Markets Wired

The Federal Trade Commission provided information to Congress today on the status of its work regarding companies that collect and aggregate consumers’ information and then resell it, known as data brokers.

Testifying on behalf of the Commission before the Senate Committee on Commerce, Science and Transportation, Bureau of Consumer Protection Director Jessica Rich told lawmakers about the FTC’s past and present efforts related to the privacy practices of the data broker industry.

“Because data brokers generally never interact directly with consumers, consumers are typically unaware of their existence, much less the variety of ways they collect, analyze, and sell consumer data,” the testimony states.

The testimony notes that FTC’s work in the data broker industry is not a recent development, pointing to work done by the Commission in the 1990s looking at the privacy practices of data companies not covered under the Fair Credit Reporting Act (FCRA).

In addition, the testimony points to recommendations made by the Commission in its 2012 report on privacy issues about improving the transparency of data brokers’ practices and giving consumers greater control over how their information is used. The recommendations made in the report included giving consumers reasonable access to the data maintained about them by data brokers. The report also noted that the Commission has long supported legislation both to improve consumers’ access rights to data and to improve the transparency of industry practices.

The testimony goes on to address the Commission’s ongoing initiatives regarding data brokers using a three-pronged strategy made up of enforcement actions, research and reports, and education for consumers and businesses.

In describing the FTC’s enforcement efforts in the data broker industry, the testimony notes that the agency has brought nearly 100 cases and obtained more than $30 million in civil penalties for violations of the FCRA. Among the cases highlighted in the testimony are the Commission’s 2012 consent decree with online data broker Spokeo, its case against app developer Filiquarian, and the Commission’s recent consent decree with Certegy Check Services, which resulted in a $3.5 million FCRA fine.

The testimony describes the Commission’s ongoing study of the data broker industry, conducted under its authority in Section 6(b) of the FTC Act. The study is examining the practices of nine companies, and the Commission expects to issue a report outlining the findings in the coming months. In addition, the testimony notes the FTC’s upcoming series of workshops to be held in 2014 on emerging privacy issues, including alternative scoring products sold by data brokers, which are used to predict trends and behaviors of consumers.

Finally, the testimony addresses the Commission’s work in educating businesses and consumers about privacy issues in the data broker industry. The testimony highlights warning letters sent by Commission staff to data brokers that provided tenant-screening services as well as to to marketers of mobile apps that provide employment screening services.

The testimony also mentions a recent undercover effort by Commission staff to determine if data brokers who said they were not covered under FCRA were willing to sell information for FCRA-covered purposes. As a result, ten warning letters were issued to companies.

“These enforcement, policy, and education efforts demonstrate the Commission’s continued commitment to understanding and addressing consumer privacy issues posed by the data broker industry,” the testimony states.

The Commission vote approving the testimony and its inclusion in the formal record was 4-0. 

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