A Call for Transparency and Accountability

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DATA

BROKERS

A Call for Transparency and Accountability

Federal Trade Commission

May 2014

Data Brokers

A Call for Transparency and Accountability

May 2014

Federal Trade Commission

Edith Ramirez, Chairwoman

Julie Brill, Commissioner

Maureen K. Ohlhausen, Commissioner

Joshua D. Wright, Commissioner

Terrell McSweeny, Commissioner

Table of Contents

EXECUTIVE SUMMARY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . i

I. INTRODUCTION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1

II.

Background . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

The Commission’s Past Efforts to Improve Transparency of Data Broker Practices . . . 4

Data Broker Study. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

DATA ACQUISITION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

Sources of Data. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

Government Sources. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

Publicly Available Sources, Including Social Media, Blogs, and the Internet. . . . 13

Commercial Data Sources . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13

Assessing Sources . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16

Contracts with Sources. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16

Collection Methods. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17

Data Updates. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18

III. DEVELOPMENT OF PRODUCTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19

Creation of Data Elements and Segments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19

Data Suppression . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21

Data Storage. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22

IV. TYPES OF PRODUCTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23

Marketing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23

Direct Marketing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23

Online Marketing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26

Marketing Analytics. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31

Risk Mitigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32

Identity Verification. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32

Fraud Detection. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33

People Search. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34

DATA QUALITY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36

Marketing Products. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36

Risk Mitigation Products. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37

People Search Products. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38

VI. CLIENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39

Types of Clients. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39

Client Screening, Contracting, and Monitoring Practices. . . . . . . . . . . . . . . . . . . . . . . . 40

VII. CONSUMER CONTROLS OVER DATA BROKER INFORMATION . . . . . . . . . . . . . . . . . . . 42

Marketing Products. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42

Risk Mitigation Products. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43

People Search Products. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44

VIII. FINDINGS AND RECOMMENDATIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46

Findings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46

Characteristics of the Industry. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46

Benefits and Risks. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47

Consumer Choice. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49

Legislative Recommendations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49

Marketing Products. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50

Risk Mitigation Products. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53

People Search Products. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54

Best Practice Recommendations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54

IX. CONCLUSION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57

APPENDIX A: Text of the Model Order. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-1

APPENDIX B: Illustrative List of Data Elements and Segments. . . . . . . . . . . . . . . . . . . . . . . . B-1

APPENDIX C: Concurring Statement of Commissioner Julie Brill. . . . . . . . . . . . . . . . . . . . . . C-1

List of Exhibits

Exhibit 1: Data Collection—Online & Offline. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

Exhibit 2: Data Sources. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15

Exhibit 3: Revenue of Nine Data Brokers by Product Category. . . . . . . . . . . . . . . . . . . . . . . . . . . 23

Exhibit 4: Onboarding. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30

Exhibit 5: Clients by Product Type and Industry Sector. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39

Data Brokers: A Call for Transparency and Accountability

EXECUTIVE SUMMARY

In today’s economy, Big Data is big business. Data brokers—companies that collect consumers’ personal

information and resell or share that information with others—are important participants in this Big Data

economy.

In this report, the Federal Trade Commission (“FTC” or “Commission”) discusses the results of an indepth study of nine data brokers. These data brokers collect personal information about consumers from

a wide range of sources and provide it for a variety of purposes, including verifying an individual’s identity,

marketing products, and detecting fraud. Because these companies generally never interact with consumers,

consumers are often unaware of their existence, much less the variety of practices in which they engage. By

reporting on the data collection and use practices of these nine data brokers, which represent a cross-section

of the industry, this report attempts to shed light on the data broker industry and its practices.

For decades, policymakers have expressed concerns about the lack of transparency of companies that

buy and sell consumer data without direct consumer interaction. Indeed, the lack of transparency among

companies providing consumer data for credit and other eligibility determinations led to the adoption of

the Fair Credit Reporting Act (“FCRA”), a statute the Commission has enforced since its enactment in

1970. The FCRA covers the provision of consumer data by consumer reporting agencies where it is used

or expected to be used for decisions about credit, employment, insurance, housing, and similar eligibility

determinations; it generally does not cover the sale of consumer data for marketing and other purposes.

While the Commission has vigorously enforced the FCRA,1 since the late 1990s it has also been active in

examining the practices of data brokers that fall outside the FCRA.

Most recently, in its 2012 report Protecting Consumer Privacy in an Era of Rapid Change:

Recommendations for Businesses and Policymakers (“Privacy Report”),2 the Commission specifically

addressed the subject 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.3 The Commission noted that, while the FCRA addresses a number of critical

transparency issues associated with companies that sell data for credit, employment, and insurance purposes,

data brokers within the other two categories remain opaque. In the report, the Commission recommended

The Commission has brought 100 FCRA enforcement actions resulting in over $30 million in penalties. See What

Information Do Data Brokers Have on Consumers, and How Do They Use It? Before the S. Comm. on Commerce, Sci., &

Transp., 113th Cong. (2013) (statement of Jessica Rich, Director of the Bureau of Consumer Protection, Fed. Trade

Comm’n), available at http://www.ftc.gov/sites/default/files/documents/public_statements/prepared-statement-federal-tradecommission-entitled-what-information-do-data-brokers-have-consumers/131218databrokerstestimony.pdf.

Fed. Trade Comm’n, Protecting Consumer Privacy in an Era of Rapid Change: Recommendations for Businesses

and Policymakers (2012), available at http://ftc.gov/os/2012/03/120326privacyreport.pdf. Commissioners Ohlhausen and

Wright were not members of the Commission at that time and thus did not offer any opinion on that matter.

Id. at 65.

Federal Trade Commission

legislation in this area to improve the transparency of industry practices.4 Following the Privacy Report, the

Commission determined that, despite some progress, too little was still known about the practices of data

brokers and that further examination was needed.

To further the objective of increased transparency, in December 2012, the Commission initiated a study

of data broker practices. It issued identical Orders to File Special Reports (“Orders”) under section 6(b) of

the Federal Trade Commission Act5 to nine data brokers seeking information about their data collection and

use practices, as well as any tools provided to consumers to control these practices. Appendix A is a copy of

the text of the Orders that the Commission issued to the data brokers. The nine data brokers that received

the Orders are Acxiom, Corelogic, Datalogix, eBureau, ID Analytics, Intelius, PeekYou, Rapleaf, and

Recorded Future. The Orders requested detailed information regarding the data brokers’ practices, including

the nature and sources of consumer data they collect; how they use, maintain, and disseminate the data; and

the extent to which the data brokers allow consumers to access and correct data about them or to opt out of

having their personal information sold or shared.

This report summarizes the information provided in response to the Commission’s Orders, including

information gathered through follow-up questions and meetings and publicly available sources. In general,

the data brokers collect information about consumers from a wide variety of commercial, government, and

other publicly available sources. In developing their products, the data brokers use not only the raw data

they obtain from these sources, such as a person’s name, address, home ownership status, or age, but also

certain derived data, which they infer about consumers. For example, a data broker might infer that an

individual with a boating license has an interest in boating, that a consumer has a technology interest based

on the purchase of a “Wired” magazine subscription, or that a consumer who has bought two Ford cars

has loyalty to that brand. The data brokers use this actual and derived data to create three main kinds of

products for clients in a wide variety of industries: marketing products, risk mitigation products, and people

search products.

Marketing Products

Five of the data brokers studied sell marketing products, which assist clients in a variety of ways. For

example, businesses can purchase their customers’ email addresses from data brokers so that they can

send email solicitations to them. They can also purchase information about their customers’ interests in

order to market specific products to them, including using consumers’ offline activities to determine what

advertisements to serve them on the Internet. The data brokers also sell analytics products. For instance,

some data brokers analyze their client’s customer data and suggest the media channel to use to advertise

a particular product (e.g., online or newspapers) and/or the geographic region where the advertisements

Id. at 69.

15 U.S.C. § 46(b). See also Appendix A.

Data Brokers: A Call for Transparency and Accountability

should be shown. A few data brokers also convert their analyses into marketing scores that, for example,

rank clients’ customers on the basis of how likely they are to respond to particular marketing efforts or to

make a purchase, their presence on the web or their influence over others, or other metrics.

Most of the data brokers that sell marketing products provide consumers with limited access to some,

but not all, of the actual and derived data the data brokers have about them. Only two of the data brokers

allow consumers to correct their personal information for marketing purposes, and four of the five data

brokers that sell marketing products allow consumers to opt out of the use of their personal information for

marketing purposes. However, it is not clear how consumers would learn about these rights; for example,

no centralized portal currently exists for consumers to learn about data brokers and what access rights and

choices they provide.

Risk Mitigation Products

Four of the data brokers studied sell risk mitigation products, which clients use to verify their customers’

identities or detect fraud. For example, a lender might use a data broker’s identity verification product

to ensure that the individual presenting himself as John Smith at 123 Main Street who wants to open an

account is in fact that John Smith. The same lender might use a fraud detection product to flag whether a

Social Security number provided as part of the application process has recently been associated with many

different addresses, thereby suggesting fraud.

Even if consumers knew about the data brokers providing products in this category or knew they were

denied or limited in their ability to complete a transaction, they might not be able to access their own

information from these data brokers and correct errors. Two of the data brokers studied provide consumers

with some form of access to their information used in risk mitigation products after verifying their identity,

but only one allows consumers to correct their information.

People Search Products

Three of the data brokers studied provide “people search” websites through which users can search

for publicly available information about consumers. Users can use these products to research corporate

executives and competitors, find old friends, look up a potential love interest or neighbor, network, or obtain

court records or other information about consumers. Consumers can generally access their information

through the same free or fee-based products that the data brokers provide to their clients. These data brokers

allow consumers to correct certain information to varying degrees; most of them also allow consumers to opt

out of the disclosure of their information.

iii

Federal Trade Commission

Based on the information obtained, the Commission makes the following findings.

Findings

Characteristics of the Industry

⊲⊲ Data Brokers Collect Consumer Data from Numerous Sources, Largely Without

Consumers’ Knowledge: Data brokers collect data from commercial, government, and

other publicly available sources. Data collected could include bankruptcy information, voting

registration, consumer purchase data, web browsing activities, warranty registrations, and other

details of consumers’ everyday interactions. Data brokers do not obtain this data directly from

consumers, and consumers are thus largely unaware that data brokers are collecting and using

this information. While each data broker source may provide only a few data elements about

a consumer’s activities, data brokers can put all of these data elements together to form a more

detailed composite of the consumer’s life.

⊲⊲ The Data Broker Industry is Complex, with Multiple Layers of Data Brokers

Providing Data to Each Other: Data brokers provide data not only to end-users, but also

to other data brokers. The nine data brokers studied obtain most of their data from other data

brokers rather than directly from an original source. Some of those data brokers may in turn

have obtained the information from other data brokers. Seven of the nine data brokers in the

Commission’s study provide data to each other. Accordingly, it would be virtually impossible

for a consumer to determine how a data broker obtained his or her data; the consumer would

have to retrace the path of data through a series of data brokers.

⊲⊲ Data Brokers Collect and Store Billions of Data Elements Covering Nearly Every

U.S. Consumer: Data brokers collect and store a vast amount of data on almost every U.S.

household and commercial transaction. Of the nine data brokers, one data broker’s database

has information on 1.4 billion consumer transactions and over 700 billion aggregated data

elements; another data broker’s database covers one trillion dollars in consumer transactions;

and yet another data broker adds three billion new records each month to its databases. Most

importantly, data brokers hold a vast array of information on individual consumers. For

example, one of the nine data brokers has 3000 data segments for nearly every U.S. consumer.

⊲⊲ Data Brokers Combine and Analyze Data About Consumers to Make Inferences About

Them, Including Potentially Sensitive Inferences: Data brokers infer consumer interests

from the data that they collect. They use those interests, along with other information, to place

consumers in categories. Some categories may seem innocuous such as “Dog Owner,” “Winter

Activity Enthusiast,” or “Mail Order Responder.” Potentially sensitive categories include those

Data Brokers: A Call for Transparency and Accountability

that primarily focus on ethnicity and income levels, such as “Urban Scramble” and “Mobile

Mixers,” both of which include a high concentration of Latinos and African Americans with

low incomes. Other potentially sensitive categories highlight a consumer’s age such as “Rural

Everlasting,” which includes single men and women over the age of 66 with “low educational

attainment and low net worths,” while “Married Sophisticates” includes thirty-something

couples in the “upper-middle class . . . with no children.” Yet other potentially sensitive

categories highlight certain health-related topics or conditions, such as “Expectant Parent,”

“Diabetes Interest,” and “Cholesterol Focus.”

⊲⊲ Data Brokers Combine Online and Offline Data to Market to Consumers Online: Data

brokers rely on websites with registration features and cookies to find consumers online and

target Internet advertisements to them based on their offline activities. Once a data broker

locates a consumer online and places a cookie on the consumer’s browser, the data broker’s

client can advertise to that consumer across the Internet for as long as the cookie stays on the

consumer’s browser. Consumers may not be aware that data brokers are providing companies

with products to allow them to advertise to consumers online based on their offline activities.

Some data brokers are using similar technology to serve targeted advertisements to consumers

on mobile devices.

Benefits and Risks

⊲⊲ Consumers Benefit from Many of the Purposes for Which Data Brokers Collect and

Use Data: Data broker products help to prevent fraud, improve product offerings, and deliver

tailored advertisements to consumers. Risk mitigation products provide significant benefits

to consumers by, for example, helping prevent fraudsters from impersonating unsuspecting

consumers. Marketing products benefit consumers by allowing them to more easily find

and enjoy the goods and services they need and prefer. In addition, consumers benefit from

increased and innovative product offerings fueled by increased competition from small

businesses that are able to connect with consumers they may not have otherwise been able

to reach. Similarly, people search products allow individuals to connect with old classmates,

neighbors, and friends.

⊲⊲ At the Same Time, Many of the Purposes for Which Data Brokers Collect and Use

Data Pose Risks to Consumers: There are a number of potential risks to consumers from

data brokers’ collection and use of consumer data. For example, if a consumer is denied the

ability to conclude a transaction based on an error in a risk mitigation product, the consumer

can be harmed without knowing why. In such cases, the consumer is not only denied the

immediate benefit, but also cannot take steps to prevent the problem from recurring. Similarly,

the scoring processes used in some marketing products are not transparent to consumers. This

Federal Trade Commission

means that consumers are unable to take actions that might mitigate the negative effects of

lower scores, such as being limited to ads for subprime credit or receiving different levels of

service from companies. As to other marketing products, they may facilitate the sending of

advertisements about health, ethnicity, or financial products, which some consumers may find

troubling and which could undermine their trust in the marketplace. Moreover, marketers

could even use the seemingly innocuous inferences about consumers in ways that raise concerns.

For example, while a data broker could infer that a consumer belongs in a data segment for

“Biker Enthusiasts,” which would allow a motorcycle dealership to offer the consumer coupons,

an insurance company using that same segment might infer that the consumer engages in

risky behavior. Similarly, while data brokers have a data category for “Diabetes Interest” that

a manufacturer of sugar-free products could use to offer product discounts, an insurance

company could use that same category to classify a consumer as higher risk. Finally, people

search products can be used to facilitate harassment, or even stalking, and may expose domestic

violence victims, law enforcement officers, prosecutors, public officials, or other individuals to

retaliation or other harm.

