United States: FTC Report Seeks Congressional Review Of Data Broker Industry

As the advent of "big data" increasingly takes center stage in the data and privacy sphere, data brokers—companies that compile and resell or share consumers' personal data—have come under increased scrutiny.  On May 27, 2014, the Federal Trade Commission ("FTC") issued a report titled "Data Brokers: A Call for Transparency and Accountability," as part of its efforts to educate the public about the industry and its practices.  In its report, the FTC renewed its call to Congress to enact legislation that would increase industry transparency on the methods used by data brokers to collect consumer data, and increase consumer access to the data itself.  While recognizing the value the data broker industry provides to companies and consumers alike, the report also urges caution for the potential consumer harm posed by the misuse of such data, offering legislative recommendations and industry best practices to ensure consumer data is adequately protected.

The Basics of the Business

The report explains that data brokers compile incredible amounts of information on practically every U.S. consumer, with one featured broker estimating that it currently holds about 3,000 data points for each individual U.S. consumer.  Certainly, some of the information sources are massive: one of the featured data brokers maintains about 700 billion data elements, adding roughly 3 billion more per month.  In the ever-expanding world of "big data," where new and diverse sources of data provide enormous amounts of information for collection and analysis, the data brokers have found themselves to be collecting and storing more data than can actually be used.

None of the data brokers surveyed obtained this information directly from consumers.  Rather, the data sources varied, and included both government and private sources, such as state tax records, voter records, court records, press and news reports, social media posts and social networking connections, and transaction data from retailers, magazines, and travel sites.  Further, nearly all data brokers collect or trade data from other data brokers, thereby weaving an incredibly tangled web and making tracing the source of the data a nearly impossible task.  This includes data sources that overlap, which affords data brokers some ability to verify the accuracy of the data they collect.

The benefits of the collection and use of consumer data are considerable, and bring a host of efficiencies and new practices to the table.  The analytics products offered by some data brokers enable companies to more accurately target consumers for advertising campaigns, refine product and campaign messages, and gain insights about consumer preferences.  Other uses are less obvious to the average consumer, such as banks' use of big data analytic products to comply with "know your customer" identity verification requirements under the USA Patriot Act.1

Categories of Data Products

Once the data brokers have obtained the data, they then analyze and convert it into a marketable product.  Data brokers generally package data into two forms: (i) data elements such as age, marital status, interests, etc. and (ii) data segments, which combine interests to create lists of individuals with similar characteristics (examples cited in the report include "African-American Professional," "Allergy Sufferer," and "Bible Lifestyle").  Data brokers use these packaged data sets to create products that fall into one of three categories: (1) marketing, (2) risk mitigation, and (3) people search.  Together, the nine data brokers surveyed reported approximately $426 million in annual revenue derived from these products.

Marketing Products. Marketing products, the largest revenue generator (totaling over $196 million in 2012), are designed to enhance direct marketing campaigns (postal mail, telemarketing, and email marketing), steer online marketing campaigns (ads on the Internet, television, and mobile devices), and provide market analytics.  Companies provide data brokers with limited consumer information, such as a consumer's name and email address, and based on those limited data points, data brokers aggregate data elements and data segments to identify information that a client might need, such as the consumer's home address and telephone number.

Risk mitigation products.  Risk mitigation products, the second largest revenue generator ($177 million in 2012), are generally split into identity verification products and fraud detection products, which both use aggregated data to provide safeguards that ensure the actual identity of the consumer.

People Search Products.  People search products, the smallest revenue stream ($52 million in 2012), are generally intended to be used by consumers, and allow for searches of data such as court records, email addresses, education information, and ancestry, among others.  Data brokers provide these products as both free and fee-based services, and generally instruct users that they cannot use such products for purposes governed by the Fair Credit Reporting Act of 1970 ("FCRA") (such as credit, insurance, or housing eligibility determinations).

The Legal Landscape

The report noted that the existence of companies selling consumer data for credit in a nontransparent fashion has long existed, and in fact was the impetus behind the FCRA, which regulates consumer credit reporting agencies and their handling of sensitive consumer data.2  While some data brokers fall under the scope of the FCRA, most do not, particularly those that aggregate marketing data and individual location data.3  In the absence of a comprehensive federal legislative framework governing the collection and use of consumer data, the report noted the handful of laws that do exist and require written agreement affirming that the data broker will only use the data for a specified purpose, or prohibit the resale or illegal use of the data.  These include the Graham Leach-Bliley Act, the Child's Online Privacy Protection Act (COPPA) of 1998, the Driver's Privacy Protection Act, and the Health Insurance Portability and Accountability Act (HIPAA) of 1996.

The FTC also recognized that contracts between data brokers and their sources offer some protection.  Most data brokers utilize contracts that require their sources to agree that the data was legally obtained, and/or that consumers were notified that their data would be shared with third parties or provided the opportunity to opt out of that sharing.  Restrictions are likewise applied by the data sources themselves.  For example, certain social media sites (such as Facebook) restrict third parties' ability to collect data from their sites in an automated fashion, although this was beyond the ken of the report.

