Where Data Legislation Falls Short

You know how brands constantly talk about how they have so much data, they don’t know what to do with it? The same can be said for anyone with a stake in industries around the aggregation and selling of consumer data: so-called “data brokers” to legislators to consumer watchdogs to consumers themselves. Consumer data has so many different business applications, from marketing to background checks, that sweeping legislation is inefficient.

February saw the introduction of privacy-related legislation in California by assemblywoman Barbara Lowenthal (D-Long Beach). Lowenthal’s bill, The Right to Know Act (AB 1291), seeks to update the definition of personal information to include data like buying habits and sexual orientation. It also seeks to change the extent to which companies tell consumers what personal data they’ve collected. Currently, companies in California need only report what consumer information they’re using for direct marketing.

It seems backward that of all the data that companies are compelled to report to consumers, it’s only data centered around marketing, which is one of the more innocuous uses—especially compared to information for background checks or information that enables the location of a specific individual.

The various applications of consumer data (background checks, marketing, people search engines, credit reports, etc.) need to be updated and recognized by both legislative bodies and data brokers, as each use case requires separate regulations on how that information is used, collected, and reported.

There are already measures to ensure this, of course. The Fair Credit Reporting Act (FCRA) regulates consumer reporting agencies (CRA), and though the act was established before the widespread use of the Internet, CRAs that traffic in digital information are still accountable, as the data broker Spokeo learned the hard way last year.

The problem with the FCRA is that–as mentioned–it came to be prior to the digital age and, despite the Spokeo settlement, there’s an extent to which it’s outdated. Ed Mierzwinski from the U.S. Public Interest Research Group (PIRG) and Jeff Chester from the Center for Digital Democracy point out in a report the nebulous divide between using online analytics to market financial products like credit cards versus analytics to determine a customer’s eligibility for loans and credit.

“The interplay among the traditional consumer reporting agencies, lenders, online data brokers, and interactive digital financial advertising has blurred the line between the traditional definitions of consumer reporting agency and target marketing,” the report states.

One conclusion the authors make is that media-rich ads should “be evaluated to ensure that it promotes an experience that enables reasonable decision-making on a financial product and offer.”

Point taken, of course, but how can a regulatory body gauge something like the promotion of “reasonable decision-making” in such a scenario? And who will ultimately be held responsible? The ad network that serves the ad? The publisher where it appears? Or the company whose product is being advertised?

There’s a lot of nuance that needs to be sussed out and as it stands, both sides of the data battle—consumer watchdogs and data brokers—make these broad proclamations about potential regulation.

Consumer watchdogs say that, at the very least, consumers must have the right to know across the board what data is being collected and to amend errors.

Data brokers say that high-quality information is crucial for businesses to better market and sell to consumers. When businesses are successful, they make more money and can create more jobs.

Of course, if consumers have the ability to edit their data, that influences the quality of that data, which ultimately affects, if you’re a data broker, the quality of your product. Because why would a brand want to invest in a potentially incomplete data set?

When it comes to consumer concerns, the way marketers use data is relatively benign (Target’s pregnant teen girl SNAFU notwithstanding). As a consumer, if I get coupons tailored to my buying habits, great. If I don’t, oh well.

Of course the stakes heighten considerably, however, when it comes to using data for personal background checks or when that data is used by people search engines, services where anyone, after paying a nominal fee, can locate a specific person. With personal background checks, the danger comes when information is mixed up, which can mess with an individual’s job prospects. And people search engines essentially have a reputation of being stalker tools.

Because businesses that collect and sell consumer data are so secretive, these applications of personal data—scary and not—are jumbled together. What’s left, from a consumer perspective, is a foggy, threatening entity taking notes on people in the dark.

Let’s be honest: Data brokers thrive on the fact that the nature of their businesses can’t be defined, and therefore cannot be regulated by the federal government. When Direct Marketing News asked Acxiom’s chief marketing and strategy officer Tim Suther for a definition of a data broker, he said he didn’t have one: “The way that people talk about data brokers is so broad that you could include every business.”

But legislation is likely going to be introduced, sluggishly at the federal level, but—as we’re seeing in California—more briskly at the state level. There are too many consumers already clamoring for it. So far, it seems that the data industry has been more reactive. Senators send letters, and the data industry fires off an obligatory response, many arguing that they have chief privacy officers and a complex array of internal checks and balances to ensure the responsible use of customer data.

All this may be true, but for consumers, this is mostly an elaborate way of saying: “Trust me.” Sure, but how do I know you don’t have your fingers crossed behind your back? As data brokers get more exposure, instead of battening down their hatches, it would be best for their long-term futures if they define what they do, the type of companies they work with, and—if they aren’t already doing it—take an active hand in helping to craft legislation around the regulation of their industry.  

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