⊲⊲ Storing Data About Consumers Indefinitely May Create Security Risks: Some of the

data brokers store all data indefinitely, even if it is later updated, unless otherwise prohibited

by contract. For some products, these data brokers report that they need to keep older data.

For example, they explain that even if a consumer’s address is outdated, it is important to keep

the consumer’s address history in order to verify the consumer’s identity. For other products,

however, retention of older data may not be necessary. An older address may be less relevant

to deliver marketing to a consumer. Although stored data may be useful for future business

purposes, the risk of keeping the data may outweigh the benefits. For example, identity thieves

and other unscrupulous actors may be attracted to the collection of consumer profiles that

would give them a clear picture of consumers’ habits over time, thereby enabling them to

predict passwords, challenge questions, or other authentication credentials.

Consumer Choice

⊲⊲ To the Extent Data Brokers Offer Consumers Choices About Their Data, the Choices

are Largely Invisible and Incomplete: Some data brokers provide consumers with choices

about their data, but because data brokers are not consumer-facing, consumers may not know

where to go to exercise any choices that may be offered. In addition, the data brokers’ opt

outs do not clearly convey whether the consumer can exercise a choice to opt out of all uses

of consumer data, and therefore, consumers may find the opt outs confusing. As a result,

even those consumers who know who the data brokers are, find their websites, and take the

time to find the opt out and use it may still not know its limitations. For marketing products,

Data Brokers: A Call for Transparency and Accountability

the extent of consumers’ choices over their data is not clear. For risk mitigation products,

many data brokers do not provide consumers with access to their data or the ability to correct

inaccurate data.

Many of these findings point to a fundamental lack of transparency about data broker industry practices.

Data brokers acquire a vast array of detailed and specific information about consumers; analyze it to make

inferences about consumers, some of which may be considered sensitive; and share the information with

clients in a range of industries. All of this activity takes place behind the scenes, without consumers’

knowledge.

In light of these findings, the Commission unanimously renews its call for Congress to consider enacting

legislation that would enable consumers to learn of the existence and activities of data brokers and provide

consumers with reasonable access to information about them held by these entities. The specific legislative

recommendations made by the Commission reflect high-level principles drawn from the findings of this

study, the Commission’s previous work in this area, and the ongoing public debate about data brokers.6

In particular, the recommendations build on the Commission’s work for the last two decades to improve

transparency and choice in the data broker industry. Indeed, despite the Commission’s call for greater

transparency in the 1990s, the Individual References Services Group (“IRSG”) self-regulatory experiment to

improve transparency of data broker practices was short-lived.7 Since then, data broker practices have grown

dramatically, in both breadth and depth, as data brokers have expanded their ability to collect information

from a greater number of sources, including from consumers’ online activities; analyze it through new

algorithms and emerging business models; and store the information indefinitely due to reduced storage

costs. Despite the Commission’s past recommendations, lack of transparency and choice remain a significant

source of concern about this industry.

The Commission’s legislative recommendations vary depending on the product categories at issue—

marketing, risk mitigation, or people search—and reflect differences in the business models and the

The legislative and best practice recommendations, both in the Executive Summary and in Findings and Recommendations,

Section VIII of the Report, reflect the consensus of a majority of the Commission. To the extent that particular

Commissioners have different viewpoints on a particular legislative or best practice recommendation, those viewpoints

can be found in footnotes in the Findings and Recommendations, Section VIII of the Report, or in a separate statement.

Commissioner McSweeny did not participate in the Commission vote on this report.

See Fed. Trade Comm’n, Individual Reference Services, A Report to Congress (1997), available at http://www.

ftc.gov/reports/individual-reference-services-report-congress. In September 2001, approximately four years after it was

established, the IRSG announced its termination. See Notice of Termination of IRSG, IRSG, http://web.archive.org/

web/20020202103820/www.irsg.org/html/termination.htm (last visited May 19, 2014) (accessed by searching the Internet

Archive index and viewing the Dec. 8, 2002, version of this page).

vii

Federal Trade Commission

sensitivity of the data used. Many of these legislative recommendations are consistent with best practices

that certain of the nine data brokers have already implemented.8

Legislative Recommendations

With respect to data brokers that sell marketing products, the Commission recommends that Congress

consider legislation requiring data brokers to provide consumers access to their data, including sensitive data

held about them, at a reasonable level of detail, and the ability to opt out of having it shared for marketing

purposes. The Commission recommends that Congress consider including four requirements in any such

legislation. First, Congress should seek to enable consumers to easily identify which data brokers may

have data about them and where they should go to access such information and exercise opt-out rights.

Legislation could require the creation of a centralized mechanism, such as an Internet portal, where data

brokers can identify themselves, describe their information collection and use practices, and provide links

to access tools and opt outs. Second, Congress should consider requiring data brokers to clearly disclose to

consumers (e.g., on their websites) that they not only use the raw data that they obtain from their sources,

such as a person’s name, address, age, and income range, but that they also derive from the data certain

data elements. Allowing consumers to access data about themselves is particularly important in the case

of sensitive information—and inferences about sensitive consumer preferences and characteristics—such

as those relating to certain health information. Third, Congress should consider requiring data brokers to

disclose the names and/or categories of their sources of data, so that consumers are better able to determine

if, for example, they need to correct their data with an original public record source. Finally, Congress

should consider requiring consumer-facing entities to provide a prominent notice to consumers that they

share consumer data with data brokers and provide consumers with choices about the use of their data,

such as the ability to opt-out of sharing their information with data brokers. Congress should also consider

protecting sensitive information, such as certain health information, by requiring that consumer-facing

sources obtain consumers’ affirmative express consent before they collect sensitive information. Because few

consumers know about the existence of data brokers, meaningful notice from the data source provides an

important opportunity for consumers to learn that their data is shared with data brokers and how to exercise

control over the use of their data.

For data brokers that sell risk mitigation products, the Commission recommends that Congress consider

legislation that provides consumers with transparency when a company uses a risk mitigation product to

limit consumers’ ability to complete a transaction. Specifically, when a risk mitigation product adversely

impacts a consumer’s ability to obtain certain benefits, the consumer-facing company should identify the

viii

For example, since the Commission began its study, Acxiom, one of the data brokers at issue in this report, has publicly

announced changes to its access policy and launched a new website that allows consumers to access, correct, and opt out

of having information about themselves included in certain marketing products. See Press Release, Acxiom Corp., Acxiom

Launches New Consumer Portal (Sept. 4, 2013), available at http://www.acxiom.com/acxiom-launches-new-consumerportal/.

Data Brokers: A Call for Transparency and Accountability

data brokers whose data the company relied upon; these data brokers could, in turn, give consumers the

right to access the information used and, where appropriate, correct any erroneous information. The level

of transparency, access, and correction should be tied to the significance of the benefit or transaction in

question. At the same time, the Commission recognizes that it may be appropriate for legislation to require

data brokers to implement robust authentication safeguards before allowing such access and correction so

that an unscrupulous individual cannot “correct” accurate data. Congress should consider how to enable

consumer access while preserving the accuracy and security of such data.

The Commission also recommends Congress consider legislation that would require data brokers offering

people search products to: (1) allow consumers to access their own information; (2) allow consumers to

suppress the use of this information;9 (3) disclose to consumers the data brokers’ sources of information, so

that, if possible, consumers can correct their information at the source; and (4) disclose any limitations of

the opt-out option, such as the fact that close matches of an individual’s name may continue to appear in

search results.

Best Practice Recommendations

More generally, the Commission calls on the data broker industry to adopt several best practices. First,

they should implement privacy-by-design, which includes considering privacy issues at every stage of

product development. Second, the Commission encourages data brokers to implement better measures to

refrain from collecting information from children and teens, particularly in marketing products. Finally, the

Commission recommends that data brokers take reasonable precautions to ensure that downstream users of

their data do not use it for eligibility determinations or for unlawful discriminatory purposes.

The data brokers use the term “suppress” to indicate that, although certain data may appear in their databases, they prevent

the data from being included in their products.

Federal Trade Commission

Data Brokers: A Call for Transparency and Accountability

I. INTRODUCTION

A. Background

On a daily basis, consumers engage in a variety of online and offline activities that reveal personal

information about them. Some typical activities include using a mobile device, shopping for a home or

car, subscribing to a magazine, making a purchase at a store or through a catalog, browsing the Internet,

responding to a survey in order to get a coupon, using social media, subscribing to online news sites, or

entering a sweepstakes. As consumers engage in these daily activities, the entities they interact with collect

information about them and, in many instances, provide or sell that information to data brokers.1

See, e.g., Sharing Information: A Day in Your Life, Fed. Trade Comm’n, http://www.consumer.ftc.gov/media/video-0022sharing-information-day-your-life (last visited May 19, 2014).

Exhibit 1:

Data Collection

Online

& Offline

Offline

Online &

As consumers go about their business, data brokers may collect information about them.

post

information

publicly

online

shop

online

websites

shop at

stores

fill out

warranty

cards

buy

houses

data

brokers

online

stores

websites

stores

companies

local

governments

r’s info is shared or so

ld to

sume

co ir in

lle fo

by cte is

the d

ers

Consumer

Data

Broker

Name

Address

Phone number

Email address

When a produc

t was

bought online

The price paid

for a

product online

Personal interes

In-store purcha

ses

The purchase

price of

house

Data Brokers: A Call for Transparency and Accountability

This report examines and makes findings and recommendations with respect to the practices of data

brokers—companies whose primary business is collecting personal information about consumers from

a variety of sources and aggregating, analyzing, and sharing that information, or information derived

from it, for purposes such as marketing products, verifying an individual’s identity, or detecting fraud.

Significantly, data brokers typically collect, maintain, manipulate, and share a wide variety of information

about consumers without interacting directly with them. Indeed, as discussed further below, data brokers

collect data from a variety of sources, ranging from criminal records to property data to purchase history

to warranty card registration information. In addition to using raw data, data brokers often aggregate and

analyze it to make inferences about specific consumers. For example, they may categorize a consumer as an

expectant parent, a car enthusiast, interested in diabetes, a discount shopper, and more likely to be interested

in brand medications than generic. Other data brokers may flag a consumer’s Social Security number

(“SSN”) as potentially associated with fraud.

Data brokers provide the information they compile to clients, who can use it to benefit consumers.

Their clients may use the information to send relevant offers and coupons to consumers, which can

give consumers more choices and lower their costs for searching for products and services. In addition,

consumers may benefit from increased and innovative product offerings fueled by increased competition

from small businesses that are able to connect with consumers that they may not have otherwise been able

to reach. Data broker clients can also use data broker products to detect and prevent fraud, which can lower

costs for businesses and, in turn, consumers.

At the same time, data broker practices may raise privacy concerns. Data brokers typically collect,

manipulate, and share information about consumers without interacting directly with them. Consumers are

largely unaware that data brokers are engaging in these practices and, to the extent that data brokers offer

consumers explanations and choices about how the data brokers use their data, that information may be

difficult to find and understand.

This report reflects the record developed through the Federal Trade Commission’s (“Commission” or

“FTC”) issuance of Orders to File Special Reports (“Orders”) to nine data brokers pursuant to Section 6(b)

of the Federal Trade Commission Act, 15 U.S.C. § 46(b). The Orders sought information about the data

brokers’ practices starting January 1, 2010, related to the collection and use of consumer data. This report

also reflects information gathered through follow-up communications and meetings and from publicly

available sources.

Federal Trade Commission

B. The Commission’s Past Efforts to Improve

Transparency of Data Broker Practices

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 with little consumer awareness or transparency led to the enactment in 1970 of the Fair

Credit Reporting Act (“FCRA”),2 a statute the Commission has since enforced. The FCRA primarily

regulates consumer reporting agencies (“CRAs”), which compile consumers’ information and provide it to

companies making credit, employment, insurance, housing, and similar decisions. Among other things,

the FCRA requires CRAs to undertake reasonable procedures to ensure the maximum possible accuracy of

consumer information they provide; it also requires CRAs to provide consumers with the right to access and

correct their consumer reports.

In addition to enforcing the FCRA, the Commission has hosted workshops, drafted reports, and testified

before Congress about the privacy implications of data brokers’ practices.3 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 selfregulatory Individual References Services Group (“IRSG”). The Commission subsequently issued a report

on the workshop and the IRSG in which it commended the IRSG for its self-regulatory efforts, but noted

that its principles did not do enough to address the lack of transparency of data broker practices.4 After

15 U.S.C. §§ 1681–1681x (2012).

See, e.g., What Information Do Data Brokers Have on Consumers, and How Do They Use It? Before the S. Comm. on Commerce,

Sci., & Transp., 113th Cong. (2013) (statement of Jessica Rich, Director of the Bureau of Consumer Protection, Fed.

Trade Comm’n) [hereinafter FTC Statement on Data Brokers], available at http://www.ftc.gov/sites/default/files/documents/

public_statements/prepared-statement-federal-trade-commission-entitled-what-information-do-data-brokers-have-consumers

/131218databrokerstestimony.pdf; Identity Theft: Recent Developments Involving the Security of Sensitive Consumer Information

Before the S. Comm. on Banking, Hous., & Urban Affairs, 109th Cong. (2005) (statement of Deborah Majoras, Chairman,

Fed. Trade Comm’n), available at http://www.ftc.gov/os/testimony/050310idtheft.pdf; The Information Marketplace: Merging

and Exchanging Consumer Data, Fed. Trade Comm’n (Mar. 13, 2001), http://www.ftc.gov/bcp/workshops/infomktplace/

index.shtml. See also Press Release, Fed. Trade Comm’n, Information Flows: The Costs and Benefits Related to the Collection

and Use of Consumer Information (June 18, 2003), available at http://www.ftc.gov/news-events/press-releases/2003/06/

information-flows-costs-and-benefits-consumers-and-businesses.

See Fed. Trade Comm’n, Individual Reference Services, A Report to Congress (1997), available at http://www.ftc.gov/

reports/individual-reference-services-report-congress.

Data Brokers: A Call for Transparency and Accountability

industry terminated the IRSG in September 2001,5 a series of public breaches—including several involving

ChoicePoint—ultimately led to renewed scrutiny of the practices of data brokers.6

In recent years, the development of new technologies and business models, such as social media and

mobile applications, has dramatically increased the availability, variety, and volume of consumer data.7 New

forms of tracking and increasingly powerful analytics capabilities have emerged, such as mobile tracking

and analytics services that enable tracking of users across devices so that companies can communicate a

timely message tailored to a consumer based on the consumer’s location.8 With these new sources and

technologies, along with competitive demands from companies to seek more data about more consumers on

an increasingly granular level, data brokers are finding new opportunities to collect, compile, package, and

sell the consumer information they obtain.

In its 2012 report, Protecting Consumer Privacy in an Era of Rapid Change: Recommendations

for Businesses and Policymakers (“Privacy Report”),9 the Commission discussed the privacy concerns

raised by the practices of data brokers and identified three different categories of data brokers: (1) entities

subject to the FCRA; (2) entities that maintain data for marketing purposes;10 and (3) entities that maintain

data for non-marketing purposes that fall outside of the FCRA, such as to detect fraud or locate people. In

the Privacy Report, the Commission noted that, while the FCRA addresses a number of critical transparency

issues associated with companies that sell data for credit, employment, and insurance purposes, data brokers

within the other two categories operate largely in the dark.