Risks to Consumers

While some legislation and industry practices exist to protect consumer data, the report stressed the attendant risks associated with the data broker industry.  Lack of consumer access to big data is an overarching theme of the report.  Not all data brokers who provide services ensure that consumers may access the information compiled about them; those who do may only provide limited access.  Nor are consumers usually provided access to the inferences made about them based on that data.  For example, a data broker may identify a consumer as an extreme sports fan for marketing purposes, but that identification may simultaneously cause insurance companies to identify that consumer as higher risk.  Categorizing may also occur by focusing on a combination ethnicity and/or income levels, and thus create avenues for discrimination or other wrongful uses.

To the extent consumers are able to access such information, they must navigate a lengthy privacy policy statement and often must submit additional information to confirm their identity, such as a scanned government photo ID.  It is likewise difficult for consumers to correct erroneous information.  Such concerns led FTC Commissioner Julie Brill to issue a concurring statement to the report, in which she identified two data broker practices that demonstrate the need for additional transparency and accountability measures.  First, she noted that the types of consumer information now being collected by data brokers often fall outside of the heavily regulated categories of health, financial, and racial data.  Data brokers can use seemingly innocuous data to predict or infer sensitive characteristics that closely follow these categories. Commissioner Brill gave two such examples cited in the FTC report: "Metro Parents" (single parents who are "primarily high school or vocationally educated" and are "handling the stresses of urban life on a small budget") and "Timeless Traditions" (immigrants who "speak[] some English, but generally prefer[] Spanish").  She stressed the need for more comprehensive legislation to prevent the discriminatory use of such data.  Second, Commissioner Brill called for further legislative accountability requirements on risk mitigation products.  The danger in these types of products occurs when "inaccurate information wrongly leads to a consumer being identified as a risk that needs to be mitigated."  Commissioner Brill called for increased consumer access and consumer visibility in order to correct such erroneous data.

Legislative Recommendations

The Commission offered a series of legislative and best practices recommendations for the field, chiefly directed towards increasing transparency and access.  The Commission urged Congress to consider legislation including the following regulations of marketing data products:

  • Centralized Portal.  A centralized system, such as an online portal, should be required where data brokers can identify themselves, allow consumers to find out which brokers have data on them, and provide the easy opt-out ability and access to other tools.
  • Access and Inferences.  Require data brokers to give consumers access to their data at a reasonable level of detail, and to give consumers access to the related inferences which are drawn.
  • Opt-Outs.  Tools which allow consumers to effectively opt-out should be required.
  • Sources.  Require data brokers to list the sources from which their data was drawn.
  • Consumer Notice and Choice.  Require consumer-facing entities (e.g., retailers) to provide clear notice of data sharing and the ability to opt out of the same.
  • Sensitive Data. Require that additional protections be afforded by law to sensitive information, above and beyond the protections presently bestowed.

These suggestions were largely repeated for people search products.  For risk mitigation products, aside from the above, the report suggested legislation that would require that consumers be told when a company uses risk mitigation to limit access to a product or service, and that consumers be offered an ability to correct such information.

Industry Best Practices

The report also urged data brokers in all product categories to adopt a series of best practices.  In addition to urging industry to adopt the practices covered in an earlier 2012 report Protecting Consumer Privacy in an Era of Rapid Change: Recommendations for Business and Policy Makers, the Commission called for change in three areas.

First, it urged the implementation of privacy-by-design.  In particular, it requested that industry assess its collection practices to narrow their collection efforts to only the data which may be needed, and to properly dispose of data once its utility has ebbed, reasoning that these practices will reinforce data security by decreasing the risk of a data breach or unauthorized access, and by simultaneously decreasing the attendant harm should such an event occur.

Second, the Commission requested better protections for children and minors, particularly with respect to the information collected by marketing products.  It noted that industry should apply age-based collection restrictions to data collected offline as well as online, and that data brokers should more carefully vet their sources to ensure that any age-based restrictions are likewise observed at the data source levels.

Third, the Commission recommended that data brokers take precautions to prevent illegal data uses downstream – specifically to prevent the use of data in eligibility determinations or for unlawful discrimination, or otherwise used to "deny consumers credit, insurance, employment, or the like."4  Examples of related precautions include contractual limitations, "seeding" data for monitoring purposes, or auditing their clients to ensure acceptable use.


The data broker enterprise is complex, and involves multiple players collecting, sharing, aggregating, and using consumer profiles that contain a host of consumer information.  The Commission's legislative recommendations, if enacted, would add transparency across the industry and increase the ease of and opportunity for consumer access.


1 31 C.F.R. §1020.220.

2 15 U.S.C. §§ 1681 et seq.

3 In reaction to a 1997 FTC workshop on the personal identification data, industry participants more recently formed a regulatory body titled "Individual References Services Group," which was intended to bring more transparency to the matter, but which was ultimately terminated in 2001.

4 At an upcoming workshop on September 15, 2014, the Commission will examine the potential effects of "Big Data" on American consumers, at a workshop entitled "Big Data: A Tool for Inclusion or Exclusion?"

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Similar Articles
Relevancy Powered by MondaqAI
In association with
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions