoing interest on these issues," Direct Marketing Association SVP of government affairs Peggy Hudson responded. "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,” Hudson said.  “DMA members provide consumer protection through strong self-regulatory practices, specifically outlined in our Guidelines for Ethical Business Practice.”

“DMA has long supported transparency and choice for its members,” she said. "This is accomplished through our mail opt-out service and in collaboration with the Digital Advertising Alliance (DAA), which provides notice and choice to consumers concerning online behavioral advertising.

“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, the report finds no actual harm to consumers, and only suggests potential misuses that do not occur,” said Peggy Hudson, DMA senior vice president of government affairs."