The Senate Committee on Commerce, Science, and Transportation recently released a report about the multi-billion dollar industry that largely have data brokers behind it.
The report, A Review of the Data Broker Industry: Collection, Use, and Sale of Consumer Data for Marketing Purposes, reveals that “since consumers generally do not directly interact with data brokers, they have no means of knowing the extent and nature of information that data brokers collect about them and share with others for their own financial gain.”
According to the report, “Data brokers collect and sell information for a variety of purposes including for fraud prevention, credit risk assessment, and marketing. Their customer base encompasses virtually all major industry sectors in the country in addition to many individual small businesses.”
The report focused on data broker activities that are subject to little statutory consumer protections. In the area of marketing, data brokers operate with minimal transparency, according to the report.
Based on review of the company responses and other publicly available information, the report found:
(1) Data brokers collect a huge volume of detailed information on hundreds of millions of consumers. Information data brokers collect includes consumers’ personal characteristics and preferences as well as health and financial information. Beyond publicly available information such as home addresses and phone numbers, data brokers maintain data as specific as whether consumers view a high volume of YouTube videos, the type of car they drive, ailments they may have such as depression or diabetes, whether they are a hunter, what types of pets they have, or whether they have purchased a particular shampoo product in the last six months;
(2) Data brokers sell products that identify financially vulnerable consumers. Some of the respondent companies compile and sell consumer profiles that define consumers in categories or “score” them, without consumer permission or knowledge of the underlying data. A number of these products focus on consumers’ financial vulnerability, carrying titles such as “Rural and Barely Making It,” “Ethnic Second-City Strugglers,” “Retiring on Empty: Singles,” “Tough Start: Young Single Parents,” and “Credit Crunched: City Families.” One company reviewed sells a marketing tool that helps to “identify and more effectively market to under-banked consumers” that the company describes as individuals including “widows” and “consumers with transitory lifestyles, such as military personnel” who annually spend millions on payday loans and other “non-traditional” financial products. The names, descriptions and characterizations in such products likely appeal to companies that sell high-cost loans and other financially risky products to populations more likely to need quick cash, and the sale and use of these consumer profiles merits close review;
(3) Data broker products provide information about consumer offline behavior to tailor online outreach by marketers. While historically, marketers used consumer data to locate consumers to send catalogs and other marketing promotions through the mail or contact via telephone, the information data brokers sell marketers about consumers is increasingly provided digitally. Data brokers provide customers digital products that target online outreach to a consumer based on the dossier of offline data collected about the consumer;
(4) Data brokers operate behind a veil of secrecy. Data brokers typically amass data without direct interaction with consumers, and a number of the queried brokers perpetuate this secrecy by contractually limiting customers from disclosing their data sources. Three of the largest companies – Acxiom, Experian, and Epsilon – to date have been similarly secretive with the Committee with respect to their practices, refusing to identify the specific sources of their data or the customers who purchase it. Further, the respondent companies’ voluntary policies vary widely regarding consumer access and correction rights regarding their own data – from virtually no rights to the more fulsome policy reflected in the new access and correction database developed by Acxiom.