Transcripts For CSPAN2 Marketing Of Consumer Information 20131227

In selling it for marketing purposes. The Senate Commerce committee recently held a hearing on the issue. The committees chairman, West Virginia democrat jay rockefeller, called the practice, quote, revolting. [inaudible conversations] the committee will come to order. There are, at this point, two people sitting at the dais, and theyre two wonderful people, but id be pleased if there were more. Senator blumenthal and senator pryor. Senator markey, senator fischer, senator warner will be here. But this is the day that we almost vote on the budget actually. We dont quite. We always find ways to do it. You have a motion to proceed, then off motion to whatever, and then tomorrow at some point we vote on the budget. Just be grateful youre in private life. [laughter] okay. Youre all welcome. The disclosures about u. S. Intelligence activities over the past few months have sparked a very public debate in this country about what kinds of information the government should be gathering and how we protect the privacy of americans who have done nothing wrong. The snowden disclosures have harmed our countrys national security, but they have made americans think more than they usually do about how their lives both online and offline, can be tracked, monitors and analyzed. People are aware of that. Not to the extent tear so accustomed to being videotaped on everything they do. Were still going through that adjustment period. Im glad were talking about these privacy issues in general and today. Weve all benefited from the Rapid Advances this computing technology, but we also cherish our personal freedoms. We always use that word, cherish, our personal but we do. And its a complicated subject. And we want to be able to protect ourselves and our loved ones from the unwanted gaze of the government and our neighbors. Whats been missing from this conversation so far is the role that private companies play in collecting and analyzing our personal information. A group of companies known collectively as data brokers are gathering massive amounts of data about our personal lives and selling this information to marketers. We dont hear a lot about the private sector data broker industry, but its playing a large and growing role in our lives. Let me provide a little perspective. In the year 2012, which you will recall was last year, the data broker industry generated 156 billion in revenues. Thats more than twice the size of the entire intelligence budget of the United States government. All generated by the effort to learn about and sell the details about our private lives. Whether we know it or like it or not. Makes no be difference. One of the largest data broker companies, ax on, recently boasted to its investors that it can provide insight into approximately 700 million customers worldwide. When government or Law Enforcement agencies collect information about us, they are restrained by our constitution and our laws, and they are subject to the oversight of courts, inspectors general and the United States congress through, um, the Intelligence Committee in the senate and the house. Identify served on ive served on the Intelligence Committee since before 9 11, and i can declare to you absolutely without a single thought that the protection that nsa provides to security and secrecy is far better than what were going to be talking about today. They have rules, they have all kinds of judges and hoops that you have to jump through, the fbis involved, doj. Its all its very tight. And every day you read the paper youd think it doesnt exist. Its just the government gone wild with. But marley wild. But particularly when it comes to domestic which is called section 215, its very tightly monitored, and theres never content, theres never email, and theres never a name. Theres never a name. Theres just a telephone number. But data brokers go about their business little or no oversight. While there are laws on the books that protect the privacy of Americans Health and financial information, they do not cover data brokers marketing activities. Collecting consumers information for marketing purposes is not a new business. For decades before the internet was invented, retailers, marketers and, yes, political candidates compiled mailing lists that a they used to send catalogs, coupon books or other materials to their potential customers. But the day broker Industry Data broker industry has been revolutionized in recent years by the tremendous advances in computing and data analysis. And aserers spend as consumers spend more and more time socializing and shopping online, they are generating rich new streams of personal data to collect and analyze. On the part of the data brokers. These days data brokers dont just know our address, our income level, our political affiliation most probably, they probably know the weight of everybody in the family. They have collected thousands of data points about each one of us, and were simply not aware of it except in theory. They know if you have diabetes or suffer from depression. They know if you smoke cigarettes. They know your realizing habits, your browsing habits. They know how much you and your family members weigh. And they may even know how many whiskey drinks you have consumed in the last 30 days. We wont reveal that we wouldnt reveal that kind of information, would we . Of course not. No. [laughter] like the pieces of a mosaic, data brokers combine data points like these into startingly detailed and intimate profiles of American Consumers. Under current laws we have no right to see these pictures of ourselves that these companies have criminated. No right. For the past year, this committee has been trying to bring some muchneeded oversight to the data broker industry. Wheres the copy of our report . Oh, its under here. I got it. Um, we have been pushing the data brokers to answer the same kinds of questions Many Americans have been asking the government since the snowden disclosures. What information are you collecting about us . And how are you using the information . Todays hearing is the first time were publicly discussing that we are learning what we are learning in this investigation. The Commerce Committee staff has also