DMA: Opt-In Restrictions Would Cost Billions in California

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Opt-in restrictions on third-party data sharing could cost Californians several billion dollars annually and would raise the cost of charitable direct mail campaigns in the state by 12 percent, according to a study by the Direct Marketing Association.

Restrictive privacy laws could cost Californians an average of $1,760 more in interest for a new home, the study said. Overall, consumers with credit cards would pay $927 million more yearly in interest.

The study, "The Hidden Cost of Privacy: The Potential Impact of 'Opt-in' Data Privacy Laws in California," examined the effect on costs to financial services institutions, direct marketers and e-commerce sites. The study was authored by two independent researchers from Columbia University.

The restrictions in the study are based on bills under discussion in Congress and state legislatures.

"The data ... shows the significant but often hidden costs of a data restriction policy that uses opt in," said Peter Johnson, primary author of the study and an adjunct professor of The School of International and Public Affairs at Columbia University. "When we looked at a diverse but economically significant range of economic activities -- financial services, charitable giving and direct marketing -- we found that the aggregate costs of this severe data restriction regime could run, by our conservative estimates, into the billions of dollars for Californians."

The researchers said they limited the survey to a small part of California's economy because of the lack of previously published national studies on individual economic sectors in the state.

Customer acquisition costs for the state's 90 largest financial services firms would rise about $1.02 billion annually if such restrictive third-party data privacy laws were enacted, the study said.

Charitable organizations would have to spend $933 million more for fundraising, according to the study, while losing more than $638 million in donations. The lack of access to third-party data from financial services firms would worsen the situation for charities.

"In so far as the pool of information 'dries up,' the direct marketing sector can be expected to spend more on advertising," the study said. "It is estimated direct marketers will have to spend, depending on size and segment, $189 million to $594 million in the aggregate in additional advertising to reach the same customers."

Online retailers would spend $103 million more to comply with restrictions on third-party data, the researchers said.

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