    [Senate Hearing 113-693]
    [From the U.S. Government Publishing Office]

                                                            S. Hrg. 113-693

                 WHAT INFORMATION DO DATA BROKERS HAVE
                 ON CONSUMERS, AND HOW DO THEY USE IT?

    =======================================================================

                                    HEARING

                                   BEFORE THE

                             COMMITTEE ON COMMERCE,
                          SCIENCE, AND TRANSPORTATION
                              UNITED STATES SENATE

                        ONE HUNDRED THIRTEENTH CONGRESS

                                 FIRST SESSION

                                   __________

                               DECEMBER 18, 2013

                                   __________

        Printed for the use of the Committee on Commerce, Science, and
                                 Transportation

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           SENATE COMMITTEE ON COMMERCE, SCIENCE, AND TRANSPORTATION

                        ONE HUNDRED THIRTEENTH CONGRESS

                                 FIRST SESSION

                JOHN D. ROCKEFELLER IV, West Virginia, Chairman
    BARBARA BOXER, California            JOHN THUNE, South Dakota, Ranking
    BILL NELSON, Florida                 ROGER F. WICKER, Mississippi
    MARIA CANTWELL, Washington           ROY BLUNT, Missouri
    MARK PRYOR, Arkansas                 MARCO RUBIO, Florida
    CLAIRE McCASKILL, Missouri           KELLY AYOTTE, New Hampshire
    AMY KLOBUCHAR, Minnesota             DEAN HELLER, Nevada
    MARK WARNER, Virginia                DAN COATS, Indiana
    MARK BEGICH, Alaska                  TIM SCOTT, South Carolina
    RICHARD BLUMENTHAL, Connecticut      TED CRUZ, Texas
    BRIAN SCHATZ, Hawaii                 DEB FISCHER, Nebraska
    EDWARD MARKEY, Massachusetts         RON JOHNSON, Wisconsin
    CORY BOOKER, New Jersey
                        Ellen L. Doneski, Staff Director
                       James Reid, Deputy Staff Director
                         John Williams, General Counsel
                  David Schwietert, Republican Staff Director
                  Nick Rossi, Republican Deputy Staff Director
       Rebecca Seidel, Republican General Counsel and Chief Investigator
                                C O N T E N T S

                                  ----------
                                                                       Page
    Hearing held on December 18, 2013................................     1
    Statement of Senator Rockefeller.................................     1
        Staff report entitled ``A Review of the Data Broker Industry:
          Collection, Use, and Sale of Consumer Data for Marketing
          Purposes'' by the Office of Oversight and Investigations
          Majority Staff.............................................     4
    Statement of Senator Thune.......................................    54
        Prepared statement of Alicia Puente Cackley, Director
          Financial Markets and Community Investment, U.S. Government
          Accountability Office......................................    56
    Statement of Senator Booker......................................   119
    Statement of Senator Johnson.....................................   121
    Statement of Senator Blumenthal..................................   123
    Statement of Senator Markey......................................   126
    Statement of Senator McCaskill...................................   129
    Statement of Senator Fischer.....................................   135

                                   Witnesses

    Jessica Rich, Director, Bureau of Consumer Protection, Federal
      Trade Commission...............................................    66
        Prepared statement...........................................    68
    Pam Dixon, Executive Director, World Privacy Forum...............    72
        Prepared statement...........................................    73
    Joseph Turow, Robert Lewis Shayon Professor of Communication,
      Associate Dean for Graduate Studies, Annenberg School for
      Communication, University of Pennsylvania......................   102
        Prepared statement...........................................   104
    Tony Hadley, Senior Vice President of Government Affairs and
      Public Policy, Experian........................................   105
        Prepared statement...........................................   107
    Jerry Cerasale, Senior Vice President of Government Affairs,
      Direct Marketing Assocation....................................   110
        Prepared statement...........................................   111

                                    Appendix

    Response to written question submitted to Jessica Rich by:
        Hon. John D. Rockefeller IV..................................   143
        Hon. Kelly Ayotte............................................   143
    Response to written questions submitted to Jerry Cerasale by:
        Hon. Amy Klobuchar...........................................   145
        Hon. Kelly Ayotte............................................   145

                        WHAT INFORMATION DO DATA BROKERS.
                   HAVE ON CONSUMERS, AND HOW DO THEY USE IT?

                                  ----------

                          WEDNESDAY, DECEMBER 18, 2013

                                           U.S. Senate,
            Committee on Commerce, Science, and Transportation,
                                                        Washington, DC.
        The Committee met, pursuant to notice, at 2:31 p.m., in
    room SR-253, Russell Senate Office Building, Hon. John D.
    Rockefeller IV, Chairman of the Committee, presiding.

           OPENING STATEMENT OF HON. JOHN D. ROCKEFELLER IV,
                     U.S. ENATOR FROM WEST VIRGINIA

        The Chairman. The Committee will come to order.
        There are, at this point, two people sitting at the dais,
    and they are two wonderful people, but I would be pleased if
    there were more. Senator Blumenthal and Senator Pryor, Senator
    Markey, Senator Fischer, Senator Warner will be here.
        But this is the day that we almost vote on the budget,
    actually. We don't quite. We always find ways to do it. You
    have the motion to proceed to it, and then you have a motion
    to--whatever. And then tomorrow at some point we vote on the
    budget. Just be grateful you are in private life.
        [Laughter.]
        The Chairman. OK. You are all welcome.
        The disclosures about U.S. intelligence activities over the
    past few months have sparked a very public debate in this
    country about what kinds of information the government should
    be gathering and how we protect the privacy of Americans who
    have done nothing wrong.
        The Snowden disclosures have harmed our country's national
    security, but they have made Americans think more than they
    usually do about how their lives, both online and offline, can
    be tracked, monitored, and analyzed. People are aware of that,
    not to the extent that they are in Great Britain, where they
    are so accustomed to being videotaped in everything they do. We
    are still going through that adjustment period.
        I am glad we are talking about these important privacy
    issues, in general and today. We have all benefited from the
    rapid advances in computing technology, but we also cherish our
    personal freedoms. We always use that word, ``cherish'' our
    personal freedoms. But we do. And it is a complicated subject.
    And we want to be able to protect ourselves and our loved ones
    from the unwanted gaze of the government and our neighbors.
        What has been missing from this conversation so far is the
    role that private companies play in collecting and analyzing
    our personal information. A group of companies known
    collectively as ``data brokers'' are gathering massive amounts
    of data about our personal lives and selling this information
    to marketers. We don't hear a lot about the private-sector data
    broker industry, but it is playing a large and growing role in
    our lives.
        Let me provide a little perspective. In the year 2012,
    which you will recall was last year, the data broker industry
    generated $156 billion in revenues--that is more than twice the
    size of the entire intelligence budget of the United States
    Government--all generated by the effort to learn about and sell
    the details about our private lives. Whether we know it or like
    it or not, makes no difference.
        One of the largest data broker companies, Acxiom, recently
    boasted to its investors that it can provide, quote, ``multi-
    sourced insight into approximately 700 million customers
    worldwide.''
        When government or law enforcement agencies collect
    information about us, they are restrained by our Constitution
    and our laws, and they are subject to the oversight of courts,
    inspectors general, and the United States Congress through the
    Intelligence Committee in the Senate and the House.
        And I have served on the Intelligence Committee since
    before 9/11, and I can declare to you absolutely without a
    single thought that the protection that NSA provides to
    security and secrecy is far better than what we are going to be
    talking about today. They have rules. They have all kinds of
    judges and hoops that you have to jump through. The FBI is
    involved, DOJ. It is all--it is very tight.
        And every day you read the paper, you would think it didn't
    exist, it is just the government gone wild. But particularly
    when it comes to domestic, which is called Section 215, it is
    very tightly monitored, and there is never content, there is
    never e-mail, and there is never a name--never a name. There is
    just a telephone number.
        But data brokers go about their business with little or no
    oversight. While there are laws on the books that protect the
    privacy of Americans' health and financial information, they do
    not cover data brokers' marketing activities.
        Collecting consumers' information for marketing purposes is
    not a new business. For decades before the Internet was
    invented, retailers, marketers, and, yes, political candidates
    compiled mailing lists that they used to send catalogs, coupon
    books, or other materials to their potential customers.
        But the data broker industry has been revolutionized in
    recent years by the tremendous advances in computing and data
    analysis. And as consumers spend more and more time socializing
    and shopping online, they are generating rich new streams of
    personal data to collect and analyze, on the part of the data
    brokers.
        These days, data brokers don't just know our address, our
    income level, our political affiliation, most probably, they
    probably know the weight of everybody in the family. They have
    collected thousands of data points about each one of us, and we
    are simply not aware of it, except in theory.
        They know if you have diabetes or suffer from depression.
    They know if you smoke cigarettes. They know your reading
    habits, your browsing habits. They know how much you and your
    family members weigh. And they may even know how many whiskey
    drinks you have consumed in the last 30 days.
        We wouldn't reveal that kind of information, would we?
        Senator Thune. Of course not.
        The Chairman. No.
        [Laughter.]
        The Chairman. Like the pieces of a mosaic, data brokers
    combine data points like these into startlingly detailed and
    intimate profiles of American consumers.
        Under current laws, we have no right to see these pictures
    of ourselves that these companies have created. We have no
    right. For the past year, this committee has been trying to
    bring some much-needed oversight to the data broker industry.
        Where is the copy of our report? Oh, it is under here. I
    have it.
        We have been pushing the data brokers to answer the same
    kinds of questions many Americans have been asking the
    government since the Snowden disclosures: What information are
    you collecting about us, and how are you using the information?
        Today's hearing is the first time we are publicly
    discussing what we are learning in this investigation. The
    Commerce Committee staff has also prepared a report for me and
    for the Ranking Member on the progress of this investigation.
    It is thus. More to come.
        I ask unanimous consent to put a copy of this report in the
    record of this hearing.
        [The report follows:]

        [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

                               Table of Contents

    Executive Summary
    Background

            A. GAO Review of Privacy Laws Applicable to Data Brokers

            B. Voluntary Industry Guidelines

            C. Privacy and Consumer Protection Issues Regarding Data Broker
            Practices

                    Privacy Issues

                    Potentially Harmful Uses of Data Broker Products

                    Use of Predictive Scoring Products for Marketing

                    Data Breaches

            D. Recent FTC and Congressional Reviews of the Data Broker
            Industry
    II. Committee Investigation
    III. Committee Majority Staff Findings Regarding Industry Practices

            A. Data Broker Collection of Consumer Data

                    1.  Nature of Data Collected

                    2.  Sources of Consumer Data

                            a.  Government Records and Other Publicly
                            Available Data

                            b.  Purchase or License

                            c.  Cooperative Arrangements

                            d.  Self-Reporting by Consumers

                            e.  Social Media

            B. Data Broker Products

                    1.  How Data Brokers Package Consumer Information

                    2.  Issues Regarding Data Broker Products

                            a.  Products that Identify Financially
                            Vulnerable Populations

                            b.  Scoring Products that Mirror Tools
                            Regulated under the Fair Credit Reporting Act

            C. Data Broker Customers and How They Use Data Broker Products

                    1.  Who Buys the Data
                    2.  New Mechanisms for Using Data

            D. Data Broker Transparency and Privacy Practices

                    1.  Disclosure Limitations

                    2.  Consumer Access and Control Rights

                    3.  Opt-Out Rights
    IV. Conclusion

    Appendices and Exhibits

    Appendix I: Federal Laws that May Be Applicable to Information
            Collected by Data Brokers
    Appendix II: Sample List of Targeting Products Identifying Financially
            Vulnerable Populations
    Appendix III: Sample List of Offline Elements Available for Online
            Advertising

    Exhibit A: Sample Consumer Surveys
    Exhibit B: Sample Product Descriptions
    Exhibit C: Experian ChoiceScore Marketing Description
                                     ______

    Executive Summary
        Consumers are conducting more and more of their daily business
    online and through their mobile devices. They use the Internet and
    their smart phones and tablets to make purchases, research medical
    conditions, plan vacations, interact with friends and relatives, do
    their jobs, map travel routes, and otherwise pursue their interests.
    With these activities, consumers are creating a voluminous and
    unprecedented trail of data regarding who they are, where they live,
    and what they own.
        At the same time, the Internet and other technological advances
    have made consumer data easier to access, analyze, and share.
    Information that in years past was accessible only through a trip to
    the library or courthouse can now be readily available to millions
    online, as computing capabilities for storing and reviewing information
    continue to grow at exponential rates.
        These changes have fueled the growth of a multi-billion dollar
    industry that largely operates hidden from consumer view. Today, a wide
    range of companies known as ``data brokers'' collect and maintain data
    on hundreds of millions of consumers, which they analyze, package, and
    sell generally without consumer permission or input. Since consumers
    generally do not directly interact with data brokers, they have no
    means of knowing the extent and nature of information that data brokers
    collect about them and share with others for their own financial gain.
        Data brokers collect and sell information for a variety of purposes
    including for fraud prevention, credit risk assessment, and marketing.
    Their customer base encompasses virtually all major industry sectors in
    the country in addition to many individual small businesses. Some of
    the most well-known products sold by data brokers are credit reports
    that businesses use to make eligibility determinations for, among other
    things, credit, insurance, and employment--activities where consumers
    have detailed statutory consumer protections regarding the accuracy and
    sale of their information.
        This Committee Majority staff report focuses on data broker
    activities that are subject to far less statutory consumer protection:
    the collection and sale of consumer data specifically for marketing
    purposes. In this arena, data brokers operate with minimal
    transparency.
        One of the primary ways data brokers package and sell data is by
    putting consumers into categories or ``buckets'' that enable
    marketers--the customers of data brokers--to target potential and
    existing customers. Such practices in many cases may serve the
    beneficial purpose of providing consumers with products and services
    specific to their interests and needs. However, it can become a
    different story when buckets describing consumers using financial
    characteristics end up in the hands of predatory businesses seeking to
    identify vulnerable consumers, or when marketers use consumers' data to
    engage in differential pricing.
        Further, the data breaches that have repeatedly occurred in this
    industry and with others in the data economy underscore the public's
    need to understand the volume and specificity of data consumer
    information held by data brokers.
        In light of these issues and the Chairman's longstanding commitment
    to consumer protection and privacy matters, the Committee opened an
    inquiry last October to shine a light on how the data broker industry
    operates, with a specific focus on nine representative companies that
    sell consumer data for marketing purposes. The Committee's inquiry
    sought answers to four basic questions:

       What data about consumers does the data broker industry
            collect?

       How specific is this data?

       How does the data broker industry obtain consumer data?

       Who buys this data and how is it used?

        In response to the Committee's inquiries, the companies queried
    provided documents and narrative explanations. While some of the
    companies have been completely responsive to this inquiry, several
    major data brokers to date have remained intent on keeping key aspects
    of their operations secret from both the Committee and the general
    public.
        Based on review of the company responses and other publicly
    available information, this Committee Majority staff report finds:

      (1)  Data brokers collect a huge volume of detailed information on
            hundreds of millions of consumers. Information data brokers
            collect includes consumers' personal characteristics and
            preferences as well as health and financial information. Beyond
            publicly available information such as home addresses and phone
            numbers, data brokers maintain data as specific as whether
            consumers view a high volume of YouTube videos, the type of car
            they drive, ailments they may have such as depression or
            diabetes, whether they are a hunter, what types of pets they
            have; or whether they have purchased a particular shampoo
            product in the last six months;

      (2)  Data brokers sell products that identify financially vulnerable
            consumers. Some of the respondent companies compile and sell
            consumer profiles that define consumers in categories or
            ``score'' them, without consumer permission or knowledge of the
            underlying data. A number of these products focus on consumers'
            financial vulnerability, carrying titles such as ``Rural and
            Barely Making It,'' ``Ethnic Second-City Strugglers,''
            ``Retiring on Empty: Singles,'' ``Tough Start: Young Single
            Parents,'' and ``Credit Crunched: City Families.'' One company
            reviewed sells a marketing tool that helps to ``identify and
            more effectively market to under-banked consumers'' that the
            company describes as individuals including ``widows'' and
            ``consumers with transitory lifestyles, such as military
            personnel'' who annually spend millions on payday loans and
            other ``non-traditional'' financial products. The names,
            descriptions and characterizations in such products likely
            appeal to companies that sell high-cost loans and other
            financially risky products to populations more likely to need
            quick cash, and the sale and use of these consumer profiles
            merits close review;

      (3)  Data broker products provide information about consumer offline
            behavior to tailor online outreach by marketers. While
            historically, marketers used consumer data to locate consumers
            to send catalogs and other marketing promotions through the
            mail, or contact via telephone, increasingly the information
            data brokers sell marketers about consumers is provided
            digitally. Data brokers provide customers digital products that
            target online outreach to a consumer based on the dossier of
            offline data collected about the consumer;

      (4)  Data brokers operate behind a veil of secrecy. Data brokers
            typically amass data without direct interaction with consumers,
            and a number of the queried brokers perpetuate this secrecy by
            contractually limiting customers from disclosing their data
            sources. Three of the largest companies--Acxiom, Experian, and
            Epsilon--to date have been similarly secretive with the
            Committee with respect to their practices, refusing to identify
            the specific sources of their data or the customers who
            purchase it. Further, the respondent companies' voluntary
            policies vary widely regarding consumer access and correction
            rights regarding their own data--from virtually no rights to
            the more fulsome policy reflected in the new access and
            correction database developed by Acxiom.
    I. Background
        While there is no statutory definition for ``data brokers,'' the
    Federal Trade Commission (FTC) has defined this term to include
    ``companies that collect information, including personal information
    about consumers, from a wide variety of sources for the purpose of
    reselling such information to their customers for various purposes,
    including verifying an individual's identity, differentiating records,
    marketing products, and preventing financial fraud.'' \1\ This report
    relies on the FTC definition of data broker, and focuses specifically
    on the collection and sale of consumer information for the purpose of
    marketing.
    ---------------------------------------------------------------------------
        \1\ Federal Trade Commission, Protecting Consumer Privacy in an Era
    of Rapid Change, at 68 (Mar. 2012) (hereafter ``FTC Privacy Report'').
    These companies may also be referred to as ``information resellers.''
    See Government Accountability Office, Information Resellers: Consumer
    Privacy Framework Needs to Reflect Changes in Technology and the
    Marketplace, GAO-13-663 (Sept. 2013) (hereafter ``GAO Information
    Resellers Report'').
    ---------------------------------------------------------------------------
        The practice of collecting and selling consumer data to help
    businesses conduct marketing has existed for many decades. Long before
    the advent of the Internet, e-mail, or the mobile economy, data brokers
    developed expertise in compiling consumer data to facilitate targeted
    outreach to consumers through direct mail.\2\ Toward that end companies
    have for many years assembled information about consumers from public
    records, surveys and sweepstakes entries, to develop consumer lists for
    use by marketers in targeting mailings and phone calls.\3\
    ---------------------------------------------------------------------------
        \2\ For example, after the introduction of zip codes in 1963,
    direct mail marketing companies used zip code data to make assumptions
    about individuals, such as the kinds of magazines they read, the foods
    they ate, and political affiliations. In 1974, social scientist
    Jonathan Robbin created PRIZM (Potential Rating Index for Zip Markets),
    which combined ZIP Codes with census data and consumer surveys to help
    target direct mail marketing. Michael J. Weiss, The Clustering of
    America (1988).
        \3\ Financial Times, Data Brokers Compile Lists to Map Your Life
    before you Reach the Cradle (June 13, 2013).
    ---------------------------------------------------------------------------
        What is new in recent years, however, is the tremendous increase in
    the volume and quality of digitally recorded data--and the
    technological advances that have facilitated access to, storage,
    analysis, and sharing of this information.\4\ Information that was
    previously public but required a trip to places such as a library or
    courthouse to retrieve can now be instantaneously accessible to
    millions when posted on the Internet. At the same time, consumers
    increasingly are expanding their digital data footprint as they go
    about their daily routines.
    ---------------------------------------------------------------------------
        \4\ See Kenneth Cukier and Viktor Mayer-Schhoenberger, The Rise of
    Big Data: How It's Changing the Way We Think about the World, Foreign
    Affairs, at 28-40 (May/June 2013) (noting that while in 2000 ``only one
    quarter of all the world's stored information was digital'' and ``the
    rest was preserved on paper, film, and other analog media,'' by 2013
    ``less than two percent of all stored information is non-digital'');
    Charles Duhigg, The Power of Habit: Why We Do What We Do in Life and
    Business, Chapter 7; Software & Information Industry Association, Data-
    Driven Innovation: A Guide for Policymakers--Understanding and Enabling
    the Economic and Social Value of Data, at 1-9 (2013); Organization for
    Economic Co-operation and Development, The Evolving Privacy Landscape:
    30 Years After the OECD Privacy Guidelines, OECD Digital Economy
    Papers, No. 176, at 16-18 (2011) (online at http://dx.doi.org/10.1787/
    5kgf09z90c31-en).
    ---------------------------------------------------------------------------
        For example, millions of consumers are now using computers, smart
    phones, and tablets to make purchases, plan trips, and research
    personal financial and health questions, among other activities.\5\
    These digitally recorded decisions provide insights into the consumer's
    habits, preferences, and financial and health status. A wide and ever-
    expanding variety of other routine activities also are becoming part of
    consumers' digital trail--from viewing decisions regarding video
    streaming services \6\ to online searches and mapping requests \7\ to
    personal fitness monitoring through wearable devices \8\ to stocking
    ``smart'' refrigerators that record food purchases and monitor
    expiration dates.\9\
    ---------------------------------------------------------------------------
        \5\ See Pew Internet & American Life Project, Broadband and
    Smartphone Adoption Demographics (Aug. 27, 2013) (online at http://
    www.pewinternet.org/Infographics/2013/Broadband-and-smartphone-
    adoption.aspx) (``Today 56 percent of American adults own a smartphone
    or some kind, compared with 70 percent who have broadband at home'');
    Pew Internet & American Life Project, Cell Phone Activities 2012.
        \6\ Salon.com, How Netflix is Turning Viewers into Puppets (Feb. 1,
    2013).
        \7\ Time Magazine, Data Mining: How Companies Now Know Everything
    About You (Mar. 10, 2011).
        \8\ Entrepreneur, How Fitbit Is Cashing In on the High-Tech Fitness
    Trend (July 27, 2012).
        \9\ NPR, The Salt, The `Smart Fridge' Finds the Lost Lettuce, for A
    Price (May 4, 2012).
    ---------------------------------------------------------------------------
        Amid this continuing growth in consumers' digital records, there
    has been a ``vast increase'' in the number and types of companies that
    collect and sell consumer data.\10\ No comprehensive list of such
    companies currently exists, but estimates indicate the data broker
    industry consists of many hundreds of members.\11\ Media accounts and
    other reports in recent years have provided glimpses into some of the
    ways data brokers are obtaining, compiling, and sharing consumer
    data.\12\ However, data broker activities have remained largely
    obscured from public view because these companies generally do not
    collect data directly from consumers and many of their practices lie
    outside the ambit of Federal consumer protection laws.
    ---------------------------------------------------------------------------
        \10\ GAO Information Resellers Report, supra n.1, at 34.
        \11\ GAO Information Resellers Report, supra n.1, at 5 (noting:
    ``Several privacy related organizations and websites maintain lists of
    data brokers--for example, Privacy Rights Clearinghouse lists more than
    250 on its website--but none of these lists claim to be comprehensive.
    The Direct Marketing Association, which represents companies and
    nonprofits that use and support data-driven marketing, maintains a
    proprietary membership list, which it says numbers about 2,500
    organizations (although that includes retailers and others that
    typically would not be considered information resellers)'').
        \12\ E.g., New York Times, You for Sale: Mapping, and Sharing, the
    Consumer Genome (June 16, 2012) (focusing on data broker Acxiom and
    reporting that the company maintains about 1,500 data points per
    consumer that include information on the size of home loans, household
    incomes, or whether a household is concerned about certain health
    conditions).
    ---------------------------------------------------------------------------
    A. GAO Review of Privacy Laws Applicable to Data Brokers
        In light of these changes regarding the availability and sale of
    consumer information, Chairman Rockefeller requested that the
    Government Accountability Office (GAO) review the privacy laws
    applicable to consumer information collected and sold for marketing
    purposes.\13\ In response, in September 2013, GAO released a report
    concluding that there is no one comprehensive privacy law governing
    information collection and sale of consumer data by private sector
    companies \14\ and that further, existing privacy laws have ``limited
    scope'' regarding the collection, use, and sale of consumer data for
    marketing purposes.\15\
    ---------------------------------------------------------------------------
        \13\ GAO Information Resellers Report, supra n. 1 at 1. To address
    these objectives, GAO analyzed laws, studies and other documents, and
    interviewed representatives of Federal agencies, the date broker
    industries, consumer and privacy groups, and others. Id.
        \14\ GAO Information Resellers Report, supra n.1, at 7.
        \15\ GAO Information Resellers Report, supra n.1, at 16.
    ---------------------------------------------------------------------------
        Specifically, GAO found that under current law, consumers have no
    Federal statutory right to know what information data brokers have
    compiled about them for marketing purposes, or even which data brokers
    hold any such information. Further, with the exception of information
    used for pre-screened offers of credit and insurance,\16\ consumers
    generally do not have the right to control what personal information is
    collected, maintained, used, and shared about them--even where such
    information concerns personal or sensitive matters about an
    individual's physical and mental health. In addition, no Federal law
    provides consumers with the right to correct inaccuracies in the data
    or assumptions made by data brokers on their own profiles.\17\
    ---------------------------------------------------------------------------
        \16\ 15 U.S.C. Sec. 1681b(c). The Fair Credit Reporting Act
    provides consumers opt-out rights for such information. 15 U.S.C.
    Sec. 1681b(e).
        \17\ GAO Information Resellers Report, supra n.1, at 16-19.
    ---------------------------------------------------------------------------
        GAO does note that a ``more narrowly tailored'' set of laws
    concerning private sector use of consumer information exists which
    ``apply for specific purposes, in certain situations, to certain
    sectors, or to certain types of entities.'' \18\ For example, the Fair
    Credit Reporting Act imposes a number of obligations on consumer
    reporting agencies (CRAs), which are entities that assemble consumer
    information into ``consumer reports,'' \19\ commonly referred to as
    credit reports, for use by issuers of credit and insurance, and by
    employers, landlords, and others in making eligibility decisions
    affecting consumers. The FCRA prohibits the sale of consumer reports
    for other than a permissible purpose. The FCRA does not allow the use
    of credit reports for marketing purposes, though marketing via pre-
    screened offers of credit and insurance is allowed, where it is a firm
    offer of credit and consumers are provided the opportunity to opt-out
    of such offers in the future.\20\
    ---------------------------------------------------------------------------
        \18\ GAO Information Resellers Report, supra n.1, at 7.
        \19\ A ``consumer report'' means any written, oral, or other
    communication of any information by a consumer reporting agency bearing
    on a consumer's credit worthiness, credit standing, credit capacity,
    character, general reputation, personal characteristics, or mode of
    living which is used or expected to be used or collected in whole or in
    part for the purpose of making eligibility decisions. 15 U.S.C.
    Sec. 1681a (d).
        \20\ 15 U.S.C. Sec. 1681b (e). Pre-screened offers of credit or
    insurance--sometimes called ``pre-approved'' offers--are sent to
    consumers unsolicited, usually by mail. They are based on information
    in consumers' credit reports that indicates that the individuals
    receiving the offer meet the criteria set by the company making the
    offer. The FCRA limits the circumstances in which consumer reports can
    be used to make pre-screened offers, and provides that all such offers
    must include a notice of consumers' right to stop receiving future pre-
    screened offers.
    ---------------------------------------------------------------------------
        GAO also found that current Federal law does not fully address the
    use of new technologies, despite the fact that social media, web
    tracking, and mobile devices allow for faster, cheaper and more
    detailed data collection and sharing among resellers and private-sector
    entities.\21\
    ---------------------------------------------------------------------------
        \21\ GAO Information Resellers Report, supra n.1, at 19.
    ---------------------------------------------------------------------------
        Appendix I at the end of this report provides a detailed summary of
    the FCRA, and other existing Federal privacy laws and their
    applicability to the collection and dissemination of consumer data by
    data brokers.
    B. Voluntary Industry Guidelines
        The direct advertising and data broker industries have consistently
    asserted that Congress should defer to industry self-regulation rather
    than enacting broader consumer privacy legislation.\22\ Industry
    members assert that their interest in avoiding reputational harm
    motivates them to engage in strong self-regulation and provides
    consumers with meaningful privacy protections.\23\ Privacy advocates,
    on the other hand, have argued that self-regulation does not adequately
    addresses concerns regarding the potential for consumer abuse in this
    arena.\24\
    ---------------------------------------------------------------------------
        \22\ See, e.g., Senate Committee on Commerce, Science and
    Transportation, The Need for Privacy Protections: Is Industry Self-
    Regulation Adequate, 112th Cong. (2012) (S. Hrg. 112-785).
        \23\ Id.
        \24\ Id.
    ---------------------------------------------------------------------------
        Industry trade associations that include data brokers have
    identified voluntary best practice guidelines for its members.\25\ For
    example, the Direct Marketing Association (DMA) issued Guidelines for
    Ethical Business Practice that include principles of conduct, including
    recommendations on how members should handle and protect consumer
    information. Specifically, these guidelines provide that the members
    should offer notice of its policy ``regarding the rental, sale,
    exchange or transfer of data about them'' and the ability to opt-out of
    inclusion on a mailing list or other marketing methods,\26\ as well as
    specific ways to handle health information.\27\ A number of the
    companies that are the subject of the Committee's inquiry are DMA
    members and have agreed to abide by the association's guidelines.
    ---------------------------------------------------------------------------
        \25\ Direct Marketing Association, Direct Marketing Association
    Guidelines for Ethical Business Practice (May 2011).
        \26\ Id. at 18-19.
        \27\ Id. at 20 (Article #33: Collection, Use, and Transfer of
    Health-Related Data).
    ---------------------------------------------------------------------------
        In addition, the Digital Advertising Alliance, the trade
    association of the online advertising industry, has implemented Ad
    Choice, a program that allows consumers some control over their online
    information as it is used for online behavioral advertising.\28\
    ---------------------------------------------------------------------------
        \28\ See AdChoices website at http://www.youradchoices.com/
    (accessed Dec. 13, 2013).
    ---------------------------------------------------------------------------
    C. Privacy and Consumer Protection Issues Regarding Data Broker
            Practices
        Privacy and information experts have raised concerns regarding data
    broker practices. These include issues relating to consumer privacy
    rights with respect to the use of their own personal information; the
    potential harmful ways consumer profiles can be used; the extent to
    which data broker products categorize consumers based on financial
    characteristics are serving as substitutes or supplements for the
    consumer report products that are more highly regulated; and the
    vulnerability of data broker computer systems to a data breach.
        Privacy Issues. One major issue raised by privacy advocates is that
    data brokers operate without transparency to consumers. Since data
    brokers generally collect information without the consumers' knowledge,
    consumers have limited means of knowing how the companies obtain their
    information, whether it's accurate, and for what purposes they are
    using it.\29\
    ---------------------------------------------------------------------------
        \29\ See FTC Privacy Report, supra n.1, at 61-69.
    ---------------------------------------------------------------------------
        Privacy experts further point out that consumers currently lack
    control over the compilation and use of data that may contain intimate
    details about them. For example, the Financial Times reported one data
    broker is selling lists of addresses and names of consumers suffering
    from conditions including cancer, diabetes, and depression, and the
    medications used for those conditions; another is offering lists naming
    consumers, their credit scores, and specific health conditions.\30\
    Citing these and other examples, FTC Commissioner Julie Brill recently
    raised the question: ``What damage is done to our individual sense of
    privacy and autonomy in a society in which information about some of
    the most sensitive aspects of our lives is available for analysts to
    examine without our knowledge or consent, and for anyone to buy if they
    are willing to pay the going price.'' \31\
    ---------------------------------------------------------------------------
        \30\ Financial Times, Companies Scramble for Consumer Data (June
    12, 2013).
        \31\ Keynote Address by Commissioner Julie Brill, Reclaim Your
    Name, 23rd Computers Freedom and Privacy Conference (June 26, 2013).
    ---------------------------------------------------------------------------
        Data brokers argue that the creation and use of consumer profiles
    for marketing does not pose substantial privacy issues for consumers
    because this information cannot be used in decisions affecting a
    consumer's eligibility for credit or insurance, or in employment or
    housing decisions. Rather, such profiling benefits consumers by
    facilitating targeted outreach about products and services that are
    relevant to consumers' specific interests, needs, or preferences.\32\
    ---------------------------------------------------------------------------
        \32\ See GAO Information Resellers Report, supra n.1, at 40-41
    (summarizing industry arguments on benefits of information sharing for
    consumers).
    ---------------------------------------------------------------------------
        However, an incident involving Target highlights how marketing
    based on consumer profiling may pose unintended privacy issues.
    According to a New York Times report, Target developed a pregnancy
    prediction model to enable the company to target marketing of certain
    products to expectant mothers. In one case, Target sent maternity and
    baby clothes coupons to the household of a teenage girl who, through
    use of this model, they predicted was pregnant. These mailings alerted
    the girl's father that she was pregnant--before she had told him the
    news herself.\33\
    ---------------------------------------------------------------------------
        \33\ Charles Duhigg, The Power of Habit, Chapter 7.
    ---------------------------------------------------------------------------
        Potentially Harmful Uses of Data Broker Products. Some consumer
    advocates also have noted that targeted marketing means consumers have
    unequal access to helpful information, offers, and benefits, and have
    questioned the fairness of this result when the basis for such
    targeting are consumer profiles constructed without the consumer's
    knowledge, input, or permission--and that in fact may not be accurate.
    World Privacy Forum Executive Director Pam Dixon has elaborated as
    follows:

            Two people going to one website or one retail store could
            already be offered entirely different opportunities, services,
            or benefits based on their modern permanent record comprised of
            the previous demographic, behavioral, transactional, and
            associational information accrued about them.\34\
    ---------------------------------------------------------------------------
        \34\ Testimony of Pam Dixon, Executive Director, World Privacy
    Forum, House Committee on Energy and Commerce, Subcommittee on
    Communications, Technology, and the Internet (Nov. 19, 2009). See also
    Dwork & Mulligan, It's Not Privacy, and It's Not Fair, 66
    Stan.L.Rev.Online 35 (Sept. 3, 2013) (arguing that increasing use of
    consumer profiles by marketers and others could inadvertently result in
    social discrimination where unfair or inaccurate profiles are created
    and reinforced without consumers' input).

        A related issue is whether ready access to increasingly detailed
    consumer data lends to differential pricing. Indeed, several recent
    media accounts have described cases where website retailers offered
    consumers different prices for the same product based on analysis of
    customer characteristics. For example, a Wall Street Journal report
    found that office supply retailers have varied prices displayed for the
    same product based on customers'geolocation and other factors.\35\ In
    another example the travel website Orbitz reportedly showed costlier
    travel options to visitors whose browsers indicated they were using Mac
    computers, because this brand was assumed to be used by more affluent
    consumers.\36\ While it does not appear from these news accounts that
    third party data broker products were involved with these particular
    examples, these reports underscore that targeting the most ``relevant''
    information to consumers does not always equate to providing consumers
    information about the best deals.
    ---------------------------------------------------------------------------
        \35\ Wall Street Journal, Websites Vary Prices, Deals Based on
    Users' Information (Dec. 24, 2012).
        \36\ Wall Street Journal, On Orbitz, Mac Users Steered to Pricier
    Hotels (Aug. 23, 2012).
    ---------------------------------------------------------------------------
        A few recent cases also have highlighted the value of consumer
    profiles to predatory businesses seeking to target vulnerable
    consumers. In October of 2012, the FTC alleged that the credit
    reporting division of Equifax improperly sold more than 17,000
    ``prescreened'' lists of consumers who were late on their mortgage
    payments to Direct Lending Source, Inc. and its affiliate companies.
    Direct Lending subsequently resold some of these lists to third
    parties, who ``used the lists to pitch loan modification and debt
    relief services to people in financial distress,'' including to
    companies that had been the subject of prior law enforcement
    investigations.\37\
    ---------------------------------------------------------------------------
        \37\ The FTC charged Equifax with a host of FCRA violations,
    including that it provided credit report information to entities that
    lacked a permissible purpose. The FTC further charged that Equifax's
    failure to employ appropriate measures to control access to sensitive
    consumer information was unfair, in violation of Section 5 of the FTC
    Act. Direct Lending was also charged with violating Section 5 and the
    FCRA for, among other reasons, obtaining pre-screened lists without
    having a permissible purpose and failing to maintain reasonable
    procedures to ensure that prospective users to whom it had resold the
    reports had a permissible purpose. Equifax and Direct Lending combined
    paid nearly $1.6 million to resolve charges that they violated the Fair
    Credit Reporting and the FTC Act. Press Release, FTC Settlements
    Require Equifax to Forfeit Money Made by Allegedly Improperly Selling
    Information About Millions of Consumers Who Were Late on Their
    Mortgages, Federal Trade Commission (Oct. 10, 2012) (available at
    http://www.ftc.gov/news-events/press-releases/2012/10/ftc-settlements-
    require-equifax-forfeit-money-made-allegedly).
    ---------------------------------------------------------------------------
        In June 2011, Teletrack, Inc. paid a $1.8 million penalty to settle
    FTC charges that it sold lists of consumers who had previously applied
    for non-traditional credit products, including payday loans, to third
    parties--primarily pay day lenders and sub-prime auto lenders--that
    wanted to use the information to target potential customers. The FTC
    alleged that the information Teletrack sold constituted consumer
    reports and could not be sold for marketing.\38\
    ---------------------------------------------------------------------------
        \38\ Press Release, Consumer Reporting Agency to Pay $1.8 Million
    for Fair Credit Reporting Act Violations, Federal Trade Commission
    (June 27, 2011) (available at http://www.ftc.gov/news-events/press-
    releases/2011/06/consumer-reporting-agency-pay-18-million-fair-credit-
    reporting).
    ---------------------------------------------------------------------------
        Similarly, the New York Times reported in 2007 that data broker
    InfoUSA had sold lists of consumers with titles such as ``Suffering
    Seniors'' to individuals who then used the lists to target elderly
    Americans with fraudulent sales pitches.\39\
    ---------------------------------------------------------------------------
        \39\ New York Times, Bilking the Elderly, with a Corporate Assist
    (May 20, 2007).
    ---------------------------------------------------------------------------
        Use of Predictive Scoring Products for Marketing. Consumer
    advocates have suggested that that use of scoring products that predict
    consumer behavior merits further scrutiny. Companies reportedly are
    using predictive scoring products for a range of purposes, such as
    assessing which customers will receive special offers, or looking at
    credit risks associated with certain mortgage applications--but
    consumers are generally not aware of these products and do not have
    access to the data underlying them. The FTC plans to hold a hearing in
    the Spring to examine the use of these products, including the types of
    consumer protections that should be provided.\40\
    ---------------------------------------------------------------------------
        \40\ Press Release, FTC to Host Spring Seminars on Emerging
    Consumer Privacy Issues, Federal Trade Commission (Dec. 2, 2013)
    (available at http://www.ftc.gov/news-events/press-releases/2013/12/
    ftc-host-spring-seminars-emerging-consumer-privacy-issues).
    ---------------------------------------------------------------------------
        Data Breaches. Finally, a series of incidents over recent years
    have underscored that data brokers--like others who collect and
    maintain sensitive consumer data--are vulnerable to data breaches.\41\
    Privacy advocates emphasize the need to make sure appropriate
    protections against data breach are in place for consumer data.\42\
    ---------------------------------------------------------------------------
        \41\ Wall Street Journal, Breach Brings Scrutiny (April 5, 2011);
    United States v. ChoicePoint, Inc., No. 1 06-CV-0198 (N.D. Ga. filed
    Jan. 30, 2006); Press Release, Agency Announces Settlement of Separate
    Actions Against Retailer TJX, and Data Broker Reed Elsevier and Seisint
    for Failing to Provide Adequate Security of Consumer Data, Federal
    Trade Commission (Mar. 27, 2008) (available at http://www.ftc.gov/news-
    events/press-releases/2008/03/agency-announces-settlement-separate-
    actions-against-retailer-tjx).
        \42\ FTC Privacy Report, supra n.1, at 24-26.
    ---------------------------------------------------------------------------
    D. Recent FTC and Congressional Reviews of the Data Broker Industry
        Several recent inquiries have explored data broker practices and
    related privacy and consumer protection issues. The FTC has held a
    series of workshops, opened a formal inquiry, written reports, and
    proposed principles for industry self-regulation on how companies
    collect, use and protect consumer data. In March of 2012, the
    Commission released a comprehensive report on protecting consumer's
    data privacy in light of the rapid advances of technological change.
    The Commission recommended that Congress consider enacting baseline
    privacy legislation across industry sectors. The report also called for
    greater transparency in the data broker and advertising industries.\43\
    ---------------------------------------------------------------------------
        \43\ FTC Privacy Report, supra n.1.
    ---------------------------------------------------------------------------
        The 2012 report identified the data broker industry as one of the
    Commission's main focuses in implementing an enhanced privacy
    protection framework.\44\ In examining the privacy implications of the
    data broker industry, the FTC has also noted how advances in
    technologies have rapidly allowed for the aggregating and selling of
    consumer information that combines data reflecting consumers' online
    activities as well as ``offline'' information that has been accessible
    since before the Internet.\45\
    ---------------------------------------------------------------------------
        \44\ FTC Privacy Report, supra n. 1, at 68, 72-73.
        \45\ FTC Privacy Report, supra n.1.
    ---------------------------------------------------------------------------
        In December 2012, the FTC opened an inquiry pursuant to its
    authority under Section 6(b) of the FTC Act to examine privacy
    implications of the data broker industry's collection and use of
    consumer data.\46\ This investigation is underway and will result in a
    study and recommendations on whether, and how, the data broker industry
    could improve its privacy practices.\47\
    ---------------------------------------------------------------------------
        \46\ Press Release, FTC to Study Data Broker Industry's Collection
    and Use of Consumer Data, Federal Trade Commission (Dec. 18, 2012)
    (available at http://www.ftc.gov/news-events/press-releases/2012/12/
    ftc-study-data-broker-industrys-collection-use-consumer-data). Three of
    the nine companies the FTC is examining are included in this inquiry.
        \47\ Id.
    ---------------------------------------------------------------------------
        In addition to the FTC's ongoing work, in the summer of 2012, a
    bipartisan group of eight lawmakers led by Reps. Ed Markey (D-MA) and
    Joe Barton (R-TX) opened an inquiry into how data brokers collect and
    use consumer's personal data.\48\ In November 2012 the lawmakers
    concluded their inquiry, finding that, ``Many questions about how these
    data brokers operate have been left unanswered, particularly how they
    analyze personal information to categorize and rate consumers.'' \49\
    ---------------------------------------------------------------------------
        \48\ New York Times, Congress to Examine Data Sellers (July 24,
    2012).
        \49\ AdWeek, Lawmakers Come Up Short in Data Brokers Probe (Nov. 8,
    2012).
    ---------------------------------------------------------------------------
    II. Committee Investigation
        In light of the gaps in public knowledge regarding data broker
    practices, in October 2012 the Committee opened an inquiry into the
    data broker industry to help the Committee better understand industry
    practices and the information data brokers collect and share about
    American consumers for marketing purposes. To obtain a snapshot of
    industry practices, the Committee focused on nine companies that
    collect and sell consumer information: Acxiom, Experian, Epsilon, Reed
    Elsevier, Equifax, TransUnion, Rapleaf, Spokeo, and Datalogix.
        The companies include the three major credit reporting companies--
    Experian, Equifax, and TransUnion--each of which also sells consumer
    data for marketing purposes; and well-established targeted marketing
    companies--Acxiom, Epsilon, Reed Elsevier, and Datalogix--that maintain
    data on millions of consumers. In addition, the sample reflects
    companies with discrete focus on major data collection techniques and
    marketing uses: Rapleaf, which in 2010 specialized in collecting public
    data from social media sites, and Spokeo, which offers individual
    consumer look-up services.
        On October 9, 2012, Chairman Rockefeller sent letters to the nine
    data broker companies requesting information about each company's data
    collection and use practices.\50\ The letters highlighted four basic
    questions:
    ---------------------------------------------------------------------------
        \50\ Senate Committee on Commerce, Science, and Transportation,
    Rockefeller Seeks Information About Data Brokers' Practices (Oct. 10,
    2012).

    ---------------------------------------------------------------------------
       What data about consumers does the industry collect?

       How specific is the data the industry collects about
            consumers?

       How does the industry obtain this data?

       Who buys the data and how is it used?

        All nine companies provided narrative and documentary responses to
    the Committee letter. Some of these companies were forthcoming
    regarding all questions. For example, Equifax's response included a
    list of the specific entities that are data sources and customers they
    provided after clearing this disclosure with each entity. However,
    several large data brokers--Acxiom, Experian, and Epsilon--to date have
    refused to identify to the Committee their specific data sources.
    Instead, they have described general categories of sources--such as
    ``surveys'' and ``public records.''
        One of the main consumer-facing data sources identified in the
    company responses is websites.\51\ In an attempt to learn more about
    consumer information data brokers obtain from websites, on September
    24, 2013, Chairman Rockefeller sent letters to twelve popular personal
    finance, health, and family-focused websites whose privacy policies
    allowed for sharing with third parties and that also indicate they
    collected consumer data through ``surveys,'' ``sweepstakes,'' and
    ``questionnaires,'' which were identified by data brokers to the
    Committee as sources of consumer information. The letters asked whether
    the websites shared information with third parties, and if so, with
    whom.
    ---------------------------------------------------------------------------
        \51\ For example, one company noted ``there are over 250,000
    websites who state in their privacy policy that they share data with
    other companies for marketing and/or risk mitigation purposes.'' Acxiom
    response to Chairman John D. Rockefeller IV (Mar. 26, 2013).
    ---------------------------------------------------------------------------
        On October 23, 2013, following press reports alleging that an
    Experian subsidiary sold data to an alleged identity theft
    operation,\52\ Chairman Rockefeller sent a second letter to Experian
    requesting information about the incident and the company's customer
    vetting practices, and pressing the company to provide the Committee a
    complete list of its data purchasers and sources.\53\ Experian to date
    has not provided the Committee either its specific data sources or its
    data purchasers.
    ---------------------------------------------------------------------------
        \52\ Krebsecurity.com, Experian Sold Consumer Data to ID Theft
    Service (Oct. 20, 2013); PCMag.com, Experian Confirms Subsidiary's Data
    Sold to Identity Theft Operation (Oct. 22, 2013).
        \53\ Senate Committee on Commerce, Science, and Transportation,
    Rockefeller's Latest Letter to Experian Requests Information on
    Reported Data Disclosures to Identity Theft Services (Oct. 24, 2013).
    ---------------------------------------------------------------------------
        In the course of the inquiry, Committee Majority staff reviewed
    thousands of pages of documents produced by respondent companies
    including narrative responses, company manuals and training materials,
    contracts, and marketing materials.
    III. Committee Majority Staff Findings Regarding Industry Practices
        The responses received by the Committee during this inquiry provide
    a glimpse into the operations of a large and continually evolving
    industry. The nine data brokers queried by the Committee hold a vast
    and varied amount of consumer data. Acxiom alone has ``multi-sourced
    insight into approximately 700 million consumers worldwide,'' \54\ and
    Datalogix asserts its data ``includes almost every U.S. household.''
    \55\ Some of the companies maintain thousands of data points on
    individual consumers, with one providing the Committee a list of
    approximately 75,000 individual data elements that are in its
    system.\56\ Data collected by these companies includes detailed and
    personal information including data on consumers' health and financial
    status.
    ---------------------------------------------------------------------------
        \54\ Acxiom Corp., 2013 10-K Annual Report for the Period Ending
    March 31, 2013 (filed May 29, 2013).
        \55\ http://www.datalogix.com/about/. The other companies queried
    by the Committee hold data on millions more. For example, Rapleaf
    claims to have at least one data point for over 80 percent of U.S.
    consumer e-mail addresses. http://www.rapleaf.com/why-rapleaf/.
        \56\ Equifax Response to the Committee (Aug, 23, 2013) (EFX PROD6
    000010-001361). Acxiom claims to have ``over 3,000 propensities for
    nearly every U.S. consumer.'' Acxiom Corporation (2013). Form 10K 2013.
    ---------------------------------------------------------------------------
        One of the main types of products offered for sale by respondent
    data brokers are ``modeled'' profiles of consumers that categorize
    consumers, or that ``score'' likelihood for certain behaviors, based on
    inferences drawn from consumer data. The respondent companies offer for
    sale a number of modeled products that group consumers based on their
    degree of financial vulnerability, such as ``Rural and Barely Making
    It,'' or ``Ethnic Second-City Strugglers.'' The Committee has no
    evidence that any of the specific queried companies are currently
    selling such products for inappropriate purposes. However, the creation
    and use of these types of products merits close scrutiny, particularly
    in light of their value to predatory businesses that seek to target
    consumers who are economically fragile.\57\
    ---------------------------------------------------------------------------
        \57\ See infra Section III.B.2(a) discussing consumer protection
    issues relating to such lists.
    ---------------------------------------------------------------------------
        Data brokers continue to develop new approaches to facilitate
    marketing outreach to consumers online. Some data brokers now offer
    products that enable marketers to tailor online advertisements based on
    off-line data about the consumer provided by the data broker.
        As they conduct these various activities, data brokers remain
    largely invisible to the consumers whose information populates their
    databases. Consumers have limited means of learning that these
    companies hold their data, and respondent companies provide consumers
    rights of access and control regarding their data that vary widely by
    companies. Several of the largest respondent companies have been
    similarly secretive with the Committee, refusing to identify specific
    sources of their data, and specific customers who purchase it. And
    provisions in company contracts with customers perpetuate this secrecy
    by placing restrictions on customer disclosures regarding data sources.
        Below is a detailed discussion of the Committee Majority Staff's
    findings regarding the information companies have provided to date
    regarding the collection, compilation, and sale of consumer data.
    A. Data Broker Collection of Consumer Data
        The information the Committee obtained in this inquiry regarding
    the nature and specificity of information collected by data brokers
    paints a picture consistent with the following observation offered by
    one of the respondent companies: ``The amount of available data has
    created an unprecedented amount of information about consumers: Their
    attitudes and behaviors, perceptions about brands, what they're buying
    and even where they happen to be at the moment the data is captured.''
    \58\
    ---------------------------------------------------------------------------
        \58\ Epsilon Targeting, Data Intelligence (EPS-COM-002026).
    ---------------------------------------------------------------------------
    1. Nature of Data Collected
        Much of the information data brokers collect is demographic, such
    as consumers' names, addresses, telephone numbers, e-mail addresses,
    gender, age, marital status, presence of and ages of children in
    household, education level, profession, income level, political
    affiliation, and information about their homes and other property. In
    addition, data brokers collect many other categories of information
    about individuals. Some examples include:

       Consumer purchase and transaction information, including
            whether a purchase was made through a catalog, online, or in-
            store, as well as the frequency of such purchases;\59\
    ---------------------------------------------------------------------------
        \59\ Experian Narrative Response to Senate Commerce Committee (Dec.
    14, 2013); Datalogix Narrative Response to Senate Commerce Committee
    (Nov. 16, 2013).

       Consumers' available methods of payment, including type of
            credit card and bankcard issuance date;\60\
    ---------------------------------------------------------------------------
        \60\ Epsilon, TotalSource Plus Data Enhancement Element Listing
    (EPS-COM-5-25); Acxiom, The Power of Insight: Consumer Data Products
    Catalog (ACXM 190); Lexis Nexis, MarketView Demographic Data Dictionary
    (REP001397-1403).

       Purchase of automobiles, including makes and models of cars
            purchased or whether a consumer prefers new or used cars;\61\
    ---------------------------------------------------------------------------
        \61\ Acxiom, The Power of Insight: Consumer Data Products Catalog
    (ACXM 173-226); Lexis Nexis, MarketView Demographic Data Dictionary
    (REP001397-1403).

       Health conditions. One company collects data on whether
            consumers suffer from particular ailments, including Attention
            Deficit Hyperactivity Disorder, anxiety, depression, diabetes,
            high blood pressure, insomnia, and osteoporosis, among
            others;\62\ another keeps data on the weights of individuals in
            a household.\63\ An additional company offers for sale lists of
            consumers under 44 different categories of health conditions,
            including obesity, Parkinson's disease, Multiple Sclerosis,
            Alzheimer's disease, and cancer, among others;\64\
    ---------------------------------------------------------------------------
        \62\ Epsilon, TotalSource Plus Data Enhancement Element Listing
    (EPS-COM-16). Epsilon has provided that it collects data about health
    ailments solely through its ``Shoppers Voice'' survey through which
    consumers ``self-report'' data, which is described in more detail in
    Section III.A.2.d.
        \63\ Acxiom, The Power of Insight: Consumer Data Products Catalog
    (ACXM 184).
        \64\ Experian, List Services Catalog (EXP002569). Experian provides
    its catalog, which contains more detail about element listings on its
    website (available at http://www.experian.com/assets/data-university/
    brochures/ems-list-services-catalog.pdf).

       Social media activity, including the number of a consumer's
            friends and followers, and whether they view YouTube
            videos.\65\
    ---------------------------------------------------------------------------
        \65\ Acxiom, The Power of Insight: Consumer Data Products Catalog
    (ACXM 173-206); Acxiom Narrative Response to Senate Commerce Committee
    at 7 (Mar. 1, 2013); and Acxiom, Acxiom Predictive Scores for Social
    Media (ACXM 473).

        The specificity of consumer data that brokers collect, maintain,
    and share varies depending on the entity. For example, TransUnion
    reported that it maintains and offers for sale primarily demographic
    data.\66\ On the other hand, Equifax maintains approximately 75,000
    individual data elements for its use in creating marketing products,
    including information as specific as whether a consumer purchased a
    particular soft drink or shampoo product in the last six months,\67\
    uses laxatives or yeast infection products;\68\ OB/GYN doctor visits
    within the last 12 months,\69\ miles traveled in the last 4 weeks,\70\
    and the number of whiskey drinks consumed in the past 30 days.\71\ Some
    companies offer ``data dictionaries'' that include more than one
    thousand potential data elements, including whether the individual or
    household is a pet owner, smokes, has a propensity to purchase
    prescriptions through the mail,\72\ donates to charitable causes, is
    active military or a veteran, holds certain insurance products
    including burial insurance or juvenile life insurance, enjoys reading
    romance novels, or is a hunter.\73\
    ---------------------------------------------------------------------------
        \66\ Letter from TransUnion to Chairman John D. Rockefeller IV
    (Dec. 14, 2012).
        \67\ Equifax Response to Senate Commerce Committee (Aug, 23, 2013)
    (EFX PROD6 000010-001361). Equifax made clear in their response that
    the individual data elements are not sold as is, but are used to create
    their products and models. Individual-level data elements are
    aggregated for use in products sold to customers. Id.
        \68\ Id.
        \69\ Id.
        \70\ Id.
        \71\ Id.
        \72\ Acxiom, The Power of Insight: Consumer Data Products Catalog
    (ACXM 173-226).
        \73\ Epsilon, TotalSource Plus Data Enhancement Element Listing
    (EPS-COM-5-25).
    ---------------------------------------------------------------------------
    2. Sources of Consumer Data
        The information the responding companies provided to the Committee
    suggests that these data brokers primarily obtain consumer data through
    five major avenues: government records and other public data; purchase
    or license from other data collectors; cooperative agreements with
    other companies; self-report by consumers, often through surveys,
    questionnaires, and sweepstakes; and social media.\74\
    ---------------------------------------------------------------------------
        \74\ In November 2013, the Attorney General of New Jersey settled a
    case that suggested web browsing activity is potentially an additional
    source of information for data brokers. The case alleged that Dataium,
    a data company, used software to track websites visited by consumers, a
    practice known as ``history sniffing,'' and then sold consumer
    preferences inferred from web browsing along with consumers' names,
    phone numbers, and e-mail addresses to Acxiom. See Office of New Jersey
    Attorney General, Acting Attorney General Announces Settlement
    Resolving Allegations Data Company Engaged in Online ``History
    Sniffing'' (Nov. 21, 2013) (available at http://nj.gov/oag/
    newsreleases13/pr20131121a.html).
    ---------------------------------------------------------------------------
        Three companies--Acxiom, Experian, and Epsilon--declined to share
    specific data sources with the Committee, citing confidentiality
    clauses in their contracts, and concerns about putting themselves at a
    competitive disadvantage among the reasons. Instead, these companies
    provided general descriptions of the types of entities that are data
    sources.
    a. Government Records and Other Publicly Available Data

        Many companies reported obtaining information from public records
    sources. These include: census data; property records; court filings,
    including criminal convictions, judgments, liens, and bankruptcies;
    driver's license records; voter registrations; telephone directories;
    real estate listings; and marriage and death certificates.\75\ Data
    brokers also obtain publicly available information from licensing
    filings including licenses for physicians and other medical
    professionals, attorneys, accountants, engineers, notaries, and real
    estate professionals, as well as hunting, fishing, and pilot
    licenses.\76\ License information can supply contact information and
    license issuance and expiration dates.\77\
    ---------------------------------------------------------------------------
        \75\ E.g., Acxiom Narrative Response to Senate Commerce Committee
    (Feb. 15, 2013).
        \76\ Id at 5.
        \77\ Id.
    ---------------------------------------------------------------------------
    b. Purchase or License

        Companies reported that several types of entities either sell or
    license them data, including:

            Retailers. Retailers provide data brokers with consumers'
            purchase information, which can include consumer name, postal
            addresses, e-mail addresses, items purchased, transaction
            history, and whether the purchase was made in a store, online,
            or through a catalog.\78\ Often, the information provided does
            not identify the specific item purchased, but rather the
            category or type of product, such as ``collectibles'' or
            ``ladies apparel.'' Retailers are able to collect this
            information about consumers through many methods, among them
            store or brand loyalty/rewards cards.\79\
    ---------------------------------------------------------------------------
        \78\ Datalogix Narrative Response to Senate Commerce Committee, at
    1 (Nov. 2, 2012).
        \79\ Consumers who use loyalty cards allow retailers to collect
    information about their purchases in exchange for discounts, coupons,
    or other perks such as discounts on gasoline purchases. In 2012,
    Americans had a collective total of 2.65 billion loyalty program
    memberships. See Bulking Up: The 2013 Colloquy Loyalty Census, Growth
    and Trends in U.S. Loyalty Program Activity, Colloquy (June 2013).

            Financial institutions. Responding companies reported receiving
            information from a variety of financial institutions, such as
            banks, credit unions, brokerage services, and online trading
            platforms. Such sources provide information regarding bank
            deposits, brokerage assets, annuities, and mutual funds.
            Companies reported that the information obtained is not tied to
            specific consumers, but is received in an anonymized or
            aggregated form \80\ and used to create models and scoring
            products.\81\
    ---------------------------------------------------------------------------
        \80\ Financial institutions provide anonymous financial data,
    meaning it does not include consumers name, house number or street
    name; and information aggregated at the ZIP+4 level. Letters from Paul
    Zurawski, Senior Vice President Government Affairs and Regulatory
    Management, Equifax, to Chairman John D. Rockefeller IV (Feb. 13, 2013)
    and (Jan. 23, 2013).
        \81\ See Section III.B for a discussion of modeling and scoring.

            Other data brokers. All of the responding companies reported
            obtaining information from other data brokers either by
            purchasing or under sharing arrangements. Some have specified
            which other data brokers provide such information, while others
            refused to specify other data broker sources beyond generic
            descriptions such as ``third-party partners.'' \82\
    ---------------------------------------------------------------------------
        \82\ Experian Narrative Response to Senate Commerce Committee (May
    24, 2013).
    ---------------------------------------------------------------------------
    c. Cooperative Arrangements

        Another way data brokers obtain information is through cooperative
    arrangements in which companies provide information about their
    customers in exchange for information to enhance their existing
    customer lists or identify new customers. Examples described by
    responding companies include:

       Epsilon operates a cooperative consisting of over 1,600
            participating companies, which include catalog and retail
            companies, non-profits, and publishers.\83\ Participants
            contribute household purchase information in exchange for
            information about prospective customers. Epsilon organizes this
            data into 22 ``primary purchase categories,'' such as
            children's apparel and merchandise.\84\
    ---------------------------------------------------------------------------
        \83\ Letter from Jeanette Fitzgerald, Senior Vice President and
    General Counsel, Epsilon, to Chairman John D. Rockefeller IV (Nov. 2,
    2012); Epsilon, Abacus Cooperative Overview (EPS-COM-002114).
        \84\ Letter from Jeannette Fitzgerald, Senior Vice President and
    General Counsel, Epsilon, to Chairman John D. Rockefeller IV, at 5-6
    (Nov. 2, 2012).

       Experian manages a database open to catalog sellers as well
            as brick and mortar and e-commerce retailers. Participants
            provide customer transactional records, which may include
            consumer's name, address, gender, e-mail address, phone number,
            channel of purchase (e.g., online or in-store), dollar amount,
            payment method, transaction date, and transaction product
            category.\85\ Experian summarizes the information to describe
            buying behaviors at the household level within general product
            categories--such as ``Kitchen and Tabletop,'' ``Books,'' or
            ``Vitamins/Health Products.'' \86\ For example, ``if a high-end
            retailer of men's business suits reports a customer purchase of
            approximately $500, Experian would maintain a record showing
            only that the household engaged in a transaction involving
            Men's High-End Apparel.'' \87\
    ---------------------------------------------------------------------------
        \85\ Experian, Z-24 Catalog Database File Information (EXP001665).
        \86\ Experian Narrative Response to Senate Commerce Committee, at 5
    (Dec. 14, 2012). Experian breaks purchase information into 64 different
    categories. Experian (EXP001667).
        \87\ Experian Narrative Response to Senate Commerce Committee, at 5
    (Dec. 14, 2012).

       Equifax runs a cooperative for financial institutions that
            contribute data at least twice per year about consumer and
            small business investments and bank accounts. According to the
            company, this information is anonymized, often including only
            zip code and year of birth;\88\ it does not include information
            that could be used to individually identify consumers.
            Participants have access to certain information and products
            available only to members, including products that estimate
            total outstanding credit and that track assets.\89\
    ---------------------------------------------------------------------------
        \88\ Equifax, Member Data Submissions (EFX PROD3 0143).
        \89\ Letter from Paul Zurawski, Senior Vice President Government
    Affairs and Regulatory Management, Equifax to Chairman John D.
    Rockefeller, at 3 (Feb. 13, 2013); Equifax Corporation, IXI Services
    Core Products for Network Members (EFX PROD3 0191).

       Datalogix offers a cooperative arrangement that allows
            retailers to share information including customers' names,
            mailing addresses, e-mail addresses, purchase transaction
            histories, and transaction channel, such as Internet, catalog,
            or retail purchase. In return for supplying information,
            participants can receive mailing lists, or access to online
            audiences to identify new customers.\90\
    ---------------------------------------------------------------------------
        \90\ Datalogix Narrative Responses to Senate Commerce Committee
    (Nov. 2, 2012) and (Nov. 16, 2012).
    ---------------------------------------------------------------------------
    d. Self-Reporting by Consumers

        The responses to the Committee's inquiries indicate that data
    brokers obtain information directly from consumers through warranty
    cards, sweepstakes entries, and other types of surveys. Some of the
    data brokers conduct their own marketing surveys, both on-and off-line,
    and shared examples with the Committee.\91\ These surveys ask detailed
    questions about household demographics, income levels, shopping
    preferences, and other personal matters such as health and insurance
    related information. For example, some surveys ask whether anyone in
    the household suffers from diabetes, or what types of insurance the
    household currently has or plans to obtain.\92\ Surveys provided to the
    Committee disclose to consumers that the information they provide may
    be shared for marketing purposes in exchange for entry into a
    sweepstakes or other chances at prizes. However, the surveys do not
    generally indicate that they are affiliated with a specific data
    broker.
    ---------------------------------------------------------------------------
        \91\ E.g. Experian Narrative Response to Senate Commerce Committee
    (Feb. 8, 2013); and Letter from Jeanette Fitzgerald, Senior Vice
    President and General Counsel, Epsilon, to Chairman John D. Rockefeller
    (Nov. 2, 2012).
        \92\ Epsilon, Shopper'sVoice Consumer Product Survey of America
    (2012) (EPS-COM-000001-000004).
    ---------------------------------------------------------------------------
        For example, Epsilon obtains consumer data through its ``Shopper's
    Voice'' survey. The survey contains several pages of specific questions
    about the household, including demographic information, hobbies and
    interests, products purchased, and ailments. The survey includes
    questions about a range of health-related matters. For example, one
    category, titled ``Heart Health,'' asks whether anyone in the household
    has a family history of heart disease, heart attack, high blood
    pressure or high cholesterol, whether anyone suffers from angina,
    atrial fibrillation, and whether these ailments are treated with a
    prescription.\93\ The survey also asks the respondent to indicate
    whether they personally or another member of the household suffer from
    other listed ailments, such as depression, Bipolar disorder or other
    major depressive disorder, Lupus, or Parkinson's disease.\94\ The
    Shopper's Voice survey is mailed to approximately 36 million households
    each January; approximately 5.2 million households complete and return
    it to Epsilon.\95\ Consumers are encouraged to respond to the survey by
    being offered an opportunity for savings via coupons and a chance to
    win $10,000.\96\ See Exhibit A for a complete example of the survey
    questions.
    ---------------------------------------------------------------------------
        \93\ Id. at 2.
        \94\ Epsilon, Shopper's Voice Survey (EPS-COM-003757).
        \95\ Epsilon, TargetSource Survey Data, at 3 (EPS-COM-003150).
        \96\ Epsilon, TargetSource Survey Data, at 5 (EPS-COM-003152).
    ---------------------------------------------------------------------------
        Experian collects data through the ``Simmons National Consumer
    Surveys,'' which over 30,000 consumers fill out each year.\97\
    Questions cover subjects including demographic, hobbies and interests,
    military experience, participation in the lottery, and product
    preferences.\98\ Consumer responses are aggregated and used to create
    models that assign a shared set of characteristics to all households
    within a particular zip code. Simmons surveys include the Simmons
    National Consumer Survey; the Simmons National Kids and Teens Studies;
    the National Hispanic Consumer Survey; and the Simmons Lesbian, Gay,
    Bisexual and Transgender Study.\99\ Adults may be paid $25 for their
    participation in the survey and teens receive $14 in addition to a
    keychain.\100\
    ---------------------------------------------------------------------------
        \97\ Experian, Simmons National Consumer Studies (online at http://
    www.experian.com/simmons-research/national-consumer-studies.html).
        \98\ Experian, Simmons National Consumer Survey (EXP001785-1923).
        \99\ Experian Narrative Response to Senate Commerce Committee (Feb.
    8 2013).
        \100\ Sample letters that accompany Simmons National Consumer
    Survey (EXP002099) and (EXP002100).
    ---------------------------------------------------------------------------
        According to narrative responses from Acxiom and Experian,
    consumers report personal information to them by completing surveys,
    entering sweepstakes, registering to receive coupons, or filling out
    other forms on Internet sites. The websites either directly feed this
    information to data brokers or provide it to other ``data compilers''
    who then pass it to data brokers.\101\
    ---------------------------------------------------------------------------
        \101\ Experian Narrative Responses to Senate Commerce Committee
    (May 24, 2013) (July 26, 2013); and Acxiom Narrative Response to Senate
    Commerce Committee (Apr. 5, 2013).
    ---------------------------------------------------------------------------
        Experian uses survey results in products including Experian's
    ``BehaviorBank.'' As Experian explained:

            BehaviorBank is a database of self-reported information
            provided by consumers with the clear understanding of the
            consumer that the responses will be used for marketing. .
            .Experian acquires all such information from third-party
            partners. Such third parties typically either recruit consumers
            for their own surveys or obtain data from companies that have
            surveyed their own customers. In some cases, consumers are
            offered an incentive, such as an opportunity to win a prize,
            for participation in the survey.\102\
    ---------------------------------------------------------------------------
        \102\ Experian Narrative Response to Senate Commerce Committee, at
    2-3 (May 24, 2013).

        Experian refused to identify to the Committee the third-party
    website sources of data for the company.
        Similarly, Acxiom said consumer-facing websites are a source of
    their consumer data, but declined to provide the Committee the specific
    identities of these websites except for six self-selected samples
    websites. Instead the company stated generally, ``there are over
    250,000 websites who state in their privacy policy that they share data
    with other companies for marketing and/or risk mitigation purposes.''
    \103\
    ---------------------------------------------------------------------------
        \103\ Acxiom Narrative Response to Senate Commerce Committee (Apr.
    5, 2013).
    ---------------------------------------------------------------------------
        Of the six websites provided by Acxiom, one was not functional when
    Committee majority staff attempted to access it. The remaining five
    asked consumers for varying levels of personal information in exchange
    for benefits such as coupons and discounts, or the opportunity to
    compare health insurance quotes. The general counsel for the company
    that maintains the health insurance quote website, when contacted by
    Committee majority staff, said the company had no information sharing
    agreement with Acxiom, and that the entities that contract to receive
    the website's information are contractually prohibited from sharing
    that data with third parties such as Acxiom.\104\ Acxiom represented
    that this website data source was provided by one of Acxiom's data
    aggregators.\105\
    ---------------------------------------------------------------------------
        \104\ Committee staff interview with website general counsel (Dec.
    3, 2013).
        \105\ Acxiom Narrative Response to Senate Commerce Committee (April
    5, 2013). It is unclear at this point whether or how information from
    this website flowed to Acxiom.
    ---------------------------------------------------------------------------
        To explore the issue of website data sources further, Chairman
    Rockefeller queried 12 popular health and financial focused websites
    whose privacy policies appeared to allow for the sharing of consumer
    data obtained through surveys, sweepstakes, and questionnaires. In
    response, several websites acknowledged collecting personal information
    from consumers through surveys or sweepstakes entries. However, they
    largely denied sharing that data with third parties except in limited
    circumstances, including for their own advertising purposes,
    sweepstakes prize fulfillment, or with other third-party vendors to
    perform services on the websites' own behalf.
        Two of the website companies reported relationships with Acxiom,
    but those relationships were for the benefit of the websites: one
    retained Acxiom's services to store consumer information solely for its
    own marketing efforts, and the other to perform services such as
    collecting additional information about visitors to its website. While
    neither arrangement allowed for Acxiom to share or use the data
    provided for Acxiom's own purposes, one company did share with
    Committee majority staff that Acxiom had approached them to become a
    data supplier, a request it declined.\106\
    ---------------------------------------------------------------------------
        \106\ Website responses to Senate Commerce Committee (Oct. 2013).
    ---------------------------------------------------------------------------
    e. Social Media

        Social media is a source of consumer information for many of the
    queried data brokers. For example, Acxiom says it obtains data about
    consumers' social media interests and usage to predict the likelihood
    that a consumer would fall into one of the following categories:
    ``business fan,'' ``heavy social media user '' (including Facebook,
    LinkedIn, Twitter, and YouTube), ``mobile social networker,'' ``text
    messaging user,'' ``poster'' (including poster of photos, texts, and
    responders), ``video sharer,'' ``social influencer,'' and ``social
    influenced.'' \107\
    ---------------------------------------------------------------------------
        \107\ Acxiom Narrative Response to Senate Commerce Committee at 7
    (Mar. 1, 2013). Acxiom asserts that they ``do not collect specific
    activity from social media sites, such as individual postings, lists of
    friends or any data that is not public.'' (ACXM 1422).
    ---------------------------------------------------------------------------
        In 2010, the Wall Street Journal and other media outlets reported
    that Rapleaf was collecting information about consumers' social media
    accounts and selling that information to other companies.\108\ Rapleaf
    had been ``crawling'' publicly available data consumers placed on
    social media sites such as Facebook, MySpace, LinkedIn, and others, to
    gather information including consumers' names, age, gender, location,
    colleges and universities attended, and occupations, information about
    membership on social media sites such as Facebook, Flickr, LinkedIn,
    Twitter, CafeMom, Amazon Wishlist, Pandora, Photobucket, and
    Dailymotion, number of friends and followers, and the URL of consumers'
    profiles.\109\
    ---------------------------------------------------------------------------
        \108\ See Wall Street Journal, Facebook in Privacy Breach (Oct. 18.
    2010), and Wall Street Journal, A Web Pioneer Profiles Users by Name
    (Oct. 25, 2010).
        \109\ Rapleaf, Report Data Dictionary, (RAP-SEN-001-00121-RAP-SEN-
    001-00125).
    ---------------------------------------------------------------------------
        Following public backlash and requests by Facebook, Rapleaf deleted
    most of the information it collected through webcrawling.\110\ However,
    companies that purchased this data before Rapleaf ceased this activity
    were not required to delete the information that they had previously
    purchased.\111\
    ---------------------------------------------------------------------------
        \110\ Letter from Phil Davis, Chief Executive Officer, Rapleaf, to
    Chairman John D. Rockefeller IV (Nov. 21, 2012). According to Rapleaf,
    the information it maintained was non-sensitive data consisting of age
    range, gender, zip code, and marital status. Id.
        \111\ Letter from Kenneth M. Dreifach, Counsel to Rapleaf, to
    Melanie Tiano, Counsel to the Senate Commerce Committee (Dec. 28,
    2012); Committee staff conversation with Rapleaf Counsel (Dec. 5,
    2012).
    ---------------------------------------------------------------------------
    B. Data Broker Products
        Data brokers compile and analyze consumer data to create products
    and services that provide customers with data that has varying degrees
    of specificity about individual consumers. Most of the products
    described by respondent companies are essentially lists of consumers
    grouped by shared characteristics or predicted behaviors. The companies
    also provide data on individual consumers to supplement data customers
    may already have on the consumer.
        Data broker products can consist of ``actual'' or ``modeled''
    elements. Actual data includes factual information about individuals,
    such as their date of birth, contact information, and presence of
    children in a household. ``Modeled'' data results from drawing
    inferences about consumer characteristics or predicted behavior based
    on actual data. For example, a company may infer a consumer's marital
    status based upon use of the prefix ``Mrs.''; characterize an
    individual as having an interest in golf based on the fact that an
    individual subscribes to a golf magazine; \112\ or characterize an
    individual as having a health interest in allergies based on the fact
    that the individual made a non-prescription purchase of over the
    counter allergy medication.\113\
    ---------------------------------------------------------------------------
        \112\ Acxiom Narrative Response to Senate Commerce Committee (Feb.
    15, 2013).
        \113\ Id.
    ---------------------------------------------------------------------------
        The companies also use actual data to create ``look-a-like''
    models. Look-a-like models use known information--such as living within
    a particular zip code and having children in the household--to predict
    characteristics such as the likelihood that an individual drives an
    SUV. With this model, a data broker could create a list of consumers
    likely to drive an SUV that a customer could purchase for targeted
    marketing.
        Two prominent means by which data brokers provide consumer data to
    customers are ``original lists'' and ``data appends.'' Original lists
    are sold to customers seeking a list of consumers who fit certain
    criteria--for example, women who live in Cleveland and have an interest
    in cooking.\114\ Typically, customers purchase this information in
    large quantities, hundreds or thousands of names at a time.\115\
    ---------------------------------------------------------------------------
        \114\ Except in instances where a company offers some type of
    individual look-up product, ``original list'' information is not
    generally available to be purchased on an individual consumer basis.
    Spokeo, for example, offers consumers an individual look-up service
    that provides the ability to search for information about specific
    individuals. Products offered by Spokeo allow customers to search for
    people by name or address or through a ``reverse search'' service--
    where customers may enter a telephone number or e-mail address to
    identify the individual associated with that number or address.
    Customers are able to obtain a ``person's name, address, phone number,
    e-mail address, occupation, property value, family relations, and
    social media accounts.'' Letter from Angela Saverice-Rohan, General
    Counsel, Spokeo, Inc., to Chairman John D. Rockefeller IV (Nov. 2,
    2012).
        \115\ Committee staff conversations with respondent companies;
    several companies reported that segments are priced and sold by the
    thousand.
    ---------------------------------------------------------------------------
        ``Data append,'' on the other hand, occurs when a customer has some
    information about specific consumers, but they want to create more
    complete profiles. In that case, the customer provides some identifying
    information about their customers, such as a list of names and zip
    codes or e-mail addresses, to a data broker company to purchase
    additional information about the specific consumers on the list.
        The products companies described to the Committee include consumer
    profiles characterizing consumers based on degree of financial
    vulnerability and propensity to use payday loans and other non-
    traditional financial products. These types of data broker products
    merit close scrutiny as they appear tailor made for businesses that
    profit from taking advantage of consumers. Following is a discussion of
    major types of data broker products, methods for sharing these
    products, and questions raised by certain products described by
    respondent companies.
    1. How Data Brokers Package Consumer Information
        One product data brokers offer is ``segments,'' or groupings of
    consumers defined by shared characteristics and likely behaviors. Many
    data brokers offer some variation of segmenting products, and several
    of the large data brokers included in the Committee's review offer
    dozens of different segment choices.
        The idea of segmenting consumers for marketing purposes is not a
    novel concept. In the 1970s, Claritas--which merged with Nielsen in
    2001--developed a segmenting product called PRIZM, which defined groups
    of consumers based on demographics and behaviors.\116\ PRIZM is now
    advertised as ``the industry-leading lifestyle segmentation system that
    yields rich and comprehensive consumer insights to help you reveal your
    customer's preferences.'' \117\ When clustering first began, companies
    generally relied on census data to predict the behavior of consumers.
    Today, however, there are endless avenues to obtain consumer data.
    ---------------------------------------------------------------------------
        \116\ Wall Street Journal, Placing Products: Marketing Firm Slices
    U.S. into 240,000 Parts to Spur Clients' Sales (Nov. 3, 1986).
        \117\ Nielsen, My Best Segments (online at http://www.claritas.com/
    MyBestSegments/Default.jsp?ID=70&pageName=Learn
    percent2BMore&menuOption=learnmore).
    ---------------------------------------------------------------------------
        Another type of product described by data brokers involves
    ``scoring,'' a form of analytics that utilizes data to make predictions
    about likely consumer behavior. Scoring products are designed to
    provide marketers insight about existing and prospective customers by
    assigning a number or range that signifies each consumer's likelihood
    to exhibit certain characteristics or perform certain actions. For
    example, Acxiom offers a product that can provide marketers with
    predictive indicators of consumers' social media behaviors, assigning a
    number from 1-20 on the basis of whether they are likely to be a
    ``social influencer'' or are ``socially influenced,'' and whether they
    are a frequent ``text poster'' or ``business fan.'' \118\
    ---------------------------------------------------------------------------
        \118\ Acxiom, Precision Targeting and Messaging in Social Networks:
    Acxiom Predictive Scores for Social Media (ACXM 473-474).
    ---------------------------------------------------------------------------
    2. Issues Regarding Data Broker Products
    a. Products that Identify Financially Vulnerable Populations

        A number of products described by data brokers focus on
    characterizing a consumer's economic status. For example, some of the
    consumer profiles they sell identify economically comfortable
    consumers. Consumers in clusters titled ``Established Elite,'' ``Power
    Couples,'' ``American Royalty,'' and ``Just Sailing Along,'' indicate a
    level of affluence that might be used to identify a likely audience for
    luxury products or investments. Data broker descriptions of such
    products provide further detail. For example, Experian describes
    ``American Royalty'' as ``[w]ealthy, influential and successful couples
    and families living in prestigious suburbs.'' \119\
    ---------------------------------------------------------------------------
        \119\ Experian, Mosaic USA New Segment and Group Names (EXP002634-
    002678).
    ---------------------------------------------------------------------------
        Understanding the financial circumstances of consumers is important
    for assessing how to best the reach those most likely to purchase
    particular goods or products. However, some of the targeting products
    described by the companies appear to focus specifically on identifying
    financially vulnerable populations. The table below represents a sample
    of the segments offered for sale by the queried companies:
    Table I: Company Product Names

        Source: Company Responses \120\
    ---------------------------------------------------------------------------
        \120\ Experian, Mosaic USA New Segment and Group Names (EXP002634-
    2636); Acxiom, Personicx Classic, (Mar. 1, 2013); Epsilon, Niches 3.0
    (EPS-COM-003484--003496); Equifax, Economic Cohorts: Economic-based
    Household Segmentation (EFX Prod4 0002-0292); Equifax, Financial
    Cohorts: Direct-Measured Asset-Based Household Segmentation (EFX PROD4
    0293-0543). See Appendix II.

        The product descriptions that data brokers provide to potential
    customers further elaborate on such vulnerability.\121\ For example,
    ``Hard Times'' is described by Experian as, ``Older, down-scale and
    ethnically-diverse singles typically concentrated in inner-city
    apartments.'' \122\ The description continues: ``This is the bottom of
    the socioeconomic ladder, the poorest lifestyle segment in the Nation.
    Hard Times are older singles in poor city neighborhoods. Nearly three-
    quarters of the adults are between the ages of 50 and 75; this is an
    underclass of the working poor and destitute seniors without family
    support. . . . One-quarter of the households have at least one resident
    who is retired.'' \123\
    ---------------------------------------------------------------------------
        \121\ See Exhibit B for sample product descriptions.
        \122\ Experian, Mosaic USA Segment Descriptors (EXP002946).
        \123\ Experian, Mosaic USA Segment Descriptors (EXP002947). In
    another example, ``Resilient Renters'' is described as ``singles with
    high-school and vocational/technical educations. At a mean age of 39,
    they are renters in the second-tier cities and, if employed, earn wages
    in service and clerical positions.'' Acxiom Narrative Response to
    Senate Commerce Committee, Acxiom Personicx Classic (Mar. 1, 2013).
    ---------------------------------------------------------------------------
        A number of scoring products similarly focus on consumers'
    financial vulnerabilities. One example is Experian's ``ChoiceScore,''
    which the company asserts ``helps marketers identify and more
    effectively market to under-banked consumers.'' \124\ According to the
    company's marketing materials for this product, ``each year, under-
    banked consumers alone spend nearly $11 billion on non-traditional
    financial transactions like payday loans and check-cashing services.''
    \125\ These consumers include ``new legal immigrants, recent graduates,
    widows, those with a generation bias against the use of credit,
    followers of religions that historically have discouraged credit,'' and
    ``consumers with transitory lifestyles, such as military personnel.''
    \126\
    ---------------------------------------------------------------------------
        \124\ Experian, ChoiceScore: Improve Targeting and Customer
    Acquisition in the Untapped Under-banked Population (EXP002353). See
    Exhibit C for ChoiceScore Marketing description.
        \125\ Id.
        \126\ Id.
    ---------------------------------------------------------------------------
        The ChoiceScore options include a ``Confidence Score'' that
    ``identifies and assigns a score, determining the propensity for a
    consumer to be in the under-banked population,'' and a ``Risk Score,''
    a ``non-credit based score used to identify the most and least
    desirable consumers.'' \127\ Suggested applications of the product
    include: ``target under-marketed new prospect segments eager to accept
    direct-marketing offers; target invitation-to-apply credit card offers,
    secured card, prepaid debit and other non-traditional financial service
    offerings; and suppress records of those less likely to get approved.''
    \128\
    ---------------------------------------------------------------------------
        \127\ Experian, List Services Catalog: ChoiceScore (EXP002601).
        \128\ Id.
    ---------------------------------------------------------------------------
        This Committee inquiry did not review whether any of the specific
    identified lists that designate financially vulnerable consumers have
    been used in a harmful manner. However, precedent underscores the value
    of such products to unscrupulous businesses that seek to take advantage
    of consumers. For example, the New York Times has reported on
    telemarketing criminals that succeeded in raiding the banking account
    of a 92-year old Army veteran.\129\ Data broker InfoUSA sold his name
    and contact information to a scam artist. As detailed in the Times'
    account, InfoUSA advertised lists such as ``Elderly Opportunity
    Seekers,'' described as older people ``looking for ways to make
    money;'' ``Suffering Seniors,'' older people with cancer or Alzheimers
    disease; and ``Oldies but Goodies,'' people described as ``gullible . .
    . [who] want to believe their luck can change.''
    ---------------------------------------------------------------------------
        \129\ The New York Times, Bilking the Elderly, with Corporate
    Assist (May 20, 2007).
    ---------------------------------------------------------------------------
        InfoUSA was not one of the companies examined in this Committee
    inquiry, but the concerns raised by lists identifying financially
    vulnerable customers are illustrated by this example. The names,
    descriptions and characterizations in these products--all generated by
    the data brokers--likely appeal to companies that sell high-cost loans
    and other financially risky products to populations more likely to need
    quick cash, such as payday and installment lenders.
        Most of the companies provided to the Committee customer vetting
    and oversight policies that they assert ensure that information is used
    properly.\130\ Further, several of the contracts reviewed by the
    Committee include provisions that prohibit resale of consumer data to
    certain types of businesses such as ``debt repair'' \131\ and one
    specifically prohibits resale for ``payday or short-term lending.''
    \132\ However, because data brokers operate in the shadows, with little
    oversight or regulation, companies in this industry have discretion
    regarding their voluntary enforcement of such restrictions. Indeed, an
    investigation into InfoUSA showed that employees routinely ignored
    rules about selling data to known fraudsters.\133\ Unfortunately, three
    of the largest companies--Acxiom, Experian, and Epsilon--to date have
    declined to disclose their customers to the Committee. As a result, the
    precise range and nature of their customer base remains unknown.
    ---------------------------------------------------------------------------
        \130\ The procedures range from a very basic requirement that each
    new customer agree to Terms of Service to a thorough vetting process of
    each new customer. While several data brokers report that customers
    must agree to abide by the companies' terms of service or use, other
    companies described a stricter vetting process that include additional
    screening components. Company Narrative Responses to Senate Commerce
    Committee (2012).
        \131\ Acxiom Narrative Response to Senate Commerce Committee (Feb.
    15, 2013).
        \132\ Sample Equifax Contract (EFX SUPP 008).
        \133\ The New York Times, Bilking the Elderly, with Corporate
    Assist (May 20, 2007).
    ---------------------------------------------------------------------------
        One recent incident involving Experian's credit services arm
    underscored that customer vetting and oversight practices are not
    always failsafe. In October 2013, media accounts reported that an
    alleged identity theft operation had purchased consumer data from Court
    Ventures, a company Experian acquired in March 2012, and that sales of
    data to the operation went on ``for almost a year after Experian did
    their due diligence'' and purchased the company.\134\ Concerned about
    implications of these reports regarding Experian's customer vetting
    processes, Chairman Rockefeller wrote Experian asking the company to
    confirm whether such sales had occurred, how long such sales had
    continued after Experian had acquired Court Ventures, and Experian's
    vetting of Court Ventures customers prior to and after acquisition. He
    also pressed the company for a complete customer list.\135\
    ---------------------------------------------------------------------------
        \134\ Krebsecurity.com, Experian Sold Consumer Data to ID Theft
    Service (Oct. 20, 2013); PCMAG.com, Experian Confirms Subsidiary's Data
    Sold to Identity Theft Operation (Oct. 22, 2013).
        \135\ Letter from Chairman John D. Rockefeller to Mr. Don Robert,
    Chief Executive Officer, Experian (Oct. 23, 2013).
    ---------------------------------------------------------------------------
        Experian's response acknowledged that a person possibly engaged in
    criminal activity had been a Court Ventures customer before and after
    Experian's acquisition of the company, and underscored that Experian
    stopped sales to this customer immediately after notification by
    authorities that this customer was under investigation. However, the
    company did not make clear how long the sales occurred undetected by
    Experian after acquisition of Court Ventures. The company further
    refused to provide specific customers to the Committee.\136\
    ---------------------------------------------------------------------------
        \136\ Letter from Tony Hadley, Senior Vice President of Government
    Affairs and Public Policy, Experian, to Chairman John D. Rockefeller IV
    (Nov. 8, 2013).
    ---------------------------------------------------------------------------
        Given that identifying vulnerable consumers is critical to the
    business of predatory lenders and fraudfeasors, and precedent where
    such entities have turned to data brokers for consumer data, the sale
    and use of data broker products segmenting financially vulnerable
    consumers merits close scrutiny.
    b. Scoring Products that Mirror Tools Regulated under the Fair Credit
            Reporting Act

        Some of the scoring products the respondent companies sell for
    marketing purposes resemble credit scoring tools that, under the Fair
    Credit Reporting Act, cannot be used for marketing. In materials
    describing one such product, ``Summarized Credit Statistics,'' Experian
    emphasizes the distinction between the aggregated credit related
    information offered by the product and individual credit information,
    explaining: ``because individual credit information may not be used for
    marketing purposes without a pre-approved offer, Experian developed
    Summarized Credit Statistics to characterize a neighborhood's consumer
    credit activity.'' \137\
    ---------------------------------------------------------------------------
        \137\ Experian, Summarized Credit Statistics (EXP002109-EXP002110).
    This credit product includes the following:

           Median equivalency score--assesses the potential risk
    for seriously derogatory behavior. The scores range from 360 to 840
    (high score equals low risk) to accommodate the industry standard use
    of credit scores,

           Median risk score--similar to median equivalency score,
    this option also characterizes neighborhoods or market segments based
    on their likelihood of having future derogatory credit activity. This
    score range (0-1000) has a direct correlation, where a low score equals
    a low risk, and,

           Median bankruptcy score--pinpoints neighborhoods or
    market segments that may be more likely to file for bankruptcy or
    become seriously delinquent over the next 12 months. This score is a
    leading indicator of potential derogatory impacts. Scores range from
    108 to 1257, with a high score indicating great likelihood. Id.
    ---------------------------------------------------------------------------
        Similarly, Equifax offers ``Aggregated FICO Scores,'' which Equifax
    distinguishes from FICO scores which are generally prohibited for use
    in marketing under the Fair Credit Reporting Act. In its marketing
    materials for this product, the company states that ``FICO Scores are
    no longer only for credit approvals: With aggregated FICO Scores,
    [customers] can leverage the basis of FICO scores for non-FCRA
    marketing applications such as prospecting and ITA [invitations to
    apply].'' \138\ The company further explains that ``for the first time,
    marketers now have access to an aggregated, non-FCRA measure derived
    from the FICO Score.\139\
    ---------------------------------------------------------------------------
        \138\ Equifax, Aggregated FICO Scores: Utilize Aggregated FICO for
    Marketing Applications (EFX PROD3 0258-0260).
        \139\ Equifax, Aggregated FICO Scores from IXI Services (EFX SUPP
    168-169).
    ---------------------------------------------------------------------------
        This Committee inquiry did not focus on FCRA compliance
    issues.\140\ However, the emergence of marketing products that closely
    resemble credit scoring tools underscores the need for additional
    review of key questions including:
    ---------------------------------------------------------------------------
        \140\ Contracts that respondent data brokers provided the Committee
    make clear they require customers to comply with FCRA's prohibition
    against using marketing information for eligibility determinations.

       whether there are privacy concerns surrounding the use of
    ---------------------------------------------------------------------------
            these tools

       whether additional consumer protections should be provided,
            and

       whether use of some of these scores might be considered
            eligibility determinations that should be scrutinized under the
            Fair Credit Reporting Act.\141\
    ---------------------------------------------------------------------------
        \141\ See discussion at part I.C regarding consumer protection
    issues relating to scoring products.
    ---------------------------------------------------------------------------
    C. Data Broker Customers and New Mechanisms for Using Data Broker
            Products
        Responding data brokers told the Committee they sell their
    marketing products to a range of customers for a variety of types of
    marketing. These customers use data broker products for traditional
    mailing lists and increasingly to tailor outreach to individual
    consumer computers or mobile devices. Following is a discussion of the
    types of customers with whom data brokers share marketing products and
    what companies told the Committee about how their products are shared
    and used.
    1. Who Buys the Data
        The respondent companies told the Committee they sell consumer data
    to a wide range of customers. The types of customers included financial
    institutions, hotel chains, wireless telephone service providers, cable
    companies, and jewelry stores, as well as other data brokers or
    resellers. While, some companies provided identities of specific
    customers, others instead provided only general descriptions of the
    types of customers that purchase their data. For example, Acxiom's
    customers include ``47 Fortune 100 clients; 12 of the top 15 credit
    card issuers; seven of the top 10 retail banks; eight of the top 10
    telecom/media companies; seven of the top 10 retailers; 11 of the top
    14 automotive manufacturers; six of the top 10 brokerage firms; three
    of the top 10 pharmaceutical manufacturers; five of the top 10 life/
    health insurance providers; nine of the top 10 property and casualty
    insurers; eight of the top 10 lodging companies; two of the top three
    gaming companies; three of the top five domestic airlines; six of the
    top 10 U.S. hotels.'' \142\
    ---------------------------------------------------------------------------
        \142\ Acxiom, Fact Sheet: Consumer Insight Products (ACXM 458).
    Acxiom also provided several examples of specific publicly identified
    clients. E.g., Acxiom Response to Senate Commerce Committee (Nov. 2,
    2012).
    ---------------------------------------------------------------------------
        Experian's customers include ``retailers, including online,
    storefront, and catalog sellers; consumer products manufacturers;
    charities and other nonprofit organizations; advertising agencies;
    media placement agencies; government agencies; Internet service
    providers; Internet portals; businesses offering services, especially
    local businesses; direct mail service providers; real estate agents;
    local, state, and Federal politicians; and colleges and universities.''
    \143\
    ---------------------------------------------------------------------------
        \143\ Experian Narrative Response to Senate Commerce Committee, at
    19 (Nov. 2, 2012).
    ---------------------------------------------------------------------------
        Epsilon provided a list of the industries associated with their
    customers, which includes ``business to business, broker, consumer
    packaged goods, direct to consumer, emerging markets, finance,
    healthcare, high tech--telco, insurance, multichannel marketers
    (catalog), not for profit, publishing, research, retail, strategic
    partners, tobacco, and travel and entertainment.'' \144\ The company
    further elaborated on several of these categories, explaining that list
    brokers are ``buying agents for companies that send direct mail,'' that
    ``research the types of available lists that a mailer could use for
    their offer.'' Emerging markets are ``a collection of types of clients
    that are new to using direct marketing to reach customers,'' and
    strategic partners are ``companies that license data as inputs for
    models they create and resell to other companies.'' \145\
    ---------------------------------------------------------------------------
        \144\ Letter from Lydia Parnes, Counsel to Epsilon, to Erik Jones,
    Deputy General Counsel to the Senate Commerce Committee, at 10 (Feb.
    13, 2013).
        \145\ Letter from Lydia Parnes, Counsel to Epsilon, to Melanie
    Tiano, Counsel to Senate Commerce Committee (July 24, 2013). An example
    is a company that specializes in in serving not-for-profit clients on
    fund-raising matters, which then uses marketing data furnished by
    Experian to help their clients refine fund-raising mailing campaigns.
    Id. Epsilon also described to the Committee several examples of
    specific publicly identified clients. Epsilon Response to Senate
    Commerce Committee, (Feb. 13, 2013) (EPS-COM-003612-003650).
    ---------------------------------------------------------------------------
    2. New Mechanisms for Using Data
        In their responses to the Committee, data brokers described client
    uses of their data in general terms such as fraud detection, identity
    authentication, and marketing. Specific customers named in some
    responses of the queried data brokers provided Committee staff with
    additional detail regarding their use of data broker products.
        For example, one retail bank noted if it were seeking to determine
    ideal locations of new branches it may be interested in examining
    predicted borrowing and spending behaviors of their existing customers.
    Such information also might help banks when they are setting goals
    based upon the likely needs of their clientele, such as whether one
    branch should give more loans while another should open more new
    accounts.\146\
    ---------------------------------------------------------------------------
        \146\ Committee staff telephone interview with retail bank
    purchaser of segmenting buckets (Nov. 21, 2013).
    ---------------------------------------------------------------------------
        Further, the data broker responses made clear that customers are
    using data broker products to reach consumers both through on-line and
    off-line outreach. While American consumers are beginning to
    understand, and even expect, that their online activities will be
    tracked in order to send them online advertisements,\147\ it is unclear
    whether they understand the extent to which data concerning their
    offline activities also may be collected and used to tailor online
    advertisements.\148\
    ---------------------------------------------------------------------------
        \147\ Joseph Turow, The Daily You, at 185 (2011) (citing a 2005
    survey that showed 80 percent of respondents ``believed that `companies
    today have the ability to follow my activity across many sites on the
    web.'')
        \148\ See Appendix III for a sampling of some of the data elements
    one company reported offering for online targeting.
    ---------------------------------------------------------------------------
        Historically, data about consumers was used to locate consumers to
    send catalogs and other marketing promotions through the mail or
    contact via telephone. Increasingly, the information that data brokers
    make available about consumers--including demographic characteristics,
    financial information, and offline purchases and interests--is provided
    to clients digitally such that it informs the client's ability to
    target consumers online.\149\
    ---------------------------------------------------------------------------
        \149\ As Datalogix explained its digital product offerings:

        The DLX Digital Display Media product is a direct and natural
    evolution of Direct Mail product for the digital era, in virtually
    every way. In the traditional mail world, the data was and is used to
    deliver catalogues and marketing promotions through the mail channel to
    the personal address of a family or individual. In the display
    business, the data is used to deliver an advertisement via a banner
    advertisement. If the consumer clicks on the advertisement, the
    consumer is taken to a company-sponsored website that provides detail
    about the product or service in an analogous way to a catalog. Websites
    have replaced or augmented catalogues as a preferred method of consumer
    shopping in the last decade.