prepared a report for me and for the Ranking Member on the progress of this investigation. It is thus. More to come. I ask unanimous consent to put a copy of this report in the record of this hearing. One of the things that we have learned in this investigation is the data brokers engage in unobjectionable activities. They do what marketers have always done, they help businesses find potential customers. But we have also found some practices that raise some serious Consumer Protection concerns. In particular, im disturbed by the evidence showing the data broker segment americans categorize them into categories, name those categories based on their incomes, and then they sort economically vulnerable customers into groups with names like rural and barely making it. Not making it up, thats one of their categories. Tough start, young single parents. Rough retirement, small town and rural. Seniors. And zero mobility. I want to know how and why data brokers are putting American Consumers into categories like these, and i want to know which companies are buying these lists to target their marketing to these groups. Maybe its totally innocuous and benign. I dont start out accepting that, but maybe it is. Thats why were doing this investigation. Some Company Companies in the data broker industry have responded positively to our oversight efforts. When i became chairman here several years ago, we went over to henry waxman and stole a couple of his best people and set up an investigations p unit which for some reason we never had. And we gave ourselves subpoena power. For some reason wed never done that. Its a powerful tool when youre doing investigations, which is what we tend to do if here. I want to know which companies are buying these lists to target their marketing to those groups. Some companies in the data broker industry have responded very positively to our oversight efforts. They have provided complete answers to my questions, even the tough ones over the past year. But several of the largest data brokers, specifically axion, epsilon and experian, are continuing to resist oversight. Just resist it. To date, they have not given me complete answers about where they sell get their Customer Data on consumers and to whom they sell it. Im putting these three companies on notice today that i am not satisfied with their responses, and im considering further steps. And i have steps that i can use. That i can take to get this information. We have oversight over this activity in american commerce. And if you do oversight whether its over intelligence or whether its over this, you do it seriously, and you do can it with a purpose, and you want to get the truth. So im putting these companies on notice that im not satisfied, and i have further steps that i can take to get this information. And i want to assure them that oversight efforts in this committee that we have started will continue. I call now on my distinguished friend from a similar urban state [laughter] thats right. Senator john thune. Well, thank you, mr. Chairman, for holding this hearing, and thank you also to the witnesses for coming here today. Our economys increasingly data driven, and data brokers play a growing role in facilitating the goods and services to consumers. Data or information brokers are companies that collect data including personal information about consumers from a wide variety of sources such as public records, web sites and retailers and resale such information for purposes of identifying the customer bes identity to reventing fraud. As the chairman noted, the purpose of the inquiry has been to better understand the industry, and and i look forward to todays hearing as we focus on how the information collected by day that brokers is used for marketing purposes. Without question, datadriven marketing can provide benefits and greater convenience to consumers, can lower the cost of products and services because businesses can target marketing more precisely. It can also help businesses sell products that consumers actually want. Datadriven marketing is one important reason many of us are able to use Search Engines in our email accounts for free. And it promotes the targeting of resources to reduce the amount of junk mail and catalogs that arent tailored to a consumers particular interests, at least that is the goal. Put simply, this industry is at the center of something the Commerce Committee cares about, mrs. In todays economy, datadriven marketing is used across financial, insurance, automotive, technology, health care, its even used by profits, dub nonprofits, governments and campaigns. Data resources helped the president s reelection in 2012. As well hear from the Marketing Data industry, theyre also helping to fuel job creation and Technical Innovation in our slowlyrecovering economy. And while the industry creates many benefits, this hearing will also explore important questions about the privacy implications of data brokers activities including issues of transparency, profiling and concerns about allegations of differential pricing. Questions have also been raised about whether consumers are aware of the instances in which their personal information may be collected, bought and sold resulting this calls for more transparency into day broker practices. Advocates have also raised concerns that data brokers create profiles of individual consumers based on the aggregation of sensitive and sometimes personal data including health conditions. These are important issues, and i look forward to the discussion today n. Rapidly changing marketplace, the federal trade commission has done important work concerning data brokers and related privacy issues including developing educational efforts. Theyve also brought Enforcement Actions under the ftc act and the fair Credit Reporting act. The ftc is also completing a study about practices in the data broker industry and will provide recommendations to Congress Based on their findings next year. I look forward to their testimony, the Government Accountability office has recently produced a report on the day broker industry which i understand will be splitted as part of the submitted as part of the record for this hearing. Ill be asking our witnesses how practices for marketing purposes