By Julian Hattem - 05/27/14 11:36 AM EDT
The Federal Trade Commission is urging Congress to enact new laws to protect consumers from secretive companies that track their purchases and buying habits.
Known as “data brokers,” the companies earn billions of dollars collecting information about where people shop, their hobbies, how wealthy they are and what they post on social media sites. They then package the information and sell it to advertisers or as part of a background check.
In a 110-page report issued on Tuesday, the FTC said the companies have a "fundamental lack of transparency” that needs to be addressed through legislation.
The information merchants operate behind the scenes, leaving users unaware of how their online activity and offline behavior is being tracked. The FTC said that the brokers have amassed billions of bits of information that is used to break people down into categories such as “Mobile Mixers,” “Dog Owner” and “Thrifty Elders.”
The categories can help companies find the right consumers and crack down on fraud, but can also make it harder for people to correct the record or keep their information private, the FTC found.
The data can also make some consumers vulnerable to poor treatment or allow companies to discriminate. People marked as “Biker Enthusiasts,” for instance, might be prime targets for deals on a motorcycle but could also be considered a risk by an insurance company, which could lead to higher premiums.
Among its recommendations to Congress, the FTC called for an online central portal where users could find out about data brokers and take better control of their data.
The call for new legislation was met warmly on Capitol Hill, where Senate Commerce Committee Chairman Jay Rockefeller (D-W.Va.) and Sen. Ed Markey (D-Mass.) have already introduced a bill to rein in the companies.
“The new FTC review of data broker practices reflects growing consensus that this industry sorely lacks transparency and accountability,” Rockefeller said in a statement.
“Congress can no longer put off action on this important issue. We owe it to consumers to provide them with greater control over how data brokers are obtaining and using their personal data.”
Markey said the report “makes clear that data mining and information brokerage firms do not believe there is such a thing as privacy.”
“These companies have put a ‘For Sale’ sign outside the house containing America’s personal information. It’s time to shine light on this shadow industry and put in place the rules that put consumers in control of their information.”
The senators’ Data Broker Accountability and Transparency Act would prohibit the brokers from using deceptive methods to collect people’s information and would also make them disclose what information they had obtained so that it could be corrected.
Ramirez, the head of the FTC, said the agency’s call to action was an extension of the work that is underway in Congress.
“We are trying to build on the prior efforts and important efforts that Sen. Rockefeller has taken on in this area,” she said.
The data broker industry raked in more than $150 billion in 2012 and has become an active lobbying force on Capitol Hill. Top companies including Acxiom and CoreLogic, which were among the nine profiled in the FTC’s report, spent hundreds of thousands of dollars on lobbying last year, according to federal records.
Acxiom chief privacy officer Jennifer Barrett Glasgow said its executives “generally agree” with the FTC’s analysis, which she said would codify the company’s policies into law.
But not everyone was enthusiastic about the FTC’s call for new legislation.
The head of the Software and Information Industry Association, Ken Wasch, fears the push could lead to “burdensome new legal requirements” that could “impede data-driven innovation and hurt the ability of U.S. companies to create jobs and drive economic growth.”
Concern about the data companies, which draw information from online sources like social media as well as offline shopping and official government records, has grown in the last year, amid revelations about the operations of the National Security Agency.
This month, a White House report highlighted concerns about how the use of vast quantities of information, known as “big data,” could make it easier for businesses to discriminate against consumers.
The Senate Commerce Committee last year wrapped up its own report on the brokers, which it said operate behind a “veil of secrecy” and can target “vulnerable” consumers.
The FTC effort has been in the works since December 2012, but Ramirez said she was surprised at the depth and breadth of the firms' operations.
“When you look at how complex this industry is ... the sheer magnitude of what’s taking place, I think, is quite astonishing,” she said.
— This story was updated at 4:06 p.m.