The Commission’s Privacy Report made two primary recommendations to improve the transparency of

the practices of data brokers, which built on the prior work of the agency. First, the Commission renewed

In September 2001, approximately four years after it was established, the IRSG announced its termination. See Notice of

Termination of IRSG, IRSG, http://web.archive.org/web/20020202103820/www.irsg.org/html/termination.htm (last visited

May 19, 2014) (accessed by searching the Internet Archive index and viewing the Dec. 8, 2002, version of this page).

See, e.g., Complaint at 4, Reed Elsevier Inc., No. C-4226 (F.T.C. July 29, 2008), available at http://www.ftc.gov/sites/

default/files/documents/cases/2008/08/080801reedcomplaint.pdf; Complaint at 4–7, United States v. ChoicePoint,

No. 1:06-CV-0198-JTC (N.D. Ga. Feb. 16, 2006), available at http://www.ftc.gov/sites/default/files/documents/

cases/2006/01/0523069complaint.pdf. See also Press Release, Fed. Trade Comm’n, Consumer Data Broker ChoicePoint

Failed to Protect Consumers’ Personal Data, Left Key Electronic Monitoring Tool Turned Off for Four Months (Oct. 19,

2009), available at http://www.ftc.gov/news-events/press-releases/2009/10/consumer-data-broker-choicepoint-failed-protectconsumers.

See U.S. Gov’t Accountability Office, Information Resellers: Consumer Privacy Framework Needs to Reflect

Changes in Technology and the Marketplace (2013), available at http://www.gao.gov/products/GAO-13-663.

On February 19, 2014, the FTC hosted a seminar on Mobile Device Tracking, as part of a series of seminars to examine the

privacy implications of new areas of technology. See Spring Privacy Series: Mobile Device Tracking, Fed. Trade Comm’n (Feb.

19, 2014), http://www.ftc.gov/news-events/events-calendar/2014/02/spring-privacy-series-mobile-device-tracking.

Fed. Trade Comm’n, Protecting Consumer Privacy in an Era of Rapid Change: Recommendations for Businesses

and Policymakers (2012), available at http://ftc.gov/os/2012/03/120326privacyreport.pdf [hereinafter Privacy Report].

Commissioner Ohlhausen and Commissioner Wright were not members of the Commission at that time and thus did not

participate in the vote on the report.

10 The FCRA covers consumer report information used to make eligibility determinations in connection with credit, insurance,

and employment. It generally does not cover information used for marketing purposes.

Federal Trade Commission

a call for legislation that it had first recommended in 2009,11 which would have provided consumers with

access to information data brokers held about them, in order to improve the transparency of the industry’s

practices. In its recommendations, the Commission emphasized that the level of access should be reasonable

in light of the privacy issues raised, meaning that it should be in proportion to the nature, sensitivity, and

use of the data. Subsequently, in testimony before Congress, the Commission reaffirmed its support for

legislation that would provide consumers with such reasonable access.12

Second, the Commission recommended best practices to improve the transparency of the data broker

industry. For example, it proposed exploring the idea of a centralized website where data brokers that

compile and sell data for marketing purposes could identify themselves to consumers, describe how they

collect consumer information, disclose the types of companies to which they sell the information, and

explain the access rights and other choices they offer consumers.13 The Commission’s recommendations

regarding data brokers built on almost two decades of work on these issues14—indeed, decades marked by an

expansion in the number of data brokers and the richness of data they collect, but little progress in providing

transparency and choices to consumers about their practices. While the Commission recognizes the benefits

that data brokers offer, it continues to support legislation to provide consumers with more information and

meaningful choices about data broker practices.

The Commission is not alone in calling for greater transparency of the data broker industry. In

September 2013, the U.S. Government Accountability Office released a report on the practices of data

11 See Legislative Hearing on H.R. 2221, the Data Accountability and Protection Act, and H.R. 1319, the Informed P2P User Act

Before the H.R. Comm. on Energy & Commerce, 111th Cong. (2009) (statement of Eileen Harrington, Acting Director of the

Bureau of Consumer Protection, Fed. Trade Comm’n), available at http://www.ftc.gov/sites/default/files/documents/public_

statements/prepared-statement-federal-trade-commission-legislative-hearing-h.r.2221-data-accountability-and-protection-actand-h.r.1319-informed-p2p-user-act/p064504peertopeertestimony.pdf.

12 See The Need for Privacy Protections: Perspectives from the Administration and the Federal Trade Commission Before the S. Comm.

on Commerce, Sci., & Transp., 112th Cong. (2012) (statement of Jon Leibowitz, Chairman, Fed. Trade Comm’n), available at

http://www.ftc.gov/os/testimony/120509privacyprotections.pdf.

13 Privacy Report, supra note 9, at 69–70. The current website of the Direct Marketing Association offers choices to

consumers to opt out of receiving direct marketing materials, such as catalogs. This could be a potential model for such a

website. See DMAChoice, https://www.dmachoice.org/ (last visited May 19, 2014).

14 The Commission’s two decades of work regarding the data broker industry began when the Commission held its first public

workshop on Internet privacy in April 1995. In a series of hearings held in October and November 1995, the FTC examined

the implications of globalization and technological innovation for competition and consumer protection issues, including

privacy concerns. This workshop culminated in an FTC Staff Report. Fed. Trade Comm’n, Anticipating the 21st

Century: Consumer Protection Policy in the New High-Tech, Global Marketplace (1996), available at http://

www.ftc.gov/reports/anticipating-21st-century-competition-consumer-protection-policy-new-high-tech-global. Expanding

on this work, at a public workshop in June 1996, the Commission examined a wide range of consumer privacy issues,

including website practices with respect to the collection and use of consumers’ personal information. FTC staff issued a

report summarizing this workshop. Fed. Trade Comm’n, Staff Report: Public Workshop on Consumer Privacy on the

Global Information Infrastructure (Dec. 1996), available at http://www.ftc.gov/reports/staff-report-public-workshopconsumer-privacy-global-information-infrastructure. Finally, in June 1997, the agency held a four-day workshop to explore

issues relating to unsolicited commercial e-mail, online privacy, children’s online privacy, and individual reference services.

Press Release, Fed. Trade Comm’n, FTC Privacy Week—June 10–13 (June 4, 1997), available at http://www.ftc.gov/newsevents/press-releases/1997/06/ftc-privacy-week-june-10-13.

Data Brokers: A Call for Transparency and Accountability

brokers and concluded that Congress should consider legislation to reflect the challenges posed by changes

in technology, the increased market for consumer information, and the lack of transparency of the data

broker industry.15 Congress has also investigated data broker activities. In December 2013, the U.S. Senate

Committee on Commerce, Science and Transportation released a Majority Staff report summarizing its

investigation into how data brokers collect, compile, and sell consumer information.16 The report concluded

that data brokers that sell data for marketing purposes operate with minimal transparency and are subject to

virtually no statutory consumer protections.17 And on February 12, 2014, Senators Jay Rockefeller and Ed

Markey introduced a bill, entitled “Data Broker Accountability and Transparency Act,” that would improve

transparency of data broker practices by, among other things, requiring data brokers to make available the

information they have collected about each consumer.18 Similarly, U.S. Representatives Bobby L. Rush and

Joe Barton re-introduced a bipartisan bill, entitled “The Data Accountability and Trust Act of 2014,” that

would improve transparency of data broker practices by, among other things, requiring data brokers to make

available at least once per year the information they have collected about each consumer.19

C. Data Broker Study

To further the objective of increased transparency, in December 2012, the Commission initiated a

study of data broker practices. It issued identical Orders to nine data brokers seeking information about

the recipients’ information collection and use practices. The Orders contained requests for information and

documents about each data broker’s products and services, data collection practices, the sources of its data,

its clients, and the extent to which it provides consumers with access to and control of their information.

Appendix A is a copy of the text of the Orders that the Commission issued to the data brokers.

The Commission did not seek information about the data brokers’ activities that fall within the scope

of the FCRA.20 As noted above, the FCRA generally governs the practices of entities that assemble or

evaluate consumer information for use by creditors, employers, insurance companies, landlords, and others

15 See U.S. Gov’t Accountability Office, supra note 7, at 46. In its report, the GAO analyzed laws, studies, and other

documents, and interviewed representatives of federal agencies, the data broker industry, consumer and privacy groups, and

others. The report contains an extensive discussion of existing laws affecting the data broker industry.

16 Majority Staff of S. Comm. on Commerce, Sci., & Transp., Office of Oversight & Investigations, A Review of

the Data Broker Industry: Collection, Use, and Sale of Consumer Data for Marketing Purposes (2013) available

at http://www.commerce.senate.gov/public/?a=Files.Serve&File_id=0d2b3642-6221-4888-a631-08f2f255b577. The

Committee found that data brokers collect and maintain data on hundreds of millions of consumers, which they analyze,

package, and sell for a variety of purposes.

17 Id. In addition, on July 24, 2012, eight members of the House of Representatives sent a letter to nine data brokers asking for

information about how the companies amass, refine, sell, and share consumer data. See Natasha Singer, Congress to Examine

Data Sellers, N.Y. Times (July 24, 2012), http://www.nytimes.com/2012/07/25/technology/congress-opens-inquiry-into-databrokers.html?_r=0.

18 See Data Broker Accountability and Transparency Act, S. 2025, 113th Cong. (2014).

19 The Data Accountability and Trust Act of 2014, H.R. 4400, 113th Cong. (2014).

20 Some of the data brokers studied sell FCRA and non-FCRA covered products.

Federal Trade Commission

engaged in making certain eligibility determinations affecting consumers. It allows consumers to access their

consumer reports and dispute inaccurate information about them.

The nine data brokers that received the Orders are as follows:

1. Acxiom: Acxiom provides consumer data and analytics for marketing campaigns and fraud

detection. Its databases contain information about 700 million consumers worldwide with over

3000 data segments for nearly every U.S. consumer.21

2. Corelogic: Corelogic provides data and analytic services to businesses and government based

primarily on property information, as well as consumer and financial information. Its databases

include over 795 million historical property transactions, over ninety-three million mortgage

applications, and property-specific data covering over ninety-nine percent of U.S. residential

properties, in total exceeding 147 million records.22

3. Datalogix: Datalogix provides businesses with marketing data on almost every U.S. household and

more than one trillion dollars in consumer transactions.23 In September 2012, Facebook announced

a partnership with Datalogix to measure how often Facebook’s one billion users see a product

advertised on the social site and then complete the purchase in a brick and mortar retail store.24

4. eBureau: eBureau provides predictive scoring and analytics services for marketers, financial services

companies, online retailers, and others. eBureau primarily offers products that predict whether

someone is likely to become a profitable customer or whether a transaction is likely to conclude in

fraud. It provides clients with information drawn from billions of consumer records,25 adding over

three billion new records each month.26

5. ID Analytics: ID Analytics provides analytics services designed principally to verify people’s

identities or to determine whether a transaction is likely fraudulent. The ID Analytics network

21 Acxiom Corp., Annual Report 8 (2013), available at http://d3u9yejw7h244g.cloudfront.net/wp-content/

uploads/2013/09/2013-Annual-Report.pdf.

22 Corelogic, Annual Report 7 (2012), available at http://phx.corporate-ir.net/External.File?item=UGFyZW50SUQ9MTkw

NDg0fENoaWxkSUQ9LTF8VHlwZT0z&t=1.

23 About Us, Datalogix, http://www.datalogix.com/about/ (last visited May 19, 2014).

24 Joey Tyson, Relevant Ads That Protect Your Privacy, Facebook (Sept. 30, 2012, 8:55AM), https://www.facebook.com/notes/

facebook-and-privacy/relevant-ads-that-protect-your-privacy/457827624267125.

25 Find Your Next Customer Through Predictive Analytics, eBureau, http://www.ebureau.com/sites/default/files/file/ebureau_

solutions_brochure.pdf (last visited May 19, 2014).

26 eScores, eBureau, http://www.ebureau.com/sites/default/files/file/datasheets/ebureau_escore_datasheet.pdf (last visited May

19, 2014).

Data Brokers: A Call for Transparency and Accountability

includes hundreds of billions of aggregated data points, 1.1 billion unique identity elements, and it

covers 1.4 billion consumer transactions.27

6. Intelius: Intelius provides businesses and consumers with background check and public record

information. Its databases contain more than twenty billion records.28

7. PeekYou: PeekYou has patented technology that analyzes content from over sixty social media sites,

news sources, homepages, and blog platforms to provide clients with detailed consumer profiles.29

8. Rapleaf:30 Rapleaf is a data aggregator that has at least one data point associated with over eighty

percent of all U.S. consumer email addresses.31 Rapleaf supplements email lists with the email

address owner's age, gender, marital status, and thirty other data points.32

9. Recorded Future: Recorded Future captures historical data on consumers and companies across the

Internet and uses that information to predict the future behavior of those consumers and companies.

As of May 2014, Recorded Future had access to information from over 502,591 different open

Internet sites.33

The Commission selected these data brokers because they represent a broad swath of activity from a

cross-section of large, mid-sized, and small data brokers. The Commission also considered their prominence

in the industry; the amount and types of data they collect; their use of different models to find, collect, and

analyze data; and the range of products they sell. While some of these data brokers are established entities,

others are new entrants to the data broker market.

The data brokers submitted Special Reports in response to the Orders, responded to follow-up questions,

and met with Commission staff to provide additional clarification regarding their business models and

practices. The Commission used the information obtained from the data brokers and from publicly available

sources to prepare this report. Consistent with Sections 6(f ) and 21(d) of the FTC Act, information that the

27 Leverage Deep Insight Into Consumer Identity Behavior, ID Analytics, https://web.archive.org/web/20130901122631/http://

www.idanalytics.com/technology/ (last visited May 19, 2014) (accessed by searching the Internet Archive index and viewing

the Sept. 1, 2013 version of this page).

28 Intelius Facts, Intelius, http://corp.intelius.com/intelius-facts (last visited May 19, 2014).

29 About Us, PeekYou, http://www.peekyou.com/about/ (last visited May 19, 2014).

30 In August 2012, Rapleaf became a wholly-owned subsidiary of LiveRamp. In October 2013, TowerData purchased Rapleaf ’s

assets and Rapleaf was dissolved. Press Release, TowerData, Inc., TowerData Acquires Rapleaf, Forges Comprehensive

Email Data Solutions Company (Oct. 1, 2013), available at http://www.towerdata.com/company/news/towerdata-acquiresrapleaf-press-release/. In its response to the Orders, Rapleaf provided information for both Rapleaf and LiveRamp, which,

for the purpose of this report, were treated as one entity. In May 2014, Acxiom acquired LiveRamp. Press Release, Acxiom

Corp., Acxiom to Acquire LiveRamp (May 14, 2014), available at http://www.acxiom.com/acxiom-liveramp/.