may impact consumers both positively and negatively. Im also entered if hearing from our witnesses how the industry can work to balance the privacy concerns of individuals with the information needs of businesses and our economy. While ive expressed my thanks, i do want to add a special note of thanks to tony hadley from experian. This query has included letters to several consumerfacing web sites. Having only one of those companies testify is a good way to keep the number of witnesses manageable. Mr. Hadley, im sure many of the other companies are also grateful for your willingness to help advance our understanding of the data broker industry. [laughter] i know i certainly am. So i want to thank you again, mr. Chairman, for having this hearing, and i do look forward to hearing from our witnesses. Thank you, senator thiewrntion very much. Senator thune, very much. Well have well, ill. Just o one by one. Jessica rich. Ms. Rich is the director of the bureau of Consumer Protection at the federal trade commission. And ill go down the line. Could you give your testimony, leads . Chairman rockefeller, Ranking Member thune [inaudible] youve got to push the little button. [inaudible] its called technology. Yes. I assure you, i know something about technology. Um, im jessica rich, director of the bureau of protection at the federal trade commission, and i really appreciate this opportunity to present testimony. This is a highly opportune time to examine the practices of data brokers aztec logical developments have allowed for the dramatic increase in the collection and use of consumers information. Data brokers collect consumers personal information from a wide variety of sources and resell it for a variety of purposes without most consumers ever knowing of their existence, much less the variety of practices in which they engage, and many of these practices as you noted fall outside of the scope of existing laws. I know this committee is well aware of the lack of transparency of data broker practices. Chairman rockefeller, we commend you for your leadership on this issue and stand ready to work with the committee and with congress on ways to improve the transparency of day broker practices. The report you released today is a Key Initiative in this effort as is the study you requested from gao. At the ftc, our work on data broker practices goes back to the 1970s. For decades policymakers have expressed concerns about the transparency of companies that buy and sell consumer data. Indeed, the existence of Companies Selling consumer data for credit and other eligibility determinations invisibly and behind the scenes led to the enactment in 1970 of the fair Credit Reporting actment since then the commission has been active in examining the practices of data brokers. Weve used three primary tools in this effort. First, we bring Enforcement Actions when Company Practices violate the law. Perhaps our most well known data broker case involved choice point in which we obtained 10 million in Civil Penalties and five million in redress for consumers. We allege they implements lax privacy and security procedures resulting in sensitive Consumer Report information p ending up in the hands of known identity thieves. More recently, we entered into that Consent Decree with online data brokers. According to our complaint, they collected personal information from hundreds of online and offline sources including social networks and combined that data into details profiles. We allege they marketed these profiles for use by with Human Resource departments in hiring which made it subject to the fair Credit Reporting act, but it failed to awide by the accuracy and privacy requirements. The order contains strong unjunkettive relief and an 800,000 civil penalty. Second, the commission conducts research and issues reports addressing data broker issues. For example, our 2012 privacy report made best practices and legislative recommendations for Consumer Privacy including specific relations regarding recommendations regarding data brokers. The report reiterated a Longstanding Commission recommendation that data brokers provide consumers with access to the data they maintain, and depending on how the data is used, the ability to correct it. More recently, in order to shine a light on the industry, we issued orders requiring nine day brokers to provide us information regarding how they collect and use data. The commission is close to completing a report based on this information and expects to release it in the coming months. And in the spring of next year, we plan to host a series of privacy workshops including a seminar on whats called alternative scoring products offered by day that brokers. That is, products that Companies Use to predict Consumer Behavior and shape how they market to particular consumers. Our final tool is educating businesses and consumers on privacy issues in the practices of data brokers. For example, we recently sent letters to multiple data brokers that provide tenant and background be Screening Services warning them about their duty to comply with the fair Credit Reporting act. And for consumers we recently produced a video on data brokers and have published frequent blog posts and updates on issues related to the industry. In closing, as the collection and use of consumer data continues to explode, we share committees commitment to continue examining data brokers, and we stand ready to work with the committee on this critical issue. Thank you. Thank you very much, ms. Rich. Pam dixon. Ms. Dixon is the exive director at the world executive director at the world privacy forum. Youre on. Shes gloating. [laughter] chairman rockefeller, members of the committee, thank you for the opportunity to share what ive learned about the data broker industry today. I appreciate it very much. As a moderate in the privacy debate and in the privacy world, i have come to a troubling conclusion. The data broker industry as it is today does not have constraints and does not have shame. It will sell any information about any person regardless of sensitivity for 7. 9 cents a nature which is the price of a list of rape suffererrers which was recently sold. Lists of rape sufferers, victims of domestic violence, Police Officers home addresses, people who suffer from genetic illnesses complete with names, home addresses, ethnicity, gender and many other factors. This is whats being sold and circulated today. Its a far cry from visiting a web site and seeing an ad. What it is is a sale of the personally identifiable information and highly Sensitive Information of americans. So, senators, id like to make three points. First, scoring. There are now pseudo scorers which comprised of factors that are nonfinancial or, i should say, nonCredit Report based. These pseudo Credit Scores are used in lieu of actual Credit Scores because they completely circumvent the fair Credit Reporting act. So a business or insurer or employer can purchase these scores and use them with no consequence or any consequence at all. This needs to change. Secondly, health. There are lists of millions of people that are categorized by the diseases that they have ranging from cancer to bedwetting, alzheimers. Terrible diseases, some of them benign, some of them relating to mental illness. There are lists of millions of people and what prescription drugs that they take. And these lists exist entirely outside of hipaa. Outside of what . Hipaa. Okay. The any kind of federal health protection. Unless the datas held by a provider or, you know, a covered entity under hipaa, forget it. Hipaa doesnt apply. In this industry has selling these lists, theres been a lot of mention made of marketing purposes for these lists. These lists are being sold without constraint. We dont know if employers are buying them, if insurers are buying them, we dont know who is buying them. But the lists are being sold for, apparently, billions of dollars which suggests to me that we need to find out who is buying these lists. This terms of of solutions, my third and final point, we need to expand the fair Credit Reporting act so that when there are consumer scores that are pseudo Credit Scores, that this is brought under the fair Credit Reporting act so that consumers can exercise the same rights they would have if a credit score had been pulled. If the information is statistically as accurate and as the same the same effect as a credit score, then why isnt it regulated under the fair Credit Reporting act . This should be be a wright line here, and i dont think that that is too terribly difficult to draw. There needs to be and, actually, there is an you are urgent need for a National Data broker requirement for an opt out. We favor an opt out thats highly branular so that consumers granular so that consumers dont always have to take the Nuclear Option and get spirally off of every list entirely off every list. We favor consumers having the ability to make their own choices. Maybe a consumer wants her name and phone number on a list but nothing else. Certainly nothing about her weight, certain hi nothing about the number of children she has, or maybe she does. The point is, consumers need to know when theyre on a list and need to make choices about what appears on those lists. We need to reexamine hipaa and decide if Health Information that is not held by Health Care Providers deserves Health Care Protections in privacy. I believe they do. This is going to be the beginning of an important lick dialogue that is public dialogue that is going to be incredibly important for all of us to engage in. Because if we have an industry that has not curtailed the sale of names of anyone with highly Sensitive Information for 7. 9 cents a name, then we havent done enough. Thank you for this opportunity, and i look forward to your questions. Thank you, ms. Dixon. And youre exactly right. This is the beginning of a dialogue, and we immediate to make it, we need to probe deeply without fear of consequence, and then we need to do something about it. Thatll be a judgment that we will have to make, but youve already suggested a change in hipaa which is, you know, used to be very sacred and still is, but not in all cases. So i thank you for your testimony. Professor joseph turow. Dr. Turows the associate dean for graduate studies at the Annenberg School for communication at the university of pennsylvania. Thank you, chairman rockefeller, members of the committee. In a bit of a different tack, id like to address two key questions about data brokers and their collection of information about americans for marketing purposes. First, if we take sensitive first, if we take sensitive topics like health and employment out of the equation, what possible harm can come from using peoples data for marketing purposes . After all, what were talking about is simply targeting for product advertising. Second, havent data brokers and their lists been around for over a century, and if so, what makes them today any different from the past . Lets start with a history question. Its true that marketers compiled and bought lists of prospects way back into the 19th century. These lists became more detailed in the 20th century. But the differences between lists 35 be years ago and today is extreme. The amount of information brokers have now and how they deal wit. The numbers of Data Companies had about us was rather small. It was difficult to interconnect pieces of data, and the data didnt change all that quickly. Today data brokers can collect huge amounts of information about tens of millions, even hundreds of millions of people. They update that information frequently, and they use highspeed computers and advanced statistics to draw conclusions in ways previous generations of data brokers could hardly imagine. Crr axioms recent catalog. That information rangings from the amount of money people make to the kinds of vacation they take to the number of friends they have on social media to the value of neighborhoods they live in to how tall they are to whether they gamble to their media uses and much more. Axiom sells any number of these items about individuals as well as packets of this data. In addition, through its operating system, the day broker has created a kind of universal cookie to find and follow people across desktops, laptops, mobile phones and tablets as well as to collect more information about them from these media. Like axioh, other data brokers continually run programs that connect the dots for marketers and tape them to