        Letter from Eric Roza, Chief Executive Officer, Datalogix, to
    Chairman John D. Rockefeller IV (Nov. 16, 2012).
    ---------------------------------------------------------------------------
        The primary method for achieving online data sharing described by
    respondent companies is through the use of ``cookies,'' \150\ and other
    technical means, such as ``cookie syncing,'' or ``cookie matching.''
    \151\ However, as Internet browser companies take steps to block cookie
    traffic, other technology to track consumers is developing rapidly, and
    some data broker companies appear to be finding new ways to follow
    consumers across different channels such as mobile devices. For
    example, in September 2013, Acxiom announced its ``Audience Operating
    System (AOS).'' AOS will combine data from multiple sources and enable
    digital marketers to segment and target audiences across channels and
    devices and would eliminate the need for third-party cookies, the
    current technology used to track consumers across the Internet.\152\
    ---------------------------------------------------------------------------
        \150\ A cookie is a text file that a website's server places on a
    consumer's web browser. Cookies can be used to transmit information
    back to the website's server about the browsing activities on the site
    as well as be used to track a computer across different sites. See
    Federal Trade Commission, FTC Staff Report: Self-Regulatory Principles
    for Online Behavioral Advertising (Feb. 2009).
        \151\ Cookie syncing is the process of mapping user id's from one
    system to another. See AdMonsters, Cookie Syncing (Apr. 20, 2010)
    (online at http://www.admonsters.com/blog/cookie-synching).
        \152\ Gartner, Acxiom's Audience Operating System Could Reinvent
    Data-Driven Marketing (Sep. 26, 2013).
    ---------------------------------------------------------------------------
        Data brokers are increasingly focused on using their offline
    consumer profiles for the purposes of serving online advertisements.
    Acxiom, for example, currently offers approximately 47 percent of its
    1,500 data elements to help marketers target consumers online by
    personalizing websites for individual consumers or serving
    advertisements.\153\ Similarly, Equifax offers many of its products
    digitally, including modeled FICO scores and the Ability to Pay
    Index.\154\ Experian's Hitwise product enables marketers to obtain
    aggregate reports on the online behavior of their existing consumers by
    anonymously matching Experian offline marketing data with website
    traffic pattern analysis.\155\
    ---------------------------------------------------------------------------
        \153\ Committee staff conversation with Jennifer Barrett Glasgow,
    Chief Privacy Officer, Acxiom (Dec. 10, 2013).
        \154\ For use online, the Ability to Pay Index assigns consumers a
    score from one to four. A score of one represents consumers with the
    highest likelihood of being able to pay. Equifax, Ability to Pay
    Digital (EFX SUPP 164); Equifax, Aggregated FICO Digital Targeting
    Segments (EFX PROD3 0294).
        \155\ Experian Narrative Response to Senate Commerce Committee, at
    10-11 (Feb. 26, 2013). The marketing materials suggest that customers
    can identify and track consumer groups based upon a variety of
    elements, including visits to specific websites; online searches for
    specific terms; demographics, including age, income, gender, race, and
    ethnicity; summarized credit scores; presence of children; hobbies;
    ailments and prescriptions; and life events, such as new parents,
    movers, or new homeowners. Experian, AudienceView (EXP002472-2473).
    ---------------------------------------------------------------------------
        Data brokers have asserted that digital products offer more privacy
    protections for consumers than traditional mail marketing because the
    data on consumers used in this context is not ``personally
    identifiable'' as that term is commonly understood. They point out that
    for marketing online, information about a consumer is often associated
    with a code instead of the consumer's name.\156\ However, some privacy
    and information experts have expressed concerns that re-identification
    techniques may be used with such data,'' \157\ and questioned whether
    data that identifies specific computers and devices can truly be
    considered ``anonymous.'' As marketing scholar Joseph Turow wrote:
    ---------------------------------------------------------------------------
        \156\ Letter from Eric Roza, Chief Executive Officer, Datalogix, to
    Chairman John D. Rockefeller IV (Nov. 16, 2013).
        \157\ See How Anonymous Is Your Data? So, Should You Be Worried
    That We're on a Fast Track to Mass Privacy Invasions?, Advertising Age
    (Mar. 18, 2013) (discussing the re-identification of online data that
    has been anonymized).

            Industry claims of anonymity surrounding all these data may
            soften the impact of the sorting and labeling processes. But in
            doing so, it seriously undermines the traditional meaning of
            the word. If a company can follow and interact with you in the
            digital environment--and that potentially includes the mobile
            phone and your television set--its claim that you are anonymous
            is meaningless, particularly when firms intermittently add
            offline information to the online data and then simply strip
            the name and address to make it ``anonymous.'' \158\
    ---------------------------------------------------------------------------
        \158\ Joseph Turow, The Daily You, supra n. 146, at 190; see also
    Paul Ohm, Broken Promises of Privacy, 57 UCLA Law Review 1701, 1704
    (2010) (``Data can either be useful or perfectly anonymous, but never
    both.'').
    ---------------------------------------------------------------------------
    D. Data Broker Transparency and Privacy Practices
        Data brokers generally are not consumer facing, therefore, most
    consumers have no way of knowing that data brokers may be collecting
    their data. Further, a number of companies have contracts with their
    customers that limit customer disclosures regarding their data sources.
    And since consumers generally do not have Federal statutory rights of
    access, correction, or control with respect to the information data
    brokers maintain on them for marketing, companies can establish privacy
    protections for this data largely at their own discretion.
        Industry representatives continue to support self-regulation as the
    best approach for protecting the privacy of consumer data used for
    marketing, and many of the data broker responses to the Committee
    highlighted the importance of self-regulation. In fact, Acxiom cited a
    company philosophy--``just because you can doesn't mean you should''
    \159\--as a guiding principle for how to handle the mass quantities of
    consumer data available to them.
    ---------------------------------------------------------------------------
        \159\ Acxiom Narrative Response to Senate Commerce Committee, at 3
    (Apr, 15, 2013).
    ---------------------------------------------------------------------------
        Most company responses indicated they have incorporated many of the
    best practices set forth in the Guidelines for Ethical Business
    Practices issued in 2009 by the Direct Marketing Association.\160\
    These guidelines provide ``generally accepted principles of conduct''
    for ``database compilers'' that cover subjects including consumer
    choice and privacy notices, handling sensitive and specifically health-
    related information, oversight of customer data use, and information
    security. The guidelines also provide for a consumer right to opt out
    of the marketing process but do not provide for consumer access and
    correction rights with respect to their own data.\161\
    ---------------------------------------------------------------------------
        \160\ For discussion of these guidelines see Part I.B.
        \161\ DMA Guidelines, supra n.25, Article 31.
    ---------------------------------------------------------------------------
        This section discusses respondent company practices relevant to
    transparency and privacy.
    1. Disclosure Limitations
        Although DMA Guidelines recommend that members ``not prohibit an
    end-user marketer from divulging the database compiler as the source of
    the marketer's information,'' \162\ a number of the companies have
    contracts with customers that place restrictions on customer disclosure
    of their data source. For example, one company's contract language
    provides: ``All marketing communications used in connection with any
    list or data element provided to client shall . . . be devoid of any
    reference to . . . the source of the recipient's name and address.''
    \163\ Similarly, another company's contracts provide that the company
    ``may not be advertised, or otherwise disclosed to any third party, as
    the source of the Licensed Data unless Client first obtains the
    express, written permission'' of the company.'' \164\
    ---------------------------------------------------------------------------
        \162\ DMA Guidelines, supra n.25, Article 36.
        \163\ Sample contract provided to the Senate Commerce Committee.
        \164\ Sample contract provided to the Senate Commerce Committee.
    ---------------------------------------------------------------------------
        The contracts reviewed by the Committee do, however, provide
    exceptions to such restrictions where a consumer makes a direct inquiry
    to the data broker's customer.\165\
    ---------------------------------------------------------------------------
        \165\ E.g., Sample Contract provided to the Senate Commerce
    Committee.
    ---------------------------------------------------------------------------
    2. Consumer Access and Control Rights
        The respondent data brokers varied widely with respect to access
    and correction rights. For example, Experian and Equifax provide
    consumers no right to view their own data or correct it. Rapleaf
    provides consumers access to their data, and allows them to correct
    data that Rapleaf originates, but the company does not provide
    correction rights to data originating from others.
        Equifax states that a large percentage of the products it offers
    are aggregated or modeled scores that are then attributed to every
    household or individual sharing a particular ZIP+4 Code. Equifax
    asserts that because the consumer data obtained is de-identified and
    therefore not about a particular consumer, Equifax does not provide an
    opportunity for consumer notice, access, or correction.\166\ Similarly,
    Experian does not provide consumers the ability to access or correct
    the data maintained because the company ``does not maintain sufficient
    personal information to allow adequate authentication of an individual
    who requests access,'' \167\ and much of the information is modeled or
    inferred or provides general information, such as income ranges, rather
    than details, such as exact income, making correction rights
    unnecessary.\168\
    ---------------------------------------------------------------------------
        \166\ Response Letter from Robert W. Kamerschen, U.S. Chief Counsel
    and Senior Vice President, Equifax to Chairman John D. Rockefeller IV,
    at 5 (Nov. 2, 2012).
        \167\ Experian Narrative Response to Senate Commerce Committee, at
    16 (Nov. 2, 2013).
        \168\ Id.
    ---------------------------------------------------------------------------
        Acxiom in September 2013 unveiled a new website--Aboutthedata.com--
    that allows consumers to see and correct certain information that
    Acxiom has collected about them. In order to access information,
    consumers must enter their full name, address, date of birth, last four
    digits of their social security number, and e-mail address. Once a
    consumer's information has been authenticated, the consumer can view,
    and correct or delete broad categories of what Acxiom calls ``core''
    data.
        While the new Acxiom database marks a step forward in promoting
    transparency, it does not provide consumers a complete view of the data
    the company holds on consumers for marketing purposes. First, consumers
    do not have access to data to which Acxiom has applied analytics. For
    example, a consumer could see data points showing their occupation and
    that they have children, but if Acxiom inferred from those two data
    points that the consumer is a ``working parent,'' the consumer would
    not have access to that inferred element. Second, the database includes
    only those data points that are currently incorporated into Acxiom's
    digital--as opposed to offline--products. According to Acxiom
    representatives, as of early December, about 47 percent of Acxiom's
    offline data was included in the digital products, and the company is
    aiming to have complete overlap of the two data sets within a few
    years.\169\
    ---------------------------------------------------------------------------
        \169\ See Section III.C.2. According to documents provided to the
    Committee, as of June 2012, Acxiom had 160 elements available in the
    digital products. The 160 elements include some modeled data that would
    not be available for access and correction. This is out of Acxiom's
    over 1,500 data elements currently listed as available in their data
    catalog. Acxiom Narrative Response to Senate Commerce Committee (Mar.
    1, 2013). Conversations with Acxiom suggest that this number may now be
    as high as 47 percent of the available 1,500 data elements. Committee
    staff conversation with Jennifer Barrett Glasgow, Chief Privacy
    Officer, Acxiom (Dec. 10, 2013).
    ---------------------------------------------------------------------------
    3. Opt-Out Rights
        Several companies reported that they provide an avenue for
    consumers to opt out of having their information shared for marketing
    purposes. The companies that provide these options typically give
    notice to consumers of this option via their privacy policies and
    company websites. They can also entirely opt out of having any of their
    data collected.
        Acxiom's policy is to permanently delete the records of consumers
    who choose to opt out. However, a number of other respondent companies
    provide that, when a consumer opts out of having their information
    shared, the companies do not delete the consumer's information. Rather,
    as Epsilon describes:

            When a consumer opts-out with Epsilon, Epsilon marks the
            consumer's information as ``Do Not Share,'' rather than
            deleting the information. Epsilon does this to preserve the
            consumer's preference; if the consumer's information is
            deleted, in the future, Epsilon would have no way to know that
            the consumer requested that their information not be shared.
            When a consumer is marked as ``Do Not Share,'' Epsilon will
            know that the consumer did not want their information shared in
            case the consumer's information is later resubmitted. Epsilon
            adheres to this policy to ensure that consumers' opt-out
            requests are persistent and honored.\170\
    ---------------------------------------------------------------------------
        \170\ Epsilon Narrative Response to Senate Commerce Committee (Nov.
    2, 2012).

        Similarly, when a consumer requests that Experian suppress the use
    of their information for marketing purposes, ``Experian does not
    completely eliminate data in response to a suppression request.
    [Experian] must continue to internally maintain a record pertaining to
    the suppressed household in order to properly manage consumer records,
    such as the consumer's choice for suppression.'' \171\
    ---------------------------------------------------------------------------
        \171\ Experian Narrative Response to Senate Commerce Committee, at
    16 (Nov. 2, 2012).
    ---------------------------------------------------------------------------
        It is worth noting that since consumers are often not aware that
    data brokers hold their information, it is not clear how they would be
    aware that they have opt-out rights, or how to exercise them.
    IV. Conclusion
        The responses the Committee received in its inquiry into the data
    broker industry provide a snapshot of how data brokers collect, use,
    and share consumer data for marketing purposes. This information makes
    clear that consumers going about their daily activities--from making
    purchases online and at brick-and-mortar stores, to using social media,
    to answering surveys to obtain coupons or prizes, to filing for a
    professional license--should expect that they are generating data that
    may well end up in the hands of data brokers. They should expect that
    this data may well be amassed with many other details about them data
    brokers already have compiled. And they should expect that data brokers
    will draw on this data without their permission to construct detailed
    profiles on them reflecting judgments about their characteristics and
    predicted behaviors.
        The responses also underscore that consumers have minimal means of
    learning--or providing input--about how data brokers collect, analyze,
    and sell their information. The wide variety of consumer access and
    control policies provided by the representative companies show that
    consumer rights in this arena are offered virtually entirely at the
    companies' discretion. The contractual limitations imposed by companies
    regarding customer disclosures of their data sources place additional
    barriers to consumer transparency. And the refusal by several major
    data broker companies to provide the Committee complete responses
    regarding data sources and customers only reinforces the aura of
    secrecy surrounding the industry.
        This Committee inquiry has been conducted at a time when sources of
    consumer data and technological capabilities for storage and speedy
    analysis of data continue to expand. As data brokers are creating
    increasingly detailed dossiers on millions of consumers, it is
    important for policymakers to continue vigorous oversight to assess the
    potential harms and benefits of evolving industry practices and to make
    sure appropriate consumer protections are in place.
                                     ______

                                   Appendix I

         Federal Laws That May Be Applicable To Information Collected
                                By Data Brokers

        In its September 2013 Information Resellers Report, GAO found that
    no single comprehensive Federal privacy law governs the collection,
    use, and sale of personal information maintained and sold by data
    brokers.\1\ Instead, a ``more narrowly tailored'' set of laws
    concerning private sector use of consumer information exists which
    ``apply for specific purposes, in certain situations, to certain
    sectors, or to certain types of entities.'' \2\ The Fair Credit
    Reporting Act (FCRA), the Gramm-Leach-Bliley Act (GLBA), Section 5 of
    the Federal Trade Commission Act (FTC Act), and to some extent the
    Health Insurance Portability and Accountability Act of 1996 (HIPAA),
    and the Children's Online Privacy Protection Act (COPPA) are the
    primary laws that govern the collection and use of consumer
    information. A brief summary of the applicable portions of each of
    these laws follows below.
    ---------------------------------------------------------------------------
        \1\ Government Accountability Office, Information Resellers:
    Consumer Privacy Framework Needs to Reflect Changes in Technology and
    the Marketplace, GAO-13-663 (Sept. 2013) (hereafter ``GAO Information
    Reseller Report'').
        \2\ Id..
    ---------------------------------------------------------------------------
    I. Fair Credit Reporting Act
        The Fair Credit Reporting Act (FCRA) \3\ imposes a number of
    obligations on consumer reporting agencies (CRAs), which are entities
    that assemble consumer information into ``consumer reports'' for use by
    issuers of credit and insurance, and by employers, landlords, and
    others in making eligibility decisions affecting consumers.\4\ Whether
    the obligations and protections of the FCRA apply to consumer data
    depends largely on the purpose for which the information is collected,
    and the intended and actual use of the information, rather than the
    origin or nature of the information itself. The FCRA does not apply to
    the collection and use of information for the purpose of marketing,
    except it allows marketing of pre-screened offers of credit and
    insurance where consumers are provided the opportunity to opt out of
    future such offers.\5\
    ---------------------------------------------------------------------------
        \3\ Pub. L. No. 91-508, Tit. VI, 84 Stat. 1114, 1128 (1970)
    (codified as amended at 15 U.S.C. Sec. Sec. 1681-1681x).
        \4\ 15 U.S.C. Sec. 1681a.
        \5\ 15 U.S.C. Sec. 1681b(e). Pre-screened offers of credit or
    insurance--sometimes called ``pre-approved'' offers--are sent to
    consumers unsolicited, usually by mail. They are based on information
    in consumers' credit reports that indicates that the individuals
    receiving the offer meet the criteria set by the company making the
    offer. The FCRA limits the circumstances in which consumer reports can
    be used to make pre-screened offers, and provides that all such offers
    must include a notice of consumers' right to stop receiving future pre-
    screened offers.
    ---------------------------------------------------------------------------
        The FCRA requires that CRAs make reasonable efforts to assure the
    ``maximum possible accuracy'' \6\ of the information they provide to
    data users, and further requires they maintain procedures through which
    consumers can dispute and correct inaccurate information in their
    consumer reports.\7\ CRAs also must take reasonable measures to ensure
    that they provide credit reports only to those entities that have a
    statutorily-specified ``permissible purpose'' to receive them.\8\ The
    FTC has recently taken actions against a number of companies for
    allegedly violating the FCRA.\9\
    ---------------------------------------------------------------------------
        \6\ 15 U.S.C. Sec. 1681e(b).
        \7\ 15 U.S.C. Sec. 1681i(a)-(d)
        \8\ 15 U.S.C. Sec. 1681b(a), (c). Permissible purposes under the
    FCRA include, but are not limited to, the use of a consumer report in
    connection with a determination of eligibility for credit, insurance,
    or a license; in connection with the review of an existing account; and
    for certain employment purposes. Other typical uses that are subject to
    FCRA protections include tenant screening, and check cashing services.
        \9\ See, e.g., Press Release, ``Certegy Check Services to Pay $3.5
    Million for Alleged Violations of the Fair Credit Reporting Act and
    Furnisher Rule,'' Federal Trade Commission (Aug. 15, 2013) (available
    at www.ftc.gov/news-events/press-releases/2013/08/certegy-check-
    services-pay-35-million-alleged-violations-fair); Press Release
    ``Marketers of Criminal Background Screening Reports To Settle FTC
    Charges They Violated Fair Credit Reporting Act'' Federal Trade
    Commission, (Jan. 10, 2013) (available at www.ftc.gov/news-events/
    press-releases/2013/01/marketers-criminal-background-screening-
    reportsto-settle-ftc); Press Release,``Spokeo to Pay $800,000 to Settle
    FTC Charges Company Allegedly Marketed Information to Employers and
    Recruiters in Violation of FCRA,'' Federal Trade Commission,(June 7,
    2012) (available at www.ftc.gov/news-events/press-releases/2012/06/
    spokeo-pay-800000-settle-ftc-charges-company-allegedly-marketed).
    ---------------------------------------------------------------------------
    II. Gramm Leach Bliley Act
        The Gramm Leach Bliley Act (GLBA) \10\, also known as the Financial
    Services Modernization Act of 1999, imposes privacy and security
    obligations on nonpublic personal information that consumers provide to
    ``financial institutions,'' which GLBA defines as businesses that are
    engaged in ``financial activities,'' including traditional banking,
    lending, and insurance functions, as well as other activities such as
    providing investment advice, brokering loans, credit reporting, and
    real estate settlement services.\11\ Financial institutions subject to
    GLBA must comply with two key provisions of the Act--the ``Financial
    Privacy Rule,'' and ``Safeguards Rule.'' The Financial Privacy Rule
    governs the collection and disclosure of consumers' personal
    information.\12\ The ``Safeguards Rule,'' requires that financial
    institutions design, implement and maintain safeguards to protect
    consumers' nonpublic information.\13\
    ---------------------------------------------------------------------------
        \10\ Pub. L. No. 106-102, 113 Stat. 1338 (1999) (codified as
    amended in scattered sections of 12 and 15 U.S.C.).
        \11\ 15 U.S.C. Sec. 6809(3)(A).
        \12\ 15 U.S.C. Sec. 6801(a).
        \13\ 15 U.S.C. Sec. 6801(b).
    ---------------------------------------------------------------------------
        The GLBA Privacy Rule generally prohibits covered financial
    institutions from disclosing nonpublic personal information about
    consumers to non-affiliated third parties without first providing
    consumers with notice and the opportunity to opt out of the
    disclosure.\14\ However, the GLBA provides a number of statutory
    exceptions under which disclosure is permitted without specific notice
    to the consumer, including consumer reporting (pursuant to the FCRA),
    fraud prevention, law enforcement and regulatory or self-regulatory
    purposes, compliance with judicial process, and public safety
    investigations.\15\
    ---------------------------------------------------------------------------
        \14\ 15 U.S.C. Sec. 6802(b).
        \15\ 15 U.S.C. Sec. 6802(e).
    ---------------------------------------------------------------------------
        Entities that receive information under an exception to the GLBA
    are subject to reuse and re-disclosure restrictions, even if those
    entities are not themselves financial institutions.\16\ In particular,
    the recipients may only use and disclose the information ``in the
    ordinary course of business to carry out the activity covered by the
    exception under which . . . the information [was received].'' \17\
    Thus, for example, if a data broker obtains ``credit header
    information''--which includes a consumer's name, address, and social
    security number--from a financial institution pursuant to the GLBA
    exception ``to protect against or prevent actual or potential fraud,''
    then that data broker may not reuse and re-disclose that information
    for marketing purposes.
    ---------------------------------------------------------------------------
        \16\ 16 C.F.R. Part 313.
        \17\ 16 C.F.R. Part 313.11(a).
    ---------------------------------------------------------------------------
    III. Federal Trade Commission Act
        Section 5 of the Federal Trade Commission (FTC) Act provides the
    Commission with broad jurisdiction to regulate unfair or deceptive
    practices in competition and consumer protection.\18\ Section 5 forms
    the basis of the FTC's substantial body of law that covers advertising,
    marketing, certain financial practices, and privacy, among other areas.
    In the privacy space, section 5 applies to both deceptions and
    violations of written privacy policies and statements made to consumers
    about how they will safeguard or use consumer information.\19\ The
    Commission's Section 5 authority extends to the sale of data for
    marketing purposes.\20\
    ---------------------------------------------------------------------------
        \18\ 15 U.S.C. Sec. 45. Banks, savings and loans, credit unions,
    common carriers, and air carriers are exempt from the FTC's Section 5
    jurisdiction.
        \19\ See, e.g, Press Release, Google Will Pay $22.5 Million to
    Settle FTC Charges it Misrepresented Privacy Assurances to Users of
    Apple's Safari Internet Browser, Federal Trade Commission (Aug.9, 2012)
    (available at www.ftc.gov/news-events/press-releases/2012/08/google-
    will-pay-225-million-settle-ftc-charges-it-misrepresented); Press
    Release, Online Data Broker Settles FTC Charges Privacy Policies were
    Deceptive, (Sept. 22, 2010) (available at http://www.ftc.gov/news-
    events/press-releases/2010/09/online-data-broker-settles-ftc-charges-
    privacy-pledges-were) (charging that U.S. Search, Inc.'s promises that
    they would prevent consumers' personal information from appearing in
    their reverse lookup database in exchange for a $10 fee were false);
    Press Release, Agency Announces Settlement of Separate Actions Against
    Retailer TJX, and Data Brokers Reed Elsevier and Seisint for Failing to
    Provide Adequate Security for Consumers Data, Federal Trade Commission
    (Mar. 27, 2008) (available at http://www.ftc.gov/news-events/press-
    releases/2008/03/agency-announces-settlement-separate-actions-against-
    retailer-tjx).
        \20\ In October of 2012, the FTC alleged that the credit reporting
    division of Equifax improperly sold more than 17,000 ``prescreened''
    lists of consumers who were late on their mortgage payments to Direct
    Lending Source, Inc. and its affiliate companies. Direct Lending
    subsequently resold some of these lists to third parties, who used the
    lists to pitch loan modification and debt relief services to people in
    financial distress, including to companies that had been the subject of
    prior law enforcement investigations. See Press Release, FTC
    Settlements Require Equifax to Forfeit Money Made by Allegedly
    Improperly Selling Information about Millions of Consumers Who Were
    Late on Their Mortgages, Federal Trade Commission (Oct. 10, 2012)
    (available at http://www.ftc.gov/news-events/press-releases/2012/10/
    ftc-settlements-require-equifax-forfeit-money-made-allegedly).
    ---------------------------------------------------------------------------
    IV. Health Insurance Portability and Accountability Act
        The Health Insurance Portability and Accountability Act (HIPAA)
    \21\ protects certain personal health information from use and
    disclosure. HIPAA applies to individually identifiable health
    information \22\ held by ``covered entities,'' which include health
    insurers, health care providers--if they transmit any information in an
    electronic form for certain covered transactions--and health care
    clearinghouses, as well as their vendors, subcontractors, and business
    associates.\23\ The HIPPA Privacy Rule governs the use and disclosure
    of personal health information and, with some exceptions, requires an
    individual's written authorization prior to using consumers' protected
    health information for marketing and sale.\24\ However, HIPPA affords
    fairly narrow protections and its restrictions on sharing do not apply
    to health information held by non-covered entities, including data
    brokers.
    ---------------------------------------------------------------------------
        \21\ Pub. L. No. 104-191, 110 Stat. 1936 (1996) (codified as
    amended in scattered sections of 18, 26, 29, and 42 U.S.C.).
        \22\ 45 C.F.R. Part 160.103. Individually identifiable health
    information is information which can be linked to a particular person.
    This information can relate to the individual's past, present or future
    physical or mental health or condition, or, the past, present, or
    future payment for the provision of health care to the individual.
        \23\ 45 C.F.R. Part160.103.
        \24\ Exceptions include refill reminders or otherwise communicate
    about a drug or biologic that is currently being prescribed for the
    individual, only if any financial remuneration received by the covered
    entity in exchange for making the communication is reasonably related
    to the covered entity's cost of making the communication. 45 CFR
    164.501
    ---------------------------------------------------------------------------
    V. Children's Online Privacy Protection Act
        The Children's Online Privacy Protection Act \25\ (COPPA) applies
    to the online collection and use of personal information from children
    under age 13. Websites and online services, including mobile apps,
    covered by COPPA are required to post privacy policies, provide parents
    with direct notice of their information practices, and get verifiable
    consent from a parent or guardian before collecting personal
    information from children. Personal information is defined as
    information that would allow someone to identify or contact a child. It
    includes, among other things, name, physical or e-mail address,
    geolocation, and ``persistent identifier'' which can be used to
    recognize a user over time and across different websites or online
    services.\26\ The law specifies what information must be included in
    the notice provided to parents and how and when to acquire parental
    consent.\27\
    ---------------------------------------------------------------------------
        \25\ 15 U.S.C. Sec. Sec. 6501-6506 (Pub.L. 105-277, 112 Stat. 2581-
    728, enacted October 21, 1998).
        \26\ 16 C.F.R. Part 312.2.
        \27\ 16 C.F.R. Part 312.5.
    ---------------------------------------------------------------------------
        COPPA's restrictions and protections could apply to this
    investigation because websites have been identified as one of the
    sources from which data brokers obtain consumer information. COPPA does
    not restrict the collection of a child's information from the child's
    parent or other adult.

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        The Chairman. One of the things that we have learned in
    this investigation is that data brokers engage in many
    unobjectionable activities. They do what marketers have always
    done: They help businesses find potential customers.
        But we have also found some practices that raise some
    serious consumer protection concerns. In particular, I am
    disturbed by the evidence showing that the data brokers segment
    Americans, categorize them into categories, name those
    categories, based on their incomes, and then they sort
    economically vulnerable customers into groups with names like
    ``rural and barely making it''--not making it up, that is one
    of their categories--``tough start: young single parents'';
    ``rough retirement: small-town and rural seniors''; and ``zero
    mobility.''
        I want to know how and why data brokers are putting
    American consumers into categories like these, and I want to
    know which companies are buying these lists to target their
    marketing to these groups. Maybe it is totally innocuous and
    benign. I don't start out accepting that, but maybe it is. That
    is why we are doing this investigation.
        Some companies in the data broker industry have responded
    positively to our oversight efforts.
        When I became Chairman here several years ago, we went over
    to Henry Waxman and stole a couple of his best people and set
    up an investigations unit, which for some reason we had never
    had. And we gave ourselves subpoena power; for some reason, we
    had never done that. It is a powerful tool when you are doing
    investigations, which is what we tend to do in here.
        I want to know which companies are buying these lists to
    target their marketing to those groups.
        Some companies in the data broker industry have responded
    very positively to our oversight efforts. Over the past year,
    they have provided complete answers to my questions, even the
    tough ones.
        But several of the largest data brokers--specifically,
    Acxiom, Epsilon, and Experian--are continuing to resist
    oversight, just resist it. To date, they have not given me
    complete answers about where they get their customer data on
    consumers and to whom they sell it.
        I am putting these three companies on notice today that I
    am not satisfied with their responses and I am considering
    further steps--and I have steps that I can use--that I can take
    to get this information. We have oversight over this activity
    in American commerce. And if you do oversight, whether it is
    over intelligence or whether it is over this, you do it
    seriously and you do it with a purpose and you want to get the
    truth.
        So I am putting these companies on notice that I am not
    satisfied and I have further steps that I can take to get this
    information. And I want to assure them that the oversight
    efforts in this committee that we have started will continue.
        I call now on my distinguished friend from a similar urban
    state----
        Senator Thune. That is right.
        [Laughter.]
        The Chairman.--Senator John Thune.

                     STATEMENT OF HON. JOHN THUNE,
                     U.S. SENATOR FROM SOUTH DAKOTA

        Senator Thune. Well, thank you, Mr. Chairman, for holding
    this hearing.
        And thank you also to the witnesses for coming here today.
        Our economy is increasingly data-driven, and data brokers
    play a growing role in facilitating the provision of goods and
    services to consumers. Data or information brokers are
    companies that collect data, including personal information,
    about consumers from a wide variety of sources, such as public
    records, websites, and retailers, and then resell such
    information for purposes that range from verifying an
    individual's identity to preventing fraud to marketing
    products.
        As the Chairman noted in his initial letters to several
    data brokers in 2012, the purpose of his inquiry has been to
    better understand the industry and I look forward to today's
    hearing as we focus on how the information collected by data
    brokers is used for marketing purposes.
        Without question, data-driven marketing can provide
    benefits and greater convenience to consumers. It can lower the
    cost of products and services because businesses can target
    marketing more precisely. It also can help businesses create
    and sell products that consumers actually want, lowering start-
    up costs for new businesses.
        Data-driven marketing is one important reason that many of
    us are able to use search engines and our e-mail accounts for
    free. It also allows consumers to receive frequent-shopper
    benefits and coupons. And it promotes the targeting of
    resources to reduce the amount of junk mail and catalogs that
    aren't tailored to a consumer's particular interests--at least,
    that is the goal.
        Put simply, this industry is at the center of something the
    Commerce Committee cares about: commerce. In today's economy,
    data-driven marketing is widely used across all sectors of the
    economy: financial, insurance, automotive, retail, technology,
    health care. It is even used by nonprofits, governments, and
    political campaigns. In fact, many media outlets have noted how
    the use of commercial data resources helped the president's
    reelection campaign in 2012.
        As we will hear from the Direct Marketing Association, the
    marketing data industry is also helping to fuel job creation
    and technical innovation in our slowly recovering economy.
        While the industry creates many benefits, this hearing will
    also explore important questions about the privacy implications
    of data brokers' activities, including issues of transparency,
    profiling, and concerns about allegations of differential
    pricing.
        Questions have also been raised about whether consumers are
    aware of the instances in which their personal information may
    be collected, bought, and sold, resulting in calls for more
    transparency into data broker practices.
        Advocates have also raised concerns that data brokers
    create profiles of individual consumers based on the
    aggregation of sensitive and sometimes personal data, including
    health conditions.
        These are important issues, and I look forward to the
    discussion today.
        In a rapidly changing marketplace, the Federal Trade
    Commission has done important work concerning data brokers and
    related privacy issues, including developing educational
    efforts. They have also brought enforcement actions under the
    FTC Act and the Fair Credit Reporting Act. The FTC is also
    completing a study about practices in the data broker industry
    and will provide recommendations to Congress based on their
    findings next year. I look forward to their testimony.
        The Government Accountability Office has recently produced
    a report on the data broker industry, which I understand will
    be submitted as part of the record for this hearing as well as
    to help inform this committee.
        [The report follows:]

                                 GAO Highlights
    Why GAO Did This Study
        Members of Congress and others have raised privacy concerns about
    information resellers (data brokers) and consumer information. In part,
    their concerns stem from consumers not always knowing the nature and
    extent of the information collected and how it is used. Growing use of
    the Internet, social media, and mobile applications has intensified
    privacy concerns because these media greatly facilitate gathering of
    personal information, tracking of online behavior, and monitoring of
    individuals' locations and activities. This statement for the record
    discusses: (1) existing Federal laws and regulations on the privacy of
    consumer information held by information resellers, (2) any gaps that
    may exist in this legal framework, and (3) views on approaches for
    improving consumer data privacy.
        This statement draws from a September 2013 report (GAO-13-663),
    which focuses on information used for marketing. GAO analyzed relevant
    laws and regulations; interviewed representatives of Federal agencies,
    trade associations, consumer and privacy groups, and resellers; and
    identified and reviewed approaches for improving consumer data privacy.
    What GAO Recommends
        In September 2013, GAO suggested that Congress should consider
    strengthening the consumer privacy framework and review issues such as
    the adequacy of consumers' ability to access, correct, and control
    their personal information; and privacy controls related to new
    technologies such as web tracking and mobile devices.
                             Information Resellers
    Consumer Privacy Framework Needs to Reflect Changes in Technology
            and the Marketplace
    What GAO Found
        No overarching Federal privacy law governs the collection and sale
    of personal information among private-sector companies, including
    information resellers. Instead, laws tailored to specific purposes,
    situations, or entities govern the use, sharing, and protection of
    personal information. For example, the Fair Credit Reporting Act limits
    the use and distribution of personal information collected or used to
    help determine eligibility for such things as credit or employment, but
    does not apply to information used for marketing. Other laws apply
    specifically to health care providers, financial institutions, or to
    the online collection of information about children.
        The current statutory framework for consumer privacy does not fully
    address new technologies--such as tracking of online behavior or mobile
    devices--and the vastly increased marketplace for personal information,
    including the proliferation of information sharing among third parties.
    No Federal statute provides consumers the right to learn what
    information is held about them for marketing and who holds it. In many
    circumstances, consumers also do not have the legal right to control
    the collection or sharing with third parties of sensitive personal
    information (such as health information) for marketing purposes. As a
    result, although some industry participants have stated that current
    privacy laws are adequate, GAO found that gaps exist in the current
    statutory framework for information privacy. The framework also does
    not fully reflect the Fair Information Practice Principles, widely
    accepted principles for protecting the privacy and security of personal
    information that have served as a basis for many privacy
    recommendations Federal agencies have made.
        Views differ on the approach that any new privacy legislation or
    regulation should take. Some privacy advocates have argued that a
    comprehensive privacy law would provide greater consistency and address
    gaps in law left by the current sector-specific approach. Others have
    stated that a comprehensive, one-size-fits-all approach would be
    burdensome and inflexible. Some privacy advocates also cited the need
    to provide consumers with greater ability to access, control the use
    of, and correct information about themselves, particularly for data
    being used for purposes different than those for which they originally
    were provided. Industry representatives have asserted that restrictions
    on the collection and use of personal data would impose compliance
    costs, inhibit innovation, and reduce consumer benefits. Nonetheless,
    the rapid increase in the amount and type of personal information that
    is collected and resold warrants reconsideration of how well the
    current privacy framework protects personal information. The challenge
    will be providing appropriate privacy protections without unduly
    inhibiting the benefits to consumers, commerce, and innovation that
    data sharing can accord.
                                     ______

    Prepared Statement of Alicia Puente Cackley, Director Financial Markets
        and Community Investment, U.S. Government Accountability Office
        Chairman Rockefeller, Ranking Member Thune, and Members of the
    Committee:

        I am pleased to submit this statement on our recent work on
    privacy, personal information, and information resellers.\1\ As you
    know, information resellers (also known as data brokers) offer several
    types of products to customers that include retailers, advertisers,
    individuals, nonprofit organizations, law enforcement, and government
    agencies. This statement is based on a report we issued this September
    in response to a request from this committee to review privacy issues
    related to the consumer data that information resellers collect, use,
    and sell. Others also have raised privacy concerns about resellers and
    consumer information. In part, their concerns stem from consumers not
    always knowing the nature and extent of the information collected and
    how it is used. Moreover, growing use of the Internet, social media,
    and mobile applications has intensified privacy concerns because these
    media greatly facilitate the gathering of personal information,
    tracking of online behavior, and monitoring of individuals' locations
    and activities.
    ---------------------------------------------------------------------------
        \1\ GAO, Information Resellers: Consumer Privacy Framework Needs to
    Reflect Changes in Technology and the Marketplace, GAO-13-663
    (Washington, D.C.: Sep. 25, 2013).
    ---------------------------------------------------------------------------
        Our September report examined: (1) existing Federal laws and
    regulations related to the privacy of consumer information held by
    information resellers, (2) any gaps that may exist in this legal
    framework, and (3) views on approaches for improving consumer data
    privacy. We focused on privacy issues related to information used for
    marketing and individual reference services (look-up or people-search);
    we did not focus on information used for other purposes such as
    determining credit or employment eligibility.\2\
    ---------------------------------------------------------------------------
        \2\ In a 2006 report, we examined financial institutions' use of
    information resellers, focusing on consumer information used for
    eligibility determinations, compliance with legal requirements, and
    fraud prevention. GAO, Personal Information: Key Federal Privacy Laws
    Do Not Require Information Resellers to Safeguard All Sensitive Data,
    GAO-06-674 (Washington, D.C.: June 26, 2006).
    ---------------------------------------------------------------------------
        For our September 2013 report, we reviewed and analyzed relevant
    laws, regulations, and enforcement actions. We interviewed
    representatives of Federal agencies, trade associations, consumer and
    privacy groups, and resellers to obtain their views on data privacy
    laws related to resellers. We identified and reviewed approaches
    (legislative, regulatory, or self-regulatory) for improving consumer
    data privacy that Federal entities--such as the White House, Federal
    Trade Commission (FTC), and Department of Commerce (Commerce)--or
    representatives of industry, consumer, and privacy groups advocated. We
    interviewed representatives of these entities and reviewed relevant
    studies, hearings, position papers, public comments, and other sources.
    Further details of our scope and methodology can be found in our
    published report.
        We conducted the performance audit on which this statement is based
    from August 2012 through September 2013, in accordance with generally
    accepted government auditing standards. Those standards require that we
    plan and perform the audit to obtain sufficient, appropriate evidence
    to provide a reasonable basis for our findings and conclusions based on
    our audit objectives. We believe that the evidence obtained provides a
    reasonable basis for our findings and conclusions based on our audit
    objectives.
    Background
        Resellers maintain large, sophisticated databases with consumer
    information that can include credit histories, insurance claims,
    criminal records, employment histories, incomes, ethnicities, purchase
    histories, and interests. Resellers largely obtain their information
    from public records, publicly available information (such as
    directories and newspapers), and nonpublic information (such as from
    retail loyalty cards, warranty registrations, contests, and web
    browsing). Characterizing the precise size and nature of the reseller
    industry can be difficult because of limited publicly known information
    about the industry.
        In 1972, a U.S. government advisory committee first proposed the
    Fair Information Practice Principles (FIPP) for protecting the privacy
    and security of personal information. While FIPPs are not legal
    requirements, they provide a framework for balancing privacy with other
    interests. The Organisation for Economic Co-operation and Development
    (OECD) developed a revised version of the FIPPs that has been widely
    adopted (see table 1).\3\
    ---------------------------------------------------------------------------
        \3\ Organisation for Economic Co-operation and Development,
    Guidelines on the Protection of Privacy and Transborder Flow of
    Personal Data (Paris, France: Sept. 23, 1980). OECD's 30 member
    countries include the United States. OECD has been considering whether
    to revise or update its privacy guidelines to account for changes in
    the role of personal data in the economy and society.

    ------------------------------------------------------------------------

                 Table 1.--Fair Information Practice Principles
    ------------------------------------------------------------------------
             Principle                           Description
    ------------------------------------------------------------------------
    Collection limitation        The collection of personal information
                                  should be limited, obtained by lawful and
                                  fair means, and, where appropriate, with
                                  the knowledge or consent of the
                                  individual.
    ------------------------------------------------------------------------
    Data quality                 Personal information should be relevant to
                                  the purpose for which it is collected, and
                                  should be accurate, complete, and current
                                  as needed for that purpose.
    ------------------------------------------------------------------------
    Purpose specification        The purposes for the collection of personal
                                  information should be disclosed before
                                  collection and upon any change to those
                                  purposes, and the use of the information
                                  should be limited to those purposes and
                                  compatible purposes.
    ------------------------------------------------------------------------
    Use limitation               Personal information should not be
                                  disclosed or otherwise used for purposes
                                  other than a specified purpose without
                                  consent of the individual or legal
                                  authority.
    ------------------------------------------------------------------------
    Security safeguards          Personal information should be protected
                                  with reasonable security safeguards
                                  against risks such as loss or unauthorized
                                  access, destruction, use, modification, or
                                  disclosure.
    ------------------------------------------------------------------------
    Openness                     The public should be informed about privacy
                                  policies and practices, and individuals
                                  should have ready means of learning about
                                  the use of personal information.
    ------------------------------------------------------------------------
    Individual participation     Individuals should have the following
                                  rights: to know about the collection of
                                  personal information, to access that
                                  information, to request correction, and to
                                  challenge the denial of those rights.
    ------------------------------------------------------------------------
    Accountability               Individuals controlling the collection or
                                  use of personal information should be
                                  accountable for taking steps to ensure the
                                  implementation of these principles.
    ------------------------------------------------------------------------
    Source: OECD.