31 Fast. Simple. Secure., Rapleaf, http://www.rapleaf.com/why-rapleaf/ (last visited May 19, 2014).

32 Batch Append, Rapleaf, http://www.rapleaf.com/pricing-append/ (last visited May 19, 2014).

33 Recorded Future, https://www.recordedfuture.com/ (last visited May 19, 2014).

Federal Trade Commission

data brokers have designated as confidential or privileged commercial or financial information is reported on

an aggregate basis, without naming the particular company to which it pertains.

This report describes several key practices staff examined through the Commission’s Orders. First, it

identifies how and from where the data brokers acquire their data. Second, it describes how the data brokers

develop their products from this raw data. Third, it discusses the types of products the data brokers provide

to their clients.34 Fourth, it explains the data brokers’ procedures to ensure the quality of their products.

Fifth, it describes the assortment of clients that use the data broker products. Finally, it describes the options

the data brokers give to consumers to access, suppress, and correct their own data.

34 As noted above, the Orders focused on the data brokers’ non-FCRA covered products.

Data Brokers: A Call for Transparency and Accountability

II. DATA ACQUISITION

A. Sources of Data

None of the nine data brokers collect data directly from consumers. Rather, they collect data from

numerous other sources, which fall into three categories: (1) government sources; (2) other publicly

available sources; and (3) commercial sources. While each data broker source may provide only a few data

elements about a consumer’s activities, data brokers can put all of these data elements together to form a

more detailed composite of the consumer’s life.

1. Government Sources

a. Federal Government

All but three of the nine data brokers obtain information directly from federal government sources.

For example, the U.S. Census Bureau provides information about the demographics of particular city

blocks, such as ethnicity, age, education level, household makeup, income, occupations, and commute

times. In addition, it provides geographic information including roads, addresses, congressional districts,

and boundaries for cities, counties, subdivisions, and school and voting districts. The Social Security

Administration provides information such as the Death Master File, which includes consumers’ names,

SSNs, and dates of death. The U.S. Postal Service provides information such as address standardization

and change of address information. Other federal and international agencies, such as the Federal Bureau

of Investigation, U.S. Secret Service, and European Union, provide information related to terrorist watch

lists or most wanted lists. In addition, federal and international agencies provide lists of individuals who are

ineligible to receive government contracts or other benefits.35 Also, federal courts provide information on

bankruptcies.

b. State and Local Governments

State and local governments offer a wide variety of information, including:

⊲⊲ Professional licenses (e.g., licenses for pilots, doctors, lawyers, architects)

⊲⊲ Recreational licenses (e.g., hunting and fishing licenses)

⊲⊲ Real property and assessor records

•

Taxes

35 For example, such lists are maintained and provided by the U.S. Office of Foreign Assets Control, U.S. Immigration and

Customs Enforcement, and the U.S. Department of State.

Federal Trade Commission

•

Assessed Value

•

Liens

•

Deeds

•

Mortgages

•

Mortgage Releases

•

Pre-foreclosures

•

Identifying information about the owner

•

Information about the property (e.g., square footage, number of bathrooms and bedrooms, and

whether the property has a pool)

⊲⊲ Voter registration information (e.g., name, address, date of birth, and party affiliation)

⊲⊲ Motor vehicle and driving records

⊲⊲ Court records

•

Criminal records

•

Civil actions and judgments

•

Birth, marriage, divorce, and death records

Two points are worth highlighting in connection with this information. First, some of the data

brokers do not obtain this information directly from state and local governments. Rather, they obtain the

information from other data brokers that either hire people to visit local offices to compile the information

or that have relationships with these offices that allow them to acquire this information automatically (e.g.,

through an online portal). The data brokers identified nearly twenty-five other data brokers from which they

obtain state and local government information.

Second, some laws restrict the use of this information. For example, at least twenty-two states prohibit

the use of voter registration records for commercial or non-election-related purposes.36 In addition, the

federal Driver’s Privacy Protection Act (“DPPA”)37 and some state laws contain restrictions that apply to

36 States restricting the use of such information for commercial purposes include California, Georgia, Illinois, Kansas, Maryland,

Missouri, Montana, Nebraska, New Hampshire, New Jersey, Oregon, South Dakota, West Virginia, and Wyoming.

37 Driver’s Privacy Protection Act, 18 U.S.C. §§ 2721–2725 (2012).

Data Brokers: A Call for Transparency and Accountability

state motor vehicle departments.38 For instance, the DPPA prohibits the disclosure of motor vehicle and

driving record information, except for limited purposes such as law enforcement, insurance, and identity

verification or fraud detection. It allows the unrestricted use of such information with the express consent of

the individual, which at least one state requests in its driver’s license application.39

2. Publicly Available Sources, Including Social Media, Blogs,

and the Internet

Over half of the data brokers reported that they obtain other publicly available information, including

telephone and other directories, press reports, and information that individuals post on the Internet,

including blogs and social media sites. For example, some of them obtain information by crawling social

media sites, such as Bebo and LinkedIn, where individuals have not set their privacy settings to restrict access

to their information and the social media sites have given the data brokers access to such information.40 As

with government sources, these data brokers either obtain information directly from these sources or, in

limited instances, from other data brokers that compile such information.

3. Commercial Data Sources

All but one of the data brokers in this study purchase information about individuals from wide-ranging

commercial sources. For example, the data brokers obtain detailed, transaction-specific data about purchases

from retailers and catalog companies. Such information can include the types of purchases (e.g., high-end

shoes, natural food, toothpaste, items related to disabilities or orthopedic conditions), the dollar amount of

the purchase, the date of the purchase, and the type of payment used. Several of the data brokers also obtain

information from magazine publishers about the types of subscriptions sold.

Three data brokers obtain customer lists from registration websites, which are sites where consumers

name, along with a postal or email address. A few of the data brokers obtain aggregated transaction data

from financial services companies. The types of data that the data brokers obtain from these sources include

38 At least twenty-three states have state laws governing the disclosure of motor vehicle records that prohibit companies from

using such information, except for limited purposes such as identity verification or fraud prevention (i.e., Connecticut,

Idaho, Illinois, Indiana, Kansas, Maryland, Michigan, North Dakota, Nebraska, New Hampshire, New Jersey, New Mexico,

Ohio, Oklahoma, Oregon, Rhode Island, South Dakota, Tennessee, Texas, West Virginia, Colorado, Arizona, and Alaska).

Other states prohibit access to this information in virtually all circumstances (i.e., Montana, Washington, and Delaware).

39 Driver License/Identification Card Application, Ariz. Dep’t of Transp., available at http://www.azdot.gov/docs/default-source/

mvd-forms-pubs/40-5122.pdf?sfvrsn=11 (last visited May 19, 2014).

40 According to the data brokers, some social media sites restrict third parties’ ability to collect data from their sites in an

automated way. For example, some of the data brokers stated that Facebook only allows specified search engines to crawl

its site, and its Terms of Service bar scraping, or the copying of the information on Facebook’s website, without Facebook’s

written permission. The Commission did not independently examine the policies of social media sites as part of this study.

Federal Trade Commission

more sensitive information (e.g., certain health-related purchases41) and less sensitive information (e.g.,

certain clothing purchases).

Some of the data brokers report that they obtain data directly from their merchant and financial service

company clients, either to create or enhance products or services for those particular clients or to use in other

products in aggregated, de-identified form, as explained further below. Other data, such as some data from

registration websites, comes from non-client consumer-facing companies pursuant to specific contractual

arrangements. At least one of the nine data brokers obtains consumers’ web browsing activities from online

advertising networks.

Most of the commercially sourced data, however, comes from other data brokers outside this study. For

example, the data brokers in this study obtain information from other data brokers that:

⊲⊲ Obtain information from telephone companies about consumers who have recently created a new

landline account;

⊲⊲ Obtain information from automobile dealers about sales and service, warranty, and aftermarket

repairs;

⊲⊲ Aggregate and model the purchase history of 190 million individual consumers from more than

2600 merchants; and

⊲⊲ Compile self-reported information that consumers provide online or offline through marketing

surveys, warranty registrations, and contests. One data broker that compiles self-reported

information maintains data of over 240 million consumers sorted into 1000 interest categories.

Several of the data brokers share the same sources. And each data broker utilizes multiple sources for

similar data. For example, one of the data brokers in this study obtains consumers’ contact information

from twenty different sources.42

In addition, seven of the nine data brokers buy from or sell information to each other. Accordingly,

it may be virtually impossible for a consumer to determine the originator of a particular data element. As

shown in Exhibit 2, which depicts the flow of data among the nine data brokers in this study, the consumer

would have to retrace the path of data through a series of data brokers to finally arrive at the original source.

41 The health-related purchases are not covered under the Health Insurance Portability and Accountability Act of 1996

(“HIPAA”), which protects the privacy of certain health-related information. The data brokers are not covered entities under

HIPAA, which are defined to include certain doctors’ offices, hospitals, insurance companies, and others that electronically

bill insurance companies. See Health Insurance Portability and Accountability Act of 1996, Pub. L. No. 104-191, 110 Stat.

1936 (codified as amended in scattered sections of 18, 26, 29, and 42 U.S.C.).

42 The data brokers share not only commercial sources but government and other publicly available sources as well.

Exhibit 2:

Data Sources

Collection

The nine data brokers the FTC studied collect information from

many sources.*

data brokers

in the study

government

sources†

publicly available

sources‡

commerical

sources

* The Commission issued identical Orders to File Special Reports (“Orders”) to nine data brokers under Section

6(b) of the Federal Trade Commission Act, 15 U.S.C. § 46(b), to seek information about the data brokers’

practices related to consumer data collection and use.

† Includes data brokers that sell information from government sources.

‡ Includes data brokers that sell information from publicly available sources.

Federal Trade Commission

B. Assessing Sources

While the data brokers in this study do not typically take steps to assess government and other publicly

available sources, they may take some steps to assess their commercial sources in order to ensure that the

sources provide accurate data. The majority of the data brokers in this study selects these sources based on

their reputation in the industry. A few, however, affirmatively evaluate the legitimacy, stability, and quality of

their sources before accepting data from them. This credentialing process may include reviewing the source’s

website, terms of use, data collection methods, privacy policy, privacy practices, and regulatory compliance.

A few of the data brokers ask the source for its sources and then evaluate the original sources’ websites, terms

of use, privacy policies, and collection methods.

Several of the data brokers test the reliability of the information their sources provide up front. When

they acquire a new data source, they put the new data in a holding area and test it to make sure it is

internally consistent, corroborated by other sources, verifiable as legitimate, and that it encompasses a

sufficiently large portion of the population.43 Part of the testing process may include comparing the data

against known truths (e.g., comparing the actual birthdate of the data broker’s employee to the birthdate

provided by the source). It may also include comparing the data to that obtained from other high-quality

sources. Other data brokers assess the reliability of the data on an ongoing basis. They rely on automated

systems that detect material deviations in their data and identify the sources that are causing such deviations.

If there are discrepancies in the data obtained from two separate sources, some data brokers will use the data

from the source they trust the most.

C. Contracts with Sources

The data brokers often enter into a variety of written contracts with their data sources. The data brokers

may acquire ownership of the data under a data supply contract, use of the data for a defined time period

under a data licensing agreement, or the right to resell the source’s product using the data broker’s brand

under a data reseller agreement. These contracts generally include a description of the data provided to the

data broker, the method for transferring the data, the frequency of updates, and any restrictions on using the

data.

The contracts between the data brokers and their data sources include a range of provisions. Most

of the data brokers insert provisions in these contracts stating that the data source warrants that it legally

obtained the information. Only two of the data brokers insert contractual provisions requiring the data

source to warrant that either it or its sources provided consumers with notice that their information would

be shared with third parties and an opportunity to opt out of that sharing. At least one of these two data

brokers appears to review the original source’s website, terms of use, and privacy policy to determine whether

43 For example, before acquiring data on “Soccer Moms,” the data broker will want to verify that this source has data on 10,000

“Soccer Moms,” rather than just 100 “Soccer Moms.”

Data Brokers: A Call for Transparency and Accountability

the source provided consumers such notice and opt out opportunity. These contractual provisions do not

contain requirements about the prominence of the notice or opt out, which the source may include in a

information provided beyond noting that the sources will make best efforts to ensure accuracy.

The contracts also often contain use restrictions on data brokers. For example, certain federal or state laws

or agencies require a written agreement affirming that the data broker will only use the data for a specified

purpose. Sources may also prohibit data brokers from reusing or reselling the data without permission;

decoding or reverse engineering the data; illegally or illicitly using the data; and using the data in violation

of the FCRA,44 Gramm-Leach-Bliley Act (“GLBA”),45 HIPAA,46 or Children’s Online Privacy Protection Act

(“COPPA”).47

D. Collection Methods

The data brokers in this study collect information from sources in numerous ways. First, some data

brokers collect publicly available web-based data through web crawlers, which are programs that capture

content across the Internet and transmit it back to the data broker’s servers.48 The data brokers use software

to determine which websites to crawl, how often, and what data points to collect from each website. Second,

some data brokers buy or acquire printed information, such as telephone directories or local government

records, and either scan these documents into an electronic format or have data entry professionals manually

create an electronic record. Third, some data brokers arrange for batch processing of information. For

example, some data brokers acquire data from their sources through a daily feed. Finally, the data brokers

may arrange for their sources to make available to them an Application Programming Interface (“API”)

through which to process the data.

Whatever the method, it appears that the data brokers often collect more information than they use.

Several of the data brokers reported that they cannot obtain a subset of data elements they request. For

example, some sources sell the data brokers a multitude of data elements as part of a fixed data set even if

the data broker does not need all of these elements. The data brokers may try to use the additional data

elements in some other way, such as for matching or authentication purposes or to create models to predict

consumer behavior. Or they may not use the data at all.

44 15 U.S.C. §§ 1681–1681v.

45 Gramm-Leach-Bliley Act, Pub. L. No. 106-102, 113 Stat. 1338 (1999) (codified as amended in scattered sections of 12 and

15 U.S.C.).

46 Health Insurance Portability and Accountability Act, 110 Stat. 1936.

47 Children’s Online Privacy Protection Act of 1998, 15 U.S.C. §§ 6501–6506 (2012).

48 As noted in supra note 40, some websites restrict or prohibit web crawlers from collecting data from their sites.

Federal Trade Commission

E. Data Updates

The data brokers’ sources generally dictate the frequency of update schedules. Sources may update data

either in real time, daily, weekly, monthly, quarterly, biannually, annually, or, in some limited instances,

never. Data that is available through crawling or an API is typically updated more frequently than data

acquired through, for example, batch processing or other non-automated collection methods.

Even if a source updates its data on a frequent basis, the data broker may not update its databases to

reflect this new information immediately. There is typically a delay between when the data broker receives

updated information from a source and when the data broker’s system reflects this updated information.49

Such a delay may occur because it is more cost effective for the data broker to update its databases at

scheduled intervals rather than as each new data set is received. Or a delay may occur because the data

broker is testing the data for accuracy. For example, when a source updates its data, the data broker may

compare the source’s newest file with its previous files for deviations that could affect accuracy. If the

data broker obtains a substantially smaller file from a source that had previously provided a larger file, the

data broker may discover that the source failed to provide information for all consumers with last names

beginning with “A.” When the data broker discovers such an omission, it may contact the source and ask for

a new updated file.50

49 One data broker reports that it is upgrading its technology so that its system will update in real time.

50 Some of the data brokers report that they perform similar reviews of their own data to ensure that their databases reflect the

most accurate data. For example, after updating its database to reflect an update from a source, a data broker might discover

that its database is substantially smaller than the previous version of the database. In comparing the files, the data broker

might discover that it failed to upload information about consumers residing in California.

