Technology: Data Brokers Face Federal Trade Commission Scrutiny

Breaches of users’ presumed privacy, and social networks’ policies on sharing information were constant topics in business news throughout 2012. It’s likely that these issues will continue to be major concerns in the New Year, too. Meanwhile, the larger issue of data brokerage has also come under increased scrutiny – highlighted by the Federal Trade Commission’s year-end launching of a probe into this industry – which remains largely unregulated. Unlike social networks that rely on voluntary membership, data brokers don’t seek your permission to mine, collect and sell your personal data. At a later date, this data – whether it is accurate or not – could affect your credit rating, your ability to sign a lease or conduct other important professional or personal business.

This is a very important issue – one that needs clarification. Dubious collection processes and sketchy business policies leave consumers’ privacy and data security vulnerable to unethical, greedy companies heedless to the havoc their business activities might unleash. Here’s a brief overview of what’s at stake, and the government’s latest efforts to investigate a business sector whose practices have been described as “murky” and “lacking transparency.”

The Federal Trade Commission has asked nine companies to explain how they collect and use consumer data. These nine are Acxiom, Corelogic, Datalogix, eBureau, ID Analytics, Intelius, Peekyou, Rapleaf and Recorded Future. Data brokers offer information on just about anyone, for a fee. In some instances, the brokers require only an email address to begin their collection process. The FTC has stated it only wants to collect information from these companies in order to study the brokerage industry – their inclusion in the study does not infer the companies selected are under any suspicion.

Currently the brokerage industry is largely unregulated. Industry observers believe the FTC is getting ready to sharpen its teeth, having previously relied upon appeals made to brokers for better self-regulation. This recent probe is a further step in the process to create enforcement actions if the FTC finds current industry processes too murky, opaque or potentially controversial.

The FTC wants each of the nine companies identified above to describe:

• How they use, maintain and distribute the information they collect.
• To what extent each brokerage company allows consumers to access and correct their data.
• To what extent they provide consumers with an opportunity to opt out of having their personal data sold.

This is the third time the FTC has looked at this particular industry. This most recent investigation follows a March 2012 report outlining recommendations for businesses and policymakers to voluntarily adopt a series of best practices to protect consumers’ privacy and provide individuals with more control over who gets access to their personal data. This same report called on data brokers to improve the transparency of their practices. Recognizing the enormity of the challenge in today’s technological age, the report is called “Protecting Consumer Privacy in an Era of Rapid Change – Recommendations for Businesses and Policymakers.”

Since the March report was published, a number of data brokers have been contacted by mail with questions regarding their business practices. The United States Congressional Bi-Partisan Privacy Caucus noted back in November that responses to their letters had left many questions unanswered.

These articles are intended to provide general resources for the tax and accounting needs of small businesses and individuals. Service2Client LLC is the author, but is not engaged in rendering specific legal, accounting, financial or professional advice. Service2Client LLC makes no representation that the recommendations of Service2Client LLC will achieve any result. The NSAD has not reviewed any of the Service2Client LLC content. Readers are encouraged to contact their CPA regarding the topics in these articles.

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