        FIPPs served as the basis for the Privacy Act of 1974--which
    governs the collection, maintenance, use, and dissemination of personal
    information by Federal agencies.\4\ The principles also were the basis
    for many FTC and Commerce privacy recommendations and for a framework
    for consumer data privacy the White House issued in 2012.\5\
    ---------------------------------------------------------------------------
        \4\ Pub. L. No. 93-579, 88 Stat. 1896 (1974) (codified as amended
    at 5 U.S.C. Sec. 552a). The act generally prohibits (with a number of
    exceptions) the disclosure by Federal entities of records about an
    individual without the individual's written consent and provides U.S.
    persons with a means to seek access to and amend their records.
        \5\ The framework includes a consumer privacy bill of rights and
    encourages Congress to provide FTC with enforcement authorities for the
    bill of rights. The White House, Consumer Data Privacy in a Networked
    World: A Framework for Protecting Privacy and Promoting Innovation in
    the Global Digital Economy (Washington, D.C.: Feb. 23, 2012).
    ---------------------------------------------------------------------------
    Several Laws Apply in Specific Circumstances to Consumer Data That
            Resellers Hold
        No comprehensive Federal privacy law governs the collection, use,
    and sale of personal information by private-sector companies. More
    narrowly tailored laws govern the use, sharing, and protection of
    personal information--they apply for specific purposes, in certain
    situations, to certain sectors, or to certain types of entities. The
    primary laws include the following:

            Fair Credit Reporting Act (FCRA).\6\ FCRA protects the security
            and confidentiality of personal information collected or used
            to help make decisions about individuals' eligibility for
            credit, insurance, or employment.\7\ It applies to ``consumer
            reporting agencies'' (such as credit bureaus) that provide
            ``consumer reports.'' \8\
    ---------------------------------------------------------------------------
        \6\ Pub. L. No. 91-508, Tit. VI, 84 Stat. 1114, 1128 (1970)
    (codified as amended at 15 U.S.C. Sec. Sec. 1681-1681x).
        \7\ See 15 U.S.C. Sec. 1681.
        \8\ For the definition of ``consumer reporting agency'', see 15
    U.S.C. Sec. 1681a(f). For the definition of ``consumer report'', see 15
    U.S.C. Sec. 1681a(d).

            Gramm-Leach-Bliley Act (GLBA).\9\ GLBA protects nonpublic
            personal information that individuals provide to ``financial
            institutions'' or that such institutions maintain.\10\ GLBA
            sharing and disclosure restrictions apply to financial
            institutions or entities that receive nonpublic personal
            information from such a financial institutions.\11\ For
            example, a third party that receives nonpublic personal
            information from a financial institution to process consumers'
            account transactions may not use the information or resell it
            for marketing purposes.
    ---------------------------------------------------------------------------
        \9\ Pub. L. No. 106-102, 113 Stat. 1338 (1999) (codified as amended
    in scattered sections of 12 and 15 U.S.C.).
        \10\ See 15 U.S.C. Sec. Sec. 6801-6802. Subtitle A of Title V of
    the act contains the privacy provisions relating to the disclosure of
    nonpublic personal information. 15 U.S.C. Sec. Sec. 6801-6809.
        \11\ 15 U.S.C. Sec. 6802. A ``financial institution'' is any
    institution the business of which is engaging in financial activities
    as described in section 4(k) of the Bank Holding Company Act (12 U.S.C.
    Sec. 1843(k)). 15 U.S.C. Sec. 6809(3)(a).

            Health Insurance Portability and Accountability Act
            (HIPAA).\12\ HIPAA establishes a set of national standards to
            protect certain health information. The HIPAA privacy rule
            governs the use and disclosure of an individual's health
            information for purposes including marketing.\13\ With some
            exceptions, the rule requires an individual's written
            authorization before a covered entity--a health care provider
            that transmits health information electronically in connection
            with covered transactions, health care clearinghouse, or health
            plan--may use or disclose the information for marketing.\14\
            The act does not directly restrict the use, disclosure, or
            resale of protected health information by resellers or others
            not considered covered entities under the act.
    ---------------------------------------------------------------------------
        \12\ Pub. L. No. 104-191, 110 Stat. 1936 (1996) (codified as
    amended in scattered sections of 18, 26, 29, and 42 U.S.C.).
        \13\ 45 C.F.R. Parts 160, 164.
        \14\ For the definition of ``marketing'', including exceptions,
    see. 45 C.F.R. Sec. 164.501.

            Children's Online Privacy Protection Act (COPPA).\15\ COPPA and
            its implementing regulations apply to the collection of
            information--such as name, e-mail, or location--that would
            allow someone to identify or contact a child under 13.\16\
            Covered website and online service operators must obtain
            verifiable parental consent before collecting such information.
            COPPA may not directly affect information resellers, but the
            covered entities are potential sources of information for
            resellers.
    ---------------------------------------------------------------------------
        \15\ Pub. L. No. 105-277, Div. C, Tit. XIII, 112 Stat. 2681-728
    (1998) (codified at 15 U.S.C. Sec. Sec. 6501-6506).
        \16\ FTC issued regulations implementing COPPA, 16 C.F.R. Part 312.

            Electronic Communications Privacy Act (ECPA).\17\ ECPA
            prohibits the interception and disclosure of electronic
            communications by third parties unless an exception applies
            (such as one party to the communication consenting to
            disclosure). For example, the act would prevent an Internet
            service provider from selling the content of its customers' e-
            mails to a reseller for marketing purposes, unless the
            customers had consented to disclosure. However, ECPA provides
            more limited protection for information considered to be ``non-
            content,'' such as a customer's name and address.
    ---------------------------------------------------------------------------
        \17\ Pub. L. No. 99-508, 100 Stat. 1848 (1986) (codified as amended
    in scattered sections of 18 U.S.C.).

            Federal Trade Commission Act (FTC Act), Section 5.\18\ The FTC
            Act prohibits unfair or deceptive acts or practices in or
            affecting commerce. Although the act does not explicitly grant
            FTC the specific authority to protect privacy, it has been
            interpreted to apply to deceptions or violations of written
            privacy policies. For example, if a retailer's written privacy
            policy stated customers' personal information would not be
            shared with resellers and the retailer later sold information
            to such parties, FTC could bring an enforcement action against
            the retailer for unfair and deceptive practices.
    ---------------------------------------------------------------------------
        \18\ 15 U.S.C. Sec. 45. Section 5 of the FTC Act, as originally
    enacted, only related to ``unfair methods of competition.'' The
    Wheeler-Lea Act, passed in 1938, expanded the Commission's jurisdiction
    to include ``unfair or deceptive acts or practices.'' Wheeler-Lea
    Amendments of 1938, Pub. L. No. 75-447, 52 Stat. 111.

        As they relate to specific types of consumer services or records,
    other Federal privacy laws also may apply to information resellers'
    practices and products. For instance, while not specifically a privacy
    law, the Computer Fraud and Abuse Act (CFAA) can restrict a third party
    from collecting personal information from a website when the collection
    would violate the site's terms of service.\19\ The Telecommunications
    Act requires telecommunications carriers to protect the confidentiality
    of proprietary information of customers.\20\
    ---------------------------------------------------------------------------
        \19\ Pub. L. No. 99-474, 100 Stat. 1213 (1986) (codified as amended
    at 18 U.S.C. Sec. 1030). Courts have held that CFAA prohibits access to
    websites when that access exceeds the sites' terms of use or end-user
    license agreements. See, e.g., Snap-On Bus. Solutions Inc. v. O'Neil &
    Assoc., Inc., 708 F.Supp. 2d 669 (N.D. Ohio 2010); Southwest Airlines
    Co. v. Farechase, Inc., 318 F.Supp. 2d 435 (N.D. Tex. 2004); America
    Online, Inc. v. LCGM, Inc., 46 F.Supp. 2d 444 (E.D. Va. 1998).
        \20\ Pub. L. No. 104-104, 110 Stat. 56 (1996) (codified as amended
    in scattered sections of 15 and 47 U.S.C.).
    ---------------------------------------------------------------------------
    Laws Have Limited Scope over Personal Data Used for Marketing
        Privacy protections under Federal law have been limited for
    consumer data used for marketing. The scope of protections is narrow in
    relation to individuals' ability to access, control, and correct their
    personal data; collection methods and sources and types of information
    collected; and new technologies.
    Laws Provide Individuals Limited Ability to Access, Control, and
            Correct Their Personal Data
        No Federal statute that we examined generally requires resellers to
    allow individuals to review personal information (intended for
    marketing purposes), control its use, or correct it. The FIPPs (for
    collection limitation and openness) state that individuals should be
    able to know about and consent to the collection of their information,
    while the individual participation principle states they should have
    the right to access the information, request correction, and challenge
    the denial of those rights.
        No Federal statute provides consumers the right to learn what
    information is held about them and who holds it for marketing or look-
    up purposes. FCRA provides individuals with certain access rights, but
    only when information is used for credit eligibility purposes.. And
    GLBA's provisions allowing consumers to opt out of having their
    personal information shared with third parties apply only in specific
    circumstances. Otherwise, individuals cannot require that their
    personal information not be collected, used, and shared. Also, no
    Federal law provides correction rights (the ability to have resellers
    and others correct or delete inaccurate, incomplete, or unverifiable
    information).
    Laws Largely Do Not Address Data Collection Methods, Sources, and Types
        Federal privacy laws are limited in addressing the methods by
    which, or the sources from which, resellers collect and aggregate
    personal information, or the types of information collected for
    marketing or look-up purposes. FIPPs (for data quality, purpose
    specification, and collection limitation) state that personal
    information should be relevant, limited to the purpose for which it was
    collected, and collected with the individual's knowledge or consent.
        Federal laws generally do not govern the methods resellers may use
    to collect personal information. An example of such a method is ``web
    scraping,'' in which resellers, advertisers, and others use software to
    search the web for information about individuals and extract and
    download bulk information from websites with consumer information.
    Resellers or retailers also may collect information indirectly (by
    combining information from transactions).
        Current law generally allows resellers to collect personal
    information from sources including warranty registration cards,
    surveys, and online sources such as discussion boards, social media
    sites, blogs, and web browsing histories and searches. Current law does
    not require disclosure to consumers when their information is collected
    from these sources.
        The Federal laws that address the types of consumer information
    that can be collected and shared are not comprehensive. Under most
    circumstances, information that many people may consider very personal
    or sensitive can be collected, shared, and used for marketing. This can
    include information about physical and mental health, income and
    assets, political affiliations, and sexual habits and orientation. For
    health information, HIPAA provisions apply only to covered entities.
    Current Law Does Not Directly Address Some Privacy Issues New
            Technology Raises
        The current privacy framework does not fully address new
    technologies such as social media, web tracking, and mobile devices. In
    a 2013 report, FTC noted that mobile technologies present unique
    privacy challenges (for instance, mobile devices identify a user's
    geographical location).\21\ As shown in figure 1, the original
    enactment of several Federal privacy laws predates these trends and
    technologies.
    ---------------------------------------------------------------------------
        \21\ Federal Trade Commission, Mobile Privacy Disclosures: Building
    Trust through Transparency (Washington, D.C.: February 2013).

    ---------------------------------------------------------------------------
        Source: GAO.

        Note: The most recent amendments to the Federal laws referenced in
    figure 2 are as follows:

            Federal Trade Commission Act of 1914: last amended July
    21, 2010 (Pub. L. 111-203).

            Fair Credit Reporting Act of 1970: last amended Dec.
    18, 2010 (Pub. L. No. 111-319).

            Family Educational Rights and Privacy Act of 1974: last
    amended Jan. 14, 2013 (Pub. L. No. 112-278).

            Electronic Communications Privacy Act of 1986: last
    amended Oct. 19, 2009 (Pub. L. No. 111-79).

            Video Privacy Protection Act of 1988: last amended Jan.
    10, 2013 (Pub. L. No. 112-258).

            Driver's Privacy Protection Act of 1994: last amended
    Oct. 23, 2000 (Pub. L. No. 106-346).

            Health Insurance Portability and Accountability Act of
    1996: last amended Mar. 23, 2010 (Pub. L. No. 111-148).

            Children's Online Privacy Protection Act of 1998: has
    not been amended.

            Gramm-Leach-Bliley Act of 1999: last amended July 21,
    2010 (Pub. L. No. 111-203).

        Because these laws were enacted to protect the privacy of
    information involving specific sectors rather than to address specific
    technologies, some have been interpreted to apply to new technologies.
    For example, FTC has taken enforcement actions under COPPA and revised
    the statute's implementing regulations to account for smartphones and
    mobile applications.
    Online Tracking

        No Federal privacy law explicitly addresses the full range of
    practices to track or collect data from consumers' online activity.
    Cookies--text files placed on a computer by the website that the
    computer user visits--allow website operators to recall information
    such as user name and address, credit card number, and purchases in a
    shopping cart. Resellers can match information in cookies and their
    databases to augment consumer profiles. Third parties also can
    synchronize their cookie files with resellers' files. Advertisers can
    use third-party cookies--placed on a computer by a domain other than
    the site being visited--to track visits to the websites on which they
    advertise. Consumers' ability to prevent such tracking can be
    restricted. For example, flash cookies--cookies which do not expire at
    the end of a browsing session--cannot be erased.\22\
    ---------------------------------------------------------------------------
        \22\ Shannon Canty, Chris Jay Hoofnagle, et al., ``Flash Cookies
    and Privacy'' (Aug. 10, 2009), available at http://papers.ssrn.com/
    sol3/papers.cfm?abstract_id=1446862.
    ---------------------------------------------------------------------------
        While current law does not explicitly address web tracking, FTC has
    taken enforcement actions related to web tracking under its authority
    to enforce the prohibition on unfair or deceptive acts. For example, in
    2011, FTC settled charges with Google for $22.5 million after alleging
    that Google violated an earlier privacy settlement with FTC when it
    misrepresented to users of Apple's Safari web browser that it would not
    track and serve targeted advertisements to Safari users.\23\ Google
    agreed to disable its advertising tracking cookies.
    ---------------------------------------------------------------------------
        \23\ United States v. Google Inc., No. CV 12-04177-SI, 2012 WL
    5833994 (N.D. Cal. Nov. 16, 2012).
    ---------------------------------------------------------------------------
        Federal law also does not expressly prohibit ``history sniffing,''
    which uses code on a webpage to record visitors' browsing history.
    However, in 2012, FTC took an enforcement action against Epic
    Marketplace, a large online advertising network, for deceptively
    failing to disclose its use of history-sniffing technology.\24\ Epic
    Marketplace used the data it collected to target advertising.
    ---------------------------------------------------------------------------
        \24\ FTC alleged that Epic Marketplace's use of history-sniffing
    was deceptive because it collected data about sites outside of its
    network that consumers had visited, contrary to Epic's privacy policy,
    which represented that it would collect information only about
    consumers' visits to websites in its network. In the Matter of Epic
    Marketplace, Inc., and Epic Media Group, LLC, FTC File No. 112 3182,
    decision and order (Mar. 13, 2013).
    ---------------------------------------------------------------------------
    Mobile Technologies

        In relation to collection and use of consumer data for marketing,
    no Federal privacy laws that we identified specifically govern mobile
    applications and technologies.

            Mobile applications. No Federal law specifically governs mobile
            applications--software downloaded onto mobile devices for uses
            such as providing information and online banking and
            shopping.\25\ Application developers, mobile carriers,
            advertisers, and others may collect an individual's information
            through services provided on a mobile device. However, FTC has
            taken enforcement action against companies for use of mobile
            applications that violate COPPA and FCRA.\26\ The agency also
            has taken action under the FTC Act.\27\ And CFAA, which bans
            unauthorized access to computers, has been found to apply to
            mobile phones.\28\
    ---------------------------------------------------------------------------
        \25\ On July 25, 2013, Commerce released a draft of a voluntary
    code of conduct for mobile applications, including guidelines for
    notices to consumers about collection and sharing of information with
    third parties. See Department of Commerce, National Telecommunications
    and Information Administration, Short Form Notice Code of Conduct to
    Promote Transparency in Mobile App Practices, redline draft (July 25,
    2013), available at http://www.ntia.doc.gov/files/ntia/publications/
    july_25_code_draft.pdf.
        \26\ FTC settled charges that a social networking service deceived
    consumers when it collected information from children under 13 through
    its mobile application in violation of COPPA. See United States v.
    Path, Inc., No. C13-0448 (N.D. Cal. Jan. 31, 2013). FTC also settled
    charges that a company compiled and sold criminal record reports
    through its mobile application and operated as a consumer reporting
    agency in violation of FCRA. See In the Matter of Filiquarian
    Publishing, LLC, FTC File No. 112 3195 (Apr. 30, 2013).
        \27\ For example, in addition to the alleged COPPA violation, Path
    allegedly deceived users by collecting personal information from their
    mobile address books without their knowledge and consent. See United
    States v. Path, Inc., No. C13-0448 (N.D. Cal. Jan. 31, 2013).
        \28\ In 2011, the U.S. Court of Appeals for the Eighth Circuit held
    that a basic cellular telephone--used only to place calls and send text
    messages--was a computer for CFAA purposes. The judicial decision did
    not address more advanced devices such as smartphones in the CFAA
    context. See U.S. v. Kramer, 631 F.3d 900 (8th Cir. 2011).

            Location tracking. No Federal privacy laws, except COPPA,
            expressly address location data, location-based technology, and
            consumer privacy. We and others have reported that the
            capability of mobile devices to provide consumer's location
            engenders privacy risks, particularly if companies use or share
            location data without consumers' knowledge.\29\ ECPA might not
            apply if location data were not deemed content and would not
            govern entities such as developers of location-based
            applications that are not covered by ECPA. But FTC could pursue
            enforcement action if a company's collection or use of the
            information violated COPPA.
    ---------------------------------------------------------------------------
        \29\ Risks included disclosure to third parties for unspecified
    uses, tracking of consumer behavior, and identity theft. See GAO,
    Mobile Device Location ID: Additional Federal Actions Could Help
    Protect Consumer Privacy, GAO-12-903 (Washington, D.C.: Sept. 11,
    2012). A Federal Communications Commission report also noted privacy
    risks. See Federal Communications Commission, Location-Based Services:
    An Overview of Opportunities and Other Considerations (Washington,
    D.C.: May 2012).

            Mobile payments. No Federal privacy laws expressly address
            mobile payments (for example, by smartphone). An FTC report
            noted that although mobile payment can be an easy way for
            individuals to pay for goods and services, privacy concerns
            have arisen because of the number of companies in the mobile
            payment marketplace and the large amount of detailed personal
            and purchase information collected and consolidated.\30\
    ---------------------------------------------------------------------------
        \30\ Federal Trade Commission, Paper, Plastic or Mobile? An FTC
    Workshop on Mobile Payments (Washington, D.C.: March 2013).
    ---------------------------------------------------------------------------
    Stakeholders Diverge on Adequacy of Legal Framework and Need for
            Legislation
        Stakeholder views diverge on whether significant gaps in the legal
    framework for privacy exist, whether more legislation is needed, or
    whether self-regulation can suffice. The marketing and information
    reseller industries generally have argued that the current framework of
    sector-specific laws and regulations has not left significant gaps in
    consumer privacy protections. Privacy advocates and others stated that
    the current privacy scheme leaves significant gaps. Industry and
    privacy advocates also disagreed on the need for more legislation or
    regulation and the efficacy of self-regulatory approaches to protect
    privacy. Industry representatives acknowledged the importance of
    consumer privacy protections, but argued that voluntary industry
    measures and self-regulation mitigated the need for additional
    legislation. Some privacy advocates and others argued that voluntary
    compliance or self-regulation was not sufficient to uniformly protect
    consumer privacy rights.
    Views Differ on Approaches to Privacy Law and Consumer Interests
        Debate also has focused on appropriate approaches for new privacy
    legislation or regulation. This debate can be framed around three sets
    of issues: a comprehensive versus sector-specific approach to privacy
    legislation; how to address consumers' interests in accessing,
    controlling, and correcting their data; and the potential impact of new
    regulation on consumers and commerce.
    Comprehensive versus Sector-Specific Approaches
        Ongoing debate centers on what kind of legislative approach--
    sectoral or comprehensive--would best effect enhanced consumer privacy
    protections. Industry stakeholders have argued a comprehensive privacy
    law would amount to a one-size-fits-all approach and could be overly
    burdensome. Stakeholders also said that the current sector-specific
    system was flexible and well-suited to addressing any gaps. In
    contrast, some consumer and privacy groups and academic experts cited
    advantages to comprehensive privacy legislation such as filling gaps in
    existing privacy protections and providing comprehensive and consistent
    protections. Privacy advocates and some business representatives also
    argued that comprehensive legislation would benefit businesses
    internationally and help reduce compliance costs.
        While not recommending a comprehensive Federal privacy statute as
    such, in 2010 Commerce's Internet Policy Task Force recommended the
    adoption of a baseline commercial data privacy framework built on an
    expanded FIPPs. The 2012 White House privacy framework called for
    enacting baseline legislation while preserving existing sector-specific
    laws. The Administration supported exempting companies from consumer
    data privacy legislation to the extent their activities were subject to
    existing data privacy laws.
    Views on How to Address Consumers' Interests in Use and Control of
            Their Data
        Other debate on privacy protections has focused on the third-party
    market for and usage of consumer data, whether or how consumers can
    access and control such usage or correct data, and how or if limits
    should apply to web tracking.
    Use of Consumer Data

        Consumer and privacy advocates have noted that consumers often were
    not aware of, and had not always consented to, personal information
    being repurposed for marketing and other uses. Changes in the
    marketplace for consumer data include a vast increase in recent years
    in the number and types of companies that collect and share such data
    with third parties. The Administration noted that consumers have a
    right to expect that companies will collect, use, and disclose their
    information in ways consistent with the context in which the
    information was provided.\31\ FTC articulated a ``context of the
    interaction'' standard for determining when a practice required
    consumer choice.\32\
    ---------------------------------------------------------------------------
        \31\ The White House, A Framework for Protecting Privacy (2012).
        \32\ Federal Trade Commission, Protecting Consumer Privacy in an
    Era of Rapid Change, pp. 38-39.
    ---------------------------------------------------------------------------
        Representatives of information resellers, marketers, and other
    industries that use consumer data have argued that repurposing
    generally is not inappropriate or harmful. One reseller argued that
    personal information on unrestricted websites--such as blogs--becomes
    publicly available and can be used by a third party, without legal or
    ethical limitations on its use.
    Access and Correction

        Stakeholders' views differed on the extent to which consumers
    should be able to access data held about them. FTC said that companies
    should provide reasonable access to consumer data they maintain, a
    position many privacy groups echoed. FTC called on information
    resellers that compile data for marketing purposes to explore creating
    a centralized website on which resellers would identify themselves,
    describe how they collect and use the data, and consumers' access
    rights and choices.
        Debate also developed on consumers' right to correct information
    held about them. Some privacy advocates and members of Congress have
    argued that consumers should have the right to correct inaccurate
    information. One advocate noted that data not covered by FCRA also can
    be used for fraud prevention and identity verification, and that
    inaccuracies in this context could harm a consumer. Another advocate
    noted that companies may base some individual product pricing on a
    consumer's profile, so inaccurate data could affect the price offered.
    But FTC and the Direct Marketing Association said that special measures
    were not needed to ensure the accuracy of data maintained and used for
    marketing.\33\ The Administration expressed a similar view in its
    privacy framework. Some resellers also said that because they acquire
    information from many sources, giving consumers the opportunity to
    correct information would not be effective unless consumers also could
    have information corrected at the sources from which it had been drawn.
    ---------------------------------------------------------------------------
        \33\ Federal Trade Commission, Protecting Consumer Privacy in an
    Era of Rapid Change, pp. 38-39; and letter from Direct Marketing
    Association to members of Congress on August 13, 2012, available at
    http://the-dma.org/news/August-13-2012-DMALetter.pdf.
    ---------------------------------------------------------------------------
    Web Tracking

        Some of the most publicized debate on privacy and new technologies
    has centered on consumers' ability to control tracking of their web
    activity. Areas of disagreement include the effectiveness of voluntary
    initiatives that allow consumers to exert some control over tracking
    and the use of information collected during tracking. For example, the
    Digital Advertising Alliance developed an icon to let web page users
    know that their visit was being tracked and their actions used to infer
    their interests and target future advertising. Users can click on the
    icon to learn more about behavioral advertising and control whether
    they receive such advertising and from which companies.\34\ Some
    privacy advocates have pointed to limitations to this mechanism (for
    example, the opt-out option only applies to companies in the Digital
    Advertising Alliance).
    ---------------------------------------------------------------------------
        \34\ According to the Digital Advertising Alliance, in 2012 more
    than 5.2 million unique users accessed the resources at
    www.aboutads.info, and nearly 1 million exercised a choice using the
    site's opt-out mechanism.
    ---------------------------------------------------------------------------
        Debate also has developed about the implementation of ``do not
    track.'' Under this approach, consumers would be able to choose whether
    to allow the collection and use of data about their online searching
    and browsing. FTC supported the concept of a universal do-not-track
    mechanism in its 2010 and 2012 privacy reports.\35\ On the self-
    regulatory side, some Internet browsers, including Mozilla Firefox,
    have introduced do-not-track features. The World Wide Web Consortium
    has been developing a universal web protocol for do not track.\36\ But
    disagreements on different issues (such as scope and technological
    specifications) have delayed widespread adoption or standardization of
    do not track.\37\
    ---------------------------------------------------------------------------
        \35\ Federal Trade Commission, Protecting Consumer Privacy in an
    Era of Rapid Change (2012) and Protecting Consumer Privacy in an Era of
    Rapid Change: A Proposed Framework for Businesses and Policymakers;
    preliminary staff report (Washington, D.C.: December 2010).
        \36\ In the World Wide Web Consortium, member organizations and the
    public work together to develop web protocols and standards. The
    consortium's Tracking Protection Working Group proposes recommendations
    and technologies to improve user privacy and control. See http://
    w3.org/2011/tracking-protection/.
        \37\ Senate Committee on Commerce, Science, and Transportation, A
    Status Update on the Development of Voluntary Do-Not-Track Standards,
    113th Cong., 1st sess., April 24, 2013; see testimony of Justin
    Brookman, Director, Consumer Privacy, Center for Democracy and
    Technology.
    ---------------------------------------------------------------------------
        Proposals in Congress and elsewhere would require FTC to promulgate
    regulations for a do-not-track mechanism.\38\ Proponents of such
    proposals noted that the use of third-party cookies greatly increased
    in recent years--for example, the Wall Street Journal identified more
    than 3,000 tracking files the top 50 websites placed on a test
    computer.\39\ Advocacy organizations argued that Internet users may not
    be fully aware of the extent of third-party tracking and that users
    should affirmatively consent to tracking. Some members of Congress
    raised concerns about flash cookies and whether the FTC Act's
    prohibition of unfair or deceptive acts or practices would cover them.
    Representatives of the advertising and other industries have cautioned
    against many of the proposals.
    ---------------------------------------------------------------------------
        \38\ For example, see Do-Not-Track Online Act of 2013, S. 418,
    113th Cong.
        \39\ Julia Angwin, ``The Web's New Gold Mine: Your Secrets,'' Wall
    Street Journal, July 30, 2010.
    ---------------------------------------------------------------------------
    Views on Potential Impacts of New Regulation on Consumers and Commerce
        Representatives of the marketing and reseller industries argued
    that regulatory restrictions on using consumer data could reduce the
    benefits consumers get. Advertising representatives noted that targeted
    marketing and advertising helps underwrite applications and services
    available free to consumers. Some resellers said that targeted
    behavioral advertising gives consumers information relevant to their
    specific interests, needs, or preferences. However, some privacy
    advocates believe that consumer benefits have been overstated. Some
    advocates also raised concerns that the profiling and scoring
    techniques used to deliver specific advertisements to specific
    consumers might have discriminatory effects because they present
    information, sales, or opportunities only to consumers with certain
    characteristics.
        Stakeholder views also diverged on the potential economic effects
    of strengthened privacy regulations. Industry representatives said that
    new restrictions on the use of consumer information could inhibit
    innovation and increase compliance costs for businesses. Privacy and
    consumer groups said that the industry's claims that increased privacy
    protections would be too burdensome and stifle innovation have not been
    accompanied by convincing evidence. And in public comments solicited by
    Commerce in 2010 on information privacy and innovation in the Internet
    economy, online businesses and advertisers noted the importance of
    respecting customers' privacy if they wanted to retain their business
    or encourage individuals to adopt new devices and services.\40\
    ---------------------------------------------------------------------------
        \40\ Department of Commerce, Notice of Inquiry, Information Privacy
    and Innovation in the Internet Economy (Privacy and Innovation NOI), 75
    Fed. Reg. 21226, Apr. 23, 2010, available at http://ntia.doc.gov/
    frnotices/2010/FR_PrivacyNOI_04232010.pdf.
    ---------------------------------------------------------------------------
        Views vary on the economic effects of greater harmonization of U.S.
    and foreign privacy rules. Commerce's Internet Policy Task Force noted
    that a significant number of comments they received concerned
    difficulties and costs in complying with foreign data protection rules
    and regulations. For example, the European Union's 1995 Data Protection
    Directive states that personal information of European Union citizens
    may not be transmitted to nations not deemed to have ``adequate'' data
    protection laws.\41\ The United States does not have an adequacy
    finding from the European Commission.\42\
    ---------------------------------------------------------------------------
        \41\ European Union, Directive 95/46/EC of the European Parliament
    and of the Council on the Protection of Individuals with Regard to the
    Processing of Personal Data and the Free Movement of Such Data (Oct.
    24, 1995).
        \42\ However, companies participating in the U.S.-EU Safe Harbor
    Framework are deemed to provide adequate data protections and may
    transfer personal data from the European Union. FTC has the authority
    to enforce the substantive privacy requirements of the U.S.-EU Safe
    Harbor Framework.
    ---------------------------------------------------------------------------
        The task force recommended the U.S. government work toward mutual
    recognition of other commercial data privacy frameworks.\43\ Many
    commenters also advocated for greater harmonization of privacy rules.
    In contrast, some industry observers warned against enacting a stricter
    privacy regime like the European Union's. A reseller representative
    said moving to a stricter regime would hinder commerce and innovation.
    ---------------------------------------------------------------------------
        \43\ Department of Commerce, Internet Policy Task Force, Commercial
    Data Privacy and Innovation in the Internet Economy: A Dynamic Policy
    Framework (Washington, D.C.: 2010).
    ---------------------------------------------------------------------------
        New technologies have enormously changed the amount of personal
    information private companies collect and how they use it. But our
    current privacy framework does not fully address these changes. Laws
    protecting privacy interests are tailored to specific sectors and uses.
    And, consumers have little control over how their information is
    collected, used, and shared with third parties for marketing purposes.
    As a result, current privacy law is not always aligned with the Fair
    Information Practice Principles, which Commerce and others have said
    should serve as the foundation for commercial data privacy. Thus, the
    privacy framework warrants reconsideration in relation to consumer
    interests, new technologies, and other issues. In our September report,
    we suggested that Congress consider strengthening it and review issues
    such as the adequacy of consumers' ability to access, correct, and
    control their personal information; and privacy controls related to new
    technologies. The challenge will be providing appropriate protections
    without unduly inhibiting the benefits to consumers, commerce, and
    innovation that data sharing can accord.
        This concludes my statement for the record.

        Senator Thune. I will be asking our witnesses how data
    broker practices for marketing purposes may impact consumers,
    both positively and negatively. I am also interested in hearing
    from our witnesses how the industry can work to balance the
    privacy concerns of individuals with the information needs of
    businesses and our economy.
        Finally, Mr. Chairman, while I have expressed my thanks to
    all of our witnesses being here today, I do want to add a
    special note of thanks to Tony Hadley from Experian. This
    inquiry began with letters sent to nine companies, and over
    time it has also included letters to several consumer-facing
    websites. Having only one of those companies testify is a good
    way to keep the number of witness manageable in light of the
    busy Senate schedule.
        Mr. Hadley, I am sure that many of the other companies are
    also grateful for your willingness to testify and help advance
    our understanding----
        [Laughter.]
        Senator Thune.--of the data broker industry. I know I
    certainly am.
        So I want to thank you again, Mr. Chairman, for having this
    hearing, and I do look forward to hearing from our witnesses.
        The Chairman. Thank you, Senator Thune, very much.
        We have--well, I will just do one by one--Jessica Rich. Ms.
    Rich is the Director of the Bureau of Consumer Protection at
    the Federal Trade Commission. And I will go down the line.
        Could you give your testimony, please?

        STATEMENT OF JESSICA RICH, DIRECTOR, BUREAU OF CONSUMER
                  PROTECTION, FEDERAL TRADE COMMISSION

        Ms. Rich. Chairman Rockefeller, Ranking Member Thune, and
    members of the Committee----
        The Chairman. You have to push a little button.
        Ms. Rich. That would be a good start.
        The Chairman. It is called ``technology.''
        Ms. Rich. Yes.
        [Laughter.]
        Ms. Rich. I assure you I know something about technology.
        I am Jessica Rich, director of the Bureau of Consumer
    Protection at the Federal Trade Commission. And I really
    appreciate this opportunity to present the Commission's
    testimony on data brokers.
        This is a highly opportune time to examine the practices of
    data brokers, as technological developments have allowed for
    the dramatic increase in the collection and use of consumers'
    information.
        Data brokers collect consumers' personal information from a
    wide variety of sources and resell it for a variety of purposes
    without most consumers ever knowing of their existence, much
    less the variety of practices in which they engage. And many of
    these practices, as you noted, fall outside of the scope of
    existing laws.
        I know this committee is well aware of the lack of
    transparency of data broker practices. Chairman Rockefeller, we
    commend you for your leadership on this issue and stand ready
    to work with the Committee and with Congress on ways to improve
    the transparency of data broker practices. The report you
    released today is a key initiative in this effort, as is the
    study you requested from GAO.
        At the FTC, our work on data broker practices goes back to
    the 1970s. For decades, policymakers have expressed concerns
    about the transparency of companies that buy and sell consumer
    data. Indeed, the existence of companies selling consumer data
    for credit and other eligibility determinations, invisibly and
    behind the scenes, led to the enactment in 1970 of the Fair
    Credit Reporting Act.
        Since then, the Commission has been active in examining the
    practices of data brokers. We have used three primary tools in
    this effort.
        First, we bring enforcement actions when company practices
    violate the law. Perhaps our most well-known data broker case
    involved ChoicePoint, in which we obtained $10 million in civil
    penalties and $5 million in redress for consumers. We alleged
    that ChoicePoint implemented lax privacy and security
    procedures, resulting in sensitive consumer report information
    ending up in the hands of known identity thieves.
        More recently, we entered into a consent decree with online
    data broker Spokeo. According to our complaint, Spokeo
    collected personal information from hundreds of online and
    offline sources, including social networks, and combined that
    data into detailed personal profiles. We allege that Spokeo
    marketed these profiles for use by human resource departments
    in hiring, which made it a consumer reporting agency subject to
    the Fair Credit Reporting Act, but that it failed to abide by
    the FCRA's accuracy and privacy requirements. The order
    contains strong injunctive relief and an $800,000 civil
    penalty.
        Second, the Commission conducts research and issues reports
    addressing data broker issues. For example, our 2012 privacy
    report made best practices and legislative recommendations for
    consumer privacy, including specific recommendations regarding
    data brokers. Among other things, the report reiterated a
    longstanding Commission recommendation that data brokers
    provide consumers with access to the data they maintain and,
    depending on how the data is used, the ability to correct it.
        More recently, in order to shine a light on the industry,
    we issued orders requiring nine data brokers to provide us with
    information regarding how they collect and use consumer data.
    The Commission is close to completing a report based on this
    information and expects to release it in the coming months.
        And in the spring of next year, we plan to host a series of
    privacy workshops, including a seminar on what is called
    ``alternative scoring products'' offered by data brokers--that
    is, products that companies use to predict consumer behavior
    and shape how they market to particular consumers.
        Our final tool is educating businesses and consumers on
    privacy issues in the practices of data brokers. For example,
    we recently sent letters to multiple data brokers that provide
    tenant and background screening services, warning them about
    their duty to comply with the Fair Credit Reporting Act. And
    for consumers, we recently produced a video on data brokers and
    have published frequent blog posts and updates on issues
    related to the data broker industry.
        In closing, as the collection and use of consumer data
    continues to explode, we share the Committee's commitment to
    continue to examine data brokers, and we stand ready to work
    with the Committee on this critical issue.
        Thank you.
        [The prepared statement of Ms. Rich follows:]

               Prepared Statement of the Federal Trade Commission
    I. Introduction
        Chairman Rockefeller, Ranking Member Thune, and members of the
    Committee, I am Jessica Rich, Director of the Bureau of Consumer
    Protection of the Federal Trade Commission (``FTC'' or
    ``Commission'').\1\ I appreciate the opportunity to present the
    Commission's testimony on data brokers.
    ---------------------------------------------------------------------------
        \1\ This written statement presents the views of the Federal Trade
    Commission. My oral statements and responses to questions are my own
    and do not necessarily reflect the views of the Commission or any
    Commissioner.
    ---------------------------------------------------------------------------
        Data brokers collect and aggregate consumers' personal information
    from a wide range of sources and resell it for an array of purposes,
    such as marketing, verifying an individual's identity, and preventing
    financial fraud. Because data brokers generally never interact directly
    with consumers, consumers are typically unaware of their existence,
    much less the variety of ways they collect, analyze, and sell consumer
    data.
        This Committee, by investigating the privacy practices of data
    brokers, has helped call attention to the lack of transparency
    surrounding data broker privacy practices. We look forward to reviewing
    the Committee's report on its examination of the data broker industry.
    We commend Chairman Rockefeller's leadership on this issue and stand
    ready to work with this Committee and Congress on ways to improve the
    transparency of data broker practices. As the Committee is aware, the
    Commission is developing its own report on the data broker industry
    (discussed further below), which the Commission expects to release in
    the coming months.
        This testimony begins by describing the Commission's longstanding
    work in this area. It then lays out our strategy for addressing the
    privacy practices of the data broker industry through enforcement,
    research and reports, and business and consumer education.
    II. Background on FTC Initiatives Concerning Data Broker Privacy
            Practices
        Concerns about the privacy practices of companies that buy and sell
    consumer data are not new. Indeed, in 1970, the existence of companies
    selling consumer data with little transparency for credit and other
    eligibility determinations led Congress to enact the Fair Credit
    Reporting Act (FCRA)\2\, which it gave the Commission authority to
    enforce.
    ---------------------------------------------------------------------------
        \2\ 15 U.S.C. Sec. 1681 et seq.
    ---------------------------------------------------------------------------
        In the late 1990s, the Commission began to examine the privacy
    practices of data brokers that fall outside the FCRA.\3\ Notably, in
    1997, the Commission held a workshop to examine database services used
    to locate, identify, or verify the identity of individuals, referred to
    at the time as ``individual reference services.'' The workshop prompted
    industry members to form the self-regulatory Individual Reference
    Services Group (IRSG).\4\ The Commission subsequently issued a report
    on the workshop and the IRSG. The report commended the progress made by
    the industry's self-regulatory programs, but one of the report's
    conclusions was that the industry's efforts did not adequately address
    the lack of transparency of data broker practices. Although industry
    ultimately terminated the IRSG, a series of public breaches--including
    one involving ChoicePoint--led to renewed scrutiny of the practices of
    data brokers.\5\
    ---------------------------------------------------------------------------
        \3\ See, e.g., FTC Workshop, The Information Marketplace: Merging &
    Exchanging Consumer Data (Mar. 13, 2001), available at http://
    www.ftc.gov/bcp/workshops/infomktplace/index
    .shtml; Prepared Statement of the FTC, Identity Theft: Recent
    Developments Involving the Security of Sensitive Consumer Information:
    Hearing Before the S. Comm. on Banking, Housing, and Urban Affairs,
    109th Cong. (Mar. 10, 2005), available at http://www.ftc.gov/public-
    statements/2005/03/prepared-statement-federal-trade-commission-
    identity-theft-recent; see also FTC Workshop, Information Flows: The
    Costs and Benefits to Consumers and Businesses of the Collection and
    Use of Consumer Information (June 18, 2003), available at http://
    www.ftc.gov/news-events/events-calendar/2003/06/information-flows-
    costs-and-benefits-related-collection-and-use.
        \4\ See FTC, Individual Reference Services, A Report to Congress
    (1997), available at http://www.ftc.gov/reports/individual-reference-
    services-report-congress.
        \5\ This scrutiny included an FTC investigation that resulted in
    the FTC's largest FCRA civil penalty to date. See United States v.
    ChoicePoint, Inc., No. 1:06-cv-00198 (N.D. Ga. Feb. 15, 2006)
    (stipulated final order imposing $10 million fine and $5 million in
    consumer redress), available at http://www.ftc.gov/sites/default/files/
    documents/cases/2006/01/stipfinaljudge
    ment.pdf.
    ---------------------------------------------------------------------------
        Most recently, in its 2012 report Protecting Consumer Privacy in an
    Era of Rapid Change: Recommendations for Businesses and Consumers
    (Privacy Report),\6\ the Commission specifically addressed the privacy
    practices of data brokers. The Commission described three different
    categories of data brokers: (1) entities subject to the FCRA; (2)
    entities that maintain data for marketing purposes; and (3) non-FCRA
    covered entities that maintain data for non-marketing purposes that
    fall outside of the FCRA, such as to detect fraud or locate people.\7\
    The report noted that, while the FCRA gives consumers a variety of
    rights with regard to companies that sell data for credit, employment,
    and insurance purposes, data brokers within the other two categories
    operate without much transparency.
    ---------------------------------------------------------------------------
        \6\ FTC, Protecting Consumer Privacy in an Era of Rapid Change:
    Recommendations for Businesses and Policymakers (Mar. 2012), available
    at http://ftc.gov/os/2012/03/120326privacy
    report.pdf. Commissioner Wright's term as Commissioner began in January
    2013 and he was not at the Commission when the Privacy Report was
    issued. While he may not necessarily endorse all the views in that
    Report, he agrees with the substance of this testimony.
        \7\ Id. at 65.
    ---------------------------------------------------------------------------
        Building on the agency's prior work, the Commission's Privacy
    Report made recommendations to improve the transparency of the
    practices of data brokers and to give consumers greater control over
    how their information is used. Among other things, the Report proposed
    that data brokers provide consumers with reasonable access to the data
    they maintain. The Report also noted that the Commission had long
    supported legislation that would give access rights to consumers for
    information held by data brokers.\8\ The Report stated that the
    Commission continues to support legislation in this area to improve the
    transparency of industry practices.\9\
    ---------------------------------------------------------------------------
        \8\ Id. at 69.
        \9\ Id.
    ---------------------------------------------------------------------------
    III. The Commission's Ongoing Initiatives Regarding Data Brokers
        The Commission's ongoing initiatives to address the privacy
    practices of the data broker industry build on this body of prior work.
    The Commission is pursuing a three-pronged strategy to ensure consumer
    interests are protected in the data broker context. First, the
    Commission takes aggressive enforcement action to ensure that data
    brokers comply with the FCRA where it applies. Second, as data broker
    business models expand beyond traditional credit reporting, the FTC
    continues to conduct research and issue reports examining the practices
    of the data broker industry. Third, the Commission educates businesses
    about their legal responsibilities, especially small data brokers that
    may be unaware of their legal obligations, and consumers regarding how
    their data is disseminated. These three initiatives are discussed
    below.
    A. Enforcement
        The Commission maintains an aggressive FCRA enforcement program. To
    date, it has brought almost 100 cases and obtained in excess of $30
    million in civil penalties. FCRA enforcement is a vital priority for
    the agency, particularly as companies that are not traditional credit
    reporting agencies venture into territory covered by the FCRA.\10\
    ---------------------------------------------------------------------------
        \10\ The FCRA provides basic consumer protections when consumer
    reporting data is used to make eligibility determinations for credit,
    insurance, employment and similar purposes.
    ---------------------------------------------------------------------------
        For example, last year the Commission entered into a consent decree
    with online data broker Spokeo to resolve allegations that the company
    violated the FCRA.\11\ As set forth in the Commission's complaint,
    Spokeo assembled personal information from hundreds of online and
    offline data sources, including social networks, and merged that data
    to create detailed personal profiles, including name, address, age
    range, hobbies, ethnicity, and religion. Spokeo marketed these profiles
    for use by human resources departments in hiring decisions. The FTC
    alleged that Spokeo, which marketed profiles for employment purposes,
    was a consumer reporting agency subject to the FCRA. The Commission
    charged Spokeo with violating the FCRA by, among other things, failing
    to (1) take reasonable steps to ensure the accuracy of information; and
    (2) tell its clients about their obligations under the FCRA, including
    the requirement to send adverse action notices to people denied
    employment on the basis of information obtained from Spokeo. The order
    contained strong injunctive relief and an $800,000 civil penalty.
    ---------------------------------------------------------------------------
        \11\ United States v. Spokeo, Inc., No. CV12-05001 (C.D. Cal. June
    12, 2012), available at http://www.ftc.gov/enforcement/cases-and-
    proceedings/cases/2012/06/spokeo-inc-united-states-america-federal-
    trade; see also Press Release, FTC, Spokeo to Pay $800,000 to Settle
    FTC Charges Company Allegedly Marketed Information to Employers and
    Recruiters in Violation of FCRA (June 12, 2012), available at http://
    www.ftc.gov/news-events/press-releases/2012/06/spokeo-pay-800000-
    settle-ftc-charges-company-allegedly-marketed.
    ---------------------------------------------------------------------------
        The Commission also recently took action against a mobile
    application developer that compiled and sold criminal record reports
    without complying with the FCRA.\12\ The app developer, Filiquarian,
    claimed that consumers could use its mobile apps to access hundreds of
    thousands of criminal records and conduct searches on potential
    employees. The FTC charged that Filiquarian failed to take reasonable
    steps to ensure that the information it sold was accurate and would be
    used solely for permissible purposes, as required by the FCRA. In
    addition, Filiquarian failed to inform users of its reports of their
    obligations under the FCRA, including the requirement to notify
    consumers if an adverse action was taken against them based on a
    report. In both the Spokeo and Filiquarian cases, the companies' terms
    of service included disclaimers stating that the information they
    provided should not be used for FCRA purposes. Despite these
    disclaimers, the companies specifically advertised that their reports
    could be used for employment purposes.
    ---------------------------------------------------------------------------
        \12\ Decision and Order, Filiquarian Publishing, LLC, FTC File No.
    112-3195 (May 1, 2013), available at http://www.ftc.gov/enforcement/
    cases-and-proceedings/cases/2013/05/filiquarian-publishing-llc-choice-
    level-llc-and; see also Press Release, FTC, FTC Approves Final Order
    Settling Charges Against Marketers of Criminal Background Screening
    Reports (May 1, 2013), available at http://www.ftc.gov/news-events/
    press-releases/2013/05/ftc-approves-final-order-settling-charges-
    against-marketers.
    ---------------------------------------------------------------------------
        Most recently, the Commission entered into a consent decree with
    Certegy Check Services, one of the Nation's largest check authorization
    service companies.\13\ Certegy compiles consumers' personal information
    and uses it to help retail merchants determine whether to accept
    consumers' checks. The Commission's complaint alleged that, among other
    things, when a merchant denied a consumer's check, and the consumer
    contacted Certegy to dispute the denial, the company failed to follow
    proper dispute procedures, as required by the FCRA. As a result,
    Certegy's denials may have been in error, and consumers may not have
    been able to pay for essential goods and services. Certegy agreed to
    pay $3.5 million, the agency's second largest FCRA fine, to resolve the
    Commission's allegations.
    ---------------------------------------------------------------------------
        \13\ U.S. v. Certegy Check Servs., Inc., No. 1:13-cv-01247 (D.D.C.
    Aug. 15, 2013), available at http://www.ftc.gov/enforcement/cases-and-
    proceedings/cases/2013/08/certegy-check-services-inc; ; see also Press
    Release, FTC, Certegy Check Services to Pay $3.5 Million for Alleged
    Violations of the Fair Credit Reporting Act and Furnisher Rule (Aug.
    15, 2013), available at http://www.ftc.gov/news-events/press-releases/
    2013/08/certegy-check-services-pay-35-million-alleged-violations-fair.
    ---------------------------------------------------------------------------
    B. Research and Reports
        The Commission is devoting significant resources to research and
    reports addressing the privacy practices of data brokers. As described
    above, the Commission's Privacy Report discussed the data broker
    industry specifically and recommended steps data brokers should take to
    improve the transparency of data broker practices and give consumers
    greater control over their information.\14\
    ---------------------------------------------------------------------------
        \14\ Protecting Consumer Privacy in an Era of Rapid Change, supra
    note 6, at 68-70.
    ---------------------------------------------------------------------------
        To undertake a more detailed examination of the data broker
    industry, the Commission issued orders requiring nine data brokers to
    provide the agency with information regarding how they collect and use
    consumer data. The orders, issued pursuant to the Commission's
    authority under Section 6(b) of the FTC Act, mandated production of
    detailed information regarding company practices, including the nature
    and sources of consumer data the companies collect, how they use,
    maintain, and disseminate the information, and the extent to which the
    data brokers allow consumers to access and correct their information or
    to opt out of having their personal information sold. These orders were
    directed to companies providing three basic non-FCRA services--
    marketing services, risk mitigation services, including identity
    verification and fraud detection, and people search or look-up
    services. The Commission is expects to release a report on this
    examination of the data broker industry in the coming months.
        We also continue to examine emerging practices in the data broker
    industry. Just this month, we announced a series of seminars for early
    2014 that will address a number of consumer privacy issues, including
    alternative scoring products offered by data brokers. Many data brokers
    offer companies scores to predict trends and the behavior of their
    customers. Companies are using predictive scores for a variety of
    purposes, ranging from identity verification and fraud prevention to
    marketing and advertising. Consumers are largely unaware of these
    scores and have little to no access to the underlying data from which
    they are derived. The program will explore a number of issues,
    including what scores are currently available, how companies are using
    them, how accurate the scores and underlying data are, privacy concerns
    surrounding the use of predictive scoring, how consumers can benefit
    from use of these scores, and what sort of consumer protections should
    exist for them.\15\
    ---------------------------------------------------------------------------
        \15\ Press Release, FTC, Spring Privacy Series: Alternative Scoring
    Products (Mar. 19, 2014), available at http://www.ftc.gov/news-events/
    events-calendar/2014/03/spring-privacy-series-alternative-scoring-
    products.
    ---------------------------------------------------------------------------
    C. Education
        In addition to its enforcement and policy work on data broker
    issues, the agency also focuses on educating businesses and consumers
    about these issues. An important method for educating businesses is to
    publicize Commission complaints and orders and issue public letters
    warning companies of legal requirements and/or potential violations. In
    this vein, the Commission sent staff warning letters to a number of
    data brokers that provided tenant-screening services, and to marketers
    of six mobile apps that provide employment background screening
    services.\16\ The FTC warned the companies and app developers that, if
    they have reason to believe the reports they provide are being used for
    employment screening, housing, credit, or other similar purposes, they
    must comply with the FCRA.\17\
    ---------------------------------------------------------------------------
        \16\ Press Release, FTC, FTC Warns Data Brokers That Provide Tenant
    Rental Histories They May Be Subject to Fair Credit Reporting Act (Apr.
    3, 2013), available at http://www.ftc.gov/opa/2013/04/tenant.shtm;
    Press Release, FTC, FTC Warns Marketers that Mobile Apps May Violate
    Fair Credit Reporting Act (Feb. 7, 2012), available at http://
    www.ftc.gov/opa/2012/02/mobileapps.shtm.
        \17\ The Commission made no determination as to whether the
    companies were violating the FCRA, but encouraged them to review their
    apps and their policies and procedures to ensure they comply with the
    Act.
    ---------------------------------------------------------------------------
        More recently, Commission staff conducted an undercover effort to
    determine if data brokers that disclaimed FCRA liability were willing
    to sell information for credit, insurance, employment, or housing
    decisions. As a result of this ``test shopping'' operation, Commission
    staff found ten data brokers who appeared to offer data for these
    purposes. Commission staff then sent warning letters to these
    companies, advising them that their practices could violate the
    FCRA.\18\
    ---------------------------------------------------------------------------
        \18\ Press Release, FTC, FTC Warns Data Broker Operations of
    Possible Privacy Violations (May 7, 2013), available at http://
    www.ftc.gov/opa/2013/05/databroker.shtm.
    ---------------------------------------------------------------------------
        The FTC also hosts a Business Center blog,\19\ which frequently
    includes consumer privacy and data security topics; currently,
    approximately 3,500 attorneys and business executives subscribe to
    these e-mail blog updates. The Business Center blog consistently
    features the Commission's enforcement actions and warning letters.
    ---------------------------------------------------------------------------
        \19\ See generally http://business.ftc.gov/blog.
    ---------------------------------------------------------------------------
        Finally, the FTC has developed materials designed to educate
    consumers about the ways in which their data may be disseminated to
    companies with which they do not interact. For example, the FTC
    produced a video called Sharing Information: A Day in Your Life, that
    describes how everyday activities by consumers--shopping in retail
    stores with loyalty cards, buying good online, and using social
    networking services--can lead to wide dissemination of personal
    information.\20\
    ---------------------------------------------------------------------------
        \20\ FTC, Sharing Information: A Day in Your Life, available at
    http://www.consumer.ftc.gov/media/video-0022-sharing-information-day-
    your-life.
    ---------------------------------------------------------------------------
    IV. Conclusion
        These enforcement, policy, and education efforts demonstrate the
    Commission's continued commitment to understanding and addressing
    consumer privacy issues posed by the data broker industry. We
    appreciate the leadership of Chairman Rockefeller and this Committee on
    these issues and look forward to continuing to work with Congress,
    industry, and other critical stakeholders on these issues in the
    future.