Data Brokers: A Call for Transparency and Accountability

III. DEVELOPMENT OF PRODUCTS

A. Creation of Data Elements and Segments

In developing their products, the data brokers use not only the raw data that they obtain from their

sources, such as a person’s name, address, home ownership status, age, income range, or ethnicity ( “actual

data elements”), but they also derive additional data (“derived data elements”). For example, a data broker

might infer that an individual with a boating license has an interest in boating, that a consumer has a

technology interest based on the purchase of a Wired magazine subscription, that a consumer has an interest

in shoes because she visited Zappos.com, or that a consumer who has bought two Ford cars has loyalty to

that brand.

The data brokers in this study sell both the actual and derived data elements to their clients. For

example, elements they sell about Jane Doe may include her name, her age (36), her marital status (married),

her interests (children and recreational sports), and her residence (123 Main Street). They may also use the

actual and derived data elements to put consumers in categories (“data segments”).

The data brokers create segments by:

⊲⊲ Combining data elements to create a list of consumers who have similar characteristics. Soccer

Moms, for example, might include all women between the ages of 21 and 45, with children, who

have purchased sporting goods within the last two years; or

⊲⊲ Developing complex models to predict behaviors. The data brokers can identify a group of

consumers that has already bought the products in which the data broker wants to predict an

interest, analyze the characteristics the consumers share, and use the shared characteristic data to

create a predictive model to apply to other consumers. For example, a data broker can:

•

Analyze the characteristics of a subset of consumers that purchased camping gear in the last year,

identify consumers in its database that share these characteristics, and create a segment called

“Consumers Interested in Buying Camping Gear;”

•

Identify a group of consumers that sought chargebacks on their credit cards in the last year,

analyze the characteristics those consumers share, and use the characteristic data to predict

“Consumers that are Likely to Seek a Chargeback;” or

•

Analyze data on consumers in this manner to predict which consumers are likely to use brand

name medicine, order prescriptions by mail, research medications online, or respond to

pharmaceutical advertisements.

Federal Trade Commission

Some segments primarily focus on minority communities51 with lower incomes, such as “Urban

Scramble” and “Mobile Mixers,” both of which include a high concentration of Latino and AfricanAmerican consumers with low incomes.52 Other segments highlight older consumers with lower incomes.

For example, “Rural Everlasting” includes single men and women over the age of 66 with “low educational

attainment and low net worths,” and “Thrifty Elders” includes singles in their late 60s and early 70s in

“one of the lowest income clusters.” Yet other segments focus purely on consumers’ financial status, such as

“Underbanked Indicator,” “Credit Worthiness,” “Invitation to Apply Offers – Bankcard Utilization Rate,”

“Invitation to Apply Score,” “Consumer Prominence Indicator,” “Pennywise Mortgagees,” and “Number of

Orders – Low Scale Catalogs.” Finally, other segments showcase a consumer’s interests, such as “Truckin’ &

Stylin’” and “Health & Wellness Interest.”53 While some of these segments seem innocuous, others rely on

characteristics, such as ethnicity, income level, and education level, which seem more sensitive and may be

disconcerting.

51 Some of the data brokers offer an “Assimilation Code,” which indicates a consumer’s degree of assimilation to the English

language.

52 Other segments focusing on a combination of ethnicity and/or income levels include: (1) “Work & Causes,” which includes

consumers “with lower-incomes, in their late 40s, early 50s,” “living in multi-unit dwellings;” (2) “Resolute Renters,” which

includes consumers in their 30s and 40s, single with no children, that are “relatively mobile renters and on the lower rungs of

income and net worth;” (3) “Metro Parents,” which includes consumers, “primarily in high school or vocationally educated,”

“handling single parenthood and the stresses of urban life on a small budget;” (4) “Modest Wages,” which includes “lowincome singles living without children in a mix of smaller, industrial cities” with low “educational attainment;” (5) “Kids and

Rent,” which includes “lower income households” with children that are “mostly renters, living in both single-family and

multiple-family apartment buildings;” (6) “Downtown Dwellers,” which includes “lower-income, single, downtown-metro

dwellers,” that are “upper-middle-aged” and with a “high-school” or “vocational/technical” degree working to “make[ ] ends

meet with low-wage clerical or service jobs;” (7) “Financially Challenged,” which includes consumers “[i]n the prime working

years of their lives, . . . including many single parents, struggl[ing] with some of the lowest incomes and little accumulation

of wealth.” These consumers are “[n]ot particularly loyal to any one financial institution, [and] they feel uncomfortable

borrowing money and believe they are better off having what they want today as they never know what tomorrow will bring;”

(8) “Timeless Traditions,” which includes “immigrants, many of retirement age, . . . who have been in the country for 10 or

more years,” that “speak[ ] some English, but generally prefer[ ] Spanish,” and that have “lower than average” incomes; (9)

“Traditions & Timecards,” which includes consumers with “an average age of 53” that “are still working” and that are the

“least acculturated Hispanics, residing in more metro areas;” and (10) “Latchkey Leasers,” which includes consumers with “an

average age of 52” that are “predominately single renters living in multiple unit dwellings.” This group tends “to be bicultural

and bilingual,” and “they earn some of the lower incomes and have relatively little net worth accrued at this point in their

lives.”

53 The data brokers offer a variety of segments, including at the individual, household, and zip code levels.

Data Brokers: A Call for Transparency and Accountability

Segment Examples

⊲⊲ Financial Newsletter Subscriber

⊲⊲ Bible Lifestyle

⊲⊲ African-American Professional

⊲⊲ New Age/Organic Lifestyle

⊲⊲ Affluent Baby Boomer

⊲⊲ Plus-size Apparel

⊲⊲ Spanish Speaker

⊲⊲ Biker/Hell's Angels

⊲⊲ Outdoor/Hunting & Shooting

⊲⊲ Leans Left

⊲⊲ Allergy Sufferer

⊲⊲ Exercise - Sporty Living

⊲⊲ Santa Fe/Native American Lifestyle

⊲⊲ Working-class Mom

⊲⊲ Senior Products Buyer

⊲⊲ Upscale Retail Card Holder

⊲⊲ Twitter User with 250+ Friends

⊲⊲ Modest Wages

⊲⊲ Media Channel Usage - Daytime TV

⊲⊲ Financially Challenged

B. Data Suppression

Most of the data brokers exclude or suppress certain data from their products in several ways.54 For

example, they obtain suppression lists, such as the Commission’s Do Not Call registry, to determine which

data elements to mark as suppressed when processing the data that they acquire. Some of the data brokers

reported that they have a policy against collecting or using information about children or teens.55 Some of

these data brokers rely on their sources to suppress the information, but do not take any additional steps.

Others take additional steps to double check that the source has properly suppressed the information; they

search the age, age range, or date of birth information to identify records of children or teens, filter out those

records, and suppress any other records they associate with that same child or teen in the products they

provide to their clients.

54 The data brokers use the term “suppress” to indicate that, although certain data may appear in their databases, they prevent

the data from being included in their products. This section does not address consumer opt-out requests which, as discussed

in Section VII.A., infra, also result in the data brokers suppressing data from their products.

55 Some of the data brokers intentionally include or factor in children’s and teens’ information in certain products. The data

brokers that provide risk mitigation products used to detect fraudulent activity in commercial transactions, for example, may

flag for a mobile telephone provider that an applicant’s personal information belongs to an individual under the age of 18 and

that the transaction may be fraudulent.

Federal Trade Commission

C. Data Storage

Three of the data brokers reported that they store data in the form of individual consumer profiles. For

these data brokers, Jane Doe’s file may contain her contact and demographic information, interests, and

purchasing habits.56

Two of the data brokers store data by listing “events” in a database. For example, rather than having a

profile of Jane Doe, they may have a long list of events such as:

⊲⊲ Jane Doe opened an account with ABC Bank on August 2 and listed her address as 123 Main Street;

⊲⊲ 123 Main Street was associated with a fraudulent transaction on September 23;

⊲⊲ John Smith moved to 123 Main Street on July 3;

⊲⊲ Mark Nobody was reported as deceased on December 21; and

⊲⊲ Mark Nobody opened a new mobile telephone account on December 31 and listed his address as

123 Main Street.

When these data brokers run a query on “Jane Doe,” they can create a profile on her. For example,

these brokers can determine not only that Jane Doe lives on 123 Main Street and that she has an ABC Bank

account, but also that her address has been associated with multiple, potentially fraudulent transactions.

Two of the data brokers maintain databases that correspond to the sources of the data. For example,

a data broker may have one database containing “court records” and another containing “real estate

transactions.” Some of the data brokers maintain databases that correspond to a product line; for example,

a data broker may have a database for all of the data that is used in its risk mitigation products and another

database for the data used in its marketing products, even if the data is duplicative. (These types of products

are described in Section IV., infra.)

As to the length of retention of data, some of the data brokers store all data indefinitely, even if it is

later amended, unless otherwise prohibited by contract. For some products, these data brokers report that

they need to keep older data. For example, they explain that even if a consumer’s address is outdated, it is

important to keep the consumer’s address history in order to verify his or her identity. For other products,

however, retention of older data may not be necessary. An older address, for instance, is less relevant to

deliver marketing to a consumer.

56 Rather than using names, some of these data brokers store individual consumer profile information using unique

identification numbers.

Data Brokers: A Call for Transparency and Accountability

IV. TYPES OF PRODUCTS

The data brokers offer products in three broad categories: (a) marketing; (b) risk mitigation; and (c)

people search. These products generated a combined total of approximately $426 million in annual revenue

in 2012 for the nine data brokers. The following graph depicts the proportion of revenue contributed by

each type of product category.

Exhibit 3: Revenue of Nine Data Brokers by Product Category

$250,000,000

$200,000,000

$196,206,100

$177,842,153

$150,000,000

$100,000,000

$52,694,542

$50,000,000

Marketing

Risk Mitigation

People Search

A. Marketing

Five of the data brokers sell marketing products that collectively generated over $196 million in annual

revenue in 2012. The Commission has grouped these marketing products into (1) direct marketing,

which encompasses postal mail, telemarketing, and email marketing; (2) online marketing, which includes

marketing to consumers on the Internet, on mobile devices, and through cable and satellite television; and

(3) marketing analytics. All of these products enable the data brokers’ clients to create tailored marketing

messages to consumers.

1. Direct Marketing

Based on the information received, the Commission has identified two categories of direct marketing

products: (a) data append; and (b) marketing lists.

Federal Trade Commission

a. Data Append

“Data append” products help companies learn more about their customers. They require the data

broker’s client to provide some customer information, such as name and address; the client can then select

additional information—such as the customers’ telephone number and purchasing habits—that the data

broker appends to the client’s data set for the client’s use in direct mail, telemarketing, and email marketing

campaigns.

Some products help clients fill in gaps that may exist in customer contact information. For example, the

client may provide a customer’s name and address, and the data broker could provide the customer’s landline

telephone number or email address. Alternatively, the client may provide the customer’s landline telephone

number, mobile telephone number, or email address, and the data broker could provide the customer’s name

and address. In some data append products, the client provides a customer’s name and a store’s zip code, and

the data broker provides the customer’s address.

Other products help clients better understand their customers. Clients may provide their customers’

identifying information. The data broker can then append data to the clients’ data sets. The data brokers in

this study offer a large array of actual and derived data elements, including:

⊲⊲ Age

⊲⊲ Net Worth

⊲⊲ Religious Affiliation

⊲⊲ Credit Card Usage

⊲⊲ Technology Interest

⊲⊲ Discount Shopper

⊲⊲ Expectant or New Parent

⊲⊲ Race

⊲⊲ Gender

⊲⊲ Marital Status

⊲⊲ Political Affiliation

⊲⊲ Vacation Habits

⊲⊲ Social Media Usage

⊲⊲ High-End Shopper

⊲⊲ Real Property Attributes

⊲⊲ Ethnicity

⊲⊲ Height

⊲⊲ Biker

⊲⊲ Household Income

⊲⊲ Cholesterol Focus

⊲⊲ Vehicle Ownership

⊲⊲ Home Loan Type

⊲⊲ New Mover/Renter/Owner

⊲⊲ Occupation

⊲⊲ Weight

⊲⊲ Presence of Children

Data Brokers: A Call for Transparency and Accountability

⊲⊲ Diabetes Interest

⊲⊲ Guns and Ammunition Purchases

⊲⊲ Investment Habits

⊲⊲ Home Ownership Status

⊲⊲ Soon-to-be High School Graduates

⊲⊲ Buy Disability Insurance

⊲⊲ School-aged Children

⊲⊲ Lenses or Contacts

⊲⊲ Smoker in Household

⊲⊲ Brand Medication Conscious

⊲⊲ Gambling

This information may include actual data elements, derived data elements, and data segments, as

described in Section III.A. of this report. Appendix B provides an illustrative list of data elements and

segments to demonstrate further the breadth of information available to clients.

b. Marketing Lists

Marketing lists identify consumers who share particular characteristics (e.g., all persons living with

at least two children, all persons who are both women and own a specific car brand, people interested in

diabetes, and households with smokers in them). The client identifies the attributes that it would like to

find in a consumer audience, and the data broker provides a list of consumers with those attributes.57 A

client, for example, can request a list of consumers who are “Underbanked” or “Financially Challenged” in

order to send them an advertisement for a subprime loan or other services.58 Marketing lists can be limited

to consumer names and addresses for direct mail campaigns, consumer names and telephone numbers for

telemarketing campaigns, or consumer email addresses for email marketing campaigns. For clients who want

more robust data to better tailor their marketing campaigns, the data brokers can include in the marketing

lists any of the other data elements or segments described under the data append products. For example, a

client can request a list of consumers in a particular region with an interest in gourmet cooking for a direct

mail campaign and, in addition to the consumer names and addresses, the data broker can include in the

marketing list the age or age range and household income of the consumers.

57 It has been reported that other data brokers, not part of this study, sell marketing lists identifying consumers who have

addictions, AIDS and HIV, genetic diseases, or are police officers and troopers. See, e.g., Addictive Behaviors, Alcohol and

Drugs Mailing List, Exact Data, http://www.consumerbase.com/mailing-lists/addictive-behaviors-alcohol-and-drugsmailing-list.html (last visited May 19, 2014); Ailments Mailing Lists/Email Lists, DMDatabases.com, http://dmdatabases.

com/databases/consumer-mailing-lists/ailments-lists (last visited May 19, 2014); Complete Medical’s Ailments, Illnesses and

Medical Conditions Mailing List, Nextmark, http://lists.nextmark.com/market?page=order/online/datacard&id=221569 (last

visited May 19, 2014); Police Officers By District Mailing List, Nextmark, http://lists.nextmark.com/market?page=order/

online/datacard&id=330218&trk=y&aId=1381 (last visited May 19, 2014). See also What Information Do Data Brokers Have

on Consumers, and How Do They Use It? Before the S. Comm. on Commerce, Sci., & Transp., 113th Cong. (2013) (statement

of Pam Dixon, Executive Director, World Privacy Forum), available at http://www.commerce.senate.gov/public/?a=Files.

