WP: Brokers use 'billions' of data points to profile Americans

http://www.washingtonpost.com/business/technology/brokers-use-billions-of-data-points-to-profile-americans/2014/05/27/b4207b96-e5b2-11e3-a86b-362fd5443d19_story.html

Brokers use 'billions' of data points to profile Americans

By Craig Timberg

May 27, 2014

Are you a financially strapped working mother who smokes? A Jewish retiree with a fondness for Caribbean cruises? Or a Spanish-speaking professional with allergies, a dog and a collection of Elvis memorabilia?

All this information and much, much more is being quietly collected, analyzed and distributed by the nation's burgeoning data-broker industry, which uses billions of individual data points to produce detailed portraits of virtually every American consumer, the Federal Trade Commission reported [1] Tuesday.

The FTC report provided an unusually detailed account of the system of commercial surveillance that draws on government records, shopping habits and social-media postings to help marketers hone their advertising pitches. Officials said the intimacy of these profiles would unnerve some consumers who have little ability to track what's being collected or how it's used -- or even to correct false information. The FTC called for legislation to bring transparency to the multibillion-dollar industry and give consumers some control over how their data is used.

Data brokers' portraits feature traditional demographics such as age, race and income, as well as political leanings, religious affiliations, Social Security numbers, gun-ownership records, favored movie genres and gambling preferences (casino or state lottery?). Interest in health issues -- such as diabetes, HIV infection and depression -- can be tracked as well.

With potentially thousands of fields, data brokers segment consumers into dozens of categories such as "Bible Lifestyle," "Affluent Baby Boomer" or "Biker/Hell's Angels," the report said. One category, called "Rural Everlasting," describes older people with "low educational attainment and low net worths." Another, "Urban Scramble," includes concentrations of Latinos and African Americans with low incomes. One company had a field to track buyers of "Novelty Elvis" items.

"The extent of consumer profiling today means that data brokers often know as much -- or even more -- about us than our family and friends," FTC Chairman Edith Ramirez said in a statement. "It's time to bring transparency and accountability to bear on this industry on behalf of consumers, many of whom are unaware that data brokers even exist."

The brokers gather the information from public records and private sources, such as advertising networks that follow a consumer's online activities, traditional media companies that record a subscriber's billing history or the loyalty programs that track a shopper's purchases at a grocery store.

The individual profiles are largely sold to marketers, determining what ads and offers consumers see online, or to banks that use the data to verify the identity of customers. Laws prohibit using such information to set insurance rates, make job offers or measure creditworthiness, although the FTC expressed concern about potential abuses.

FTC officials, who based their report on documents gathered by issuing subpoenas [2] to nine data brokers in December 2012, found "a fundamental lack of transparency" in the industry but no evidence of illegal activity. Ramirez said the FTC does not know how many data brokers exist.

The profiles they produce could affect what products are offered to consumers and how well consumers are treated by customer service, officials said. A "financially challenged" couple, for example, might see ads for subprime loans while their affluent friends are offered premium credit cards and vacation options. Some consumers might face long waits when they call companies with complaints, while others receive speedy, responsive service.

The collection of data about health-related issues also concerned the FTC. Brokers had categories for people interested in weight loss or high cholesterol. One tracked whether consumers preferred brand-name drugs or looked for medical information online.

Stuart P. Ingis, general counsel for the Direct Marketing Association, which represents nearly 2,000 companies that collect and distribute consumer data, said the industry helps prevent consumer fraud and improves the effectiveness of online advertising -- the main revenue source for free services, such as e-mail and social-networking sites.

He said the FTC's inability to find documented abuse of personal information suggests that data brokers should continue operating through self-regulation rather than new government intervention. "You'd think if there was a real problem, they'd be able to talk about something other than potential" abuses, Ingis said.

The report included several legislative proposals intended to help Americans learn what data has been gathered about them and to correct errors. Consumers would be able to opt out of data- gathering about themselves.

Ingis said that the FTC's proposals, such as a requirement for a centralized portal for consumers who want to know what information data brokers collect about them, are unnecessary and cumbersome. "I'm not sure that there's a problem that requires a law here," he said.

The Software & Information Industry Association, whose members in some cases collect and share personal data, endorsed the FTC's call for greater transparency but warned that new legislation would struggle to keep up with the pace of innovation online. "It just gets very challenging because of the dynamic nature of data," said David LeDuc, senior director of public policy for the group.

But FTC commissioner Julie Brill urged Congress to act, and said Americans should learn more about how their data is being collected and used. "Consumers can't manage this process by themselves," she said. "It's too big. It's too complex. There are too many moving parts."

Data-broker firms typically have no direct dealings with the public, relying on third-party sources or trading information with one another. Of the nine companies subpoenaed by the FTC -- Acxiom, CoreLogic, Datalogix, eBureau, ID Analytics, Intelius, PeekYou, Rapleaf and Recorded Future -- seven share information with one another, the FTC report said.

Among the most striking findings in the reports, officials said, was the extent that data brokers connect the online and offline behaviors of consumers. This process, called "onboarding," allows markets to load offline information -- from magazine subscriptions, store loyalty cards or government records -- into cookies that digital advertisers use to target consumers for pitches. Cookies, which are a small bit of computerized code stored in a computer's Web browser, allow advertisers to feature a single product across many Internet services.

The issue of data collection has generated increasing attention in recent years -- and especially since former National Security Agency contractor Edward Snowden revealed how intelligence agencies vaccum up information collected by the private sector. The White House issued a report on the collection and use of Big Data [3] on May 1.

Sens. Edward J. Markey (D-Mass.) and John D. Rockefeller IV (D-W.Va.) proposed legislation in February that largely tracks with the FTC's goal of greater transparency for the data-broker industry.

Yet privacy advocates see little hope of action on Capitol Hill. "There's no political pressure on Congress, really, to act. The data-broker lobby is incredibly powerful," said Jeffrey Chester, executive director of the Center for Digital Democracy.

He noted that political campaigns routinely use information collected by data brokers to tailor their election and fund-raising messages to targeted groups. "They're not going to vote against their political self-interest," he said.

The American Civil Liberties Union said in a statement: "This report's intentions are good, but waiting for Congress to pass new regulations isn't going to help protect Americans' privacy rights anytime soon. The FTC needs to start using its existing authority to root out bad practices now."

[1] http://www.ftc.gov/system/files/documents/reports/data-brokers-call-transparency-accountability-report-federal-trade-commission-may-2014/140527databrokerreport.pdf

[2] http://www.washingtonpost.com/business/technology/ftc-orders-data-brokers-to-explain-use-of-consumer-profiles/2012/12/18/90668904-492b-11e2-b6f0-e851e741d196_story.html

[3] http://www.washingtonpost.com/blogs/the-switch/wp/2014/05/01/white-house-releases-big-data-and-privacy-report/