        The Chairman. Thank you very much, Ms. Rich.
        Pam Dixon. Ms. Dixon is the Executive Director at the World
    Privacy Forum.
        You are on.

              STATEMENT OF PAM DIXON, EXECUTIVE DIRECTOR,
                          WORLD PRIVACY FORUM

        Ms. Dixon. Chairman Rockefeller, members of the Committee,
    thank you for the opportunity to share what I have learned
    about the data broker industry today. I appreciate it very
    much.
        As a moderate in the privacy debate and in the privacy
    world, I have come to a troubling conclusion: The data broker
    industry, as it is today, does not have constraints and does
    not have shame. It will sell any information about any person,
    regardless of sensitivity, for 7.9 cents a name, which is the
    price of a list of rape sufferers which was recently sold.
        Lists of rape sufferers, victims of domestic violence,
    police officers' home addresses, people who suffer from genetic
    illnesses, complete with names, home addresses, ethnicity,
    gender, and many other factors--this is what is being sold and
    circulated today. It is a far cry from visiting a website and
    seeing an ad. What it is is the sale of the personally
    identifiable information and highly sensitive information of
    Americans.
        So, Senators, I would like to make three points.
        First, scoring. There are now pseudo scores which are
    comprised of factors that are non-financial or, I should say,
    non-credit-report-based. These pseudo credit scores are used in
    lieu of actual credit scores because they completely circumvent
    the Fair Credit Reporting Act. So a business or an employer or
    an insurer can purchase these scores and use them with no ill
    consequence or any consequence at all. This needs to change.
        Second, health. There are lists of millions of people that
    are categorized by the diseases that they have, ranging from
    cancer to bedwetting, Alzheimer's--terrible diseases, some of
    them benign, some of them relating to mental illness. There are
    lists of millions of people and what prescription drugs they
    take. And these lists exist entirely outside of HIPAA.
        The Chairman. Outside of what?
        Ms. Dixon. HIPAA.
        The Chairman. OK.
        Ms. Dixon. The----
        The Chairman. I understand.
        Ms. Dixon. Any kind of Federal--yes--health protection.
    Unless the data is held by a provider or, you know, a covered
    entity under HIPAA, forget it, HIPAA doesn't apply.
        This industry that is selling these lists--there has been a
    lot of mention made of marketing purposes for these lists.
    These lists are being sold without constraint. We don't know if
    employers are buying them, if insurers are buying them. We
    don't know who is buying them. But the lists are being sold for
    apparently billions of dollars, which suggests to me that we
    need to find out who is buying these lists.
        In terms of solutions, my third and final point, we need to
    expand the Fair Credit Reporting Act so that when there are
    consumer scores that are pseudo credit scores that this is
    brought under the Fair Credit Reporting Act so that consumers
    can exercise the same rights they would have if a credit score
    had been pulled. If the information is statistically as
    accurate and has the same effect as a credit score, then why
    isn't it regulated under the Fair Credit Reporting Act? This
    should be a bright line here, and I don't think that that is
    too terribly difficult to draw.
        There needs to be, and actually there is an urgent need
    for, a national data broker requirement for an opt-out. We
    favor an opt-out that is highly granular so that consumers
    don't always have to take the nuclear option and get entirely
    off of every list. We favor consumers having the ability to
    make their own choices. Maybe a consumer wants her name and
    phone number on a list but nothing else, certainly nothing
    about her weight, certainly nothing about the number of
    children she has, or maybe she does, but the point is consumers
    need to know when they are on a list and need to make choices
    about what appears on those lists.
        We need to reexamine HIPAA and decide if health information
    that is not held by healthcare providers deservers healthcare
    protections in privacy. I believe they do.
        This is going to be the beginning of an important public
    dialog that is going to be incredibly important for all of us
    to engage in. Because if we have an industry that has not
    curtailed the sale of names of anyone with highly sensitive
    information for 7.9 cents a name, then we haven't done enough.
        Thank you for this opportunity, and I look forward to your
    questions.
        [The prepared statement of Ms. Dixon follows:]

             Prepared Statement of Pam Dixon, Executive Director,
                              World Privacy Forum
        Chairman Rockefeller and Members of the Committee, thank you for
    the opportunity to testify today about data brokers, an industry that
    is often hidden from public view, and the impact of data brokers on
    consumers' lives. My name is Pam Dixon, and I am the founder and
    Executive Director of the World Privacy Forum.\1\ The World Privacy
    Forum is a 501(c)(3) non-partisan public interest research group based
    in California. We focus on conducting in-depth research on emerging and
    contemporary privacy issues as well as on consumer education.
    ---------------------------------------------------------------------------
        \1\ For more information and to read many of the research studies
    and publications, see http://www.worldprivacyforum.org.
    ---------------------------------------------------------------------------
        I have been conducting privacy-related research for more than since
    1998, first as a Research Fellow at the Denver University School of
    Law's Privacy Foundation where I researched privacy in the workplace
    and employment environment, as well as technology-related privacy
    issues such as online privacy. While a Fellow, I wrote the first
    longitudinal research study benchmarking data flows in employment
    online and offline, and how those flows impacted consumers.
        After founding the World Privacy Forum, I wrote numerous privacy
    studies and commented on numerous regulatory proposals impacting
    privacy as well as creating useful, practical education materials for
    consumers on a variety of privacy topics. A few months ago, we
    published a report on data brokers and the Federal Government, Data
    Brokers and the Government, which examined current law and practices in
    regards to the eligibility use of data brokers in particular. I have
    published many additional studies. Previously, in 2005 I discovered
    previously undocumented consumer harms related to identity theft in the
    medical sector. I coined a termed for this activity: medical identity
    theft. In 2006 I published a groundbreaking report introducing and
    documenting the topic of medical identity theft, and the report remains
    the definitive work in the area.\1\ In 2010 I also published the first
    report on digital and retail privacy, The One Way Mirror Society:
    Privacy Implications of Digital Signage Networks. I have also written
    several well-known reports on self-regulation, and in 2012-2013, was a
    lead drafter in the NTIA MultiStakeholder Process for Mobile App Short
    Form Notices.
        Beyond my research work, I have published widely, including a
    reference book on privacy, Online Privacy, and seven books on
    technology issues with Random House, Peterson's and other large
    publishers, as well as more than one hundred articles in newspapers,
    journals, and magazines.
        I appreciate the dedication and work of Senator Rockefeller in
    bringing much-needed attention to the issue of data brokers, which
    prior to his attention, was languishing on legislative backburners.
    Introduction & Summary
        What do a retired librarian in Wisconsin in the early stages of
    Alzheimer's, a police officer, and a mother in Texas have in common?
    The answer is that all were victims of consumer data brokers. Data
    brokers collect, compile, buy and sell personally identifiable
    information about who we are, what we do, and much of our ``digital
    exhaust.''
        We are their business models. The police officer was ``uncovered''
    by a data broker who revealed his family information online,
    jeopardizing his safety. The mother was a victim of domestic violence
    who was deeply concerned about people finder websites that published
    and sold her home address online. The librarian lost her life savings
    and retirement because a data broker put her on an eager elderly buyer
    and frequent donor list. She was deluged with predatory offers.
        These people--and 320 million others in the United States--are not
    able to escape from the activities of data brokers. Our research shows
    that only a small percentage of known consumer data brokers offer a
    voluntary opt out. These opt outs can be incomplete, extremely
    difficult, and must typically be done one-by-one, site-by-site. Often,
    third parties are not allowed to opt individual consumers out of data
    brokers.
        This state of affairs exists because no legal framework requires
    data broker to offer opt out or suppression of consumer data. Few
    people know that data brokers exist, and beyond that, few know what
    they do. There are about 4,000 data brokers. Despite the large and
    growing size of the industry, until this Committee started its work,
    this entire industry largely escaped public scrutiny.
        Privacy laws apply to credit bureaus and health care providers, but
    data broker activity generally falls outside these laws. Even a
    knowledgeable consumer lacks the tools to exercise any control over his
    or her data held by a data broker. It doesn't matter that the data is
    about the consumer. The data broker has all the rights, and the
    consumer has none.
        Consumers have no effective rights because there is no legal
    framework that requires data brokers to offer consumers an opt out or
    any other rights. Privacy laws apply to credit bureaus and health care
    providers, but data broker activity generally falls outside these laws.
    Even a knowledgeable consumer lacks the tools to exercise any control
    over his or her data held by a data broker. It doesn't matter that the
    data is about the consumer. The data broker has all the rights, and the
    consumer has none.
        In my testimony, I will discuss consumer data brokers, businesses
    that traffic in consumer data. The data broker industry is complex, and
    I can only focus on a few aspects of it.
        There are consumer list brokers that sell lists of individually
    identifiable consumers grouped by characteristics. To our knowledge, it
    is not practically possible for an individual to find out if he or she
    is on these lists. If a consumer learns that he or she is on a list,
    there is usually no way to get off the list. Some exceptions exist, but
    the rule is that the lists are circulated far from consumers' eyes.
        Lists reveal information that would surprise most people. Data
    brokers sell lists of people suffering from mental health diseases,
    cancer, HIV/AIDS, and hundreds of other illnesses. Data brokers sell
    lists of people who live in or near trailer parks so that these
    undesirable consumers can be targeted for suppression. Data brokers
    sell lists of people who are late on payments, often to those who make
    predatory offers to those in financial trouble. Data brokers sell lists
    of people who are impulse buyers or ``eager senior buyers.'' All in
    all, there are millions of lists.
        In addition to list brokers, there are people finder services that
    sell consumer demographic information online. The hundreds of ``people
    finder'' websites online are also part of the data broker industry.
    Statistically, few of these sites give individuals a meaningful
    opportunity to have their information removed from their databases. A
    handful do offer a partial or complete opt out or suppression, but to
    exercise the opt out, consumers have to first find the site, then go
    through what can be an incredibly frustrating series of hoops. Scanning
    drivers' licenses, sending the opt-out through postal mail, and
    sometimes paying as much as $1,000.00 to opt out. A consumer who
    successfully negotiates an opt-out at one data broker faces the
    challenge of doing the same thing at dozens or hundreds of other data
    brokers. There is always the risk that a name removed today will be
    added back tomorrow.
        I will also discuss consumer scores, a growing area of data broker
    activity. Consumer scores are not well-known yet, but their influence
    on consumers is profound. One important example is the modeled consumer
    credit score. The modeled consumer credit score consists entirely of
    non-credit elements. Why? Because this allows the consumer data broker
    industry to avoid giving consumers the rights that the Fair Credit
    Reporting Act provides.
        I will offer some solutions focused on addressing the problems
    identified in my testimony. The solutions I propose are practical and
    possible. The solutions are designed to bring fairness and rights to
    consumers. The data broker industry has not shown restraint. Nothing is
    out of bounds. No list is too obnoxious to sell. Data brokers sell
    lists that allow for the use of racial, ethnic and other factors that
    would be illegal or unacceptable in other circumstances. These lists
    and scores are used everyday to make decisions about how consumers can
    participate in the economic marketplace. Their information determines
    who gets in and who gets shut out. All of this must change. I urge you
    to take action.
    The Structure of the Data Broker Industry and Why it Matters
        The data broker industry is complex, layered and multi-faceted, and
    it is evolving rapidly. The industry cannot readily be described as
    just consumer information being sold on flat lists. There is much, much
    more than that.
        A way to start approaching an understanding is to look at some key
    aspects of the industry.

            Size: The data broker industry, by its own estimation, numbers
            in the neighborhood of 3,500 to 4,000 companies. Most data
            brokers engage in multiple activities and have a range of core
            expertise.

            Scope: Data brokers range in scope from multi-national
            corporations with revenues in the billions to small sole
            proprietors operating locally. Some data brokers operate
            offshore.

            Shape of the long tail: This industry has a relatively small
            number of very large name brand companies, and many more small
            to mid-size companies. The tail of this industry is very long,
            and the end of the tail works its way down from large companies
            to small affiliates selling data online.

            Activities: These include list brokering, data analytics,
            predictive analytics and modeling, scoring, CRM, online,
            offline, APIs, cross channel, mailing preparation, campaigns,
            and database cleansing.

            Data flows: Some data brokers host their own data and are
            significant purchasers of original data. Acxiom is an example
            of this kind of company. Some primarily analyze data and come
            up with scoring and Return on Investments proofs. Datalogix is
            an example of this kind of company. Some sell or resell
            consumer information online. Intelius is an example of this
            kind of company. There are many other models in addition. Some
            data moves from online to offline and back; some through social
            media and back. The point is that the business models and data
            flows are complex, use many sources, and differ between types
            of data brokers.

            Affiliate Storms: One common model results in the flow of
            information from the largest name-brand companies to the
            smaller companies, who then turn around and resell the data to
            a third tier of ``affiliates'' who then market the information
            themselves, or to another downstream affiliate. The term I use
            for this is ``affiliate storm.'' A consumer at the end of all
            of the data reselling has difficulty finding the original
            compiler and seller of the data.

            Regulation: The 2013 GAO report on data resellers outlined the
            lack of regulatory oversight regarding data brokers.\2\ There
            are additional concerns that some existing regulations are
            being circumvented in some cases.
    ---------------------------------------------------------------------------
        \2\ Information Resellers: Consumer Privacy Framework Needs to
    Reflect Changes in Technology and the Marketplace, http://www.gao.gov/
    products/GAO-13-663. Sept. 25, 2013.

        My comments today address the consumer-focused aspects of data
    brokers. Some activities of data brokers do not affect consumers in a
    negative or unfair way. Some list cleansing or compliance activities to
    bring the data broker in line with the Do Not Call list are
    unobjectionable. My testimony is about the other consequences of the
    data broker business today.
    Sources for Data Broker Data
        The sources for data broker data have become more complex as the
    industry has grown, and as the information systems have become more
    digitized. Consumers sometimes have a choice about whether they give
    data; other times, they do not. Even if a consumer paid mainly cash and
    lived very quietly, using shredders for their mail and records and
    keeping their SSN to themselves, the likelihood that the consumer could
    totally avoid landing on a data broker list is quite small. Most people
    in the U.S. are in many data bases and on many lists.
        Some of the most common sources of consumer data include:
    (marketing, not credit data)

       Retailers and merchants via Cooperative Databases and
            Transactional data sales & customer lists

       Financial sector non-credit information (PayDay loan, etc.)

       MultiChannel direct response

       Survey data, especially online

       Catalog/phone order/Online order

       Warranty card registrations

       Internet sweepstakes

       Kiosks

       Social media interactions (dependent on data broker
            interactions/agreements)

       Loyalty card data (retailers)

       Public record information

       Website interactions, including specialty or knowledge-based
            websites

       Lifestyle information: Fitness, health, wellness centers,
            etc.

       Non-profit organizations' member or donor lists

       Subscriptions (online or offline content)

        Following are some source examples from data broker cards, these
    examples are not surprising or out of the ordinary.
        On a Baby Boomers data card, Adrea Rubin gave this source data:

            Source: Multichannel Direct Response, Survey Data, and Public
            Record Information \3\
    ---------------------------------------------------------------------------
        \3\ DEFINING MOMENTS REACTIVE BABY BOOMERS Data Card, http://
    datacardhub.ad
    rearubin.com/market?page=research/datacard&id=255914. Last accessed
    Dec. 17, 2013.

        On a data card for a Transaction Database, the company listed the
    ---------------------------------------------------------------------------
    source as:

            Source: 79 percent catalog/phone order/Online, 21 percent
            retail.\4\
    ---------------------------------------------------------------------------
        \4\ Adrea Rubin, Action Network Transaction Database, http://
    datacardhub.adrearubin.com/market?page=research/datacard&id=257898,
    last accessed Dec. 15, 2013.
    ---------------------------------------------------------------------------
        On a data card describing extreme mail order buyers, the source for
    gender, age, income, number of purchases, and number of credit cards
    was cited as

            Source: Multi-source, consolidated from a variety of sources,
            overlaid with co-op/transactional data[1]

        A data card listing seniors listed the source as warrantee cards.

            Source: Warrantee card registrations \5\
    ---------------------------------------------------------------------------
        \5\ Warranty IT Seniors, Adrea Rubin, http://
    datacardhub.adrearubin.com/market?page=
    research/datacard&id=123434, last accessed Dec. 15, 2013.

        Of the sources, a disturbing source is retail purchases both online
    and off. Cooperative databases allow retailers to append copious data
    about consumers to retail transaction files. This is the basis of the
    Pineda vs. Williams Sonoma case in California which Williams Sonoma
    took a consumer's e-mail and added home address information. Below is
    an example of the use of retail transactional/cooperative databases,
    this one from KBM Group.\6\
    ---------------------------------------------------------------------------
        \6\ http://www.kbmg.com/privacy-policy/.

        Later in this testimony, I include this company as an exemplar of
    good opt out practices.
    Sensitive Information and Lists That Should Not Exist
        One of the key characteristics of modern data brokers is a lack of
    restraint. The degree to which no piece of data is sacred is evident in
    the reams of sensitive consumer data compiled, scored, circulated, and
    sold.
        I do not oppose the selling of lists entirely. There is a
    reasonable center to be found. I agree that some lists are probably
    always going to exist that one or another person deems sensitive.
    Selling lists of doctors, nurses, teachers, and so forth are not among
    my favorite business models. But I understand the need for these lists
    and how they can be used in an unobjectionable way. I think of these
    lists as the center of the bell curve. These lists are of professional
    people.
        However, some lists should not exist at all. This is where I urge
    Congress to take action. Highly sensitive data are the frayed and ugly
    ends of the bell curve of lists, far from the center. This is where
    lawmakers can work to remove unsafe, unfair, and overall just
    deplorable lists from circulation. There is no good policy reason why
    unsafe or unfair lists should exist.
        I give you some examples: police officers home addresses, rape
    sufferers, domestic violence shelters, genetic disease sufferers, among
    others, below:

       A list of police officers at home addresses. This list can
            threaten the safety of police officers and their families.
            [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

       A list of rape sufferers. This is an unjustifiable outrage
            that sacrifices a rape victim's privacy for 7.9 cents per name.
            [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

       A list of domestic violence shelters. Existing laws allow
            domestic violence shelters to keep their location secret so
            that abusers cannot find their victims. The commercial sale of
            lists of these shelters is unjustifiable.
            [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

       A list of genetic disease sufferers. This list identifies
            people suffering from genetic diseases. This information will
            apply to these people--and their progeny--for their lifetime.
            Congress and the States have passed laws to protect the privacy
            of genetic information, but these laws do not stop data brokers
            from selling genetic information to anyone for any purpose.
            [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

       A list of seniors who are currently suffering from dementia.
            These unfortunate people are often targeted for highly
            predatory offers. A list of caregivers would not have the same
            potential for deleterious consequences.
            [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

       A list of HIV/AIDs sufferers.
    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

       A list of people with addictive behavior, alcohol and drugs.
            Alcohol and drug treatment information about patients is the
            subject of extra protections under existing law, but no law
            stops data brokers from profiting by selling the information.
            [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

       A massive list of people identified by disease and
            prescription taken. Diseases include everything from A to Z,
            from cancer to mental illness, to bedwetting to gambling and
            much more.
            [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        These lists speak for themselves. Can we agree that some lists
    should not be circulated? Can we agree that the people named and
    pinpointed and targeted by these lists should be protected from the
    harm that can come from simply the inclusion on the list? I hope this
    is the case.
        I also would put derogatory credit lists on the firing line for if
    not removal, then special treatment. These lists abound,
       Hispanic payday loan responders

       Derogatory credit consumers. These millions of consumers
            fall into a low credit category.
            [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        In the Solutions section of this testimony I discussion ways that
    this negative list situation can be improved. It is important to note
    that the lists are just the obvious outgrowth of other data broker
    activity, such as scoring.
    Geography is Destiny: Trailer Parks and Zip+4
        Where a person lives counts. A lot. Unfortunately, or fortunately,
    depending on where you live, geography is marketing destiny. And
    marketing destiny can now affect what opportunities come your way by
    virtue of savings, discounts, or receiving financial offers.
        For example, people who either live in a trailer park or within a
    certain radius, usually a couple of miles of a trailer park, are often
    candidates for list suppression. They will not receive opportunities
    that their neighbors do solely because of their type of shelter. Or
    conversely, people who are in a trailer park may be specifically
    targeted for ads for low-income products or services. Is this trailer
    park redlining?
        DMDatabases offers, for example, a suppression list that includes
    trailer parks as an option, among others:

                            OTHER SUPPRESSION OPTIONS
                            NURSING HOMES
                            TRAILER PARKS
                            MILITARY BASES
                            COLLEGE DORMORTORIES
                            BANKRUPTCIES, TAX LIENS, JUDGEMENTS \7\
    ---------------------------------------------------------------------------
        \7\ DMDatabases, Suppression, http://dmdatabases.com/data-
    processing/suppression, last accessed Dec. 17, 2013. Screen shot
    available.

        It can be reasonable and fair or a local business to use Zip+4 to
    target a geographical area nearby. This makes a lot of sense. But I am
    not persuaded that it is fair to use detailed census tract data and
    Zip+4 to unfairly exclude people who may be living in or near the edge
    of poverty.
    Inferences and Categorization
        Data brokers categorize consumers into tightly defined boxes
    sourced by retail transactions, number of credit cards, ethnicity,
    marital status, gender, education, and many other factors, including
    neighborhood. There are a number of products sold by data brokers that
    accomplish this. One product in this category is Personix, sold by
    Acxiom. There are 70 Personix Clusters, each one identifying a type of
    consumer. Another product is Prizm, sold by Claritas.\8\ ``P$ycle'' by
    Dataman Group \9\ is another product. However, I do not know of a
    single company that allows consumers to view the clusters they are put
    in. I do not know of a single data broker that will allow consumers to
    permanently opt out of the cluster definitions attached to them.
    ---------------------------------------------------------------------------
        \8\ http://www.claritas.com/MyBestSegments/Default.jsp.
        \9\ http://www.datamangroup.net/PycleFinancialMarkets.php.
    ---------------------------------------------------------------------------
        At Acxiom's It's About The Data Portal, entering various zipcodes,
    salaries, and characteristics such as presence of child, marriage, and
    so forth allows one to explore the clusters.
        Here are two sample Acxiom clusters:
        [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        These clusters come attached to average ages and proximal
    information to guide marketers. The clusters are purchased by other
    data brokers and are used to overlay other data they already have. In
    many ways, the clusters shape the ads we see online, the deals we get
    in the mail, and in some cases, unwanted targeting both at the high and
    low end of the clusters.
        Take for example the following data card, which is described as Low
    End Credit Prospects. The source for the data is multi-source, and
    includes Acxiom data. The data card specifically identifies low-end
    credit prospects by their inclusion in the Acxiom Personixs clusters.
    In this case, these consumers were not described by being assigned a
    modeled credit score, rather, the cluster does the work of
    characterization. The category profiles are then combined with recent
    transactions, which in turn landed these consumers on this data broker
    list.\10\
    ---------------------------------------------------------------------------
        \10\ Adrea Rubin, Activity Tracker Low End Credit Prospects Data
    Card, Card ID 310015, http://datacardhub.adrearubin.com/
    market?page=research/datacard&id=310015 last accessed Dec. 15, 2013.

        What is most objectionable is that many products like Acxiom's
    exist without consumers having any rights with respect to the data
    about themselves that is being compiled, bought, and sold. Errors may
    significantly alter the cluster a person is in, therefore altering the
    quality and type of offers a consumer receives. Life looks very
    different for cluster 1 and cluster 70.
        Consumers need more rights over the use of their personal
    information by data brokers.
    Modern Eligibility
        Eligibility has expanded and, with it, the uses of marketing data
    for eligibility purposes and for suppression purposes. In the
    traditional credit world, the FCRA still regulates the use of credit in
    strictly-defined eligibility situations, such as employment and
    insurance. The Equal Credit Opportunity Act also places limits on data
    use. So does the Health Insurance Portability and Accountability Act's
    (HIPAA) health privacy rule.
        Modern eligibility has evaded, avoided, and overrun these laws,
    creating an unfair situation for consumers. When health data is held by
    a covered entity, HIPAA protections and rights apply. However, the
    exact same data, used for purposes outside of strictly-defined FCRA,
    ECOA or HIPAA limits and when not held by a health care provider,
    escape the bounds of regulation. The definition of eligibility needs to
    be expanded to encompass how data is now used. Consumers need more
    rights with respect to these activities:

       Authentication: using public and behavioral data to
            authenticate consumers to use a service.

       Anti-fraud: using transactional and behavioral data to
            determine whether fraud is occurring.

       Identity verification: Running quasi-background checks to
            verify aspects of a consumer's identity.

       Lifestyle: Background checks for dating websites, for
            schools, for clubs.

       Offers or suppression based on proxy credit scores: data
            broker-generated financial offers based on non-credit
            information, but just as accurate as a traditional credit
            score. Or the inverse: people are excluded from a list based on
            this information, but without associated FCRA or ECOA rights.

       Offers or suppressions based on medical data: Consumer
            health information that has escaped from the boundaries of
            HIPAA--a significant amount--needs new rules that data brokers
            must follow. Health-related analytics that have an impact on
            consumer's health care prices, health care, credit, or
            employment need controls To protect consumers. Certain lists
            should not exist, and certain data should not be used in lists,
            in analytics, or anywhere. Even lists that data brokers deem
            non-sensitive such as lifestyle lists identifying smokers or
            other patterns need controls.

        Consumers who fail authentication tests, ID verification, or get
    identified as a fraud risk will show up with different scores, will
    wind up on different consumer data broker lists, and may have
    difficulty conducting their daily business. Consumers who are painted
    as fraudsters may find themselves locked out of their own bank, credit
    cards, and even phones. Consumers who are identified as having very low
    or derogatory credit by non-traditional analysis and scoring may find
    themselves deluged with predatory offers. Consumers who are marked by a
    data broker as having cancer, previous trauma, a chronic disease,
    including genetic diseases, and even lifestyle markers, can have that
    data sold to the wrong party and find themselves on the short end of
    the health care stick and deeply stigmatized in many areas.
    Circumventing the FCRA
        While my testimony is not focused on the FCRA, it is important to
    state for the public record that many data brokers are engaging in
    behaviors that circumvent of the FCRA. I leave it to the Committee to
    decide if these activities are already illegal or if they should be
    brought within the FCRA and regulated in the same way as traditional
    credit records.
        Proxy credit scores relate to circumventing the FCRA.\11\ There is
    another issue related to circumventing the FCRA. Many of the websites
    selling consumer background check data and other data state in a
    disclaimer that they are not a consumer reporting agency and therefore
    are not regulated under the FCRA. They adjure their customers to not
    violate the terms. The restrictions are not meaningful, and we suspect
    the violations of terms are routine.
    ---------------------------------------------------------------------------
        \11\ Selling Consumers Not Lists: The New World of Digital
    Decision-Making and the Role of the Fair Credit Reporting Act, Ed
    Mierzwinski and Jeff Chester. November, 2013.
    ---------------------------------------------------------------------------
        There need to be meaningful checks and balances to keep improper
    uses from occurring. Given the sheer numbers of affiliate websites
    selling consumer data, this will require some affiliate oversight and
    reform. We found some affiliates without a privacy policy, much less an
    opt out.
        From http://www.peoplesearchnow.com/default.aspx:
        [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        Just because there is a paragraph stating that a website is not
    operating as a consumer reporting agency doesn't make it so. We
    strongly suspect that the disclaimed is offered with a wink, safe in
    the knowledge that no regulatory agency will be able to look at
    hundreds of small sites for violations of the law.
    Data Broker Opt Out: The Grim Choices Consumers Face
        Consumers face bad options and scant choice when it comes to data
    broker opt out. Leaving aside rights conferred under the FCRA for
    strict FCRA-defined eligibility purposes for the moment, consumers are
    in fact left largely to fend for themselves with few tools and no clear
    rights. Some opt outs exist, but the landscape is difficult--so much so
    that it is improbable that consumers can wend their way through the opt
    out process successfully
    How many allow opt out?
        The World Privacy Forum compiled a list of 352 consumer-focused
    data broker sites and lists. Our list is available at http://
    www.worldprivacyforum.org/2013/12/data-brokers-opt-out/. A study of the
    data broker industry conducted by Dr. John Deighton for the Direct
    Marketing Association in 2013 found that the universe of data brokers
    was approximately 3,500.\12\ Our data broker list, then, comprises at
    ten-percent rough sample of this universe. Included on the list are
    various people finder websites, data brokers that this Committee or the
    FTC has sent letters of inquiry to, consumer list brokers, and others.
    Of 352, 128 offered a data opt out. Some of those were full opt outs,
    some partial or unclear, some of them cost as much as $1,799.00, and
    one opt out promised that the site reserved the right to ``publish the
    request'' if someone decided to opt out.
    ---------------------------------------------------------------------------
        \12\ Panel comments by Dr. John Deighton, National Press Club, The
    Value of Data: Consequences for Insight, Innovation and Efficiency in
    the U.S. Economy, A Symposium Hosted by DMA's Data-Driven Marketing
    Institute, October 29, 2013. Dr. Deighton was commenting on his
    sampling for the study, The Value of Data: Consequences for Insight,
    Innovation and Efficiency in the U.S. Economy, John Deighton and Peter
    Johnson, DDMI, 2013.
    ---------------------------------------------------------------------------
    Opting out of Data Broker Scores and Lists
        To remove a consumer's name and information from all data broker
    lists appears to be an almost impossible task right now. If a mailing
    list is held by a DMA member, the DMA opt out can be effective.
    However, not every data broker is a DMA member, which poses an
    immediate problem. For scores, there is no known score opt out. After a
    consumer is assigned a score by a data broker, a consumer will find it
    nearly impossible to find that score or to opt-out of its use to
    describe or characterize the consumer.
        In our research, we have found one exemplar company that is
    allowing an opt out of their databases and lists, KBM Group. A screen
    shot of the relevant portion of the policy is below; note that the
    policy allows for internal database opt out as well as linking to the
    DMA opt out. The policy is located at http://www.kbmg.com/privacy-
    policy/. This is a best practice, and is seldom seen.
    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

    Suppression vs opt out
        It is important to note that when consumers opt out of data broker
    websites or lists, most often what is happening is that their
    information is being suppressed. The information remains, but it is
    removed from circulation. Delete is not a word that is used very often
    in data broker opt out.
        For consumers who want to get off of data brokers marketing lists,
    the primary mechanism for removal is to use the DMA Choice opt-out
    mechanism. This will put the consumer on a suppression list, which
    means the data brokers will still have the consumer information, but no
    further sales or marketing will occur within a given time frame via the
    lists that allow opt out or suppression.
        When data brokers allow for a DMA Choice opt out to influence all
    of their list and brokering activity, this is a good thing. But this is
    not nearly as common as it needs to be. Only some lists adhere to the
    DMA Choice program. One significant problem is that not all data
    brokers are DMA members, and thus escape the self-regulatory program.
    For those that are DMA members, we do not know how effective the DMA
    Choice program is.
    Policy Issues in Current Opt Out/Suppression Practices
        Of data brokers that allow opt out, additional policy issues
    include the following:

       Incomplete: Most opt outs are incomplete, and often require
            consumers to have a safety reason for the opt out.

       Suppression not deletion. Many opt outs are suppression-
            based. This may be difficult to change.

       No Third Parties: Consumers are usually required to ask for
            the opt out directly on their own. Requests through third
            parties are not allowed. This makes opt out an impossible
            proposition for consumers, who have to go to each individual
            site to effectuate the opt outs that are available to them. It
            is clear that the policy deliberately seeks to make it as hard
            as possible for consumers to exercise the ability to opt-out.

       No Guarantee: An opt out is not guaranteed, no matter why
            the consumer is conducting the opt out. Thus, the opt out may
            not work or may only be effective for a short period of time.

       Fees: Some data brokers charge fees ranging from annoying
            (less than $30) to exorbitant (in excess of $1,000).

       Hunting for the opt out: Finding the opt outs on many
            consumer data broker sites is an exercise in extreme patience
            and persistence. Opt outs are seldom indicated by a prominent
            opt out button labeled as such. While some data brokers do play
            nicely with consumers and provide this, fair play is the
            exception, not the rule. Typically, opt outs are buried deep
            within a privacy policy, terms of use, or FAQ.

       Opt out requirements non-standardized: Opt out requirements
            non-standardized: A bewildering array of choices face the
            person who wants to opt out of data broker lists. Some opt outs
            are fair. DMA Choice is a reasonable opt out. But many are not
            reasonable or fair. Some require a privacy-concerned consumer
            to send a scanned copy of a driver's license or to jump through
            other hoops. We would be reluctant to recommend that a consumer
            share a copy of a driver's license. Many consumers do not have
            a driver's license or other government-issued form of
            identification, and these consumers may find it impossible to
            opt out.

       Marketing use of opt -out information: No regulation stops
            data brokers from selling or otherwise using the information
            given in an opt out application.

       Negotiating the opt out: There is no controlling legal
            standard for data broker opt out. As a result, consumers have
            to dig through complex privacy policies and language and figure
            out each opt out.

       Partial Opt Outs Only: Some data brokers allow for partial
            opt outs, meaning that it is available only if there is a
            safety issue, or if an individual is a member of law
            enforcement. However, there are concerns even with this. There
            are no rules that say that information about the request to opt
            out will not be sold or shared.

       No opt out: Many data brokers do not allow any opt out.
            Consumers are left with no recourse.
    Examples of challenging opt outs
        Here is an example of a privacy policy with an opt out notice, this
    is from a consumer-facing data broker site called SortedbyName.com.
    Note the last sentence, where consumers who opt out may be treated
    punitively for doing so (emphasis in yellow is mine).:

       This webmaster reviews stats, including IP addresses of site
            visitors from time to time.

       Third party vendors, including Google, use cookies and web
            beacons to serve ads based on a user's prior visits to the
            website.

       Google's use of the DART cookie enables it and its partners
            to serve ads to users based on their visit to the site and/or
            other sites on the Internet.

       Users may opt out of the use of the DART cookie by visiting
            the advertising opt-out page. (You can opt out of a third-party
            vendor's use of cookies by visiting the Network Advertising
            Initiative opt-out page.)

       With the Firefox browser, use Ctrl+Shift+P for private
            browsing. Use Tools--Options--Privacy to set preferences. Use
            Shift+Ctrl+Delete to clear your history so remote servers
            cannot access it.

       By sending a request for removal of names from the site, you
            give us permission to publish the request, including your e-
            mail address and all headers.\13\
    ---------------------------------------------------------------------------
        \13\ http://sortedbyname.com/privacy.html, last accessed Dec. 17,
    2013. Screen shot available.

        Here is an example of a complicated opt out, this at from
    ---------------------------------------------------------------------------
    waatp.com:

            How do I remove or update my data on waatp.com? waatp.com
            investigates for live data reached by public on a regular
            basis. Because this information is not contented on our
            hosting, we cannot give any guarantees these data will be
            removed until the change has been occurred at the source of the
            data. To update or remove this information, we advise: Our site
            will provide the certain source for the information the applier
            would have changed or removed. Approval that applier is the
            individual specified in the Public Profile is an obligatory
            condition, therefore we may ask that appliers faxes or e-mails
            it:

            1--a written application asking for the database source or a
            change application;

            2--a screenshot of a page, with marked information that you ask
            to change or to search in the source;

            3--a legal proof of ID like State/Federal ID card that points
            your name, full address, date of birth (you can remove your
            personal photo an/or ID#);
            4--any pseudonyms;

            5--ex-addresses, including str.name, town, zip.

            You should fax this information to 800 861 9713 (please attach
            an e-mail so that we are able to contact you regarding any
            questions) or e-mail to Profile-Remove/at/waatp.com.com.
            Changes might take up to 6 weeks to come into effect and are
            only constant if the info has been previously edited or removed
            at the original source. Without a constant change at the
            original source, the process of deletion of any info stored in
            a Public Profile is NOT guaranteed.\14\
    ---------------------------------------------------------------------------
        \14\ http://waatp.com/faq.html. Last accessed Dec 17, 2013. Screen
    shot available.

        An example of the No third Party policy can be found at People
    Smart, http://www.peoplesmart.com:
    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

    The Scoring of Americans
        Americans face a future that is increasingly being shaped in
    significant ways by their consumer scores. A consumer score provides a
    way of evaluating an individual or a household. The best-known consumer
    scoring activity is credit scoring. Credit scores date back to the
    1950s, and replaced human judgment about credit granting by relying on
    standardized criteria. While most people are familiar with credit
    scoring, consumer scoring encompasses a broader category of activities
    that uses scores to assess consumers for one or more purposes.
        The World Privacy Forum offers consumer scoring as a generic term
    for these scoring methods. A consumer score derives from an algorithm
    that typically employs objective criteria. The score relies on
    demographic, health, consumption, transactional data, marketing,
    credit, or other personal characteristics. Companies and governments
    use the resulting score to make a decision about an individual or
    household.
        By itself, consumer scoring is not necessarily good or bad. Scoring
    orders a population along a mathematically defined scale. However,
    scoring has the prospect of being used to affect individuals in
    significant ways that may not be fair. If a score becomes the way that
    consumers are treated, then the results may not be acceptable to the
    American public. The quality and relevance of the data used, the
    transparency of the methodology, and the reasonableness of the
    application are the major factors that determine the fairness of any
    scoring activity. These issues are likely to be the central focus on
    the policy debate about consumer scoring.
        Consumer scoring is already more widespread than most people
    realize. A significant segment of the data broker industry already
    focuses on scoring and predictive analytics, and as such, is
    intricately interwoven into the scoring business.\15\ Known consumer
    scoring activities include assessments and predictions relating to
    insurance, bankruptcy, identity, fraud, consumption, health, propensity
    to purchase, ``consumer value estimation,'' and more. A dozen
    categories of consumer scoring have been identified so far, each
    containing numerous scores. There may be hundreds or thousands of
    consumer scores already in use. The Federal Government uses scoring for
    some purposes, an activity beyond the scope of this testimony but
    something that may be worthy of more attention by the Congress. It
    might be useful, for example, to ask the Government Accountability
    Office to identify all of the consumer scoring used by Federal
    agencies.
    ---------------------------------------------------------------------------
        \15\ The Direct Marketing Association's publicly searchable Vendor
    Database contained 377 companies stating an expertise specifically in
    scoring as of Dec. 15, 2013. Some examples of companies listed include
    Datalogix, Analytics IQ, FICO, iKnowtion, and others.
    ---------------------------------------------------------------------------
        The use of consumer scoring is expanding rapidly because scores
    provide an easy analytics shorthand for measuring consumer behavior,
    risk, and potential for future success or spending. Companies and
    government will use scores to make more decisions about a consumer's
    access to markets, price for goods and services, ability to travel, and
    other social and economic opportunities. Schools will use scores beyond
    academic measurement scores to determine the viability of candidates.
    Policy issues around consumer scoring
    Secrecy

        Most consumer scores today are secret--consumers cannot see most
    scores even if they know about them. Beyond the numeric value of the
    scores themselves, a complete lack of transparency surrounds consumer
    scores. Citing proprietary claims, the factors that make up consumer
    scores are secret. The procedures and algorithms are secret. Often,
    even the full numeric range and context are secret.
        Credit scores were unknown to most consumers through the 50s, 60s,
    70s, and 80s. Trickles of a score that was not disclosed to consumers
    but that could be used to deny a person credit began to leak out slowly
    to some policymakers, particularly around the time ECOA passed. In May
    1990, the Federal Trade Commission wrote commentary indicating that
    risk scores (credit scores) did not have to be made available to
    consumers. But when scoring began to be used for mortgage lending in
    the mid 90s,\16\ many consumers finally began hearing about a ``credit
    score,'' most of them for the first time, and mostly when they were
    being turned down for a loan.\17\ A slow roar over the secrecy and
    opacity of the credit score began to build.
    ---------------------------------------------------------------------------
        \16\ In 1995 Freddie Mac and Fannie Mae endorsed the use of credit
    scores as part of the mortgage underwriting process. This had a
    substantial impact on the use of credit scores in the mortgage loan
    industry. See for example Kenneth Harney, The Nation's Housing Lenders
    might rely more on credit scores, The Patriot Ledger, July 21 1995.
        \17\ See for example, comments of Peter L. McCorkell, Senior
    Counsel to Wells Fargo, to the Federal Trade Commission, August 16,
    2004 in response to FACT Act Scores Study.
    ---------------------------------------------------------------------------
        By the late 90s, the secrecy of credit scores and the fact that
    people could not see the underlying methodology or factors that went
    into the score or the range of the score to determine how the number
    should be interpreted was a full-blown policy issue. Beginning in 2000,
    a rapid-fire series of events--particularly the passage of legislation
    in California that required disclosure of credit scores--eventually
    dismantled credit score secrecy and non-disclosure. Now, credit scores
    must be disclosed to consumers, and the context, range, and key factors
    are now known.\18\
    ---------------------------------------------------------------------------
        \18\ As of December 2004, the Fair Credit Reporting Act as modified
    by the Fair and Accurate Credit Transactions Act, or FACTA, ended score
    secrecy formally, and required consumer reporting agencies to provide
    consumers with more extensive credit score information, upon request.
    Also made available to the public was the context of the score (its
    numeric range), the date the score was created, some of the key factors
    that adversely affected the score, and some other items.
    ---------------------------------------------------------------------------
        Credit scores are no longer secret, and this was and still is the
    right policy decision. Why are other scores secret, when they are being
    used for important decisions about consumers? Why are other score
    factors and numeric ranges secret, when the risk of marketing data
    comprising the score of a factor used in modern eligibility practices
    is very high?
        There should be no secret scores, and no hidden factors.
    Unfairness

        Of significant concern regarding scoring are the factors that go
    into the creation of a score. A single score is often created from the
    admixture of more than 600 to 1,000 individual factors. These factors
    can include race, religion, age, gender, household income, zip code,
    presence of medical conditions, zip code + 4, transactional data from
    retailers, and hundreds more. Therefore, one individual score can
    contain hidden factors that range from non-sensitive to quite
    sensitive. A score that is designed to assess or assign consumer value
    to a business could also include factors that would be entirely
    unacceptable or that, in the context of either the Equal Credit
    Opportunity Act (ECOA) or the Fair Credit Reporting Act, would be
    flatly illegal.
        In a description of its sets of scores that can be purchased, one
    company described how it creates its scores:

            Aspects Life Choices system

            Our Database at the Core

            Our proprietary set of data that allows us to produce powerful
            scored solutions. It is created from over 100 sources, updated
            quarterly, and contains 1,500 proprietary demographic,
            psychographic, attitudinal, econometric and summarized credit
            attributes.