Serve&File_id=e290bd4e-66e4-42ad-94c5-fcd4f9987781.

58 Even though these categories may implicate creditworthiness, the use of data about a consumer’s financial status in order to

send the consumer targeted advertisements is generally not covered by the FCRA, unless the advertisements are for certain

pre-approved offers of credit.

Federal Trade Commission

2. Online Marketing

Three of the data brokers facilitate the online marketing of products to consumers through the Internet,

mobile devices, and cable and satellite television. The Commission has grouped the online marketing

products into the following categories: (a) registration targeting; (b) collaborative targeting; and (c)

onboarding. As discussed below, these practices permit companies to provide more targeted and potentially

relevant advertising to consumers.

a. Registration Targeting

The data brokers can help registration websites59 promote products to consumers more effectively

through a more customized user experience. For example, if a travel website, XYZ Travel, wants to promote

particular products to its users on its website, it can send the data broker a list of its registered users, and

the data broker can provide XYZ Travel with the vacation interests of those specific users. With this

information, XYZ Travel can highlight for Jane Doe a particular vacation package to Hawaii based on Jane

Doe’s interest in tropical islands when she logs on to XYZ Travel’s website.

If XYZ Travel does not want to customize its site to individual registered users but instead wants to sell

third-party advertising space on its site, it can send the data broker a list of its registered users. The data

broker can then inform XYZ Travel that the majority of its registered users are interested in motorcycles and

household cleaning products. With this information, XYZ Travel can offer to sell advertising space on its

website to motorcycle vendors and cleaning product manufacturers.

The process works similarly for advertising on mobile devices and cable and satellite television. For

example, Cable Company CBA can provide a data broker with a list of its registered customers, and the data

broker can append that list with additional information about those customers. Cable Company CBA can

use that information not only to market its own products—for example, to decide to which customers it

should broadcast a promotional advertisement about its new Spanish-channels package—but also to offer

third parties the ability to target advertising via these new Spanish channels. Specifically, Cable Company

CBA may learn that a large subset of its Spanish-channels package subscribers enjoys international travel.

Thereafter, Cable Company CBA can approach local travel agencies to purchase broadcast advertisements for

those particular viewers.

b. Collaborative Targeting

Whereas in registration targeting, the data broker’s client is the registration website, in “collaborative

targeting,” the data broker services two clients—the registration website and an advertiser looking to target

advertisements on a registration website. The registration website gives the data broker a list of its users, and

59 “Registration websites,” as discussed in Section II.A.3., supra, are websites that allow consumers to register or log in to obtain

services, such as retail, news, and travel sites.

Data Brokers: A Call for Transparency and Accountability

the advertiser gives the data broker its customer and prospect list. The data brokers report that neither party

has access to personal information about consumers who are customers, potential customers, or registered

users of the other. Only the data broker has access to both parties’ information. The data broker can then

analyze the data in order to enable the advertiser to decide whether to advertise on the registration website.

For example, Surfshop, a retailer of surfboards, wants to advertise a new surfboard and give its customers

a discount through online advertisements. XYZ Travel offers Surfshop space on its website for a web banner,

but Surfshop does not know whether its customers typically visit XYZ Travel. XYZ Travel and Surfshop

do not want to share their customer lists with each other. XYZ Travel sends the data broker a list of its

registered users, including names and email addresses. Surfshop sends the same data broker a list of its best

customers, including names and postal addresses. The data broker appends email addresses to the Surfshop

list and identifies 3000 Surfshop customers that are registered on XYZ Travel’s website. Satisfied with these

numbers, Surfshop sends the data broker the advertisement it wants to display on XYZ Travel’s website,

which in turn sends the advertisement to XYZ Travel. XYZ Travel displays Surfshop’s advertisement to

visitors of the site.

c. Onboarding: Combining Online and Offline Data

While collaborative targeting allows advertisers to determine which campaigns to run on particular

registration websites, the practice of onboarding goes further. “Onboarding” refers to a process whereby a

data broker adds offline data into a cookie (the process of onboarding offline data) to enable advertisers to

target consumers virtually anywhere on the Internet. It allows advertisers to use consumers’ offline activities

to determine what advertisements to serve them on the Internet.60

Onboarding clients either (1) provide data about their customers to a data broker to facilitate the

process of finding those consumers on the Internet to deliver targeted advertisements; or (2) use a data

broker to identify an audience of consumers who are likely to share particular characteristics and find those

consumers on the Internet to deliver advertisements. Three of the data brokers offer an onboarding product.

Onboarding typically includes three steps: (i) segmentation; (ii) matching; and (iii) targeting.

i. Segmentation

The onboarding process starts when a client asks a data broker to find consumers with particular

characteristics. Data brokers may have stock data segments that they have created based on anticipated

client demand or they may create custom segments based on the client’s request. For example, a data broker

could help a clothing retailer advertise its new luxury fashion line to consumers online in several ways:

60 Some of the data brokers are also offering their onboarding services to clients so they can serve targeted advertisements on

mobile devices.

Federal Trade Commission

⊲⊲ To target the retailer’s existing customers: The retailer gives the data broker its customer list and

the data broker compares its stock segments, such as “Persons Interested in High-End Clothing”

or “Sophisticated Shoppers,” to the retailer’s existing list of customers to predict which of the

retailer’s customers will be interested in the new fashion line. If the data broker does not have a

stock segment that fits the retailer’s needs, the data broker can create custom segments based on the

retailer’s criteria. For example, the retailer might want to target its line to all of its existing customers

who are “Women” living in the “Zip Code 12345.” After creating the segment, the data broker

would compare individuals in the customized segment to the retailer’s customer list and identify

those existing customers best suited for the retailer’s advertising campaign.

⊲⊲ To target new customers for the retailer: The data broker may also offer the retailer access to the

data broker’s own list of segments to find new customers. The retailer would select one or more

stock segments (e.g., “Sophisticated Shoppers” or “Persons Interested in High-End Clothing”),

and the data broker would then identify consumers from its own databases that fit within these

segments. If none of the data broker’s stock segments fit the retailer’s needs, the data broker can

simply customize a segment (e.g., “Women” that are living within “Zip Code 12345”) and apply that

segment to the data broker’s database of consumers.

ii. Matching

The next step in the onboarding process is “matching,” where the data broker finds the consumers

it identified through the segmentation process online. To find consumers online, the data broker enters

into contracts with registration websites to buy lists of registered users. It then compares these registered

users with the consumers identified through the segmentation process in order to find matches. When the

data broker finds a match, it appends to that consumer any data elements or segments associated with the

consumer.61

Thus, in the example of the clothing retailer looking to advertise its new luxury clothing line, suppose

the data broker comes up with 100,000 consumers meeting the criteria of the clothing retailer, including

Jane Doe. Suppose further that the data broker has bought Social Media X’s registered users list. If the

data broker finds that Jane Doe is a registered user of Social Media X, it has found a match. The data

broker thereafter can associate Jane Doe with the data elements and segments requested by the client (e.g.,

“Woman,” “Zip Code 12345,” and “Sophisticated Shopper”).

61 The data brokers represent that they typically do not store the consumer’s name, but maintain a unique identifier for each

consumer. The entire matching process is conducted using unique identifiers, rather than consumer names.

Data Brokers: A Call for Transparency and Accountability

iii. Targeting Consumers Online

The last step in the onboarding process is to target the matched consumers online. To do so, the data

broker must first place a cookie on the browsers of the consumers it has identified through the above

process. It does so when the registration website notifies the data broker that such a consumer has logged

on to the registration website. The cookie includes the information that the data broker has appended to

the consumer’s profile, but the data brokers reported that it does not include other more traditional forms of

identifying information, such as name, email address, or postal address.

Once the data broker has placed a cookie on the consumer’s browser, the data broker can advertise to

the consumer across the Internet for as long as the cookie stays on the consumer’s browser. The data broker

either acts as an advertising network itself by buying advertising space on various websites or contracts with

advertising networks that have secured advertising space on these websites. In this way, the data broker can

place a cookie on Jane Doe’s browser, add to the cookie that she is a “Woman,” living in “Zip Code 12345,”

and a “Sophisticated Shopper,” and serve her an advertisement within the data broker’s partner network,

either on behalf of the fashion retailer or any other one of its online or offline clients.

In addition to the example described above, data broker clients can use onboarding products in

several additional ways:

⊲⊲ Retargeting. A retailer may want to use its existing customer and prospect lists to present those

consumers with specific offers across the Internet. For example, a lender may want to target its

financially distressed customers for a new subprime credit card, or a hotel might want to target its

high-value rewards members to advertise a vacation getaway.

⊲⊲ Cross-Channel Campaigns. A retailer may want to target an identical audience through multiple

channels. For example, a pet store may want to run a campaign to sell a new dog shampoo to dog

owners simultaneously via direct mail, email, and Internet advertisements. Through onboarding, the

pet store can find on the Internet the customers to whom it sent its direct mail and email brochures

and target them with Internet advertisements as well.

Finally, although some of the studied data brokers are onboarding consumers’ offline activities to

advertise to them online, they do not appear to be using consumers’ online web browsing activities to target

them offline. However, one of the data brokers stated that its customers have asked for this functionality and

that it plans to offer it in the future. A review of the privacy policies of other data brokers that were not part

of this study demonstrates that some data brokers may be already using consumers’ web browsing activities

in offline direct marketing products.62

62 See, e.g., Privacy Policy, FiveData, http://fivedata.com/privacy.html (last visited May 19, 2014); Privacy Policy,

eTargetMedia, http://www.etargetmedia.com/privacy.html (last visited May 19, 2014).

Exhibit 4:

Onboarding

When data brokers help businesses find consumer targets for online advertising.

1 Segmenting

A business asks a data broker to find consumers with particular characteristics.

We’re looking for new

customers who are:

• women

• living in the zip code 12345

• sophisticated shoppers.

Our databases tell us

people like Jane Doe fit

these characteristics!

Ok, we’ll find them

in our databases.

2 Matching

The data broker finds the targeted consumers online,

Social Media X

Jane Do

Jane

woman

12345

sophistica

shopper ted

assigns Jane Doe to the targeted

segment,

What sites does

Jane Doe visit?

and finds Jane Doe is registered on

Social Media X.

3 Targeting

The data broker uses cookies to display the business’s ads on sites the targeted

consumers visit.

Social Media X

Jane

Other News

Nam aliquet, ante in mattis fringilla, P lorem

molestie nisi, sed scelerisque massa ante et

metus. Nam sit amet sollicitudin diam, nec lacinia

libero. Integer eu felis accumsan turpis feugiat

posuere. Phasellus vehicula lacus mauris, eu

rhoncus nisl hendrerit in.

Some News Today

Oh, a sale!

Lorem ipsum dolor sit amet, consectetur

adipiscing elit. Nam aliquet, ante in mattis fringilla,

orci lorem molestie nisi, sed scelerisque massa

ante et metus. Nam sit amet sollicitudin diam, nec

lacinia libero. Integer eu felis accumsan turpis

feugiat posuere.

News Yesterday

Lorem ipsum dolor sit amet, consectetur

adipiscing elit. Nam aliquet, ante in mattis fringilla,

orci lorem molestie nisi, sed scelerisque massa

ante et metus. Nam sit amet sollicitudin diam, nec

lacinia libero. Integer eu felis accumsan turpis

feugiat posuere. Phasellus vehicula lacus mauris,

eu rhoncus nisl hendrerit in.

Next time Jane Doe logs on to

Social Media X, the data broker

places a cookie on her browser.

When Jane Doe visits certain websites,

the business’s ads may be displayed.

Data Brokers: A Call for Transparency and Accountability

3. Marketing Analytics

Five of the data brokers in this study provide analytics for marketing purposes, as a way to predict

consumers’ likely behavior. Among other things, the analytics products offered by some of the data

brokers enable a client to more accurately target consumers for an advertising campaign, refine product

and campaign messages, and gain insights and information about consumer attitudes and preferences. For

example, some data brokers will analyze their client’s customer data and advise a client regarding the type

of media channel to use to advertise a particular product or brand (e.g., online, newspapers, television) and

where the advertisements should be shown (e.g., Florida or California). As part of this analysis, the data

brokers can also help their clients model the expected outcomes of various marketing tactics, thus allowing

the clients to better advertise their products to consumers. For example, a data broker might be able to

predict whether advertising a new product exclusively through Twitter will yield the desired outcome.

Some of the data brokers offer their clients the ability to evaluate the impact of an advertising campaign

after it has run. These analytic products are generally based on algorithms that consider hundreds or

thousands of data elements, including historical data provided by the client and data that the broker gathers

from the government, other publicly available sources, and commercial sources described above. For

example, after a telecommunications company runs an online advertising campaign for its newest mobile

device, that company might want to know how many of its customers saw those advertisements, went into a

physical store, and purchased that device.

Some of the data brokers convert their analyses into a variety of different marketing scores for

consumers. Some scores rank clients’ customers on the basis of how likely they are to respond to particular

marketing efforts. For example, clients may rely on marketing scores to identify consumers or addresses on

direct mail lists with a low response rate. Clients may also rely on marketing scores to identify addresses

that have a high undeliverable mail rate or consumers with a low purchase rate. These types of scores could

be used to determine the types of offers consumers may receive, the number of offers, or even the level of

customer service provided to specific individuals. Other scoring products measure a consumer’s presence on

the Internet or a consumer’s influence over others. These scores are based on, for example, the consumer’s

blogging practices, participation in social media sites such as Facebook and Twitter, the number of friends,

followers, or readers the consumer has, the amount of content the consumer creates on the Internet, or

the consumer’s prominence in the news. Clients may use these social influence scores to ensure that they

advertise their products to these particular consumers, with the expectation that these consumers will, in

turn, tout these products to their friends and followers.63

63 On March 19, 2014, the FTC hosted a seminar on alternative scoring products, as part of a series of seminars to examine the

privacy implications of new areas of technology. See Spring Privacy Series: Alternative Scoring Products, Fed. Trade Comm’n

(Mar. 19, 2014), available at http://www.ftc.gov/news-events/events-calendar/2014/03/spring-privacy-series-alternativescoring-products. The seminar included discussions about the scores discussed in this report. Id. (transcript available at www.

ftc.gov/system/files/documents/public_events/182261/alternative-scoring-products_final-transcript.pdf ).

Federal Trade Commission

B. Risk Mitigation

Four of the data brokers sell risk mitigation products that generated approximately $177 million in

annual revenue in 2012. The Commission has grouped these products into two categories: (1) identity

verification and (2) fraud detection.64

1. Identity Verification

In general, identity verification products assist clients in confirming the identity of an individual.

The data broker clients use identity verification products for diverse reasons. For example, banks use

such products to comply with “know your customer” identity verification requirements under the USA

PATRIOT Act65 or to otherwise help deter fraud at the time a consumer commences a transaction.

