Senate report warns of vast data mining 'behind veil of secrecy'

The Senate Commerce Committee released a report Wednesday warning of the harms of firms that silently track and label consumers for marketing purposes.

The report — based on an investigation of nine companies that Chairman Jay RockefellerJay RockefellerObama to preserve torture report in presidential papers Lobbying world Overnight Tech: Senators place holds on FCC commissioner MORE (D-W.Va.) initiated last year — focuses on data brokers, or companies that track consumers online and offline, and encourages continued oversight of the industry from lawmakers.

The Federal Trade Commission is conducting its own investigation of data brokers and is expected to release its report early next year. 

Data brokers typically collect and sell information without consumers’ knowledge — including about purchasing history and social media activity — and that information can be used to target “vulnerable customers,” according to the report.

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Some of the companies included in the investigation sell products to marketers that label groups of consumers based on their financial vulnerability, the report said, citing labels like “Rural and Barely Making It,” “Credit Crunched: City Families” and “Tough Start: Young Single Parents.”

“The use of these consumer profiles merits close review” because products that group consumers based on financial vulnerability “likely appeal to companies that sell high-cost loans and other financially risky products,” the report said.

The report also notes that privacy experts worry that “ready access to increasingly detailed consumer data lends to differential pricing.”

The Committee found that data brokers collect information on consumers purchases, health information and social media activity and get their information from publicly available data sources, social media platforms, direct input from consumers and agreements with other data-collecting companies, including retailers and financial institutions.

While there are federal laws that deal with certain types of sensitive consumer data, “consumers have no federal statutory right to know what information data brokers have compiled about them for marketing purposes,” the report says, citing a Government Accountability Office report commissioned by Rockefeller.

“There is no one comprehensive privacy law governing information collection and sale of consumer data by private sector companies and … existing privacy laws have ‘limited scope’ regarding the collection, use and sale of consumer data for marketing purposes,” the Committee report said.

This unregulated data collection and use is “largely … hidden from consumer view,” the report said.

Though some data broker firms and trade groups offer some ways for consumers to access and control the information held about them, “the wide variety of consumer access and control policies … show that consumer rights in this arena are offered virtually entirely at the companies’ discretion,” the report said.

The Committee also grabbled with the lack of transparency on the part of data brokers, the report said. Rockefeller announced earlier this year that he was expanding his report to consumer-facing websites after some data brokers refused to turn over information about their business practices.

Based on the “veil of secrecy” between data brokers and consumers and the use of data to target vulnerable consumers, “it is important for policy makers to continue vigorous oversight” and the data broker industry “and to make sure appropriate consumer protections are in place,” the report concluded.