            Clear Benefits to Users

       Can be used to enhance any list   Applied at the
            Zip+4 level

       Data can be custom modeled \19\
    ---------------------------------------------------------------------------
        \19\ AnalyticsIQ, http://analytics-iq.com/download/Aspects.pdf,
    last accessed Dec. 16, 2013.

        This particular company, like most companies selling consumer
    scores, does not publish its 100 sources nor its 1,500 attributes that
    it is using to develop the score for consumers' perusal, nor does it
    summarize even the categories of information used for consumers. It is
    unlikely that consumers can purchase or see these scores for
    themselves,\20\ and like other consumer scores, this score is opaque.
    If ECOA factors are present, no one but the company employees would
    know.
    ---------------------------------------------------------------------------
        \20\ One exception to this is ID Analytics' Identity Score, which
    consumers are able to see.
    ---------------------------------------------------------------------------
        Notably, the ECOA requires that credit scoring systems may not use
    race, sex, marital status, religion, or national origin as factors
    comprising the score. The law provides the opportunity for creditors to
    use age, however, also requires that seniors are treated equally.\21\
    Marital status is commonly used as a consumer score factor, as are
    other factors either directly or inferentially connected to factors
    that would be protected under ECOA but are not in broader consumer
    scores, even if those scores are being used for other eligibility
    decisions.
    ---------------------------------------------------------------------------
        \21\ For more information, see http://www.consumer.ftc.gov/
    articles/0152-how-credit-scores-affect-price-credit-and-insurance.
    ---------------------------------------------------------------------------
    Lack of Rights in Consumer Scoring
        After a consumer has been scored, the factors (behaviors,
    characteristics, etc.) that went into the score do not typically
    disappear. After the score have been recorded into a data broker's host
    database, there is not a way for consumers to remove themselves from
    this activity. A discussion of how this impacts proxy credit scores is
    below.
    Exemplar: Modeled Credit Scores
        The privilege of marketing information based on credit report data
    comes with the requirement that consumers can opt out of that
    marketing. Marketing targeted to credit reports is strictly limited to
    credit and insurance.\22\ But analytics are at such a sophisticated
    level now that accurate ``modeled credit scores'' are being created and
    used as a proxy for traditional credit scores. These modeled scores are
    made of consumer information drawn from beyond the traditional credit
    bureau score to create an entirely new score. Because these scores
    contain no direct credit information, they are seen by some as outside
    of either ECOA or the FCRA. Therefore, information closely mimicking
    credit data is now being used for broad marketing purposes, and there
    is no requirement for opt out.
    ---------------------------------------------------------------------------
        \22\ A significant lawsuit on this issue is FTC v. Transunion which
    is definitive. From the press release: ``The Federal Trade Commission
    has ordered the Trans Union Corporation to stop selling consumer
    reports in the form of target marketing lists to marketers who lack an
    authorized purpose for receiving them under the Fair Credit Reporting
    Act (``FCRA''). In a unanimous opinion authored by Commissioner Mozelle
    W. Thompson, the FTC determined that ``Trans Union's target marketing
    lists are . . . consumer reports under the FCRA'' and concluded that
    Trans Union is violating the FCRA by selling this information to target
    marketers who lack one of the ``permissible purposes'' enumerated under
    the Act. The Commission's decision applies to a number of Trans Union's
    target marketing list products including its Master File/Selects
    products, its modeled products and its TransLink/reverse append
    products.'' http://www.ftc.gov/news-events/press-releases/2000/03/
    trans-unions-sale-personal-credit-information-violates-fair. Full case:
    http://www.ftc.gov/enforcement/cases-and-proceedings/cases/2000/03/
    trans-union-corporation-matter.
    ---------------------------------------------------------------------------
        A good modeled credit score predicts financial risk comparable to
    the traditional credit score. Fair Isaac's Expansion Score draws
    consumer information from non-traditional sources, that is, sources
    other than the big three credit bureaus. Although Fair Isaac does not
    disclose its data sources except directly to the individual consumer
    being scored, industry publications state that Fair Isaac is using
    deposit account records and pay-day loan cashing as predictive factors
    in its Expansion Score.\23\ The Expansion Score is regulated, so
    consumers who have an Expansion Score are entitled to knowing certain
    information about that score, including the factors. Fair Isaac is
    playing by the rules, but data broker data cards indicate that not all
    companies (or data brokers) are when it comes to inferred credit data
    or scores.
    ---------------------------------------------------------------------------
        \23\ Ann McDonald, High Points for Credit Scoring: With generic
    scores becoming antiquated, credit-scoring providers are focusing on
    new offerings. Collections and Credit Risk, April 1 2006, 46 Vol. 10,
    No.4.
    ---------------------------------------------------------------------------
        Companies can now build score cards with very little or even no
    data by taking advantage of the new generic credit bureau scores to
    create a baseline of information. In these cases, the score card is
    typically monitored and evaluated closely to see if it is viable.\24\
    In this way, the equivalent of consumer credit scores that would be
    otherwise regulated under the FCRA end up being used for all sorts of
    purposes that would not be allowed had they been traditional credit
    scores. The end score could be something like a churn score, or
    customer loyalty score. In other situations, behavioral clues allow
    people to be targeted just as precisely as if their scores were known.
    ---------------------------------------------------------------------------
        \24\ LC Thomas, RW Oliver, DJ Hand, A Survey of Issues in Consumer
    Credit Modeling Research, The Journal of the Operational Research
    Society, Sept. 2005, Vol. 56, Iss. 9.
    ---------------------------------------------------------------------------
        People, for example, who have a low Beacon score (an Equifax credit
    score) and are subsequently turned down for the purchase of a phone,
    show up on a data broker mailing list called ``Cell Phone Turndowns.''
    \25\ The data card says: ``These consumers are ready and eager to
    receive offers and opportunities in the following categories: secured
    and sub-prime credit, Internet, legal and financial service, health
    insurance offers, home equity loans, money making opportunities, and
    pre-approved credit with a catalog purchase.'' The Beacon score is not
    given--it does not need to be in order for data brokers to infer the
    credit score of these individuals. If a generalized credit score is
    known with certainty, as it is in this case, then why is it OK to then
    sell this information without limiting the data to FCRA constraints?
    ---------------------------------------------------------------------------
        \25\ Cell Phone Turndowns Mailing List, NextMark List ID #188161.
    http://lists.nextmark.com/market?page=order/online/datacard&id=188161,
    last accessed Dec. 12, 2013.
    ---------------------------------------------------------------------------
        The use of the modeled credit score is well understood by data
    brokers. DMDatabases wrote this on its website, discussing its modeled
    credit score:

            IMPORTANT NOTE: The Fair Credit Reporting Act (FCRA) does NOT
            allow the release of actual credit data to any party that lacks
            a permissible purpose, such as the evaluation of an application
            for a loan, credit, service, or employment. Before requesting
            information on a credit score mailing list or credit score e-
            mail list, make sure your offer is in compliance with FCRA
            guidelines. For details on FCRA compliance requirements--CLICK
            HERE.

            GOOD NEWS/BAD NEWS: The bad news is that 90+ percent of offers
            do not meet the strict FCRA compliance requirements for using
            actual credit score data. The good news is that marketers have
            a very effective alternative . . . The Premier Modeled Credit
            Score Database.-CLICK HERE and read more.\26\
    ---------------------------------------------------------------------------
        \26\ http://dmdatabases.com/databases/consumer-mailing-lists/
    consumer-lists-by-credit-score. More information about the DMDatabases
    modeled credit score is at http://dmdatabases.com/databases/specialty-
    lists/modeled-credit-score-direct-mail-e-mail-list.

        Experian sells ChoiceScore, a financial risk score built entirely
    of non-credit factors.\27\ Experian explains in its description of the
    score that it is created from consumer demographic, behavioral, and
    geo-demographic information. One data broker selling a list of
    consumers who had been segmented by the ChoiceScore said this in its
    data card description, which can be seen in the screen shot below:\28\
    ---------------------------------------------------------------------------
        \27\ Experian ChoiceScore, http://www.experian.com/marketing-
    services/data-digest-choicescore
    .html.
        \28\ http://datacardhub.adrearubin.com/market?page=research/
    datacard&id=268601.
    ---------------------------------------------------------------------------
    ChoiceScore by Experian UnderBanked and Emerging Consumers
    ChoiceScore helps marketers identify and effectively target under-
    banked and emerging consumers. Using the most comprehensive array of
    non-credit data available from Experian. A financial risk score
    (indicating the potential risk of future nonpayment) provides marketers
    with an additional tool for more precise targeting.\29\ The data card
    also indicated that the ChoiceScore could be used to suppress some
    consumers from getting information.
    ---------------------------------------------------------------------------
        \29\ CHOICESCORE BY EXPERIAN UNDER BANKED AND EMERGING CONSUMERS,
    http://datacardhub.adrearubin.com/market?page=research/
    datacard&id=268601.

        Based on Experian's website, it appears that the ChoiceScore is
    apparently not available for sale to consumers. The score appears to be
    available for non-FCRA uses.\30\ What factors go into these and other
    scores? How is ChoiceScore used in eligibility decisions? The score's
    factors are not defined, so it is difficult to know what kind of
    marketing data is included, if at all, in the score. It is also
    difficult if not impossible to determine how or if or when the score is
    being used in modern eligibility decisions.
    ---------------------------------------------------------------------------
        \30\ According to the data broker's data card, two entities
    purchased this data: Achievecard, and Figi's Incorporated. Figi's
    Incorporated appears to be a food gift retailer. (http://www
    .fbsgifts.com/about.html#figis).
    ---------------------------------------------------------------------------
        Are credit factors bundled into any base scores? Are credit factors
    used for non-credit marketing? Are any ECOA factors in the scores? How
    are credit and ECOA factors weighted in the algorithms? We do not know.
        Modern data analytics have made child's play of mimicking
    traditional credit scores and unearthing people who are in various
    credit score brackets. Congress acted to protect the use of this
    information with good reason. The change in technologies that give us
    new modeled scores of great accuracy does not change the underlying
    principles that still need to be at work here: fairness, accuracy,
    transparency, and some reasonable limits in use.
        My question is this: if a modeled credit score is as good as a
    traditional credit score, shouldn't it come under the FCRA? I believe
    the answer to this is yes. Congress needs to draw a bright line around
    this issue in particular and ensure that for fairness reasons it does
    not get entrenched any further. I predict that when consumers learn of
    data broker activity in the scoring area, they will not be happy.
    Exemplar: Heath Scores
        Another category to consider is the area of health. Health scores
    are now in circulation, which brings concerns, not the least of which
    is that consumers care deeply about their health privacy and decisions
    made about them regarding their health, insurance policy pricing, and
    prescription pricing. The same questions raised above about
    transparency, secrecy, factors, and use are relevant here. Other
    questions come into play as well. For example: can employers purchase
    health scores? Are health scores shared with debt collectors? Of note
    in the area of health and in other areas is the issue that companies
    increasingly either
    Frailty Scores
        Regarding the Frailty Score, in 2011, a rather spectacular medical
    data breach revealed that a company called Accretive was collecting
    detailed and sensitive health information about hospital patients in
    Minnesota via contract with those hospitals, and then using that data
    to develop scores. A lawsuit revealed the extent of the information
    gathering by this company. The company was collecting the following
    information and developing the following scores:

       Patient's full name

       Gender

       Number of dependents

       Date of birth

       Social Security number

       Clinic and doctor

       A numeric score to predict the ``complexity'' of the patient

       A numeric score to predict the probability of an inpatient
            hospital stay

       The dollar amount ``allowed'' to the provider

       Whether the patient is in ``frail condition''

       Number of ``chronic conditions'' the patient has

       Fields to denote whether the patient has:

         Macular degeneration

         Bipolar disorder

         Depression

         Diabetes

         Glaucoma

         HIV

         Metabolism disorder

         Hypertension

         Hypothyroidism

         Immune suppression disorder

         Ischemic heart disease

         Osteoporosis

         Parkinson's Disease

         Asthma

         Arthritis

         Schizophrenia

         Seizure disorder

         Renal failure

         Low back pain

        The screenshot below is a screenshot of a patient's data that had
    been revealed in the breach, redacted for the lawsuit.
    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        One of the complaints in the lawsuit was that patients had no
    knowledge of this scoring activity.

            ``Upon information and belief, the hospitals' patient admission
            and medical authorization forms do not identify Accretive by
            name or disclose the scope and breadth of information that is
            shared with it. Upon information and belief, patients are not
            aware that Accretive is developing analytical scores to rate
            the complexity of their medical condition, the likelihood they
            will be admitted to a hospital, their ``frailty,'' or the
            likelihood that they will be able to pay for services, among
            other things.'' \31\
    ---------------------------------------------------------------------------
        \31\ United States District Court, District of Minnesta. State of
    Minnesota vs. Accetive Health, Inc.

        This was a complex case that illustrates the complex nature of what
    constitutes data broker activities. The company, Accretive, wore many
    hats, from debt collector to data analytics. Data analytics such as
    complex scoring is one form of data broker activity. However, Accretive
    in this case did not fit the traditional mold of data broker as list
    seller. No outsider can tell if the company is internally violating
    restrictions in existing law.
    FICO's Medication Adherence Score
        FICO's Medication Adherence Score was launched in June, 2011,
    According to FICO, it is using variables from the marketing world: ``.
    . . those variables include age, gender, family size and asset
    information--such as the likelihood of car ownership--data also used by
    direct marketing companies. FICO says that with only a patient's name
    and address, it can pull the remainder of the necessary information
    from publicly available sources.'' \32\ FICO states that the score is
    used to determine reminder mailings for consumers. It is unknown if the
    uses for the score have expanded since its introduction. Historically,
    prescription reminder activity has been controversial. Those chosen for
    reminders have not always not been very happy about it.\33\ We suspect
    that prescription reminders are sent only to patients who have high-
    quality health plans and then only for high-priced, patent-protected
    drugs. That may be the type of information included in a score.
    ---------------------------------------------------------------------------
        \32\ Jeremy M. Simon, New medical FICO score sparks controversy,
    questions, Yahoo Finance, July 28, 2011. http://finance.yahoo.com/news/
    New-medical-FICO-score-sparks-creditcards-1400
    615100.html?x=0.
        \33\ Weld v. CVS Pharmacy Inc., No. CIV. A. 98-0897, 1999 WL
    1565175 (Mass. Super. Nov. 19, 1999), aff'd, Weld v. Glaxo Wellcome,
    Inc., 746 N.E.2d 522 (Mass. 2001).
    ---------------------------------------------------------------------------
    General Conclusions about Consumer Scoring and Data Brokers
        I have mentioned above that the data business is changing and is
    becoming much more sophisticated. Consumer scores are a significant
    contributor to the change. Consumer scoring has substantial potential
    to become a major policy issue as scores with unknown factors and
    unknown uses and unknown legal constraints move into broader and
    broader use.
        Secrecy, fairness of the factors, accuracy of the models, the
    inclusion of sensitive information--these are some of the key issues
    that must be handled. It is exquisitely unlikely that self-regulation
    will solve the dilemmas consumer scoring introduces. However, the path
    for what could constitute fair regulation in this area is already
    established via the history of the credit score.
    Solutions
        To bring fairness, accuracy, and transparency to consumers
    regarding data broker activities, a multi-prong approach which
    addresses multiple aspects of the problems needs to be pursued.
    National data broker list

        The Federal Trade Commission or the Consumer Finance Protection
    Bureau should require the industry to maintain a current list of all
    data brokers, with full identification, description, and contact
    information. If industry cannot provide the needed transparency, the
    agencies should create the list on their own.
    National consumer data broker opt out requirement

        There is an urgent need for a national consumer data broker opt-out
    requirement. Consumers should be able to opt out at a central portal.
    Data brokers should be allowed to download the list of those who have
    opted out. Data brokers would then be responsible for scrubbing their
    lists.
        The opt out needs to be standardized, and could operate like
    Prescreen Opt Out. Consumers would opt out at a central portal,
    consumer data brokers would be able to download the list of those who
    had opted out, then data brokers would be responsible for using this
    dated list to scrub their lists.
        National opt out standards:

       No use of opt out data for marketing purposes

       Standardized language around opt out

       Prominent placement on home page of a button or link that
            says opt out

       Notice to consumers that an opt-out request has been
            received and acted upon

       Due process rights for consumers denied an opt out

       Consequences for data brokers that do not comply

       Opt outs for all without cost or prerequisites and with
            simple procedures

        Reform and oversight of affiliate marketing of consumers'
    personally identifiable data. Affiliate marketing of consumer
    information creates very significant challenges for consumers. The
    businesses selling the data should exercise appropriate and reasonable
    oversight.
        List brokers who are selling PII of consumers must allow consumers
    to see the lists they are on and opt out. If a consumer is on a list,
    why can't the consumer be made aware of that? The list could be
    incorrect, and could have consequences if sold to an insurer or
    employer.
        The sale of lists that endanger lives or safety or wellness should
    be stopped. There are lists all of us should be able to agree should
    not exist. The lines can be drawn by regulatory agencies after
    consulting with consumers and industry
        No secret consumer scores, no unfair factors. There should full
    publication of data elements (but not weights) used in consumer scores,
    and all data elements used must be reasonable.
        The expansion of the FCRA to include modern eligibility options.
    Eligiblity uses of data have expanded. The law may need to be expanded
    so that proxy credit scoring or modeled credit scoring clearly fall
    under the law. There should also be limits on the use of sensitive
    information in scoring and on the sale of health data in all contexts.
    In addition, data brokers should be subject to strict disposal
    requirements and time limits for all data held. Fair Information
    Practices should be applied to consumer data broker practices and
    lists.
        Better Enforcement: Civil and in some cases criminal penalties when
    there is a breach of the law. Private rights of action for aggrieved
    consumers should be allowed, togegther with effective enforcement and
    oversight by the FTC and CFPB.
    Conclusion
        I agree that the data broker industry is complex, as is our digital
    world, as are the lives of all of us who live in this world. But that
    is no excuse for avoiding the necessary discussions that will need to
    take place between all stakeholders.
        In this testimony, I have said many things. It can be summed up in
    this way:

            Individuals should have the right to stop harmful collection
            and categorization activity and to force the permanent and
            immediate expungement of all data that is factually incorrect,
            data that arrives at an incorrect conclusion about them, or
            data that influences decisions about a consumer in a negative
            way.

        This was the idea behind the Fair Credit Reporting Act of 1974. It
    was a good idea then, and the fundamental values remain the same today.
        Thank you for your attention to these matters. I welcome your
    questions, and will be happy to provide further research or input.

        The Chairman. Thank you, Ms. Dixon. And you are exactly
    right; this is the beginning of a dialog. And we need to probe
    deeply, without fear of consequence, and then we need to do
    something about it. That will be a judgment that we will have
    to make, but you have already suggested a change in HIPAA,
    which is, you know, it used to be very sacred and still is but
    not in all cases. So I thank you for your testimony.
        Professor Joseph Turow. Now, Dr. Turow is the Associate
    Dean for Graduate Studies, the Annenberg School for
    Communications at the University of Pennsylvania.

             STATEMENT OF JOSEPH TUROW, ROBERT LEWIS SHAYON

             PROFESSOR OF COMMUNICATION, ASSOCIATE DEAN FOR

                 GRADUATE STUDIES, ANNENBERG SCHOOL FOR

               COMMUNICATION, UNIVERSITY OF PENNSYLVANIA

        Mr. Turow. Thank you, Chairman Rockefeller, members of the
    Committee.
        In a bit of a different tack, I would like to address two
    key questions about data brokers and their collection of
    information about Americans for marketing purposes.
        First, if we take sensitive topics like health and
    employment out of the equation, what possible harm can come
    from using people's data for marketing purposes? After all,
    what we are talking about is simply targeting for product
    advertising.
        Second, haven't data brokers and their lists been around
    for over a century? And if so, what makes them today any
    different from the past?
        Let's start with the history question. It is true that
    marketers compiled and bought lists of prospects way back into
    the 19th century. These lists became more detailed in the 20th
    century. But the differences between the lists of even 35 years
    ago and those of today is extreme. The biggest distinction is
    the amount of information brokers have now and how they deal
    with it.
        Lists of the old days were pretty static. The numbers of
    data points companies had about us was rather small. It was
    difficult to interconnect pieces of data, and the data didn't
    change all that quickly. Today, data brokers can collect huge
    amounts of information about tens of millions, even hundreds of
    millions of people. They update that information frequently.
    And they use high-speed computers and advanced statistics to
    draw conclusions in ways previous generations of data brokers
    could hardly imagine.
        Consider Acxiom's recent data catalog. It contains 41 pages
    of information about individual Americans that Acxiom sells to
    marketers. That information ranges from the amount of money
    people make to the kinds of vacations they take, to the number
    of friends they have on social media, to the value of
    neighborhoods they live in, to diseases they have an interest
    in, to how tall they are, to whether they gamble, to their
    media uses and much more. Axiom sells any number of these items
    about individuals, as well as packages of these data, tailored
    to marketers from different industries.
        In addition, through its Acxiom Operating System, the data
    broker has created a kind of universal cookie to find and
    follow people across desktops, laptops, mobile phones, and
    tablets, as well as to collect yet more information about them
    from these media.
        Like Acxiom, other data brokers continually run programs
    that connect our dots for marketers and then attach them to
    other ideas the marketers have about us. The brokers often
    bring together pieces of information that people did not expect
    would be merged when they disclosed them separately to various
    online and offline entities. The results are buckets of
    descriptions and interpretations, stories of our lives, our
    economic value, and our potential that we don't know exist and
    may not agree with.
        The consequences of their use in marketing can be profound
    and disturbing. For example, merchants can charge you more than
    others for products based on features they tag you with that
    you don't even know you have shared. Say a data broker's
    knowledge you regularly buy antacids blends into a complex
    algorithm to predict that you are inclined to accept higher
    prices for recreation than most people. That is great news to
    travel companies searching online for those types of people.
        Using apps and personalized coupons, physical and virtual
    stores can change their prices based on what they know about
    you. Data brokers can add information about your lifetime value
    to retailers' understanding of you from receipts. The results
    can dictate the kinds of items you see at discount and how much
    that discount will be.
        Negative data broker signals about you can mean having to
    wait longer than others for customer service, being rejected as
    a valued customer, and being offered coupons for non-nutritious
    foods.
        Based on predictions of your engagement with the digital or
    addressable ads, media firms can change the news and
    entertainment offerings you receive compared to news and
    entertainment offerings your neighbor or coworkers get. The
    result: you systematically see different worlds from your
    friends or work colleagues because of the stories brokers tell
    about you.
        Now, many of these examples already are taking place. All
    of them are quite plausible. Data brokers trumpet that they
    often make the individuals they sell to marketers for ads
    anonymous so there is no problem. But anonymity of this sort is
    not reassuring. If I am followed online and offline by buckets
    of data that tell particular stories about me, it doesn't
    matter if my name is Joe Turow or 2588704.
        Anonymously and with our full personal information, data
    brokers are encouraging a world of data-driven social
    discrimination that is becoming widespread precisely because it
    comes with all sorts of advertising.
        Surveys I have conducted since 1999 consistently suggest
    Americans worry about what firms learn and think about them.
    Poignantly, I have heard people say they will change their
    activities or how they talk about themselves online to be
    treated better by marketers. The difficulty, of course, is that
    it is often impossible to know whether and how that is going to
    work.
        We are only at the beginning of a data-driven century. Data
    brokers will be central to how we think of ourselves and lead
    our lives. For the sake of democratic ideals and relationships,
    let's limit what and how much data brokers can collect and
    share until, as a society, we know how to create regimes of
    data respect, where people have control over the most important
    elements of their identity.
        Thank you.
        [The prepared statement of Mr. Turow follows:]

     Prepared Statement of Joseph Turow, Robert Lewis Shayon Professor of
       Communication, Annenberg School for Communication, University of
                                  Pennsylvania
        I would like to address two key questions about data brokers and
    their collection of information about Americans for marketing purposes:

        First, haven't data brokers and their lists been around for over a
    century and if so what makes today any different from the past? Second,
    if we take sensitive topics like health treatments and employment
    issues out of the equation--which many agree should be done--what
    possible harm can come by using people's data for marketing purposes?
    After all, what we're talking about is simply targeting for product
    advertising.
        Let's start with the history question. It is true that marketers
    compiled and bought lists of prospects way back into the 19th century.
    These lists became more detailed into the 20th century. But the
    difference between list of even 35 years ago and those of today is
    extreme. The biggest distinction is the amount of information brokers
    have and how they deal with it. Lists of the old days were pretty
    static. The numbers of data points companies had about us was rather
    small, it was difficult to interconnect pieces of data, and the data
    did not change all that quickly. Today's data brokers can collect huge
    amounts of information about tens of millions, even hundreds of
    millions, of people. They update that information frequently, and they
    use high-speed computers and advanced statistics to draw conclusions in
    ways previous generation of data brokers could hardly imagine.
        Consider Acxiom's recent data catalog, which was available online
    until the company abruptly took it off a number of months ago. It
    contains 41 pages of information about individual Americans that Acxiom
    sells to marketers. That information ranges from the amount of money
    the people make, to the kinds of vacations they take, to the number of
    friends they have on social media, to the value of the neighborhoods
    they live in, to diseases they have an interest in, to how tall they
    are, to whether they gamble, to their media usage, and much more. Axiom
    sells any number of these items about individuals as well as packages
    of these data tailored to marketers from different industries. In
    addition, through its Axiom Operating System the data broker has
    created a kind of universal cookie to find and follow people across
    desktops, laptops, mobile phones, and tablets as well as to collect yet
    more information about them from these media.
        Like Acxiom, other data brokers continually run programs that
    connect our dots for marketers--and then attach them to other ideas the
    marketers have about us. The brokers often bring together pieces of
    information that people did not expect would be merged when they
    disclosed them separately to various online and offline entities. The
    results are buckets of descriptions and interpretations--stories--of
    our lives, our economic value, and our potential that we don't know
    exist and may not agree with. The consequences of their use in
    marketing can be profound and disturbing. For example:

       Merchants can charge you more than others for products based
            on features they tag you with that you don't even know you've
            shared. Say a data broker's knowledge you regularly buy
            antacids blends into a complex algorithm to predict that you
            are inclined to accept higher prices for recreation than most
            people. That's great news to travel companies searching online
            for those types of people.

       Using apps and personalized coupons, physical and virtual
            stores can change their prices based on what they know about
            you. Data brokers can add information about your ``lifetime
            value'' to retailers' understanding of you from receipts. The
            result can dictate the kinds of items you will see at discount
            and how much that discount will be.

       Negative data broker signals about you can mean having to
            wait longer than others for customer service, being rejected as
            a valued customer, and being offered coupons for non-nutritious
            foods.

       Based on predictions of your ``engagement'' with the digital
            or ``addressable'' ads, media firms can change the news and
            entertainment offerings that you receive compared to the news
            and entertainment neighbors or coworkers get. The result: you
            systematically see different worlds from your friends or work
            colleagues because of the stories brokers tell about you.

        Many of these examples are already taking place. All of them are
    quite plausible. Data brokers trumpet that they often make the
    individuals they sell marketers for ads anonymous, so there is no
    problem. But anonymity of this sort is not reassuring. If I am followed
    online and offline by buckets of data that tell particular stories
    about me, it doesn't matter if my name is Joe Turow or 2588704.
    Anonymously and with our full personal information, data brokers are
    encouraging a world of data-driven social discrimination that is
    becoming widespread precisely because it comes with all sorts of
    advertising. Surveys I have conducted since 1999 consistently suggest
    Americans worry about what firms learn and think of them. Poignantly, I
    have heard people say they will change their activities or how they
    talk about themselves online to be treated better by marketers. The
    difficulty, of course, is that it's often impossible to know what will
    work.
        We're only at the beginning of a data-driven century. Data-brokers
    will be central to how we think of ourselves and lead our lives. For
    the sake of democratic ideals and relationships, let's limit what and
    how much data brokers can collect and share until as a society we know
    how to create regime of data respect where people have control over the
    most important elements of their identity.

        The Chairman. Thank you very much.
        Mr. Hadley, Tony Hadley, is Experian's Senior Vice
    President of Government Affairs and Public Policy.
        Please. We welcome you.

     STATEMENT OF TONY HADLEY, SENIOR VICE PRESIDENT OF GOVERNMENT
                  AFFAIRS AND PUBLIC POLICY, EXPERIAN

        Mr. Hadley. Thank you, and good afternoon, Chairman
    Rockefeller and members of the Committee. My name is Tony
    Hadley, and I am Experian's Vice President of Government
    Affairs and Public Policy.
        Experian is a leading provider of data and information
    services that bring significant value to consumers and the
    economy. We welcome the Committee's interest and dialog in the
    marketing data industry and this opportunity to describe how
    Experian collects and uses data.
        I have submitted a fuller statement, but I am going to
    summarize just a couple points.
        First, Experian truly believes that responsible
    information-sharing significantly enhances economic
    productivity in the United States and provides many benefits to
    consumers. Economists have called the manner in which U.S.
    companies collect and share consumer information among
    affiliated companies and third parties the secret ingredient to
    our productivity, innovation, and ability to compete in the
    global marketplace.
        Experian shares data to help make consumers and small-
    business lending more efficient. We share to help facilitate
    access to fair and affordable credit; to help protect consumers
    from fraud, including identity theft; to help consumers gain
    greater financial literacy; and to help companies reach
    consumers with timely and relevant communications and marketing
    offers. Marketing data, in particular, brings lowers prices and
    greater convenience to consumers by strengthening competition.
        Nonprofit organizations and government agencies also depend
    upon consumer data to efficiently serve the needs of people and
    citizens. And just as important, Experian's data allows small
    companies, including many in the state of West Virginia and the
    other states around the nation, to compete with larger
    companies who maintain very sizable customer data bases. So
    Experian provides small businesses with the same data sets that
    their larger competitors have so that they can compete and grow
    their companies.
        A significant point I would like to make also is that the
    operations of Experian Marketing Services and the data it
    collects and uses and shares is completely separate from
    Experian's operations as a consumer credit bureau. No
    eligibility determinations relating to credit, insurance,
    employment, housing, or any other decision under the FCRA is
    ever made with Experian marketing data. Experian has in place
    strict policies as well as technological, management, and
    procedural controls to ensure there is complete separation.
        Experian shares data responsibly by carefully safeguarding
    compliance with all privacy and consumer protection laws and
    industry self-regulatory standards. We even promote new
    industry self-regulatory standards and best business practices.
        The Committee has also sought specific information about
    our clients and our data sources. Experian provides marketing
    data to a wide variety of client organizations in the private,
    government, and nonprofit sectors that market to consumers
    through multiple channels, both online and offline. The largest
    sectors we serve are retail, media, and financial services, but
    our products are used by nearly all sectors of the economy.
        Experian uses include the sources for specific products in
    which the Committee has expressed interest. Most of our data
    comes from public records and publicly available information
    such as ZIP-code-level census information, local property
    records, and telephone directories. Added to this, many people
    voluntarily provide data to Experian by filling out surveys and
    questionnaires.
        These multiple sources of data are aggregated at the
    household level, then analyzed and modeled to predict household
    preferences and propensities. Such methods result in a group of
    consumers receiving messages and advertising that they are more
    likely interested in responding to. When all is said and done,
    we help marketers make the best guess about what messages and
    marketing solicitations a group of consumers may be most
    interested in responding to.
        Finally, I want to emphasize that Experian has made every
    effort to be forthcoming and cooperative throughout the inquiry
    launched by the Committee this year. We have spent considerable
    time and resources to ensure that the information and documents
    we have provided are helpful to the Committee's work in
    understanding the marketplace. To date, Experian has provided
    the Committee with eight submissions, totaling over 3,000
    pages. And we believe this provides a full description of our
    products, services, and consumer protections.
        We are here today as the only corporate representative in
    that spirit of cooperation to help the Committee better
    understand our role in data services and the role we play in
    the economy and the lives of consumers.
        We thank you for your attention and for inviting us to
    appear here, and we look forward to continuing to work with
    you. And I will answer any questions the Committee might have.
    Thank you.
        [The prepared statement of Mr. Hadley follows:]

    Prepared Statement of Tony Hadley, Senior Vice President of Government
                      Affairs and Public Policy, Experian
        Good afternoon, Chairman Rockefeller, Ranking Member Thune, and
    members of the Committee. My name is Tony Hadley and I am Experian's
    Senior Vice President of Government Affairs and Public Policy. Experian
    is a leading provider of data and information services that bring
    significant benefits to individual consumers, the economy and society
    as a whole. We welcome the Committee's interest in the marketing data
    industry and this opportunity to describe to the Committee how Experian
    obtains and uses data. I would like to raise a few key points at the
    outset of my testimony today.
        First, Experian believes responsible information sharing
    significantly enhances economic productivity in the United States and
    provides many benefits to consumers. Economists have called the manner
    in which U.S. companies collect and share consumer information among
    affiliated entities and third parties the ``secret ingredient'' to our
    productivity, innovation and ability to compete in the global
    marketplace. One needs only to look at data-intensive industries like
    telecommunications, information technology, online services, financial
    services, retail and health care to see this innovation at work.
    Indeed, Experian data products and services are central to countless
    transactions within these vital business sectors.
        Experian also shares data to help make consumer and small business
    lending more efficient; to help facilitate access to fair and
    affordable credit; to help protect consumers from fraud, including
    identity theft; to help facilitate greater financial literacy among
    consumers; and to help companies reach consumers with timely and
    relevant communications and marketing offers.
        A second significant point I would like to make is that the
    operations of Experian Marketing Services and the data that it
    collects, uses and shares are completely separate from Experian's
    operations as a consumer credit bureau. No eligibility determinations
    relating to credit, insurance, employment, housing or other decisions
    covered by the Fair Credit Reporting Act are made with Experian
    marketing data. Experian has in place strict policies, as well as
    technological and procedural controls, to ensure this complete
    separation.
        At the Committee's request, and in recognition that credit data
    differs from marketing data, Experian's responses to the Committee's
    inquiry have focused on our operations involving data for marketing
    purposes. That is what I will speak to for the remainder of my
    testimony.
        Marketing data, in particular, brings lower prices and greater
    convenience to consumers by strengthening competition. Both large and
    small businesses rely on data to make their marketing efforts more
    efficient and to identify new customers. Nonprofit organizations and
    government agencies also depend upon consumer data to efficiently serve
    the needs of people and citizens and to enable e-government. For the
    Internet, this has meant providing more and improved content to
    consumers. Consumers also benefit from receiving relevant advertising
    offers that they are more likely to value and use. Marketing data is a
    critical driver behind the growth and efficiency of e-commerce.
        Importantly, Experian's data allows small companies, including many
    in the state of West Virginia and throughout the country, to compete
    with larger companies that maintain sizeable customer data assets of
    their own. Experian Marketing Services helps small businesses to
    successfully identify new customers, thereby establishing and fueling
    successful businesses.
        Experian shares data responsibly--by carefully safeguarding
    compliance with all privacy and consumer protection laws and industry
    self-regulatory standards, advancing and observing industry best
    practices, and establishing and monitoring adherence to our own
    corporate policies and practices. These ``best practices'' help balance
    the benefits to consumers that result from information sharing while
    responding to legitimate concerns consumers may have about how
    information about them is collected, shared, used and protected.
        Marketing data differs in important ways from consumer credit data.
    Experian's marketing data is drawn primarily from public records and
    other publicly available sources and includes data that is ``modeled''
    or predicted rather than actual, raw data from consumers. In addition,
    we strive for the highest standards of data quality. It is also
    important to recognize that the only negative consequence to consumers
    of inaccurate marketing information would be the possibility of
    uninteresting advertising and marketing. For this and other reasons,
    the Federal Trade Commission has recommended that it is not necessary
    to require consumer disclosure and correction for consumer data used
    only for marketing purposes.
        As described in our materials provided to the Committee, Experian
    has a robust internal compliance program designed to ensure that
    marketing data is only used for marketing purposes. Experian's
    marketing data assets are regulated under many different authorities
    such as Section 5 of the Federal Trade Commission Act, the Controlling
    the Assault of Non-Solicited Pornography and Advertising (CAN-SPAM)
    Act, the National Do Not Call Registry, the Children's Online Privacy
    Protection Act (COPPA), and comparable state laws and regulations. The
    Direct Marketing Association's Guidelines for Ethical Business Practice
    provide an additional foundation for our compliance approach to
    marketing data. Further, Experian's global corporate information
    values--balance, accuracy, security, integrity and communication--
    formally guide our data collection and use practices. Our global
    information values align with the fair information practices and
    principles embraced by the FTC and other international organizations,
    including the OECD, the European Union and APEC.
        Finally, I want to emphasize that Experian has made every effort to
    be forthcoming and cooperative throughout the inquiry launched by the
    Committee over a year ago. We have consistently been assured that this
    inquiry aims to build a general understanding within the Committee of
    the marketing data ecosystem. We have also been active in policy
    dialogues promoting effective data security and privacy principles for
    all data. We have spent considerable time and resources to ensure that
    the information and documents we have provided are helpful to the
    Committee's work in understanding the marketplace. To date, Experian
    has provided the Committee with eight submissions totaling over three
    thousand pages, which we believe should provide a full description of
    our products, services and consumer protections. We have also met with
    the offices of the Senators on the Committee to describe our practices
    and respond to any questions about our company, products and services.
    We are here today, in the spirit of cooperation, to help the Committee
    better understand the role our data services play in the economy and in
    the lives of consumers.
        The Committee has also sought specific information about our
    clients and our data sources, so I would like to provide a few details
    about the categories and nature of each. As I just mentioned, Experian
    has already provided a great deal of information and internal
    documents, some of which we regard as competitively sensitive, to
    explain the types and categories of clients we serve.
        These include client organizations in the private, government and
    non-profit sectors that communicate and market to consumers through
    multiple channels including direct mail, catalog, telephone, e-mail,
    mobile, Internet display ads, social media, highway billboards,
    newspapers and other publications. The largest sectors we serve are
    retail, media and financial services. We also provide marketing
    services to clients involved in automotive, professional services,
    telecommunications, consumer goods, healthcare, travel, insurance,
    utilities, education and politics. In total, Experian's data and
    services are used by all sectors of the economy.
        We have also provided to the Committee details on the categories of
    data sources we use, including the sources for specific products in
    which the Committee has expressed interest. As I previously stated, a
    good deal of our data comes from public records and publicly available
    information such as ZIP-code level Census information that does not
    identify specific individuals, local property records, and telephone
    and similar directories. Added to this, many people voluntarily provide
    data to Experian by filling out surveys and questionnaires, both online
    and offline, which contain clear disclosures of the fact that
    information that the individual provides will be used for marketing
    purposes. Some selected business partners also provide Experian
    consumer information after they have gained appropriate consent from
    the consumer or have de-identified or modeled customer data at the ZIP-
    code level.
        These multiple sources of data are often aggregated at the
    household level, then analyzed and modeled to predict household
    preferences and propensities. The analysis is aimed largely at helping
    marketers understand key segmentation factors such as approximate age,
    gender, education level, family size and estimated family income.
    Marketers can then use these key demographic segments and propensity
    models in combination with their own customer data to tailor relevant
    messages to existing or potential customers. Such age-old methods
    result in a group of consumers receiving messages and advertising that
    they are more likely interested in and will respond to--benefiting the
    consumer and the business. When all is said and done, we help marketers
    make the ``best guess'' about what messages and marketing solicitations
    a group of consumer may be most interested in responding to at the time
    they are interested.
        Finally, Experian has shared materials on our range of marketing
    products and services, on how we assure the quality and integrity of
    our data, and on numerous other topics. In particular, we have informed
    the Committee about the robust privacy framework that Experian has in
    place to ensure that regulated data is used only for permissible
    purposes, while marketing data is used only for marketing purposes. To
    maintain this strict division, Experian uses a combination of measures
    such as dedicated compliance teams, employee training, and contractual
    restrictions including audit rights. With respect to marketing products
    in particular, Experian's compliance team uses auditing steps such as
    mail piece review and list ``seeding'' to monitor how data is used by
    clients.
        We have also shared with the Committee information about the
    consumer protections we provide for marketing data, including offering
    consumers transparency about our practices through privacy statements
    and the option to suppress the use of their data for various types of
    marketing solicitations.
        Thank you for your attention, and for inviting me to appear before
    the Committee. I look forward to answering any questions the Committee
    may have.
    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        The Chairman. Thank you, Mr. Hadley, very much.
        I want to get this right: Jerry Cerasale. Did I do it
    right?
        Mr. Cerasale. You did it correctly. Thank you. I appreciate
    it.
        The Chairman. I am thrilled.
        You are the Senior Vice President of Government Affairs for
    the Direct Marketing Association, DMA. We welcome your
    testimony.