Some of the data brokers offer identity verification products in several formats. First, the data brokers

offer a scoring format, in which the client receives a numerical score indicating the level of risk associated

with the transaction, along with explanatory codes that relate to the calculation of the score. For a consumer

with a high risk score, the explanatory codes could state that the SSN provided by the consumer is associated

with a deceased individual, the address used by the consumer has been associated with fraud or is a prison

address, the SSN has been used very frequently in a short period of time, or the SSN has been attributed to

an address other than the one submitted by the consumer.66

Second, as a standalone product or to provide an additional layer of authentication, the data brokers

offer their clients a quiz product, which typically includes questions to which the answers should be easily

known to the consumer, but would not likely appear in information stolen by an identity thief, such as

information that can be found in the consumer’s wallet. Questions might include: “Which of these is

an email address you have used?” or “What is your mother’s birthday?” When used in conjunction with

a scoring product, if a consumer scores high on risk, the data broker’s client may require the consumer to

answer five out of the six questions correctly; however, if the consumer’s risk score is low, the data broker’s

client may only require that the consumer answer three of the six questions correctly.

64 As noted earlier, the Commission’s Orders to the nine data brokers did not seek information about data broker activities that

fall within the scope of the FCRA. However, some risk mitigation products could be covered by the FCRA, depending upon

the information collected and its use. The Commission has previously sent warning letters to data brokers that appeared

willing to sell data for FCRA purposes but did not consider themselves to be subject to the FCRA. See Press Release, Fed.

Trade Comm’n, FTC Warns Data Broker Operations of Possible Privacy Violations (May 7, 2013), available at http://www.

ftc.gov/news-events/press-releases/2013/05/ftc-warns-data-broker-operations-possible-privacy-violations. The Commission

will continue to focus on this issue.

65 Customer Identification Programs for Banks, Savings Associations, Credit Unions, and Certain Non-Federally Regulated

Banks, 31 C.F.R. § 1020.220 (implementing Section 326 of the Uniting and Strengthening America by Providing

Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 (“USA PATRIOT Act”), Pub. L. No. 107-56,

115 Stat. 272 (2001)).

66 The data brokers use the SSN to create these types of products, but do not share the SSN with their clients.

Data Brokers: A Call for Transparency and Accountability

Third, the data brokers offer the “match/no match” format, which provides confirmation that

information provided by the consumer matches the information in the data broker’s files. In some cases,

the data broker may provide a “close match” option, where, for instance, two digits in the telephone number

look like they may have been transposed.

Some of the data brokers provide a category of identity verification products called a status verification

product, which serves to both identify an individual and indicate a status of that individual. Status

verification products can ascertain whether a person is active duty military personnel and thereby entitled

to certain foreclosure protections67 or whether an individual is listed as an excluded party for purposes

of government contracting or procurement.68 They also include products that provide verification of

employment (e.g., that X consumer works for Y employer).

2. Fraud Detection

Some of the data brokers also sell products to help their clients identify or reduce fraud. For example,

one data broker offers a product that indicates whether an email address has existed for a period of time or

has a history of transactions related to it. Another data broker tracks address information to assist companies

in detecting patterns associated with attempted fraud (e.g., the delivery address is not associated with the

listed consumer).

Fraud detection products also can assist entities in verifying the reliability or truthfulness of information

a consumer submits to them. For example, if a public benefit is contingent on a consumer’s level of

income, a consumer may fill out a form declaring his or her income. The data brokers can provide a general

confirmation of such income (inferred from broad demographic data) or, with the consumer’s consent, can

verify the individual’s income based on his or her Internal Revenue Service tax return.

Data broker products also can assist companies that have had a data breach by analyzing patterns to

determine whether there appears to be misuse of the personal information breached. For example, if the

breach included employees’ SSNs, the company can provide the data broker with a list of those SSNs

67 See Servicemembers Civil Relief Act, Pub. L. No. 108-109, 117 Stat. 2835 (2003) (codified at 50 U.S.C. app §§ 501–596).

The protections of this statute apply to active duty military personnel who had a mortgage obligation prior to enlistment or

prior to being ordered to active duty.

68 As a means of protecting public funds from fraud and abuse, governmental entities and certain others publish lists of

individuals and entities that are excluded or barred from receiving government benefits, contracts, financial assistance,

or funds. Such exclusionary lists have been maintained by General Services Administration. See System for Award

Mgmt., https://www.sam.gov/portal/public/SAM/##11 (last visited Mar. 26, 2014) (The General Services Administration

discontinued the Excluded Parties List System on November 21, 2012. Exclusions are now maintained by the System

for Award Management); U.S. Department of Health & Human Services, see Exclusions Program, Office of Inspector

General: U.S. Dep’t of Health & Human Servs., https://oig.hhs.gov/exclusions/index.asp (last visited Mar. 26, 2014)

(setting forth a list of individuals and entities excluded from participating in Medicare, Medicaid, and any other federal

health care program); Freddie Mac, see How to Access Freddie Mac’s Exclusionary List in Loan Prospector, Freddie Mac (Sept.

2008), http://www.freddiemac.com/learn/pdfs/uw/ex_lst_lp.pdf (setting forth list of individuals and entities excluded from

participating in transactions involving Freddie Mac loans); and others.

Federal Trade Commission

and ask the data broker to monitor whether a particular SSN on the list is suddenly associated with many

different addresses, thereby suggesting fraud.

C. People Search

Three of the data brokers provide people search products, which generated over $52 million in combined

annual revenue in 2012. “People search” products offer information about consumers obtained from

government and other publicly available sources, such as social media sites, as described above. These

products are unique in that they are often intended for use by individuals, although they can be used by

organizations as well. Users utilize people search products for such purposes as tracking the activities of

executives and competitors, finding old friends, researching a potential love interest or neighbor, networking,

or locating court records. People search products provide personal information about consumers. These

products may allow a user to conduct a search with as little as one data element, such as name, address,

city/state, telephone number (including mobile telephone number), email address, username, or SSN. The

products provide a variety of information including:

⊲⊲ Aliases

⊲⊲ Marriage records

⊲⊲ Age and date of birth

⊲⊲ Email address

⊲⊲ News stories

⊲⊲ Criminal records

⊲⊲ Telephone number

⊲⊲ Divorce records

⊲⊲ Gender

⊲⊲ Civil records (including bankruptcies, liens,

judgments)

⊲⊲ Interests/affiliations

⊲⊲ Address history

⊲⊲ Education information

⊲⊲ Property ownership and sales history

(including loan activity)

⊲⊲ Death records

⊲⊲ Social media information (including

usernames, profile URL, friend connections)

⊲⊲ Relatives

⊲⊲ Neighbors (including sex offenders)

⊲⊲ Employment history

Some of the data brokers provide free search products, and other data brokers provide fee-based

products. In general, the data brokers instruct users that they cannot use these products for purposes

Data Brokers: A Call for Transparency and Accountability

governed by the FCRA, including eligibility for employment, credit, insurance, housing, or similar

purposes.69

69 The Commission has stated that a disclaimer alone will not suffice to keep a product outside the confines of the FCRA.

See Complaint at 3, Filiquarian Publ’g. LLC, No. C- 4401 (F.T.C. Apr. 30, 2013), available at http://www.ftc.gov/

sites/default/files/documents/cases/2013/05/130501filquariancmpt.pdf; Complaint at 5, United States v. Spokeo, Inc.,

No. CV12-05001-MMM-SH (C.D. Cal. June 7, 2012), available at http://www.ftc.gov/sites/default/files/documents/

cases/2012/06/120612spokeocmpt.pdf.

Federal Trade Commission

V. DATA QUALITY

The procedures that the data brokers use to assure the quality of the data they provide to clients

depend on the type of product at issue and the data broker’s business model.70

A. Marketing Products

For marketing products to be effective, the data brokers generally need to provide information to

their clients so that the relevant marketing message (e.g., a golf-related advertisement) reaches the correct

consumer (e.g., golfer Jane Doe at 123 Main Street). To this end, they implement several procedures.

First, as described in Section II.B. of this report, they take steps to ensure the accuracy of the data they

receive from their sources, so that, for example, consumers whom the source identifies as being interested in

hiking are, in fact, interested in hiking. These steps range from relying on the reputation of their sources to

affirmatively evaluating some of the data provided.

Second, they take steps to ensure that they are matching the correct information with the correct

consumer in their database. The data brokers’ matching practices vary. Some, for example, require stringent

matching of the name and address elements. For example, if a source says that Jane Doe at 123 Main Street

is interested in golfing, the data broker will only assign the golfing interest to the Jane Doe in its database

who lives at 123 Main Street. Others rely on fuzzy logic71 matching rules. These data brokers may assign the

golfing interest to Jane Dae, rather than Jane Doe, if their files show that Jane Dae lives at 123 Main Street.72

Third, they may take steps to ensure that the identifying information they have is accurate and up-todate. Some of the data brokers will attempt to fill in missing information, such as a middle initial on a name

or a street suffix (e.g., Avenue or Terrace). A few data brokers will check an address to make sure that a move

record is not associated with the individual and keep the most recent address. Several of the data brokers

will delete a record if it shows up on the Death Master File.

Fourth, the data brokers may reconcile conflicting information. One data broker relies on mathematical

algorithms to reconcile conflicting data elements. For example, if two data sources list a consumer’s age as

25, another as 26, and two others as 25–35, the data broker might assign the age as 25 to that consumer.

70 The phrase “data quality” has traditionally been referred to as “data accuracy.” For the reasons described in Section V.B., for

some fraud detection products, having some inaccurate data is important in order to detect anomalies and potential fraud.

Thus, this section uses the term “data quality.”

71 Fuzzy logic matching rules allow a computer to find matches even where the search terms are misspelled. For example, a

search for “Barack Obama” under fuzzy logic matching rules might retrieve information about “Barak Obama” and other

related terms.

72 A similar matching process takes place when data brokers in this category sell data append products, where they have to

associate information with a particular customer, as requested by the client.

Data Brokers: A Call for Transparency and Accountability

Finally, several of the data brokers report that they accept inquiries from clients about data quality and

attempt to take appropriate remedial action. These data brokers reported that data quality matters to their

clients, who may terminate a data broker who provides less useful or accurate data than another data broker

providing the same product. For example, if a data broker receives numerous complaints from its clients

about the accuracy of the data, and the data broker determines that the information comes from a particular

source, the data broker may further evaluate that source before obtaining updates or additional data from it.

B. Risk Mitigation Products

Like the data brokers that offer marketing products, the data brokers that provide risk mitigation

products take steps to assess whether their sources are providing reliable information. (See Section II.B.,

supra). Unlike the data brokers that provide marketing products, however, for the most part, the data brokers

selling fraud detection products avoid altering the data they obtain73 and tend to retain historical and

anomalous data in order to spot potential trends associated with fraud. For example, while a data broker

that sells a marketing product may delete a consumer record if that consumer appears on the Death Master

File, a data broker providing a fraud detection product will keep the data in the consumer’s record to flag

when a person using the deceased consumer’s data attempts to open an account. Similarly, if John Doe

attempts to use his SSN to apply for a mobile telephone contract and a data broker’s fraud detection product

shows that the same SSN belongs to another individual, then the transaction may be flagged as potentially

fraudulent.74 Eliminating the entries related to other consumers’ use of John Doe’s SSN may undercut

the ability to detect or prevent fraud. Thus, while some data used in fraud detection products may not be

current or accurate, that data may nevertheless be relevant for purposes of detecting possible fraud.

In contrast, for identity verification products, associating correct identifying information (often an SSN)

with a particular individual is critical. The data brokers selling identity verification products tend to require

precise matching before linking a data element to an individual. While a data broker selling a marketing

product may match information to a consumer using only name and address, identity verification products

are more rigorous. They rely not only on names and addresses, but may also require that the driver’s

license and SSN match the information in their records to ensure that the information relates to the correct

individual. In this way, the data broker can try to ensure that, for example, John Doe, Senior, will not be

denied the ability to complete a transaction because he has been misidentified as John Doe, Junior, who lives

in the same house.

73 They may use standardization information to make data more consistent with U.S. Postal Service standards (e.g., they may

change “North 32nd Street” in one file to “32nd Street North”).

74 See Section VIII.B.2., infra, for a discussion of the FCRA’s application to these products.

Federal Trade Commission

C. People Search Products

Unlike the data brokers in the other two categories, the data brokers providing people search products,

for the most part, do not assess their sources because they primarily use publicly available sources. One

data broker reported, however, that it compares the information acquired from publicly available sources to

information acquired from other data brokers in order to assess the accuracy of the information.

The data brokers providing people search products report that they take steps to match the data they

receive to the appropriate individual. For example, if a data broker finds a newspaper article relating to John

Doe, and there are two John Does in its system, the data broker may look at the newspaper article to see if it

mentions John Doe’s place of residence or his age. In doing so, the data broker might be able to determine

that the newspaper article relates to the John Doe living in California, rather than the John Doe living in

Florida. One of these data brokers has patented a matching logic system to facilitate better matches.

In many cases, a user’s search through one of these people search products will generate a number of

different results. For example, a search for “Mike Smith” might provide results for “Michael Smith,” “Mike

D. Smith,” “Micheal Smith,” and “Mike E. Smith.” Typically, the data brokers in this category will leave it

to users to determine which results, if any, match the person they are seeking.

Data Brokers: A Call for Transparency and Accountability

VI. CLIENTS

A. Types of Clients

Each of the data brokers studied has numerous clients. The following chart provides a snapshot of the

main categories of data broker clients.

Exhibit 5: Clients by Product Type and Industry Sector

Direct

Online

Marketing Identity

Fraud

People

Marketing Marketing Analytics Verification Detection Search

Alternative Payment

Providersi

Attorneys &

Investigators

Automotive Industry

Consumer Packaged

Goods Manufacturersii

Data Brokers

Educational

Institutions

Energy/Utilities

Government

Entities

Hospitality/Travel/

Entertainment

Individual Consumers

Insurance Companies

Lenders/

Financial Services

Firms

Federal Trade Commission

Direct

Online

Marketing Identity

Fraud

People

Marketing Marketing Analytics Verification Detection Search

Marketing/

Advertising Firms

Media

Non-profit Entities/

Political Campaigns

Pharmaceutical

Firms

Real Estate Services

Retail Companies

Technology

Companiesiii

Telecom Companiesiv

Alternative Payment Providers include companies who provide consumers with alternative methods of

payment rather than traditional methods such as checks or credit cards.

Consumer Packaged Goods Manufacturers include companies that manufacture items that consumers use

and have to replace frequently, such as food and beverages, apparel, and household products.

iii

Technology Companies include hardware companies, software companies, Internet companies, and other

technology companies.

Telecom Companies include telephone, mobile, cable and satellite television providers, and other

telecommunication companies.

In addition, some of the data brokers, on a limited basis, have also sold information to companies in the

debt collection and debt buying industries to help those companies locate individuals and/or determine the

likelihood that they will repay a debt.