         STATEMENT OF JERRY CERASALE, SENIOR VICE PRESIDENT OF
            GOVERNMENT AFFAIRS, DIRECT MARKETING ASSOCATION

        Mr. Cerasale. Thank you. Senator Rockefeller, members of
    the Committee, DMA appreciates the opportunity to be here today
    and to talk about this important subject.
        On a personal note, I want to say that I have testified
    before this committee many times, I have testified before other
    committees before Congress, and today, on my last day of work
    before I retire, I want to thank Congress for the opportunities
    they have given me to participate in dialog here before the
    Congress. And I appreciate it.
        Senator Rockefeller, I will not be here when you retire at
    the end of this Congress, so I want to say personally we thank
    you for your service to the United States.
        Now back to why I am here today, talking about data. Data--
    --
        The Chairman. Are we allowed to ask you questions, or is
    your----
        [Laughter.]
        Mr. Cerasale. Yes, you can ask questions. Sadly, they know
    where to find me to get the questions to me. They say I am a
    phone call away, and I have promised that they can call me. I
    didn't promise I would answer the phone, but that is beside the
    point.
        [Laughter.]
        Mr. Cerasale. Anyway, data. Every consumer-facing business
    in the United States uses data today. It is important, it
    drives our economy, it is driving our current recovery. And it
    is very, very important to us and to our members.
        And in that light, DMA has created the Data-Driven
    Marketing Institute, and it has commissioned a study to take a
    look at the value of data and the uses of data in the American
    economy. And we used a professor from Harvard Business School
    and a professor from Columbia University, and they conducted
    this value-of-data study and found that data is worth $156
    billion a year to the American economy, 675,000 jobs, and 70
    percent of that influence is related to sharing of data by
    companies.
        But even more importantly, this data-sharing helps small
    businesses. It helps break down the barriers to entry so small
    businesses can come in and compete with the big boys. And it
    keeps them, once they get a foothold, it keeps them on a level
    playing field.
        But this is not new. This has been happening for a long
    time. I will give you a couple of examples. L.L. Bean started
    with a list of nonresident Maine hunters, and that is how that
    started. The Discover card, which is one of the first credit
    cards that was a reward credit card, began with a list of Sears
    credit holders. Without those lists, those companies wouldn't
    have started, those benefits from those two companies would not
    have been realized. So it is important.
        It is personal information that is used. And the United
    States has some strong privacy laws: Fair Credit Reporting Act,
    Children's Online Privacy Protection Act, CAN-SPAM, HIPAA, GLB,
    Data Pass, and so forth. And those laws are complemented by
    self-regulation by the industry.
        And I can speak only for DMA here. DMA has a peer ethics
    committee that meets monthly, handles complaints from consumers
    and other businesses that are brought to it against members and
    non-members. Most of them comply with our guidelines. Those
    that don't, we publicize them on the webpage. If there is a
    violation of law, we turn it over to the state AGs, to the
    Federal Trade Commission, to the Postal Inspection Service, to
    law enforcement.
        And as we have looked at this, the Federal Trade Commission
    has said that they support this complementary effort by self-
    regulation, and we want to continue that. And we continually at
    DMA update these guidelines so that they are alive and meet
    today's real-world efforts.
        One of the things that we can talk about, however, that all
    of this is, in fact, working. The American consumers are voting
    with their pocketbooks and their feet, and e-commerce is
    growing, growing multiple times the rest of the economy,
    because they have trust in this process. And think about it;
    they need trust. They are purchasing something without having
    it on hand and paying for it before they receive it. They need
    to have that trust. And this economy, this data-driven economy
    is, in fact, working.
        Think about the great American success story, and I mean
    really great American success story, Amazon. On Cyber Monday,
    it sold 300 items per second. That shows that Americans have
    confidence in this. Their needs as American consumers are being
    met in this data-driven economy.
        There are clearly concerns. There are concerns about what
    is happening. You have heard them; it is in the report and
    others. We have heard them today. We should focus on the
    improper use of data and figure out how to prevent the improper
    use of data.
        But one of the things we can't do is pull away and stop
    responsible uses of data that are driving this economy. That is
    something that we have to be very careful of as part of this
    dialog we are having today. The American economy, small
    businesses, American workers, and American consumers rely on
    and benefit from responsible data use. And America leads the
    world in that category, and we hope to keep it that way.
        Thank you very much for this opportunity. I look forward to
    answering any of your questions.
        [The prepared statement of Mr. Cerasale follows:]

        Prepared Statement of Jerry Cerasale, Senior Vice President of
                Government Affairs, Direct Marketing Association
    I. Introduction
        Chairman Rockefeller, Ranking Member Thune, and members of the
    Committee, good afternoon and thank you for the opportunity to testify
    before you today.
        My name is Jerry Cerasale. I am the Senior Vice President of
    Government Affairs for the Direct Marketing Association (``DMA''), the
    world's largest trade association dedicated to advancing and protecting
    responsible data-driven marketing. Today, I am pleased to testify on
    behalf of the DMA and to discuss with the Committee the important role
    that marketing data and database compilers play in aiding consumers and
    fueling the United States economy.
        Founded in 1917, the DMA (www.thedma.org) represents thousands of
    companies and nonprofit organizations that use and support data-driven
    marketing practices and techniques. On behalf of its member companies,
    the DMA advocates industry standards for responsible marketing;
    promotes relevance as the key to reaching consumers with desirable
    offers; and provides cutting-edge research, education, and networking
    opportunities to improve results throughout the end-to-end direct
    marketing process.
        My testimony today will describe the value that marketing data has
    across the U.S. economy and affords to consumers. I will also explain
    how marketing data is collected and how DMA members, including data
    compilers, responsibly use and share this data to serve consumers.
    Lastly, I will explain how DMA and its member companies are subject to
    our longstanding and enforceable self-regulatory framework, the DMA
    Guidelines for Ethical Business Practice (``DMA Guidelines'').
    II. The Value of Data
        Responsible collection and sharing of marketing data is critical to
    today's information economy. When data is used to fuel data-driven
    marketing, these practices provide many benefits for job growth,
    entrepreneurship and innovation, as well as to individual consumers.
    A. The Value of Data to the U.S. Economy and American Workforce
        A recent study entitled, The Value of Data: Consequences for
    Insight, Innovation & Efficiency in the U.S. Economy (``Value of
    Data''), quantifies the critical role that the use and sharing of
    marketing data plays in fueling economic growth.\1\ Commissioned by
    DMA's Data-Driven Marketing Institute and conducted independently by
    Professors John Deighton of Harvard Business School and Peter Johnson
    of Columbia University, the study revealed that the Data Driven
    Marketing Economy (``DDME'') generated $156 billion in revenue to the
    United States economy and fueled more than 675,000 jobs in 2012 alone.
    Further, the study found that an additional 1,038,000 people owe their
    employment to these DDME jobs.\2\ The study estimated that 70 percent
    of the value of the DDME--$110 billion in revenue and 475,000 jobs
    nationwide--depends on the ability of firms to share data across the
    DDME. If this ability to share data were curtailed, those jobs and
    revenue would be impacted and the U.S. economy would be much less
    efficient.
    ---------------------------------------------------------------------------
        \1\ Deighton and Johnson, The Value of Data: Consequences for
    Insight, Innovation & Efficiency in the U.S. Economy (2013), available
    at http://ddminstitute.thedma.org/#valueofdata (hereinafter ``The Value
    of Data'').
        \2\ The Value of Data at 74.
    ---------------------------------------------------------------------------
        The DDME is a uniquely American creation, and today data-driven
    marketing is an important U.S. export. Just as the United States led
    the world when Montgomery Ward developed the first mail order catalog
    in 1872, and created digital market-making media by commercializing the
    Internet browser in the 1990s, today the United States is at the
    forefront of data-driven market growth. The Value of Data study found
    that the United States leads the world in data science applied to the
    marketplace, with DDME firms deriving up to 15 percent of their revenue
    overseas, while employing nearly all of their workers inside the United
    States.\3\
    ---------------------------------------------------------------------------
        \3\ The Value of Data at 21.
    ---------------------------------------------------------------------------
        The Value of Data study also found that database compilers are an
    important piece of the DDME. For instance, list services and database
    marketing input providers added $7 billion and 31,000 jobs to the
    United States economy.\4\ They were able to do this by combining data
    that they receive from various sources to create marketing
    opportunities. Database compilers derive most of their economic effect
    from their ability to share this data with marketers that, in turn, can
    provide consumers with more relevant advertisements.
    ---------------------------------------------------------------------------
        \4\ The Value of Data at 53-54.
    ---------------------------------------------------------------------------
    B. The Value of Data to Entrepreneurship and Innovation
        The use of data inspires new technological designs and fosters
    entrepreneurship in the process. According to the Value of Data study,
    the bridge between an idea and its implementation at scale is
    considerably shorter in an information economy than in an industrial
    economy.\5\
    ---------------------------------------------------------------------------
        \5\ The Value of Data at 78.
    ---------------------------------------------------------------------------
        The DDME, and the services offered by database compilers, are
    essential to the success of start-up companies and other small
    businesses. The Value of Data study found that the sharing of data
    across the DDME enables small and innovative businesses to compete
    effectively with big players, launching innovative offerings using
    data. Data gives all companies, and especially small businesses, the
    ability to effectively match products to customers both online and
    offline, thereby lowering barriers to market entry for specialized or
    niche offerings that previously could not have succeeded.
    C. The Value of Data to Individual Consumers and Companies
        Consumers demand personalization, and enterprises that know their
    customers better can also serve them better. Data-driven marketing is
    about discerning what customers want and need and engineering the
    company to provide it. Consumers benefit from companies' responsible
    collection and analysis of user data by receiving timely and relevant
    offerings through the marketplace and products designed to meet their
    needs. In this way, consumers enjoy a more informed and effective
    shopping experience, which saves them both time and money.
        According to the Value of Data study, the efficiency that data
    brings to the practice of marketing also bears directly on consumer
    welfare. Marketing absorbs a significant percentage of manufacturer
    revenues, meaning that marketing costs can increase the price that
    consumers pay for food and household products by up to $25 in every
    $100 spent. When marketing is informed by data, it is more efficient
    and some of this value flows back to consumers in the form of lower
    prices.\6\
    ---------------------------------------------------------------------------
        \6\ The Value of Data at 75.
    ---------------------------------------------------------------------------
        In short, the flow of data throughout the DDME is creating
    consumer-driven companies. Data sharing promotes competition and
    entrepreneurship. In the process, jobs are created across the United
    States and consumers are exposed to an array of new products and
    services that would be unavailable or unknown to them absent data-
    driven marketing.
    III. The Responsible Collection and Use of Consumer Data
        Marketing data comes through a variety of sources. It is analyzed
    by marketers to make predictions about likely consumer preferences to
    guide marketing campaigns.
    A. Marketing Data Collected Directly from Consumers
        A common source of marketing data is data obtained by businesses
    from direct interaction with customers. When a customer purchases goods
    in a local store or shops online, data about that purchase is gathered
    by the marketer. Marketers use data from other sources, including
    information from public records and other publicly-available sources,
    such as U.S. Census data. Marketing data may also include self-reported
    information that consumers choose to provide through surveys. Marketing
    data does not include the types of information that create a risk of
    identity theft or fraud to consumers, such as financial account numbers
    or social security numbers.
    B. Responsible Uses of Marketing Data
        Marketers use marketing data to understand their existing customers
    better or to identify prospective new customers, in order to predict
    what types of offers are most likely to be valued by them. For example,
    a local hardware store would want to send a coupon for a discount on a
    lawnmower to a new home buyer with a lawn and a different coupon for
    paint to a condominium buyer. Data will help this small business to be
    more efficient in its advertising and provide more value to consumers.
    Marketers may also use data to make other decisions related to their
    businesses, such as what products to develop and offer in the future or
    where to locate new retail outlets.
        Data used for marketing is also ``modeled'' or inferred information
    that represents a statistical prediction about consumers and does not
    necessarily reflect the actual characteristics of one consumer or
    household. For example, based on public property records and U.S.
    Census data that is aggregated at the Zip Code or census tract level,
    database compilers may estimate the average age of a dwelling in a
    certain ZIP code. Marketers, such as a local roofing company, can then
    use this information to make offers that are more likely to be valuable
    to households in that ZIP code.
    C. Marketing Data is Not Used for Eligibility Purposes
        It is important to note that there is a difference between using
    data for marketing purposes and using data for eligibility purposes.
    The use of data for eligibility decisions related to credit, insurance,
    and employment is regulated by the Fair Credit Reporting Act
    (``FCRA''). The FCRA requires companies that make such decisions to
    offer consumers certain disclosures about, and access to, the data used
    to make those decisions.
        In contrast, the use of data for marketing purposes is not used to
    make decisions that impact whether a consumer can obtain credit. The
    Federal Trade Commission (``FTC'') agrees that entities that maintain
    data for marketing purposes do not need to provide consumers with
    individualized access to marketing data, unlike consumer report
    data.\7\ Instead of determining a consumer's ability to receive a loan
    or get a job, the use data for marketing purposes determines which
    coupon or advertisement he or she receives. The FCRA recognizes the
    difference in these uses, which is why marketing is not included in the
    types of activity that require increased levels of disclosure and
    access.
    ---------------------------------------------------------------------------
        \7\ Protecting Consumer Privacy at 65-66.
    ---------------------------------------------------------------------------
        In addition, some policymakers have raised concerns that data
    collected for advertising purposes could be used as a basis for
    employment, credit, health care treatment, or insurance eligibility
    decisions. In fact, these are hypothetical concerns that do not reflect
    actual business practices. Nevertheless, industry has stepped forward
    to address these concerns by expanding its codes of conduct to clarify
    and ensure that such practices are prohibited and will never occur.\8\
    This prohibition will help to ensure that consumers' browsing histories
    will not be used against them when applying for a mortgage, job, or
    insurance, or when seeking health care.
    ---------------------------------------------------------------------------
        \8\ See Digital Advertising Alliance's Self-Regulatory Principles
    for Multi-Site Data (2011), available at http://www.aboutads.info/
    resource/download/Multi-Site-Data-Principles.pdf.
    ---------------------------------------------------------------------------
    IV. The Value of Self-Regulation in the Data-Driven Marketing Economy
        The DMA and its members are firmly committed to advancing
    responsible data practices across the DDME. Our members deeply value
    consumer trust and understand that responsible data practices are
    critical to building and maintaining customer relationships. To that
    end, the DMA believes that self-regulation and education are important
    components for addressing consumer privacy while ensuring that data
    flows continue to benefit consumers and the economy.
    A. The DMA Guidelines for Ethical Business Practice
        The DMA has a longstanding and enforceable self-regulatory
    framework. The DMA, working with its members, implements and enforces a
    set of best practices known as the Guidelines for Ethical Business
    Practice (``DMA Guidelines''). The DMA Guidelines, which have been in
    place for more than four decades and are a condition of membership in
    the DMA, provide DMA member companies with standards for responsible
    marketing practices by explaining how companies should provide
    transparency, choices, and other protections to consumers. The DMA
    regularly updates its guidelines to adapt to new technologies and
    marketing practices.
        There are more than 50 code sections in the DMA Guidelines that
    regulate marketing data practices. I would like to focus on a few key
    examples relevant to the subject of this hearing, and to database
    compilers in particular.
    1. Transparency

        Transparency around data practices is a core principle of the DMA
    Guidelines. For example, privacy policies are the primary way that
    companies provide consumers with information about their data
    practices. These polices typically provide consumers with detailed
    information regarding what data is collected, how it is used, and the
    choices that may be available to consumers. The DMA Guidelines require
    that these policies be made accessible via online and offline channels,
    and be easy to read and understand. The DMA Guidelines also require
    members to periodically keep existing customers aware of the nature of
    the use of their data, and how that use may have changed.
    2. Choice

        DMA members have long offered consumers the ability to opt out of
    marketing. The DMA Guidelines require data-driven marketers to honor
    within 30 days any request by a consumer to opt out of any use or
    sharing of their data for marketing purposes.
        In addition to the choices available from individual member
    companies, the DMA offers a centralized choice tool for consumers at
    DMAchoice.org. This service allows consumers to opt out of direct
    mailings and to refine what categories of mail they receive. Also at
    this website, consumers can remove their e-mail address from national
    mailing lists. Through these programs, the DMA provides consumers with
    an easy way to make informed choices about the marketing they wish to
    receive.
        The DMA's commitment to consumer choice also extends to online
    interest-based advertising. The DMA Guidelines require third party data
    collectors to provide consumers with the ability to exercise choice
    with respect to the collection, use and transfer of information for
    online interest-based advertising purposes. This choice must be
    provided online and made available to consumers as specified in the DMA
    Guidelines.
    3. Access

        Consistent with the FTC's views on individualized access to
    marketing databases, the DMA Guidelines do not require members to allow
    consumers to access individual records within marketing databases. The
    DMA agrees with the FTC that the costs of providing such access would
    outweigh the consumer benefits. The DMA is also concerned that in order
    to allow consumers the ability to access and correct data, marketers
    would have to collect and store additional personally identifying data
    needed to authenticate consumers prior to access. In addition, as
    noted, much marketing data is actually modeled or predicted data that
    would not be meaningful to consumers. The DMA therefore believes that
    its current guidelines around transparency and choice strike the
    correct balance between consumer control and marketing needs to
    encourage the continued growth and success of the DDME.
    4. Guidelines Specific to Database Compliers

        The DMA Guidelines include a section outlining specific
    requirements for database compilers that assemble and share personally
    identifiable information about consumers but do not have direct
    relationships with those consumers.\9\ For example, these compilers
    must, when requested by a consumer, suppress that consumer's data from
    marketing databases. They must also disclose the nature and sources of
    a consumer's data upon request, and they must allow their marketing
    customers to divulge the compiler as the source of their marketing
    data. The database compiler must additionally monitor the use of their
    databases to assure compliance with the law and the DMA Guidelines. A
    database compiler that discovers a violation of the law or the DMA
    Guidelines may not ``turn a blind eye'' but should stop providing data
    to that customer and either require compliance and/or refer the matter
    to the DMA or law enforcement.
    ---------------------------------------------------------------------------
        \9\ Direct Marketing Association, DMA Guidelines for Ethical
    Business Practice at Article 36, available at http://thedma.org/
    compliance/.
    ---------------------------------------------------------------------------
    B. Enforcement
        The DMA has a long history of proactive and robust enforcement. The
    DMA Guidelines have been applied to hundreds of direct marketing cases
    concerning deception, unfair business practices, personal information
    protection, and other ethics issues. The DMA enforces compliance with
    the DMA Guidelines upon both DMA member and nonmember organizations
    across the DDME. In addition, companies that represent to the public
    that they are DMA members but fail to comply with the DMA Guidelines
    may be liable for deceptive advertising under Section 5 of the FTC Act
    and comparable state laws.
        The DMA receives matters for review in a number of ways: from
    consumers, member companies, non-members, and consumer protection
    agencies. Complaints referred to the DMA's Ethics Operating Committee
    are reviewed against the DMA Guidelines and if a potential violation is
    found to exist, the company will be contacted, investigated, and
    advised on how it can come into full compliance. Most companies work
    with the Ethics Operating Committee voluntarily to cease or change the
    questioned practice.
        However, if a member company does not cooperate and the Ethics
    Operating Committee believes there are ongoing violations of the DMA
    Guidelines, it can recommend that action be taken by the Board of
    Directors and can make case results public. For example, in the period
    spanning February 2012 through June 2013, the DMA Corporate & Social
    Responsibility Committee reviewed 55 cases and 12 of these were made
    public. Additional Board actions could include public censure,
    suspension or expulsion from DMA membership. The DMA also refers cases
    to Federal and state law enforcement authorities for review when
    appropriate.
    C. Business and Consumer Education
        To help educate marketing professionals, regulators, and other
    interested parties about the DMA Guidelines, the DMA regularly issues a
    case report that summarizes questioned direct marketing promotions and
    how enforcement cases were administered.\10\ The DMA also provides
    member education regarding the DMA Guidelines through webinars, in-
    person seminars, and regular written communications to members.
    ---------------------------------------------------------------------------
        \10\ Direct Marketing Association, DMA Annual Ethics Compliance
    Report 2012-2013 (2013), available at http://thedma.org/compliance/.
    ---------------------------------------------------------------------------
        In addition to educating member companies about their
    responsibilities under the DMA Guidelines, the DMA frequently offers
    conferences, webinars, courses, seminars, and written materials to keep
    companies up to date about new legal and policy developments. These
    efforts help companies, especially small businesses, to comply with the
    host of restrictions that govern data-driven marketing.
        Finally, the DMA commits resources to educating consumers directly
    about marketing practices and the choices available to consumers. A
    section of our website is dedicated to ``Consumer Help'' and provides
    consumers with access to the centralized DMAChoice.org tool for
    managing their direct mail and e-mail preferences as well as a wealth
    of information about how marketing works.
        The Value of Data has helped us to quantify what marketers have
    long known--the use and sharing of data for marketing provides
    tremendous benefits for the U.S. economy and the American workforce,
    for small and large businesses, and for individual consumers and
    society as a whole.
        Thank you again for inviting me to testify today, and I look
    forward to answering questions from the Committee.

        The Chairman. Thank you very much, sir.
        I will start out the questioning, and then we will do it
    according to order of arrival.
        Mr. Hadley, one of the products that your company sells to
    marketers is called ``ChoiceScore.'' This product targets what
    you call ``underbanked'' consumers. Let me read your
    description of the underbanked consumers: new legal immigrants,
    recent graduates, widows, those with a generation bias against
    the use of credit, followers of religions that historically
    have discouraged credit, and consumers with transitory
    lifestyles, such as military folks.
        Mr. Hadley, the populations in this group are very
    vulnerable to financial scams. We have experienced that in this
    committee because we have done hearings about that,
    particularly near military bases, where people take--you know,
    these are relatively young people, they are overseas, they are
    back for a while, and they are very vulnerable because they
    need cash, and people could come in and really clean their
    clocks, and do, and we have the testimony to prove that.
        Last month in this committee, we held a hearing about
    companies that target fraudulent financial products to our
    military servicemembers. And military personnel are
    unfortunately vulnerable to scams because of their financial
    inexperience and their steady paychecks.
        So, Mr. Hadley, why does your company single out and sell
    lists of economically vulnerable groups like immigrants,
    widows, and military personnel?
        That is a very important question to me, because if you set
    the probable response to whom your questions are aimed, your
    marketing is aimed at, you can fairly well predict the type of
    product they are going to get. I mean, you will be offering
    them a nicer vacation, a less nice vacation, et cetera. But
    when you put people in categories and they are vulnerable, that
    is not called the L.L. Bean model.
        So I would like you to respond to that question.
        Mr. Hadley. Thank you, Senator.
        We would be very concerned if lenders were using that
    information for scamming purposes too. And we have processes
    and procedures in place to ensure that nobody gains access to
    that score for that purpose. Now----
        The Chairman. And how does that work?
        Mr. Hadley. We have an onboarding system by which we take
    on a client that gets our information to know who they are. And
    we also have a mail-piece review process to know what they are
    going to offer the consumer. And if it is anything that looks
    discriminatory or predatory, we will not provide our list to
    them.
        Now----
        The Chairman. And this is your self-regulation?
        Mr. Hadley. This is our self-regulation under DMA
    standards. So if we were to violate that, we would be in
    violation of our self-regulatory standards as well as our
    contractual standards with our clients.
        Now, what is important here is that there are somewhere
    between 45 million and 50 million Americans who are outside the
    mainstream of the credit markets in the United States. These
    are underbanked, underserved consumers who financial
    institutions cannot reach through credit scoring and credit
    report. They don't have financial identities or a big enough or
    even the presence of a credit file in order to bring them into
    the mainstream of financial markets.
        But that doesn't mean that they don't need access to
    financial services. So banks use this data to try to reach out
    to consumers who they can help to empower them, not to scam
    them. We don't want to do business with financial institutions
    who are trying to scam people, only to empower them.
        And this is their best way to find those individuals who
    are outside the mainstream--immigrants; new to credit, like
    recent college graduates, exactly what we are talking about
    here--to give them an offer, an invitation to apply, so that
    then they can make an eligibility determination regarding that
    application under the Fair Credit Reporting Act.
        But this is marketing literature, not eligibility
    determination.
        The Chairman. Who----
        Mr. Hadley. Did I add to that for you?
        The Chairman. Not entirely. Can you tell me, which are the
    companies that buy this ChoiceScore product from you? We have
    asked you that.
        Mr. Hadley. Yes, they would be banks and financial
    institutions and members of the financial community.
        The Chairman. That is what is called a general answer.
        Mr. Hadley. Yes. I can't tell you who our clients are. That
    is a proprietary list of ours. It is like our secret
    ingredient; the ones who would want that most are our
    competitors.
        And our counsel has informed me that they don't believe
    that our ability to give that to you can be shielded from
    disclosure through the rules of the Senate. If we thought they
    could be--for example, under a law enforcement action, where it
    could be shielded and protected from FOIA or other disclosures,
    we could do that, but not under the rules of the Senate. And we
    are very sorry about that, but we just simply can't do that.
    Our counsel won't let us.
        The Chairman. Oh. Well, there are a lot of counsels out
    there looking for work.
        [Laughter.]
        The Chairman. My point is that--you have to keep up with
    your competitors, and my point to you would be I am not
    necessarily approving of what your competitors are doing. I
    mean, maybe you want to keep up with them, but maybe they are
    doing exactly what you are doing but on a larger scale. And----
        Mr. Hadley. We don't want to keep up with most of our
    competitors.
        The Chairman.--a lot of those other companies,
    incidentally, gave us the precise information which I want from
    you.
        Mr. Hadley. I would hope that the focus of the Committee
    and FTC and others interested in these types of uses of data
    would focus on those data brokers, because it is not Experian
    that is doing that. We wouldn't have that within our business
    model.
        The Chairman. All right. Can you please provide the names
    of the companies that buy lists of economically vulnerable
    consumers from Experian?
        Mr. Hadley. I can tell you the types of categories. And
    there is a really good story----
        The Chairman. But don't you understand how that doesn't
    work up here?
        Mr. Hadley. Yes.
        The Chairman. The types of categories?
        Mr. Hadley. But let me tell you----
        The Chairman. It is very hard to pass the Tax Code with----
        Mr. Hadley. Yes, let me tell you who buys them, and I can
    name a few because they are public, right?
        Our Mosaic segmentation system, it reflects the entirety of
    the economic range of our economy. We don't leave out low-
    income individuals. They exist within the economy and need
    products and services, too. But the most frequent users of that
    segmentation, the economically disadvantaged, Senator, are
    typically government agencies and public policymakers who are
    trying to get a view into them so that they can deliver them
    messages and marketing materials about public services they are
    eligible for.
        Among the users of those are the West Virginia Department
    of Health and Human Services, the Massachusetts Department of
    Health and Human Services, the New Jersey Department of Health
    and Human Services. They want to reach those people, let them
    know what benefits they are eligible for so that they can come
    and get them. They also use this data to update address lists
    for their clients.
        The Chairman. You will admit, won't you, that if a state
    HHS, so to speak, will use that information, that is quite a
    different kettle of fish from a for-profit, bottom-line-
    oriented company?
        Mr. Hadley. And we would put the departments of HHS through
    the same review of who they are and what they want that
    information for, because we wouldn't want them to use our
    information to disadvantage those consumers, only to empower
    them. So they would go through the same review.
        The Chairman. All right. My time has expired. And you
    happily engaged in an interesting process; you selectively
    named some of your clients. If you can selectively do it, you
    can broadly do it.
        Mr. Hadley. Those are a matter of public record.
        The Chairman. Well, that is the point.
        Mr. Hadley. Right.
        The Chairman. What should be a matter of public record is
    what you do. This is an oversight committee. This is a serious
    subject. We have the feeling people are getting scammed or
    screwed by this feeling. It is up to you to talk us out of
    that.
        Mr. Hadley. But not by Experian. And I can assure you, Mr.
    Rockefeller, the Experian executives are watching this right
    now and they are hearing what you are saying. We respect your
    point of view.
        The Chairman. You think they are all glued to their TV
    sets?
        Mr. Hadley. No, to their monitors----
        The Chairman. Oh, OK.
        Mr. Hadley.--right? And so we want to be responsive to you,
    seriously. And so we look forward to the dialog.
        The Chairman. All right. Well, anyway, my time has expired.
        And Senator Booker--it is going to be Senator Booker, then
    Senator Johnson, then Senator Blumenthal, then Senator Markey.
    That is just so I can hold everybody here.

                    STATEMENT OF HON. CORY BOOKER,
                      U.S. SENATOR FROM NEW JERSEY

        Senator Booker. Good afternoon, and thank you very much for
    your rich testimony.
        You know, the Internet now--the ability for big data to be
    used is actually a service to many consumers. It serves me
    every time I go online, every time I am shopping.
        And I love the fact that I can use this little device and
    things will be pushed to me that are very valuable. And that is
    how data-sharing helps to fuel our economy, is a service to
    customers. There are so many great advantages of it.
        I do have worries on the back end of that, which I think my
    chairman, Senator Rockefeller, is making a point, and those are
    the concerns of consumers.
        And so, just one quick question about, you know, what
    frustrates me when I am--you know, that I know my browser
    history, these cookies are on my computer that are sort of
    tracking and tracing what I am doing, and I understand the
    upside and the benefit of it, but that is a little problematic
    to me.
        Could you--Mr. Cerasale?
        Mr. Cerasale. Sure, Senator Booker.
        There is a group that DMA is part of and started, the
    Digital Advertising Alliance, on the online--following where
    people are. And we have created an icon and a process to allow
    consumers to opt out, totally or selectively, for any cookies
    that are used to track their surfing, their browsing activity,
    across unaffiliated websites. And that icon is a little
    triangle with an----
        Senator Booker. So you are saying--I am sorry to interrupt
    you, just because I have so little time.
        Mr. Cerasale. No problem.
        Senator Booker. So you are saying that the industry is
    trying to self-regulate----
        Mr. Cerasale. Yes.
        Senator Booker.--and find a way because you recognize that
    this is a problem.
        Mr. Cerasale. Yes. And approximately a little over a
    million people have opted out. Over 10 million people have gone
    to the website----
        Senator Booker. I am a pretty tech-savvy, X-Gen guy; I
    never heard of this. So----
        Mr. Cerasale. OK.
        Senator Booker.--that is problematic to me, just because I
    am very engaged in the world of tech. So I didn't know there
    was even an opt-out function. And I am concerned about my--so
    the industry is trying to correct what they know is a problem,
    true?
        Mr. Cerasale. Right, to give consumers a choice,
    absolutely.
        Senator Booker. OK.
        So, Ms. Rich, I am just curious, there is so much positive
    here. I mean, the opportunity for big data to enrich our lives
    gets me excited about what the future is. And so these
    businesses, in some ways, have a wonderful public purpose. But
    I do worry about the darker side in the way that my Chairman is
    discussing.
        And I really want to know--it is not as simple as saying
    more transparency or--it is difficult to create a regulatory
    framework that is nimble. I mean, this is such a changing
    environment.
        So, really, I just want to know for you, like, how are you
    planning on using your 6(b) authority under the FTC Act to
    study and stay abreast of this industry and see if there are
    needs or opportunities, like in this one, where the industry is
    not correcting or self-regulating, where we can get them to the
    point where we are balancing all of these incredible positives
    of big data with the obvious downsides?
        Ms. Rich. We think about this every day, balancing the
    positive but also protecting consumers. In this case, though, I
    think the first step is pretty simple, as there is really very
    little transparency about data brokers. And providing that
    transparency is pretty basic. It is not a technological issue.
        In more complex circumstances, the way we balance is we
    engage in a constant learning process. We do workshops, we are
    always learning about industry, we meet with consumer groups,
    we meet with business groups. And we also, in everything we do,
    we are always trying to develop flexible standards. We are
    thinking about, you know, what about 20 years from now
    especially in the orders we get, will this last, will this be
    able to grow with innovation? And we make a lot of effort in
    that regard.
        But I do want to bring it back to--you know, we have some
    basic steps here to bring about some transparency that
    shouldn't undermine the data-driven economy. And, in fact,
    there is nothing in that study that DMA did that addresses how
    privacy would undermine the data-driven economy.
        Senator Booker. Right. And because so much of what I am
    doing for free on the Internet is made free because folks are
    shooting ads at me that are targeted to my interests or needs
    or what have you. But you are saying that there is just a
    tremendous larger degree of transparency that needs to be given
    to the public.
        Ms. Rich. And we think that transparency--and we were
    talking about this a few minutes ago--is completely consistent
    with the growing economy. I mean, consumers are increasingly
    demanding more information about how their data is being used.
    When you give them information, they often develop more trust
    in the businesses they are engaging with. And we think it is in
    both consumers' interests and businesses' interests to provide
    more information.
        Senator Booker. I would love to hear what Mr. Hadley or Mr.
    Cerasale have, if they have any resistance to that increased
    transparency, but I am trying to stay on the good side of the
    Chairman. I am the new kid on the block. So I will yield.
        The Chairman. Senator Booker, you are always on the good
    side of the Chairman so you can charge right ahead, but you
    have blown that opportunity.
        [Laughter.]
        The Chairman. And so we are going to go to Senator Johnson,
    to be followed by Senator Blumenthal, Senator Markey, and the
    invincible Senator McCaskill.
        Senator McCaskill. Did you say invisible?
        The Chairman. Invincible.

                    STATEMENT OF HON. RON JOHNSON,
                      U.S. SENATOR FROM WISCONSIN

        Senator Johnson. Invincible.
        Well, thank you, Mr. Chairman.
        By the way, this is an excellent discussion, this is a very
    good hearing. I appreciate Senator Booker's good questioning. I
    kind of want to pick up where he left off, talking a little bit
    about transparency, because it is a great term.
        I want to know exactly what the FTC wants to do in terms
    of, what is your fix? What is transparency to you?
        Ms. Rich. Well, in this context, what we have recommended
    is that data brokers allow consumers access to the kind of
    information that they maintain about consumers.
        Senator Johnson. How?
        Ms. Rich. Either through some sort of centralized--what we
    recommended in a privacy report we did last year was either
    through--possibly through some centralized website where
    consumers can go. DMA has something like that for opt-out. DAA
    has developed a centralized website for online tracking. And so
    we have recommended that for data brokers.
        Senator Johnson. So what would be on this centralized
    information thing? What would be on there?
        Ms. Rich. The names of data brokers, and then you would be
    able to find out what kind of information they collect, and you
    would be able to potentially opt out of the use of their data.
        Senator Johnson. Mr. Hadley, can you tell me what that
    sounds like to you and what problems the industry would have
    with that and how restrictive that would be?
        Mr. Hadley. Well, first, we want to be responsive and be
    more transparent, although we, too, are trying to figure out
    what that means in a meaningful way to consumers.
        Regarding an opt-out website, here is the problem as I see
    it: I don't know how to define ``data broker.'' I have never
    seen a definition of ``data broker'' that wouldn't sweep in
    tens of thousands of companies, because everyone exchanges data
    and shares data and sells data within the Internet ecosystem.
    That is how the business model of the Internet is.
        So would we have a website with an entire industry on it?
    And how would that really be meaningful to a consumer if you
    throw that many companies up? Of course Experian would be on
    that, but so would 10,000 other companies. That is not a
    meaningful way of providing transparency.
        Instead, what we are trying to explore is how can we make
    the exchange and sharing of information responsibly more
    meaningful to consumers. And we think one of the steps could be
    working with the users of data brokers----
        Senator Johnson. OK. Well, let me stop you, because I have
    limited time.
        With mailing lists, for example, you get a one-time use.
    And I was trying to follow what you are talking about, because
    it sounds like you have a system where you are making sure that
    this material is not misused, because that is the real problem.
    The violation is the misuse, the improper use of the
    information.
        For every time you sell data, is that restricted to a one-
    time use that you already have determined is not a misuse?
        Mr. Hadley. It is----
        Senator Johnson. Or do you sell the data and they can use
    it for years?
        Mr. Hadley. No. It is sold pursuant to a contract, in some
    cases one time, in some cases as a license over numerous times.
    But we always have audit procedures in all of those situations
    to know how they are using that data and what they are using it
    for. And it is strictly limited to marketing purposes.
        Senator Johnson. The information, you are saying it is, you
    know, from public records, sometimes surveys. But is it also
    from those cookies, and are you also getting it from all the
    other Internet applications? And do you have agreements with
    different people that gather all these cookies? I mean, is it a
    much larger data-gathering than what we were kind of talking
    about earlier?
        Mr. Hadley. We do collect information online in that realm,
    but it is all aggregated, anonymized data. There is no
    personally identifiable information attached to it.
        So, for example, we might be able to know what type of
    consumer is visiting X website versus another website so that
    we can share that in competitive intelligence for the industry.
    So Macy's might want to know what Nordstrom shoppers look like,
    in the aggregate, de-identified, so they can compete against
    one another and vice versa.
        Senator Johnson. Mr. Cerasale, again, as Senator Booker
    talked about, there are incredible benefits by people using the
    Internet, and of course we always take a look at, do you agree
    to use this website? And I would say most people just say, yes,
    I want to use this website, hit ``agree''; they don't really
    read the, what, 300 pages of all the information saying, hey,
    we are going to share this information. If you want to use this
    phenomenal, free application, you are subjecting yourself to a
    certain lack of privacy.
        How do you get--is there any way of getting around that?
        Mr. Cerasale. There is. I think that icon I was expressing
    to Senator Booker is an easy--it says ``AdChoices,'' and I can
    click on it; it tells you about what is happening of following
    your web browsing across websites. And then there is a link
    right to AboutAds.info, a website where you can opt out. That
    type of--is how we are looking at it.
        We have worked with NTIA in looking at mobile apps and the
    small screen, and how do you let people know what type of
    information you are collecting. So we need quick links from----
        Senator Johnson. So, like, on a do-not-call list, can it be
    one time and you are covered? Or is this application after
    application after application?
        Mr. Cerasale. On the DAA, it is one time and you are
    covered, and it probably affects about 96 percent of the
    targeted ads and so forth. That many people have signed up for
    it, so it is pretty close.
        Senator Johnson. And that icon is located where?
        Mr. Cerasale. That icon is usually located right around the
    ad that is targeted. And we have contracts with Canada, with
    EU. We are working on Australia, starting with Latin America,
    to try to make that icon worldwide.
        Senator Johnson. OK. Thank you.
        Thank you, Mr. Chairman.
        The Chairman. Thank you. And that was good questioning.
        Senator Blumenthal?

                 STATEMENT OF HON. RICHARD BLUMENTHAL,
                     U.S. SENATOR FROM CONNECTICUT

        Senator Blumenthal. Thank you, Mr. Chairman. And thank you
    for having this hearing. Thank you for pursuing this profoundly
    important issue with such far-ranging consequences for both
    good and ill in our society.
        And thank you to the staff for this truly remarkable study.
    For anyone who doubts how to define a data broker, I recommend
    the report, ``A Review of the Data Broker Industry: Collection,
    Use, and Sale of Consumer Data for Marketing Purposes.'' There
    is now an industry involved in this very far-reaching and far-
    ranging collection, use, and marketing of data.
        And one of the ironies is that almost every day in the
    headlines and in the news we read about what the NSA is doing
    in the collection and use of data about citizens in this
    country who are protected by the Fourth Amendment. One of our
    justices once defined the right of privacy as the right to be
    left alone. Obviously, consumers do not have that same right
    against this industry because it is not the government. And yet
    their privacy interests may be just as much at risk and abused
    as they are by the government.
        And that is really what brings us here today, not only the
    vast potential for good but also the downsides and the dark
    side and the danger of the collection and use.
        And I, quite honestly, did not expect anybody to come here
    today and say, we are using this data to exploit people. You
    know, I am not the naive. But I think you need to recognize
    that others could use it for that purpose. And all you need to
    do is turn to page 24 of this report and see the categories
    that are sometimes used for marketing purposes.
        And let me give you two very concrete examples of why I
    think that people ought not to be compelled to surrender
    personal privacy as the price of admission for the use of the
    Internet. And that is really what we are talking about, the
    sacrifice of privacy as the price of admission to the Internet.
        In December 2012, the Wall Street Journal ran a story
    entitled, ``Websites Vary Prices, Deals Based on Users'
    Information.'' And it stated, in part, quoting, ``Websites are
    adopting techniques to glean information about visitors to
    their sites in real-time and then deliver different versions of
    the web to different people. Prices change, products get
    swapped, wording is modified, and there is little way for the
    typical website user to spot it when it happens.''
        So if you prefer Hilton hotels over Marriott hotels and the
    wrong company gets its hands on that information, you could be
    charged more for staying at one hotel or another than a person
    just walking in off the street.
        Now, I assume, Mr. Hadley, that you would join me in
    feeling that such marketing practices and pricing practices
    would be offensive and should be made illegal, perhaps.
        Mr. Hadley. I would agree with you that that shouldn't be
    happening. And Experian is not involved in dynamic----
        Senator Blumenthal. I am not asking you about Experian. I
    am not expecting that you will tell us that Experian is
    involved in these kinds of----
        Mr. Hadley. But dynamic pricing does exist. All you have to
    do is look at the hotel and airline industry, and they have
    variable pricing.
        We don't provide products and services to allow them to
    undertake that dynamic pricing. That is their choice, because
    they are marketing their product or service.
        Senator Blumenthal. Do you think it is fair to the
    consumer?
        Mr. Hadley. I wouldn't want it to happen to me, but I know
    that it does. If I go to Las Vegas and there is a----
        Senator Blumenthal. Well, the fact that it does is why we
    are here today, right?
        Mr. Hadley. I am not sure that it is illegal. It is just a
    factor of----
        Senator Blumenthal. Let me ask you, Mr. Cerasale----
        Mr. Hadley.--the economics, right?
        Senator Blumenthal. I am not asking you for your legal
    opinion.
        Mr. Cerasale, what do you think about that practice?
        Mr. Cerasale. Dynamic pricing and changes in pricing are
    there all the time, and you have--frequent flyers get different
    prices. Grocery stores, people who have the card have different
    prices. It is part of where we are today.
        I think if it is discriminatory and so forth, you look at
    it. It goes back to what I said. You want to look at use, not
    the data itself or the collection of it, but use. If there is
    an improper use----
        Senator Blumenthal. Well, you would agree with me that
    discriminatory pricing that charges people more because they
    are regarded as more vulnerable, and without their knowing it,
    would be, at best, unethical?
        Mr. Cerasale. Yes--I--yes. And I believe there are laws----
        Senator Blumenthal. Let me ask you another question.
        Mr. Cerasale.--on that, as well.
        Senator Blumenthal. And I am rushed for time. I am going to
    use my last 4 seconds to ask you a question----
        Mr. Cerasale. Sure.
        Senator Blumenthal.--about a second area where I think
    discrimination, the prospect of discrimination and exploitation
    is raised. And that is in terms of job postings and screening
    of job applicants.
        I don't need to tell anybody in this building about the
    devastating impact of long-term unemployment in this country.
    And I have joined Senator Warren in a bill that would prohibit
    the use of credit scores of job seekers in a discriminatory way
    during the hiring process.
        Let me ask you whether an employer could buy information
    from your company, Mr. Hadley, for example, and use it to
    target job postings in a way that discriminates against certain
    job applicants, using the information that might be obtainable
    from your company.
        Mr. Hadley. Marketing data cannot be used for employment
    screening and job eligibility. That is a case under the Fair
    Credit Reporting Act. So they would have to obtain a credit
    report, and all of the consumer rights would accrue to that
    marketing----
        Senator Blumenthal. Well, let me ask you, what would
    prevent an employer from asking for information from your
    company and then, on its own, using it in a discriminatory way?
        Mr. Hadley. We would know who that company is and why they
    were asking us for marketing information.
        Senator Blumenthal. And you would----
        Mr. Hadley. And we would know what----
        Senator Blumenthal.--refuse to sell to them?
        Mr. Hadley.--they were going to use it for, and we would
    forbid them in our contract with them from using it for any
    purpose under the Fair Credit Reporting Act, including
    employment purposes.
        Senator Blumenthal. If it is a violation of the Fair Credit
    Reporting Act. What if they said to you it is not a violation?
        Mr. Hadley. We would disagree with them, and we wouldn't
    give them the----
        Senator Blumenthal. Is that true of other companies in your
    industry?
        Mr. Hadley. I think it is a pretty standard practice among
    those that belong to DMA and practice good standards.
        I can't vouch for all of them, but it certainly is with
    Experian. We know the bright line between those.
        Mr. Cerasale. It would violate our----
        Senator Blumenthal. Your company does, but from the
    information that has been provided to my office, not all
    companies do. Do you----
        Mr. Hadley. Then it is a violation of law, and the FTC
    should take action against those companies.
        Mr. Cerasale. It is unethical, it violates our guidelines
    to use marketing data----
        Senator Blumenthal. It is unethical, it violates your
    guidelines, but maybe the law----
        Mr. Cerasale. That is correct.
        Senator Blumenthal.--ought to be clarified so that
    everybody understands it is illegal.
        Mr. Chairman, I apologize for exceeding my time. I tried to
    move as quickly--I want to apologize to the witnesses for
    perhaps interrupting you.
        Unlike Senator Booker, although I am still a new guy on the
    block, I didn't say at the outset I was going to stop when I
    should have. So----
        The Chairman. Well----
        Senator Blumenthal.--I know I am on your bad side now.
        The Chairman. No, you are not on my bad side, but, you
    know, you are clearly just sort of settling into this role of
    being a licensed lawyer.
        [Laughter.]
        The Chairman. He was attorney general for 29 years.
        Senator Blumenthal. I am a recovering lawyer.
        [Laughter.]
        The Chairman. Yes.
        Senator Blumenthal. I apologize, Mr. Chairman, and----
        The Chairman. No.
        Senator Blumenthal.--thank you.
        The Chairman. Senator Booker will learn from you.
        [Laughter.]
        The Chairman. Senator Markey?

                   STATEMENT OF HON. EDWARD MARKEY,
                    U.S. SENATOR FROM MASSACHUSETTS

        Senator Markey. Thank you, Mr. Chairman, very much.
        So the bottom line is that there are digital dossiers being
    collected on every American right now by the companies
    represented at this table. And there is a lot of promise from
    that: services that can be provided. There is a lot of peril
    from that: the compromise of the privacy and the most intimate
    secrets of families that can go out and on sale across the
    country and across the world.
        And the bottom line is no company should be allowed to do
    that. If the individual doesn't want that information
    compromised, they should have a right to be able to control
    that data. And no company should be allowed to play fast and
    loose with the information which they have gathered about
    Americans.
        So I had a caucus meeting over on the House side last year,
    and we had some of the gentlemen here today over there for
    that. And we began to talk about propensity scores--propensity
    scores. And that is a practice of attaching a propensity score
    to individuals, hundreds of thousands, millions of Americans.
    And the scores are created without the consumers' knowledge,
    without the consumers' consent.
        And then they become the basis for targeting offers,
    benefits, products to certain consumers. And as a result of
    these e-scores, high-value prospects may receive marketing
    details and discounts regularly, but others may not. They may
    be dismissed as low-value people, characterized as ``waste'' in
    industry slang.
        So, Ms. Dixon, what are the dangers attached to an industry
    that engages in those kinds of practices, in terms of its
    impact upon tens of millions of Americans?
        Ms. Dixon. The real problem with the propensity scores and
    the propensity values that are attached to consumers is that,
    unlike a credit score that would be pulled, that would be
    covered under the Fair Credit Reporting Act, but these scores
    are not covered under the Fair Credit Reporting Act.
        If they are health scores, they are not covered under
    HIPAA, they are not being held by a healthcare provider.
        So, therefore, you can be tagged with these
    characteristics, and these characteristics are not under any
    regulation. There is no law that says that an employer cannot
    use these to determine job eligibility. There is no law that
    says that an insurer cannot use these scores to determine
    rates, because these are not regulated scores. So the
    propensity scores are of great concern.
        And, of course, consumers do not have the opportunity to
    learn about these scores. These are secret scores. And
    consumers do not have the opportunity to opt out of this, as
    they would if the scores were covered under the Fair Credit
    Reporting Act.
        Senator Markey. Great.
        So we have to do something about that, Mr. Chairman. You
    know, we are hearing language about, well, that might not be
    illegal, so we can actually pass a law and make it illegal. So
    that is what this committee is all about.
        And now let me go back to you again, Ms. Dixon. Thank you
    for that.
        We know that data brokers categorize people into market
    segments, so-called ``suffering seniors,'' ``burdened by
    debt,'' singles,'' ``credit crunch,'' ``city families.'' And
    these are the real labels that actual data brokers use to
    describe all these different segments out there as they are
    trying to decide who they are going to be talking to.
        But that categorization can cause real economic harm,
    including profiling, redlining, and racial discrimination. And,
    in fact, there is actually a term for it: not redlining, but
    ``web-lining.'' We are just going to use the web to kind of
    segment people out. They are in the wrong income group, the
    wrong racial group, the wrong sex, the wrong whatever. And they
    just can do it. And there probably aren't enough laws on the
    books to protect people against that.
        Ms. Dixon, can you talk about that and what the need is to
    fill in that vacuum, as well?
        Ms. Dixon. There is an interesting situation that is going
    on. And, interestingly enough, the DMA report came to the
    conclusion that offline information and online information are
    now thoroughly merged. And as a result, web-lining is real-
    life-lining, as well, so what happens on the web now happens in
    real life.
        So if there is a discriminatory problem there, we are going
    to be experiencing it elsewhere. It is a circular process now.
    We can't just go online and block our cookies.
        Any reasonable consumer who is shredding their Social
    Security number, blocking cookies, and surfing the web
    responsibly, they can still not evade being put on a list of
    data brokers according to their health condition.
        Senator Markey. So let's go to that line, that kind of
    blurry line that has been allowed to be created, and what the
    consequences are for consumers, kind of that line between
    credit reporting agencies and data brokers that market
    financial products. That is an atmosphere of ambiguity, and
    some fraudsters could do some real harm to people, huh?
        So if you could talk about that a little bit, Ms. Dixon.
        Ms. Dixon. So the pseudo credit scores, or pseudo scores,
    they are made up of about 1,500 factors. They are all non-
    credit-file factors, so they don't fall under the Reporting
    Act. They can include factors that would be prohibited under
    the Equal Credit Opportunity Act. This is troubling, deeply
    troubling.
        So we don't know everything that goes into these scores. We
    need to. We need to know how the scores are being used, and we
    certainly don't want these scores being used to target
    underserved Americans with predatory offers.
        Senator Markey. And let's just move on to the next
    category. You know, we can talk about the sale of lists of
    people with particular diseases, huh? And just kind of
    circulate those lists around to people, just so that, you know,
    marketers know who not to even get anywhere near, huh? I am
    going to get all the people with these different diseases that
    we have been able to compile and just make a list of it and
    make sure they are over here and they are walled off.
        Talk a little bit about that and what that means for our
    country.
        Ms. Dixon. I was stunned, in doing my research, when I
    found lists of people who were rape sufferers, people who were
    genetic disease sufferers, people who were victims of domestic
    violence. This was deeply troubling to me, and I was just
    shocked.
        So what is happening is that through survey instruments
    that are operated online and through other methods that are
    typically consumer-generated, people will volunteer this
    information to websites, thinking they are getting help, you
    know, from a website, and they will volunteer. And they have no
    idea that this information is going to be attached to not just
    a cookie but their name, their home address, their phone
    number.
        Senator Markey. And I am a lawyer but I have never had any
    clients, so I am going to be careful in how I rule here. But it
    just seems to me that it is kind of, on its face, a violation
    of Section 5 of the Federal Trade Commission Act, violation of
    unfair and deceptive practices.
        So, Ms. Rich, back over there at that Federal Trade
    Commission, what can you do about this?
        Ms. Rich. I think--well, for all of these scenarios that
    you described, especially the particularly disturbing ones
    involving discrimination, we would obviously, if we had
    specific targets we were looking at, take a close look to see
    if it did violate the Fair Credit Reporting Act or the FTC Act.
    We wouldn't give up on that.
        But one thing I want to say about--you know, our laws are
    limited, as I mentioned in my opening statement. For the Fair
    Credit Reporting Act to apply, the data has to be collected and
    used for certain purposes. And the FTC Act allows us to go
    after deceptive practices, meaning affirmative false statements
    or omissions need to be made, or unfair practices, and we have
    a lot of hoops to jump through to prove those.
        But there is nothing in our laws that would require the
    entities amassing those lists to tell consumers about it or to
    allow them access to the data they have on them. Those are the
    limitations of our laws.
        Senator Markey. Yes. Thank you. And, again, there is
    nothing like a little Section 5 action, you know? But when you
    are saying it is even beyond the penumbra of that, then we have
    a real issue here.
        And it is a real invitation for us to act, Mr. Chairman, so
    that, you know, we put on the books the----
        The Chairman. I am going to act----
        Senator Markey.--actual specific language. Excuse me?
        The Chairman.--since you have just gone through your second
    round of questions.
        [Laughter.]
        Senator Markey. No, I know that, Mr. Chairman. I have now
    taken your graciousness, your beneficence, and I have stretched
    it, you know, to a point that----
        The Chairman. Claire McCaskill is very unhappy. But she is
    going to be even more----
        Senator McCaskill. No, I am not.
        The Chairman.--even more unhappy when I call on Senator
    Thune, who----
        Senator McCaskill. I am not unhappy at all.
        The Chairman.--he and I were the first two to come.
        And then you.

                  STATEMENT OF HON. CLAIRE McCASKILL,
                       U.S. SENATOR FROM MISSOURI

        Senator McCaskill. No, I think it is terrific to have
    Senator Markey on this committee. And he obviously has worked
    on this issue in the House, and I think we will all benefit
    from the amount of time and effort he has spent at it.
        I want to try to home in on a couple of things.
        The case, Mr. Hadley, of Experian and Superget. You
    purchased the company Court Ventures in 2012, in the spring of
    2012. For more than a year after the time you purchased this
    company that had all this data, you were taking monthly wire
    transfers from Singapore, and your company did nothing. And as
    it turns out, those wire transfers were coming from a man in
    Vietnam who specialized in identity theft and was marketing the
    information that you owned to criminals to ruin people's lives.
        So my first question to you is, you were quoted as saying,
    ``We would know who was buying this.'' You were getting wire
    transfers from Singapore on a monthly basis, and no one
    bothered to check to see who that was?
        Mr. Hadley. Now, I want to be clear that this was not
    Experian marketing data; this was Experian authentication data.
    So it is under a different company, a different use. So I just
    want you to know that it is not part----
        Senator McCaskill. I don't understand the distinction.
        The Chairman. Nor do I.
        Senator McCaskill. I think it is a distinction without a
    difference. I believe it was data that you owned, Experian
    owned. You had purchased this data from Court Ventures, and
    they had, in fact----
        Mr. Hadley. No. Let me clarify.
        Senator McCaskill.--sold it to someone else.
        Mr. Hadley. Yes, let me clarify that for you, because we
    have provided a full response to that question to the
    Committee, and it is part of the eight submissions that we have
    given.
        And I do have to say that it is an unfortunate situation.
    And the incident is still under investigation by law
    enforcement agencies, so I am really extremely limited in what
    I can say publicly about it, but I do want to say this.
        The suspect in the case obtained data controlled by a third
    party--that was U.S. Info Search, that was not an Experian
    company--through a company we bought, Court Ventures----
        Senator McCaskill. OK. Let me----
        Mr. Hadley.--prior to the time that we acquired that
    company. And to be clear, no Experian data was ever accessed in
    that deal.
        Senator McCaskill. I understand what you are saying. Here
    is what happened. You had U.S. Info Search----
        Mr. Hadley. No, we did not----
        Senator McCaskill. No, no, I am--U.S. Info Search existed,
    and Court Ventures existed. They decided----
        Mr. Hadley. And they had a partnership.
        Senator McCaskill.--for commercial reasons, to make more
    money, to combine their information. And so they had a sharing
    agreement, those two companies, correct?
        Mr. Hadley. Right.
        Senator McCaskill. OK. So these two companies had a sharing
    agreement. Then you bought one of those companies.
        Mr. Hadley. Court Ventures.
        Senator McCaskill. Correct. So now you owned it. Now you
    stood in their place. Are you a lawyer?
        Mr. Hadley. I am not a lawyer, but I understand we stood in
    their place, right.
        Senator McCaskill. Are there any lawyers on the panel?
        OK. She will back me up.
        [Laughter.]
        Senator McCaskill. You stand in their place when you buy
    this. So now you are there.
        Now, you said in your earlier testimony, we would know who
    was buying this. So you now are part of their transactions.
        Mr. Hadley. During----
        Senator McCaskill. And you were receiving the benefit of
    these monthly wires.
        Mr. Hadley. So, during the due diligence process, we didn't
    have total access to all the information we needed in order to
    completely vet that. And by the time we learned about the
    malfeasance, I think 9 months had expired. The Secret Service
    came to us, told us of the incident, and we immediately began
    cooperating with the Secret Service to bring this person to
    justice.
        Senator McCaskill. OK.
        Mr. Hadley. And we are continuing to cooperate with law
    enforcement in that realm. This was--we were a victim and
    scammed by this person.
        Senator McCaskill. Well, I would say the people who had all
    their identity stolen were the----
        Mr. Hadley. And we know who they are, and we are going to
    make sure that they are protected. There has been no allegation
    that any harm has come, thankfully, in this scam.
        [The Committee received the following letter regarding Mr.
    Hadley's previous statement. The author of the letter requested
    that the statement be removed from this hearing record.]

                                                    Venable LLP
                                         Washington, DC, March 18, 2014
    Via e-mail:

    Peter Curtin
    U.S. Senate Committee on Commerce, Science, and Transportation
    254 Russell Senate Office Building
    Washington, DC.

    Re: Correction to Transcript on Hearing Titled, ``What Information Do
    Data Brokers Have on Consumers, and How Do They Use It?''

    Dear Mr. Curtin,

        Lines 12-14 in the attached document are crossed out. In reviewing
    the testimony, we checked with the Experian lawyers that are directly
    involved in handling this matter, and they have indicated that these
    lines are not accurate. In actuality, Experian does not know the
    identities of the individuals as the data was owned and controlled by
    U.S. Infosearch.
                Sincerely,
                                                  Stuart Ingis,
                                                               Venable LLP.

        Senator McCaskill. OK.
        Mr. Hadley. And we have closed that down, and----
        The Chairman. Let Senator McCaskill----
        Mr. Hadley.--we have modified our process----
        The Chairman. Let Senator McCaskill continue.
        Senator McCaskill. OK. So let's talk about that process.
    This person who got this man who they lured to Guam to arrest
    and who is now facing criminal charges in New Hampshire, they
    posed as an American-based private investigator.
        What is your vetting process when people want to buy your
    stuff?
        Mr. Hadley. That would have been Court Ventures who would
    have vetted that prior to our----
        Senator McCaskill. OK, but I am talking about now, you.
    What is your vetting process?
        Mr. Hadley. Right now, before we would allow access--first,
    let me say that that person would have not gained access to
    Experian or this data if they had gone through our vetting
    processes prior to the acquisition.
        Senator McCaskill. And what would have stopped him?
        Mr. Hadley. We would have known who that company is. We
    would have had a physical onsite inspection of that company. We
    would have known who that business is and what that business's
    record is. We would have known exactly why they wanted that
    data and for what purposes. And that would have been enshrined
    in our contract. And we would have known the kinds of systems
    they have in place to protect the data that they gained.
        Those are all incumbent upon us under the Gramm-Leach-
    Bliley Act and the FCRA.
        Senator McCaskill. Well, listen, I understand that this was
    not a crime that began under your watch.
        Mr. Hadley. Thank you.
        Senator McCaskill. But you did buy the company, and you did
    keep getting the wire transfers from Singapore. And the only
    reason you ever questioned them is because the Secret Service
    knocked on your door. I don't know how long those wire
    transfers from Singapore would have gone on until you caught
    them. I don't have confidence that it would have stopped at
    all.
        So I guess what my point is here, I maybe do not feel as
    strongly as others on this panel that behavioral marketing is
    evil. I believe behavioral marketing is a reality, and,
    frankly, the only reason we have everything we have on the
    Internet for free is because of behavioral marketing. So I
    don't see behavioral marketing as an evil unto itself.
        What I do see is some desperate need for Congress to look
    at how consumers can get this information, what kind of
    transparency is there, and whether or not companies that allow
    monthly wire transfers into their coffers from Singapore from a
    criminal who is trying to rip off identity theft, whether or
    not they should be held liable for no due diligence on checking
    those wire transfers from Singapore until the Secret Service
    knocked on their door.
        And that is what I think we need to be looking at. And I
    don't think there is enough--I mean, I know that some of my
    friends on the other side of the aisle, you say trial lawyers,
    and they break out in a sweat. But the truth is that if there
    were some liability in this area, it would be amazing how fast
    people could clean up their act. And, unfortunately, in too
    many instances there is not clear liability because we haven't
    set the rules of the road.
        So I didn't mean to pick on you, Mr. Hadley, but this is a
    great example. And you are not a fly-by-night company.
        Mr. Hadley. No, we are not.
        Senator McCaskill. If this is happening under your watch,
    can you imagine what is going on with companies that are not as
    established as yours? I think it is----
        Mr. Hadley. Cybersecurity is a huge problem.
        Senator McCaskill. It is serious and significant, and we
    need to look at it.
        Thank you all very much.
        The Chairman. Thank you, Senator McCaskill.
        Senator Thune, to be followed by Senator Fischer.
        Senator Thune. Thank you, Mr. Chairman.
        Mr. Hadley, one of the big users of your service is the
    Federal Government, correct?
        Mr. Hadley. Yes.
        Senator Thune. OK. Are there some areas in which you can
    identify how the Federal Government uses your services?
        Mr. Hadley. Certainly.
        The biggest users of Experian data in the Government are
    the Department of Health and Human Services. Right now, we
    operate on HealthCare.gov to authenticate the identities of
    individuals signing up for health care to make sure that fraud
    is eliminated on that, to make sure that Tony is getting an
    account, establishing the account, and not an imposter in his
    name.
        We also have a contract with the Social Security
    Administration as they move persons for online accounts from
    paper-based accounts. We all get our Social Security statement
    in the mail; they want people to move online to get those. So
    we authenticate individuals to have online accounts with the
    Social Security Administration.
        We, too, believe that HHS could be a good user of our
    marketing data, particularly in the lower economic echelons, to
    reach out to people to see if they are eligible for health care
    and try to determine how to market that process to them. They
    haven't done that yet, but the state agencies are far ahead of
    them in that way, of using these economic segments to reach out
    and inform consumers of benefits that are available to them.
        Senator Thune. So for purposes of Obamacare implementation,
    they are using you to authenticate people who are applying but
    not, at this moment, to market, the Federal Government. The
    state----
        Mr. Hadley. That is exactly right.
        Senator Thune.--exchanges are.
        Mr. Hadley. Right.
        Senator Thune. OK.
        Some have concerns about the profiles that data brokers
    compile on consumers, that they will have a long-lasting impact
    and put these consumers at a disadvantage, especially if that
    information is incorrect. And I would like to have you respond
    to that incorrect-information issue or concern.
        Mr. Hadley. Yes. Our data is highly accurate. It comes from
    very reputable sources. We know what sources they are, and we
    check those sources to make sure of the integrity of that data.
        Marketing profiles are not static. This is very important.
    They change. When I was a young man with young children, I used
    to get a lot of ads for diapers. Then my sons grew up, and I
    got solicitations and they got solicitations for college. Soon,
    I got solicitations for home equity loans because they knew
    that I might want to finance my sons' college education. Now I
    am getting solicitations for retirement planning and for
    vacations. So my marketing profile has changed with my age and
    my family status and my interests that I have expressed to data
    brokers.
        I want to make one point that is very clear here, with
    health information. Experian has health information from
    consumers, but only--only--on an opt-in basis, if they have
    said and clearly opted into telling us what their ailments are
    and saying, I am an arthritis sufferer, I want to know about
    new products and services coming onto the market to help me; or
    I suffer from migraines.
        These are not used, though, never used, for healthcare
    eligibility. They are used so that consumer product companies
    can offer solicitations and coupons for over-the-counter drugs,
    for the most part.
        Senator Thune. Yes.
        Mr. Hadley. So it is always opt-in with health for
    Experian, clear and conspicuous opt-in.
        Senator Thune. Mr. Cerasale, there have also been concerns
    raised that consumers should not only have the ability to see
    what information is collected about them for marketing purposes
    but also have the ability to correct it. And I am wondering
    what your thoughts are on that.
        Mr. Cerasale. On first look, that sounds like a great idea.
    However, as you delve deeper into it, as you look at access and
    then correction for marketing data--this is data that, as Mr.
    Hadley has said, is not used for eligibility purposes. But as
    you look into access to marketing data, it requires you to
    authenticate who is coming in. In other words, is it Jerry
    Cerasale or is it an imposter? And in order to have that data,
    in order to be able to authenticate, you need more data.
        So in the essence of access and then correction, it is
    going to require more data, more accurate data, because you can
    have inaccuracies in marketing data. Tony says that it is
    great, but it is not as precise as Fair Credit Reporting data
    because it is not for eligibility; it determines what ad I will
    receive, what type of offer I will receive. And if a marketer
    is off, it is 95 percent correct, that is OK because it is not
    worth the expense to go to 100 percent, whereas in Fair Credit
    Reporting you need it.
        So having access and correction requires more data. And, of
    course, it is, therefore, more expensive, as well. So, I mean,
    let's be truthful here. But I think it goes against the idea
    you are worried about with data because you are going to create
    more data on the marketing side and requiring it to be more
    precise, and therefore that is an issue. You need to have one
    bit of information more than the imposter in order to prevent
    that kind of fraud in that area. So it raises that problem.
        Senator Thune. Ms. Rich, the FTC released a report on
    consumer privacy in 2012 that recommended, and I quote,
    ``companies should provide reasonable access to the consumer
    data they maintain; the extent of access should be
    proportionate to the sensitivity of the data and the nature of
    its use,'' end quote.
        The report continued that, for marketing data, the
    commission believes that the cost of providing individualized
    access to consumers would likely outweigh the benefits.
        Can you comment on that statement, expand on what the costs
    and benefits would be to have individualized access to
    marketing data?
        Ms. Rich. What we said in the report was that, you know--
    and, obviously, the report was a prelude to further discussion
    and potentially Congress acting, because at the time we were
    recommending legislation.
        But what we said in the report is that we saw a difference
    between marketing data and, for example, fraud mitigation and
    identity verification products, and that for marketing data it
    might be appropriate to not only give consumers access to the
    categories of data that is collected about them but to allow
    them to suppress use of the data, but not necessarily to give
    them individualized access.
        But we didn't say there shouldn't be access at all. We said
    there should be access to the categories of data and an ability
    to suppress use of the data. And then, for other products, it
    may be appropriate to give individualized information about the
    data.
        Senator Thune. OK. But the calculation you made, according
    to this at least, is that the individualized access to
    consumers would likely outweigh the benefits for marketing
    purposes.
        Ms. Rich. Yes. Yes. But for further consideration also by
    Congress. But, yes, we did see a difference, we did see a
    distinction between marketing uses and other uses.
        Senator Thune. OK.
        Mr. Chairman, thank you.
        The Chairman. Thank you.
        Senator Fischer?

                    STATEMENT OF HON. DEB FISCHER,
                       U.S. SENATOR FROM NEBRASKA

        Senator Fischer. Thank you, Mr. Chairman and Ranking
    Member.
        Ms. Rich, in your testimony, you referenced the
    commission's activities with regard to enforcement. Can you
    describe to me what you think the focus of the enforcement
    activity should be?
        Ms. Rich. Well, we always, in our enforcement, focus on
    uses of data that have the potential to harm consumers. And
    most of our enforcement actions have been in the area of the
    Fair Credit Reporting Act because that is where we have our
    strongest tools. And when data is used for purposes covered by
    the FCRA, it can be used to deny consumers important benefits
    like employment or credit.
        Senator Fischer. Do you think that the FTC has done a good
    job with its existing authority to address what has been the
    number-one consumer complaint for the past 13 years running,
    and that is fighting identity theft?
        Ms. Rich. We are trying our hardest. We don't have the
    authority to go after the perpetrators of identity theft, but
    one of the main reasons we are so strong in our data security
    enforcement is that we do believe that it is the responsibility
    of companies to protect sensitive information, and to maintain
    and protect it from getting in the hands of identity thieves.
        Senator Fischer. Are you able to identify the thieves
    themselves? And what happens then? How does that all work?
        Ms. Rich. Well, you know, many of the thieves are overseas.
    We do work with criminal authorities, and sometimes they are
    investigating the thieves while we are investigating the
    companies that failed to maintain reasonable procedures to
    protect the data.
        Often, the thieves are never caught because they are in
    Russia or China. But if a company does not maintain reasonable
    procedures to protect data, we have some good tools to hold
    them liable. Although, we continue to recommend passage of a
    strong data security law that would give us civil penalty
    authority and strengthen those tools.
        Senator Fischer. Have you brought those forward before this
    committee? I am a new member on the Committee. Has the FTC
    suggested those in the past?
        Ms. Rich. Yes. Senator Rockefeller would be very--Chairman
    Rockefeller would be very familiar with our advocacy for data
    security and data breach legislation.
        Senator Fischer. OK. Thank you very much.
        Mr. Turow, when we talk about the data broker--and you had
    a definition of a data broker as somebody who connects the dots
    for marketers, is that correct, in your testimony?
        Mr. Turow. That is not my only definition, but certainly
    that is what they do. They can do that.
        One thing I would like to point out--may I go on?
        Senator Fischer. Yes.
        Mr. Turow. One thing I would like to point out that I don't
    know if we have had enough discussion about today, which is, it
    is not just discrete bits of information that is going on more
    and more and that are sold, and it is not just the aggregation
    of these. Really, what is happening is the industry and so much
    of our world is turning into an actuarial activity. It really
    is the predictive analytics that are changing the ballgame.
        And so a person can be giving out the most benign-sounding
    piece of data, and that can turn against him or her in an
    instant if it gets put into an algorithm that comes up with an
    either accurate or inaccurate sense of who that person is.
        And we have no way to deal with this at this point and no
    way--even to where I have been told in the ad industry that the
    word ``soccer mom''--that I have had people tell me they don't
    know, necessarily, how a person is tagged as a soccer mom. The
    number of data points--seriously told me this--the number of
    data points that are involved in designating a soccer mom, the
    person said in the ad agency to me, was such that they couldn't
    tell me where that got that designation from.
        Now, if it is true, that is very complicated. And if it is
    not true, that is a problem in itself. And I was trying to
    figure out why it is that ad companies can't tell people where
    particular labels on them come from. And now I am being told
    more and more it is the algorithm, it is the predictability.
        Senator Fischer. With your definition or an expanded
    definition, then, how many private companies do you think can
    be classified as this, just in the United States? How many
    private companies are we talking about?
        Mr. Turow. I haven't seen a definition, but I would agree
    that more and more we are dealing with companies of all sorts
    connecting lots----
        Senator Fischer. It would be like any small business?
        Mr. Turow. I wouldn't worry----
        Senator Fischer. The big box retailers? Who?
        Mr. Turow.--so much about a small business, but I would
    worry about big supermarkets.
        Senator Fischer. Big box retailers?
        Mr. Turow. I would worry about, yes, big box stores. I
    would worry about a whole lot of companies that on a daily--we
    haven't talked about retail outlets and the fact that the
    Internet inside a store and the connecting of online and
    offline is taking place increasingly as people walk through
    looking at products, the so-called moment of truth, and how
    that relates to the algorithms I have been discussing. What
    does it mean to have predictive analytics stare you in the face
    while you are deciding diapers, OK, or something even more
    important?
        And, in fact, the notion--it may be that Experian doesn't
    deal with over-the-counter drugs, but there are companies that,
    in one way or another, take what people purchase over the
    counter and solicit opinions through sweepstakes about their
    health activities and purchases and sell them, very clearly.
        Senator Fischer. So what I hear you saying is what I
    believe, that really almost any retailer could be classified
    then----
        Mr. Turow. If they share data, and I have----
        Senator Fischer. And how, then, do you believe the
    government should become involved in private business in this
    country, when you have that expanded definition?
        Mr. Turow. It obviously makes it much more complicated. And
    that is what I have begun to believe that, at least as a start,
    there may be some useful public discussion in asking how many
    data points firms are allowed to buy and sell about us at a
    time and how they can be merged to other data points, so that
    we won't have continual flows of data being appended to our
    lives.
        It is really an interesting difficulty that you bring up--
    --
        Senator Fischer. OK. Thank you.
        Mr. Turow.--aside from the fact that, for example, if you
    go to Kroger's website and look at their privacy policy, I
    couldn't figure out head nor tail whether they sell that stuff,
    because they use words like ``affiliates'' and
    ``subsidiaries,'' and it is done in such a way that it is
    extremely difficult to tell.
        And I know of one company that sells bracelets for health
    where I looked at their website, and basically at one point
    after they say what data they can get out of the bracelet, they
    say, some of this data might indicate poor health on your part.
    And then the issue is, what do they do with it?
        Senator Fischer. Right.
        Mr. Turow. And we don't know. You can't tell.
        Senator Fischer. Right. Thank you.
        Mr. Chairman, could I ask Ms. Rich if she wanted to say
    something? She is eager----
        Ms. Rich. I am going like this.
        Senator Fischer. And I was trying to stay within my time
    limit, seriously. Thank you, Mr. Chairman.
        Ms. Rich?
        Ms. Rich. I just wanted to add something to the point you
    were making about the number of data brokers. One of the things
    that we--the way we think about it at the FTC, to make it a
    more manageable issue and problem, is to focus on the non-
    consumer-facing data brokers, because, after all, if the issue
    is really about transparency, at least that is where the
    concerns are the greatest, that consumers don't even know who
    those invisible, behind-the-scenes companies are.
        And although I think that there has been a lot of
    discussion about how the definition is so broad we can work on
    that. But I think it is kind of proof of the problem, not that
    there isn't a solution. Because the fact that Pam says there
    are thousands of data brokers and the Committee report says
    hundreds and the industry says hundreds, I mean, I think that
    is part of the problem. We don't know who all these entities
    are and we don't have a handle on it. And that is part of the
    proof that there really isn't transparency in this industry.
        Senator Fischer. So would you say that just about any
    website that a person goes to, they are in danger of having
    information gathered that they may not want to have either
    private companies or the government know about?
        Ms. Rich. Well, I mean, as I was saying, if we are talking
    about the data broker issue, we would prefer to focus on the
    non-consumer-facing sites, where they are truly not
    transparent.
        You know, we have other recommendations for consumer-facing
    websites. We think there should be choices and opt-outs there
    so that consumers have some ability to prevent sales to third
    parties if they so choose.
        But for this data broker problem, we at the FTC would
    really like to focus on the non-consumer-facing sites.
        Senator Fischer. OK. Thank you very much.
        Thank you, Mr. Chair.
        The Chairman. Thank you, Senator Fischer.
        We have a vote at 4:30. I would like to ask one more
    question.
        And this is coming right at you, Dr. Turow. You have been
    taking all kinds of notes.
        Mr. Turow. I have.
        The Chairman. So you are ready. I would like to further
    explore the notion that data brokers are selling products to
    help marketers target pitches to the specific interests and
    needs of consumers.
        Let's take a product called ``Relying on Aid.'' This is a
    grouping of consumers that the data broker defines as follows:
    ``These single retirees of limited means and meager retirement
    savings are just barely able to make ends meet.''
        The description goes on to say, ``With only a high school
    education at best, it has been hard to get ahead. Poorly
    insured and Medicare/Medicaid-dependent, they are generally
    pessimistic about their economic situation,'' and,
    incidentally, about themselves.
        My question to you, Professor Turow: In your testimony, you
    highlight some other ways companies may be using such consumer
    lists that don't necessarily involve product pitches, such as
    deciding who should have to wait longer for customer service,
    who should be rejected as a valued customer, or who should be
    offered coupons for only non-nutritious foods.
        What thoughts come to your mind when you hear data brokers
    are marketing descriptions like ``Relying on Aid'' to potential
    consumers?
        Mr. Turow. It is not unpredictable. It has been going on
    for years. It is a problem, I agree, and it is going to get
    worse as the baby boomers get older. I think we are only
    beginning to see the tip of the iceberg here.
        But I think one of the issues is also that, as we get more
    individualized----
        The Chairman. What do you mean, tip of the iceberg?
        Mr. Turow. I think we are going to have this huge
    generation of older people in 15 years that are going to be----
        Senator Thune. Not you.
        [Laughter.]
        Mr. Turow.--divebombed with these kinds of offers. And I
    was beginning to say, it is going to be more particularized.
        The thing about that category, Chairman Rockefeller, is
    that it is a category. More and more, that is going to become
    anachronistic. And what it is going to be is a particular
    person who can be maybe even more persuaded because of other
    characteristics that predict that. So that category will be
    broken up----
        The Chairman. Including low self-esteem.
        Mr. Turow. Yes, and a lot of other things: what kind of car
    they drive that leads them to be this, that, and the other
    thing. So that you won't even be able to point to the category
    in a catalog anymore; it will be something that you won't be
    able to easily track down. And yet those people will be
    targeted increasingly because of the situations they are under.
    The same category, only divided up into millions and millions
    of people and personalized.
        The Chairman. So what would you do about it?
        Mr. Turow. As I said, I think--well, these are social
    questions. And I believe that we have to worry about the kinds
    and the amounts of data that get combined. I don't have an
    answer for that. I think it is a very important social
    discussion. At this point in time, we haven't had that social
    discussion.
        People don't even know this stuff is going on. Our studies
    have shown that people know they are being tracked. But when
    you ask people basic questions of how this stuff works and how
    they think it works--we did a 2005 study in which Americans
    said, a majority, a clear majority of Americans said that they
    think that price discrimination is illegal. OK?
        We continually find that people see the word ``privacy
    policy'' on a website, they think it means--and we have done
    this five times in national surveys--they think the words
    ``privacy policy'' means that the site can't share information
    about you without your permission.
        The ad icon is a great idea, but it doesn't work. You know,
    the studies have shown, including one that we did a couple of
    years ago, that Americans, like Senator Booker, have no clue
    that it exists most of the time.
        I suggest--and that is how I got into the algorithm thing.
    The idea for an icon that I had originally, before this one
    came out, was that when you clicked on an ad that was tailored
    to you, you could find out who gave you the ad, what were the
    elements of the ad, why did you get that particular ad just at
    that moment.
        But those data are considered too proprietary, and then
    people tell me the algorithm doesn't help. And so, at this
    point in time, there is nobody who wants to volunteer to give
    that information.
        The Chairman. And people use barcoding, don't they----
        Mr. Turow. Well, I----
        The Chairman.--to find out names and addresses and other
    stuff?
        Mr. Turow. Oh, yes. And even if you are anonymous--a very
    short example that happened to me. It is not quite a big data
    company, but it shows the direction.
        I was at O'Hare, and I had to switch planes when one of my
    planes was canceled. So I went to the customer service place of
    the affiliated airline. They asked me to put my barcode in, and
    they gave me a number. On the side of me, on the screen, it
    said, the amount of time it will take to serve you will be
    based on your priority in terms of your status with our loyalty
    program.
        The Chairman. Interesting.
        Mr. Turow. And so I, fortunately, had a lot of points, I
    got served pretty quickly, but I noticed there were people who
    were just sitting there. And that meant that they didn't get
    the flights that they could have gotten.
        The Chairman. This is segmenting Americans. It is pre-
    predicting what will happen to them by virtue of the
    circumstances into which they fall.
        Mr. Turow. And who is valued----
        The Chairman. And all the research has been done to put
    them in that situation so they can control how they market and
    maximize their profit and maybe end up absolutely giving a
    horrible experience to that consumer.
        Mr. Turow. I agree.
        The Chairman. Senator Thune, I have something I want to
    say, but you are important around here. Do you want----
        Senator Thune. No, go ahead. I am fine.
        The Chairman. OK.
        I want to come back--since before 9/11, I have been on the
    Intelligence Committee, and every day I wake up to seven
    newspapers with nothing but NSA headlines. And I am here to
    tell you, as one of the authors of FISA and the PATRIOT Act and
    all the rest of it, that the NSA is so secure in its protection
    of privacy as compared to this group that we are talking to,
    these data brokers, it is not even close.
        This affects, as was pointed out, anybody, everybody. Who
    knows? NSA knows. They are only likely to interact at a .000001
    percent of people that they conclude need, you know, further
    observation. This is everybody, anybody, but more than that,
    divided into race, economic activities, education.
        And there is something--I can't prove it is wrong, but
    there is something lethal about it. There is something unfair
    about it. It is something like--you know, if somebody is poor
    or less educated--and this is what I have spent my life--I come
    from West Virginia, where a lot of people face these problems.
    They are stigmatized. They have to live with it. The system is
    stacked against them. And a lot of people are making a lot of
    money out of it, and one are the data brokers.
        I am not asking for an argument because the bell just went
    off. But I am here to say that this is a very serious
    situation. I think everybody here agrees this has not been
    talked about. We have done an investigation of it, FTC has
    looked at it, you all have looked at it, you certainly have.
    And we have to continue on this thing.
        You know, the slogan of one of the companies that the
    Committee reviewed in this investigation, the company says it
    lives by the following words: ``Just because you can doesn't
    mean you should.'' Unfortunately, I have been thinking about
    this because today's testimony and the Committee's inquiry
    shows the industry as a whole is falling far short of that
    standard--appears to be falling far short of that standard. In
    fact, it seems to me the motto of data brokers is: ``We can,
    and indeed we will.'' Full of optimism.
        We heard from Ms. Dixon about the lists generated by data
    brokers from genetic disease sufferers and dementia sufferers
    to payday-loan responders, products that seem tailor-made for
    businesses seeking to take advantage of consumers. I hate that.
    I personally am revolted by that. I have seen it in the
    treatment of coal miners and their safety. I have seen it in
    every aspect of life in the state that I come from and
    elsewhere, living abroad. I don't like it.
        I think it is our job as a government to minimize that
    possibility and to bring out into sunlight what is going on. If
    Senator Booker doesn't know that this is happening to him--he
    does now, and he doesn't like it. Senator McCaskill really
    nailed something that could not be responded to.
        And so we are going to continue on this track. I think it
    is serious, and I think it is a dark underside of American life
    on which people make a lot of money and cause a lot of people
    to suffer even more and, therefore, have even lower self-
    esteem, which is not the America we want.
        This hearing is adjourned.
        [Whereupon, at 4:30 p.m., the hearing was adjourned.]
                                A P P E N D I X

     Response to Written Question Submitted by Hon. John D. Rockefeller IV
                                to Jessica Rich
        Question. Ms. Rich, the Commission currently has authority under
    the Fair Credit Reporting Act to seek enforcement actions against data
    brokers that provide information that is used to make eligibility
    decisions about consumers. Furthermore, the Commission has its broad
    organic authority under the FTC Act to enforce against unfair or
    deceptive acts or practices. However, the Commission lacks authority to
    mandate the type of transparency that all of the hearing's witnesses
    apparently agree is important for the industry. In this context, does
    the FTC have authority to require data brokers to allow consumers to:

       Access the information data brokers possess on them?

       Correct any inaccuracies?

       Affirmatively ``opt out'' and prevent the data broker from
            selling their information?

        Answer. Although the FTC has used its authority under the Fair
    Credit Reporting Act (FCRA) and the FTC Act to take action against
    unlawful practices by data brokers, the FTC does not have the authority
    to impose the requirements you identify. The FTC has consistently
    treated the Fair Credit Reporting Act (FCRA) as an enforcement
    priority. It has brought almost 100 cases alleging violations of the
    FCRA, obtaining in excess of $30 million in civil penalties. However,
    as we explained in our March 2012 report Protecting Consumer Privacy in
    an Era of Rapid Change: Recommendations for Businesses and Policymakers
    (Privacy Report), the FCRA covers only some data broker activities. The
    FCRA generally does not cover data brokers that maintain data for
    marketing purposes and for other non-marketing purposes, such as to
    locate people or detect fraud. Thus, consumers do not have, for all
    data broker activities, the access, correction, or consumer control
    rights the FCRA provides for data brokers engaged in certain
    eligibility determinations.
        In addition, the FTC has used its authority under the FTC Act to
    address unfair or deceptive practices in the data broker industry. See,
    e.g., United States v. ChoicePoint, Inc., No. 1:06-cv-00198 (N.D. Ga.
    Feb. 15, 2006) (FTC alleged, among other things, that a data broker
    engaged in unfair practices by failing to properly screen or monitor
    purchasers of sensitive consumer data) ; In re U.S. Search, Inc., FTC
    Docket No. C-4317 (Mar. 25, 2011) (FTC alleged that a data broker
    deceived consumers by offering an opt out that was ineffective). Unless
    they are implemented as remedies to a violation of the FTC Act,
    however, we do not currently have the authority to require data brokers
    to provide consumers with access or correction rights, or to allow
    consumers to suppress or opt out of the sale or use of data held by
    data brokers.
        In recognition of these gaps, the agency recommended legislation,
    in its March 2012 Privacy Report, that would offer the consumer rights
    you have identified.
                                     ______

        Response to Written Questions Submitted by Hon. Kelly Ayotte to
                                  Jessica Rich
        Question 1. Earlier this year, FTC Commissioner Julie Brill called
    upon state AGs to take a more active role in investigating and holding
    accountable data brokers for violations of the Fair Credit Reporting
    Act. Can you talk about the role of state law enforcement officials in
    this field? Does your agency work closely with your state law
    enforcement counterparts on pursing privacy and marketing complaints?
        Answer. The FTC has consistently treated the Fair Credit Reporting
    Act (FCRA) as an enforcement priority. It has brought almost 100 cases
    alleging violations of the FCRA, obtaining in excess of $30 million in
    civil penalties. State attorneys general (AG) also have a role to play
    in enforcing the FCRA. Under section 621 of the FCRA, state AGs can
    bring an FCRA enforcement action, so long as they provide the FTC and
    the Consumer Financial Protection Bureau with advance notice; the FTC
    has the right to intervene in such matters. This provision ensures that
    states coordinate their FCRA enforcement efforts with the appropriate
    Federal regulators. In addition, we work very closely with the states
    to educate identity theft victims of their rights under the FCRA. Our
    Tax Identity Theft Awareness week, involving multiple outreach events
    across the country, is a good example of our collaborative efforts with
    states to protect consumers in this area. See ftc.gov/taxidtheft.
        Outside the FCRA, the FTC and state AGs cooperate often on privacy
    and security and related marketing investigations. One notable example
    is the action the FTC brought with 35 state AGs against LifeLock for
    deceptive claims about the effectiveness of LifeLock's identity theft
    services and its security measures. This 2010 action is one of the
    largest FTC-state coordinated privacy-related settlements on record.
    The FTC has also pursued several Do Not Call privacy cases with state
    AGs serving as co-plaintiffs, including enforcement actions brought
    against Dish Network, LLC, United States Benefits, LLC and Worldwide
    Info Services, Inc. In addition, the FTC participates in monthly
    telephone conferences with members of the National Association of
    Attorneys General's Do Not Call working group. The FTC continues to
    coordinate with state AGs on a variety of law enforcement
    investigations involving privacy and security in order to avoid
    duplication of efforts and ensure appropriate and responsible
    allocation of enforcement resources.

        Question 2. When we look at current Federal law governing data
    brokers, we have Fair Credit Reporting Act, Graham-Leach-Bliley, HIPPA,
    Children's Online Privacy Protection Act, and Electronic Communications
    Privacy Act. Plus there are 50 AGs policing behavior and activity. In
    addition to that, we have brokers touting their aggressive self-
    regulatory policies. Can you address specifically what more
    legislation, mandates or regulations you think we need? Some have
    argued that before we add more laws and/or regulations to the books, we
    should enforce the ones we have.
        Answer. While these statutes all provide important protections for
    consumer data, they have limitations. Gramm-Leach-Bliley, for example,
    applies only to financial institutions; HIPAA covers only medical
    records maintained by specifically defined medical providers; the
    Children's Online Privacy Protection Act does not cover data collection
    or use for individuals age 13 and over; and the Electronic
    Communications Privacy Act is focused on government access to
    electronic data. Similarly, as we explained in our March 2012 report
    Protecting Consumer Privacy in an Era of Rapid Change; Recommendations
    for Businesses and Policymakers (Privacy Report), the Fair Credit
    Reporting Act covers only some data broker activities. The FCRA
    generally does not cover brokers that maintain data for marketing
    purposes and for other non-marketing purposes, such as to locate people
    or detect fraud.
        The Commission agrees that self-regulation can be an effective way
    to protect consumer interests while promoting innovation. The
    Commission has long supported robust, enforceable self-regulatory
    mechanisms established by industry to protect consumers. As we noted in
    our Privacy Report, however, self-regulatory efforts by the data broker
    industry have lagged. The Commission has monitored data brokers since
    the 1990s. In 1997, the Commission held a workshop to examine database
    services used to locate, identify, or verify the identity of
    individuals, referred to at the time as ``individual reference
    services.'' The workshop prompted industry members to form the self-
    regulatory Individual Reference Services Group (IRSG). The Commission
    subsequently issued a report on the workshop and the IRSG in which it
    commended the progress made by the industry's self-regulatory programs,
    but noted that the industry's efforts did not adequately address the
    lack of transparency of data broker practices. Although industry
    ultimately terminated the IRSG, a series of public breaches--including
    one involving ChoicePoint--led to renewed scrutiny of the practices of
    data brokers. The Privacy Report noted that the industry has continued
    to operate since then with a lack of transparency. To address this
    concern, the Privacy Report expressed support for legislation that
    would give consumers access to information held by data brokers.
                                     ______

        Response to Written Question Submitted by Hon. Amy Klobuchar to
                                 Jerry Cerasale
        Question. Most consumers would like to believe that any of their
    personal information held by companies is private, secure, and
    accurate. However, with rapidly changing marketing strategies and
    technology platforms, consumers are no longer sure that this is the
    case.
        Mr. Cerasale: How do your members, both large and small marketers,
    work to promote consumer trust in your services? How can a lack of
    consumer trust in private data storage and use policies impact the
    broader economy?
        Answer. Consumer trust forms the bedrock of the Data-Driven
    Marketing Economy--and the American economy as a whole. Consumer trust
    is critical to a company's success, regardless of the size of the
    business. This is especially true for remote sellers that rely on
    customers to purchase goods sight unseen. Businesses have every
    incentive to protect and promote consumer trust in the goods and
    services they deliver.
        While businesses are already incentivized to promote consumer
    trust, DMA supports this incentive with a robust ethics and compliance
    program that calls on its members to adhere to its Guidelines on
    Ethical Business Practice. For more than four decades, DMA has
    administered its Guidelines and promoted accountability for its
    members, setting a high bar for responsible marketing. The DMA Ethics
    Policy and Ethics Operating Committees develop, update and enforce
    DMA's Guidelines as part of DMA's public trust with regulators and
    consumers. The accountability program is flexible enough to address
    ongoing changes in technology, markets, consumer interest and new
    business practices.
        Data security is a prime example of DMA's commitment to maintaining
    consumer trust, having long served as a core principle of the DMA's
    Guidelines. Like many elements in the Guidelines, the DMA's data
    security standards have remained far from static. In January 2014, the
    DMA approved updated Business Ethical Guidelines on data security,
    calling on every data-driven marketer to take proactive measures to
    further enhance data security across the data-driven marketing
    industry.
        In addition to data security, DMA members are committed to offering
    consumers' choice, and to using marketing data for marketing purposes,
    not for eligibility such as employment and financial transactions.
    These and other consumer-friendly practices help build and maintain
    trust in the data-driven marketplace.
        When it comes to assessing whether businesses have gained
    consumers' trust and confidence, the proof is in the numbers. Remote
    selling, including through ecommerce, is a fast growing segment of our
    economy. More broadly, the data-driven marketing economy (``DDME'')
    added $156 billion in revenue to the U.S. economy and fueled more than
    675,000 jobs in 2012 alone.
        $110 billion and 46,000 jobs depend on the ability of firms to
    exchange data across the DDME.\1\ Indeed, responsible use of data by
    marketers has revolutionized one of the most costly aspects of doing
    business in any industry. As businesses of all sizes innovate to
    deliver more efficient, convenient, and secure marketing and
    transactional solutions, consumers are responding with a vote of
    confidence with their feet and with their pocketbooks.
    ---------------------------------------------------------------------------
        \1\ Deighton and Johnson, The Value of Data: Consequences for
    Insight, Innovation & Efficiency in the U.S. Economy (2013), available
    at http://ddminstitute.thedma.org/#valueofdata
    ---------------------------------------------------------------------------
                                     ______

        Response to Written Questions Submitted by Hon. Kelly Ayotte to
                                 Jerry Cerasale
        Question 1. Do self-regulatory programs, such as the DMA's
    Guidelines for Ethical Business Practice, and other industry codes of
    conduct based on these and other guidelines, promote responsible use
    and sharing of data in the marketplace? How widespread is adoption of
    these programs in the marketing industry? How do governing
    organizations enforce the rules of these programs against bad actors?
        Answer. Yes. Self-regulatory programs, like the one administered by
    the DMA, not only promote, but also require companies to engage in the
    responsible use and sharing of data in the data driven marketing
    economy (``DDME''). The DMA believes that self-regulation and education
    are important components for addressing consumer privacy while ensuring
    that data flows continue to benefit consumers and the economy.
        DMA Reach & Scope. The DMA has established an enforceable framework
    of industry best practices that focus on providing transparency,
    choice, and other protections to consumers. At the foundation of this
    framework are the DMA Guidelines for Ethical Business Practice (``DMA
    Guidelines''), which have been adopted by all DMA members, representing
    every segment of the marketing industry. In addition, the DMA enforces
    its guidelines against both members and non-members covering thousands
    of companies, making the DMA Guidelines the standard for the industry.
        DMA members deeply value consumer trust and understand that
    responsible data practices are critical to building and maintaining
    customer relationships. To that end, the DMA and its members have
    developed and implemented more than 50 code sections in the DMA
    Guidelines that regulate marketing data practices, which are regularly
    updated to adapt to new technologies and business practices. The DMA
    Guidelines address a wide variety of marketing practices including, the
    conduct of data brokers, sweepstakes, mobile marketing, internet-based
    marketing, and texting.
        Enforcement. The DMA has a long history of enforcing these
    guidelines. The DMA Guidelines have been applied to hundreds of cases
    concerning a wide range of issues including deception, unfair business
    practices and personal information protection. In addition, companies
    that represent to the public that they are DMA members, but fail to
    comply with the DMA Guidelines, may be liable for deceptive advertising
    under Section 5 of the FTC Act and comparable state laws.
        Compliance Process. The DMA receives complaints from consumers,
    members, nonmembers, and consumer protection agencies. These complaints
    are reviewed by the DMA's Ethics Operating Committee and if a potential
    violation is found to exist, the company will be contacted,
    investigated, and advised on how it can cure the violation. Most
    companies work with the Ethics Operating Committee voluntarily to cease
    or change the questioned practice. However, if a company does not
    cooperate with the Ethics Operating Committee, action can be taken by
    the Board of Directors and the results of the investigation may be made
    public. For example, from February 2012 to June 2013, the DMA Corporate
    & Social Responsibility Committee reviewed 55 cases and 12 of these
    were made public.\1\ Additional Board actions could include public
    censure, suspension or expulsion from the DMA. The DMA also refers
    cases to Federal and state law enforcement authorities for review when
    appropriate.
    ---------------------------------------------------------------------------
        \1\ Direct Marketing Association, DMA Annual Ethics Compliance
    Report 2012-2013 (2013), available at http://thedma.org/compliance/.
    ---------------------------------------------------------------------------
        Education. Beyond enforcement of the DMA Guidelines, the DMA also
    provides education to both businesses and consumers about responsible
    data collection and use. Through the regular publishing of case reports
    that summarize questioned marketing promotions, webinars, in-person
    seminars, and regular communication with its members, the DMA helps to
    promote best practices in the industry. This communication and
    education is a great benefit to small businesses as they begin to
    market their products and services to consumers. The DMA also maintains
    a section of our website focused on consumers entitled ``Consumer
    Help,'' and offers consumers a centralized tool to help manage their
    direct mail and e-mail preferences at DMAChoice.org.

        Question 2. In large part, New Hampshire's economy depends on small
    businesses and start-up companies. My husband is the owner of a small
    business. Does the use and sharing of data across all sectors of the
    economy help or hurt the ability of small businesses to compete with
    larger entities in the marketplace? Does the use and sharing of data
    increase or decrease barriers to entry in the marketplace? How do these
    trends impact job creation?
        Answer. Small businesses benefit significantly from the use and
    sharing of data. A recent study entitled, The Value of Data:
    Consequences for Insight, Innovation & Efficiency in the U.S. Economy
    (``Value of Data''), quantified the important role that the use and
    sharing of data plays in fueling economic growth.\2\ This study, which
    was conducted independently by Professors John Deighton of Harvard
    Business School and Peter Johnson of Columbia University, revealed that
    the Data Driven Marketing Economy (``DDME'') was a major asset to small
    businesses and start-ups.
    ---------------------------------------------------------------------------
        \2\ Deighton and Johnson, The Value of Data: Consequences for
    Insight, Innovation & Efficiency in the U.S. Economy (2013), available
    at http://ddminstitute.thedma.org/#valueofdata (hereinafter ``The Value
    of Data'').
    ---------------------------------------------------------------------------
        The Value of Data study found that the sharing of data across the
    DDME enables small businesses to compete effectively with larger
    competitors. Data gives all companies, and especially small businesses,
    the ability to effectively match products to customers both on and
    offline, lowering barriers to market entry for specialized or niche
    offerings. Thanks to the responsible use and sharing of data across the
    economy, small business have access to data they would not otherwise
    have available to them, enabling them to more efficiently and
    effectively market their products and better compete in the
    marketplace. Data sharing also allows small businesses to incrementally
    build their customer base, and grow their product in ways never before
    available to companies of their size.
        The Value of Data study also found that the DDME generated $156
    billion in revenue to the United States economy and fueled more than
    675,000 jobs in 2012 alone. Further, the study found that an additional
    1,038,000 people owe their employment to these DDME jobs.\3\ The study
    also found that in New Hampshire, the DDME was responsible for $1
    billion in revenue and 3,000 jobs in the state's economy.\4\ The study
    estimated that 70 percent of the value of the DDME--$110 billion in
    revenue and 475,000 jobs nationwide--depends on the ability of firms to
    share data across the DDME. If this ability to share data were
    curtailed, those jobs and revenue would be impacted and the U.S.
    economy would be much less efficient.
    ---------------------------------------------------------------------------
        \3\ The Value of Data at 74.
        \4\ The Value of Data at 96-98.
    ---------------------------------------------------------------------------

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