B. Client Screening, Contracting, and Monitoring

Practices

The data brokers’ client screening, contracting, and monitoring practices vary, depending on the type

of product (e.g., marketing or fraud detection), the type of data provided by the product (e.g., property

information or lifestyle data), or the type of client (e.g., financial institution or retailer). For example, when

compiling government and other publicly available information to provide people search products to the

Data Brokers: A Call for Transparency and Accountability

general public, the data brokers tend to engage in minimal screening or monitoring of their clients. Clients,

including individual consumers, access these products through the data brokers’ websites and the data

brokers do not determine the purpose for which the client will use the product. The data brokers state that

they prohibit certain uses of data through their websites’ Terms of Use, which often include prohibitions

on using the products for unlawful purposes, for FCRA purposes, or both. Some of the data brokers only

post their Terms of Use on their websites without requiring clients to affirmatively agree to the terms; others

require clients to affirmatively agree to the Terms of Use when completing the transaction, although the

terms may not be displayed during the transaction. The data brokers generally do not review, monitor,

audit, or evaluate the use of their people search products after the client completes the transaction.

Apart from the people search category, several of the data brokers engage in some screening and

monitoring of their clients.75 The screening process may include meeting or speaking with potential clients,

relying on the well-established reputation of the potential client, and performing some research on the

legitimacy of the potential client’s business, such as verifying the business address, performing Internet

searches, and reviewing the potential client’s website. In addition, one data broker reported that it does not

sell its products to clients involved in certain industries, such as pornography, debt repair, credit counseling,

private investigation, or the sale of illegal drug products or services or illegal weapons.

A few of the data brokers engage in more significant screening and monitoring. In addition to the

screening process described above, the data brokers may include a credentialing questionnaire to determine

if the client is a legitimate entity and has a lawful use for the product, site inspection, security review, website

review, and reference checks. These data brokers also include auditing provisions in their client contracts,

perform audits of their clients, and have terminated clients for contract violations.

Whether or not they screen or monitor their clients, the data brokers that offer risk mitigation and

marketing products enter into written, signed contracts with their clients that describe the permitted and

prohibited uses of the product. Prohibited uses may include reuse or resale of the data without permission;

decoding or reverse engineering of the data; illegal or illicit uses; uses in violation of the FCRA, GLBA,

HIPAA, or COPPA; and uses in violation of industry self-regulatory guidelines.

The contracts between data brokers and their clients include few provisions regarding the accuracy of

their products. Some of the data brokers represent to their clients that their information is only as accurate

as their sources and accept no responsibility to validate the accuracy of their data. Other data brokers, rather

than making representations regarding the accuracy of their data, focus on the utility and predictive quality

of their products.

75 Notably, the IRSG principles discussed in the Introduction were designed to screen clients, in part to avoid misuse of data

that IRSG member companies provided to their clients. However, the industry ultimately terminated the IRSG. See IRSG,

supra note 5.

Federal Trade Commission

VII. CONSUMER CONTROLS OVER DATA

BROKER INFORMATION

In the following sections, the Commission describes some of the salient features of the data brokers’

access, correction, opt-out, and deletion policies by product type.

A. Marketing Products

Of the five data brokers that sell marketing products, four provide consumers with access to certain

limited information.76 These data brokers provide notice on their website, typically within a lengthy

understand. In response to a consumer request, some of these data brokers will provide the consumer’s name

accompanied by a few general interest categories the data broker has associated with that consumer, such as

“Travel Enthusiast” or “Green Consumer.” Consumers are not provided access to all of the data that the data

broker has associated with them and/or all of the inferences made from that data. The data brokers typically

provide access to raw data and not to their proprietary information that they derive through algorithms. As

a result, consumers may not know they have been categorized in a particular manner.

To the extent consumers can access information about themselves, they are required to submit personal

information to verify their identity and sometimes additional documentation through postal or electronic

mail, such as a physical or scanned copy of a government-issued photo identification card or passport,

and, for one broker, possibly a copy of a recent credit, utility, or telephone bill.77 The data brokers in this

study report that they use this personal information only for authentication purposes and to process access

requests.

Only two data brokers that sell marketing products allow consumers to correct their information. Of

them, one data broker launched a new website in September 2013 that, among other things, lists some

elements the data broker sells in its marketing products used for online advertising and enables consumers to

correct some of these elements.

The four data brokers that sell marketing products and provide consumers with access also allow

consumers to opt out of the use or sharing of their personal information for marketing purposes. Opting

out means suppressing the consumer’s personal information from display in the data broker’s marketing

76 In September 2013, one data broker, Acxiom, publicly announced changes to its access policy after submitting its final

responses to the Order. This data broker launched a new website to enable consumers to access and correct information about

them, and to and opt out of having some information included in certain marketing products. See Press Release, Acxiom

Corp., Acxiom Launches New Consumer Portal (Sept. 4, 2013), available at http://www.acxiom.com/acxiom-launches-newconsumer-portal/.

77 Despite recognizing that minors would not typically have such documentation, one data broker explained that it provides

access only to consumers able to produce the documentation.

Data Brokers: A Call for Transparency and Accountability

products. These data brokers generally do not delete the consumer’s information from their systems.

Instead, they maintain the information in order to be able to match records that they may receive in the

future and identify which consumer records should be suppressed. Some data brokers also report that they

might continue to use the suppressed information in products that display data in aggregated, anonymous

form.

These four data brokers provide notice of their opt-out policy via their individual, company-specific

websites, usually in the privacy policy. Consumers can submit opt-out requests through a web form that

requires basic consumer contact information, such as name, mailing address, and possibly an email address.

Some of the data brokers also accept opt-out requests by mail or fax. When compared with the data access

requests, the data broker opt-out procedures appear to focus less on authentication of the individual and

more on streamlining the process for both the data broker and the consumer. For example, opt-out requests

generally do not require the submission of supporting documents. When consumers provide their personal

information in order to opt out, the data brokers have indicated that they use the information only for the

opt out.

The data brokers that provide consumers with the ability to opt out convey some limitations regarding

opt outs to consumers, but do not convey others, which could confuse consumers. For example, among

the three data brokers that sell risk mitigation and marketing products, one data broker’s opt-out disclosures

did not clearly convey that the opt out is limited to just the marketing products, which comprise a small

percentage of the data broker’s business.

Opting out typically does not take effect immediately. It often takes a data broker several weeks to

suppress a consumer’s personal information from its database. Furthermore, while a consumer may opt

out, information about that consumer might still appear in another consumer’s records, such as that of a

spouse. In addition, if a consumer submits identifying information in an opt-out request that varies from

the identifying information in the data broker’s records, the opt out may not capture all of those records.

For example, “Jonathan Doe” may not know to also submit for his shortened name, “Jon Doe.” As a result,

consumer opt-out requests may not be completely effective.

B. Risk Mitigation Products

Of the four data brokers that sell risk mitigation products, two provide consumers with some form of

access to their information. In order to obtain their information, consumers are required to submit personal

information to verify their identity, such as name, address, telephone number, email address, and possibly

provide a photocopy or electronic scan of a government photo identification card and a copy of a recent

credit card, utility, or telephone bill. As with data brokers selling marketing products, the data brokers

providing risk mitigation products use this personal information only for authentication purposes and to

process the access request. Depending on the data broker’s procedures, consumers can submit access requests

Federal Trade Commission

by web form, mail, or email. One of the two data brokers charges a $5 processing fee for access. The two

data brokers that provide consumers with access set forth a notice on their website, typically within their

different levels of detail in their website notice. For example, one data broker describes a procedure to obtain

the data used in its products generally, whereas the other data broker specifies a procedure for obtaining the

data used in its risk mitigation products.78

Only one data broker allows consumers to correct their information. The others do not offer such

an option, stating that it would undermine their efforts to detect fraud. None of the data brokers allows

consumers to opt out of the use or sharing of their personal information in the data brokers’ risk mitigation

products.

C. People Search Products

The three data brokers that provide people search products provide access to consumers by allowing

them to search for themselves by using the same free or fee-based products the data broker offers to its

clients. One data broker that offers fee-based people search products provides consumers with free access to

their own information, but consumers must verify their identity by responding to a number of knowledgebased authentication questions.

These data brokers also allow consumers to correct some information in varying degrees. One data

broker allows consumers to correct their displayed email address, another data broker allows consumers

to annotate their information by appending remarks to their profile, and the third data broker allows

consumers to report facts as inaccurate, which prompts the data broker to check on the accuracy of its source

and, if necessary, fix the inaccurate fact within twenty-four hours.

Two of the data brokers that provide people search products allow consumers to opt out of the disclosure

of their information. One data broker requires that the consumer provide a copy of the consumer’s driver’s

license—with the photo and license number crossed out—by mail or fax or uploaded through a web form,

and the other data broker does not require any documentation. One of the data brokers indicated that it

treats people search product-related complaints as opt-out requests even if the consumer does not specifically

request to opt out. As with marketing products, opt outs for people search products may be incomplete.

If a consumer submits identifying information in an opt-out request that varies from the identifying

information in the data broker’s records, the opt out may not capture all of those records. As a result,

consumers may find themselves having to submit many opt-out requests to the same data broker.

78 One of the data brokers has been providing consumers access to the data used in its risk mitigation products for a number of

years, while the other began in August 2012.

Data Brokers: A Call for Transparency and Accountability

As to deletion, the three data brokers that provide people search products explained that they do

not offer consumers the option to delete their information because such measures would be futile. They

explained that, because they refresh their data via automated means such as web crawling, the same, similar,

or seemingly related information about consumers that was deleted is otherwise publicly available and will

reappear on the Internet and in their databases.

Federal Trade Commission

VIII. FINDINGS AND RECOMMENDATIONS

This report reflects the information provided in response to the Orders issued to nine data brokers,

information gathered through follow-up communications and interviews, and information gathered through

publicly available sources. Based primarily on these materials about a cross-section of data brokers, the

Commission makes the following findings and recommendations:

A. Findings

1. Characteristics of the Industry

⊲⊲ Data Brokers Collect Consumer Data from Numerous Sources, Largely Without

Consumers’ Knowledge: Data brokers collect data from commercial, government, and

other publicly available sources. Data collected could include bankruptcy information,

voting registration, consumer purchase data, web browsing activities, warranty

registrations, and other details of consumers’ everyday interactions. Data brokers do not

obtain this data directly from consumers, and consumers are thus largely unaware that

data brokers are collecting and using this information. While each data broker source

may provide only a few data elements about a consumer’s activities, data brokers can put

all of these data elements together to form a more detailed composite of the consumer’s

life.

⊲⊲ The Data Broker Industry is Complex, with Multiple Layers of Data Brokers

Providing Data to Each Other: Data brokers provide data not only to end-users, but

also to other data brokers. The nine data brokers studied obtain most of their data

from other data brokers rather than directly from an original source. Some of those

data brokers may in turn have obtained the information from other data brokers.

Seven of the nine data brokers in the Commission’s study provide data to each other.

Accordingly, it would be virtually impossible for a consumer to determine how a data

broker obtained his or her data; the consumer would have to retrace the path of data

through a series of data brokers.

⊲⊲ Data Brokers Collect and Store Billions of Data Elements Covering Nearly Every

U.S. Consumer: Data brokers collect and store a vast amount of data on almost every

U.S. household and commercial transaction. Of the nine data brokers, one data broker’s

database has information on 1.4 billion consumer transactions and over 700 billion

aggregated data elements; another data broker’s database covers one trillion dollars in

consumer transactions; and yet another data broker adds three billion new records each

Data Brokers: A Call for Transparency and Accountability

month to its databases. Most importantly, data brokers hold a vast array of information

on individual consumers. For example, one of the nine data brokers has 3000 data

segments for nearly every U.S. consumer.

⊲⊲ Data Brokers Combine and Analyze Data About Consumers to Make Inferences

About Them, Including Potentially Sensitive Inferences: Data brokers infer

consumer interests from the data that they collect. They use those interests, along

with other information, to place consumers in categories. Some categories may seem

innocuous such as “Dog Owner,” “Winter Activity Enthusiast,” or “Mail Order

Responder.” Potentially sensitive categories include those that primarily focus on

ethnicity and income levels, such as “Urban Scramble” and “Mobile Mixers,” both

of which include a high concentration of Latinos and African Americans with low

incomes. Other potentially sensitive categories highlight a consumer’s age such as

“Rural Everlasting,” which includes single men and women over the age of 66 with “low

educational attainment and low net worths,” while “Married Sophisticates” includes

thirty-something couples in the “upper-middle class . . . with no children.” Yet other

potentially sensitive categories highlight certain health-related topics or conditions, such

as “Expectant Parent,” “Diabetes Interest,” and “Cholesterol Focus.”

⊲⊲ Data Brokers Combine Online and Offline Data to Market to Consumers Online:

Data brokers rely on websites with registration features and cookies to find consumers

online and target Internet advertisements to them based on their offline activities. Once

a data broker locates a consumer online and places a cookie on the consumer’s browser,

the data broker’s client can advertise to that consumer across the Internet for as long

as the cookie stays on the consumer’s browser. Consumers may not be aware that data

brokers are providing companies with products to allow them to advertise to consumers

online based on their offline activities. Some data brokers are using similar technology

to serve targeted advertisements to consumers on mobile devices.

2. Benefits and Risks

⊲⊲ Consumers Benefit from Many of the Purposes for Which Data Brokers Collect

and Use Data: Data broker products help to prevent fraud, improve product offerings,

and deliver tailored advertisements to consumers. Risk mitigation products provide

significant benefits to consumers by, for example, helping prevent fraudsters from

impersonating unsuspecting consumers. Marketing products benefit consumers by

allowing them to more easily find and enjoy the goods and services they need and prefer.

In addition, consumers benefit from increased and innovative product offerings fueled

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by increased competition from small businesses that are able to connect with consumers

they may not have otherwise been able to reach. Similarly, people search products allow

individuals to connect with old classmates, neighbors, and friends.

⊲⊲ At the Same Time, Many of the Purposes for Which Data Brokers Collect and Use

Data Pose Risks to Consumers: There are a number of potential risks to consumers

from data brokers’ collection and use of consumer data. For example, if a consumer

is denied the ability to conclude a transaction based on an error in a risk mitigation

product, the consumer can be harmed without knowing why. In such cases, the

consumer is not only denied the immediate benefit, but also cannot take steps to

prevent the problem from recurring. Similarly, the scoring processes used in some

marketing products are not transparent to consumers. This means that consumers

are unable to take actions that might mitigate the negative effects of lower scores,

such as being limited to ads for subprime credit or receiving different levels of service

from companies. As to other marketing products, they may facilitate the sending of

advertisements about health, ethnicity, or financial products, which some consumers

may find troubling and which could undermine their trust in the marketplace.

Moreover, marketers could even use the seemingly innocuous inferences about

consumers in ways that raise concerns. For example, while a data broker could infer

that a consumer belongs in a data segment for “Biker Enthusiasts,” which would allow a

motorcycle dealership to offer the consumer coupons, an insurance company using that

same segment might infer that the consumer engages in risky behavior. Similarly, while

data brokers have a data category for “Diabetes Interest” that a manufacturer of sugarfree products could use to offer product discounts, an insurance company could use that

same category to classify a consumer as higher risk. Finally, people search products can

be used to facilitate harassment, or even stalking, and may expose domestic violence

victims, law enforcement officers, prosecutors, public officials, or other individuals to

retaliation or other harm.

⊲⊲ Storing Data About Consumers Indefinitely May Create Security Risks: Some of

the data brokers store all data indefinitely, even if it is later updated, unless otherwise

prohibited by contract. For some products, these data brokers report that they need to

keep older data. For example, they explain that even if

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