other ideas the marketers have about us. The brokers often bring together pieces of information that people did not expect would be merged when they disclosed them separately to various online and offline entities. The results are buckets of interpretation stories of our lives, our economic value and our potential that we dont know exists and may not agree with. The consequence withs of their use in marketing can be profound and disturbing. For example, merchants can charge you more than others for products based on features they tag you with you adopt even though dont even know youve shared. Blends into a complex algorithm to precinct you in predict youre inclined to pay higher prices. Using apps and personalized coupons, physical and Virtual Stores can change their prices based on what they know about you. Data brokers can add information about your lifetime value to retailers understanding of you from receipts. The results can dictate the types of items you see at discount and how much that will be. Negative signals about you can mean having to wait longer than others for Customer Service, being rejected as a valuable customers and being offered coupons for nonknew trishes foods. Media firms can change the news and Entertainment Offerings you receive compared to offerings your neighbor or coworkers get. The result, you systematically see different worlds from your friends or work colleagues because of the stories brokers tell about you. Now, many of these examples already are taking place. All of them are quite plausible. Data brokers trumpet that they make ads anonymous so theres no problem, but anonymity of this sort is not reassuring. If i am followed with by buckets of data that tell stories about me, it doesnt matter if my name is joe turow or 2588784. Data brokers are engaging, encouraging a world of datadriven social discrimination thats becoming widespread precisely because it comes with all southerns of advertising. Surveys ive conducted since 1999 consistently suggest americans worry about what firms learn and think about them. Poignantly, i have heard people say they will change their activities or how they talk about themselves online to be treated better by marketers. The difficulty, of course, is its often impossible to know whether and how thats going to work. Were only at the beginning of the datadriven century. Day brokers will be central to how we think of ourselves and lead our lives. For the sake of democratic ideals and relationships, lets limit what and how much data brokers can collect and share until as a society we know how to create regimes of day respect where people data respect where people have control over the most important elements of their identity. Thank you. Thank you. Very much. Mr. Hadley, tony hadley, is experians Senior Vice President of Government Affairs and public policy. Please, we welcome you. Thank you, and good afternoon, chairman rockefeller and members of the committee. My name is tony hadley, and im experians Vice President of Government Affairs and public policy. Experian is a leading provider of data and Information Services that bring significant value to consumers and the economy. We welcome the committees interest ask can dialogue in the Marketing Data industry and this opportunity to describe how experian collects and uses data. Ive submitted a fuller statement, but im going to summarize just a couple pointings. First, experian truly believes that responsible information sharing significantly enhances economic productivity in the United States and provides many benefits to consumers. Economists have called the manner in which u. S. Companies collect and share Consumer Information among affiliated companies and third parties the secret ingredient to our productivity, innovation and ability to compete in the global marketplace. Experian shares data to help make consumers and Small Business lending more efficient. We share it to help facilitate access to fair and affordable credit. To help protect consumers from fraud including Identity Theft. To help consumers gain greater financial literacy. And to help Companies Reach consumers with timely and Relevant Communications and marketing offers. Marketing data in particular brings lower prices and greater convenience to consumers by strengthening competition. Nonprofit organizations and Government Agencies also depend upon consumer data to efficiently serve the needs of people and citizens. Now, just as important experians day allows small Companies Data allows Small Companies including many in the state of West Virginia and the other states around the nation to compete with Larger Companies who maintain very sizable consumer databases. So experian provides Small Businesses with the same data sets that their larger competitors have so that they can compete and grow their companies. A significant point id like to make also is that the operations of Experian Marketing Services and the data it collects and uses and shares is completely separate from experians operations as a Consumer Credit bureau. No eligibility determinations related to credit, insurance, employment, housing or any other decision under the fcra is ever made with experian Marketing Data. Experian has in play strict policies as well as technological, management, procedural controls to insure theres complete separation. Experian shares data response my by carefully safeguarding compliance with all privacy and Consumer Protection laws and industry selfregulatory standards. We even promote new industry standards and best business practices. The committee has also sought specific information about our clients and our data sources. Experian provides Marketing Data to a wide variety of client organizations in the private, government and nonprofit sectors that market to consumers through multiple channels both online and offline. The largest sectors we serve are retail, media and financial services. But our products are used by nearly all sectors of the economy. Experian uses, experian uses include the sources for specific products in which the committee has expressed interest. Most of our data comes from public records and publiclyavailable information such as zip code level census information, local property records and telephone directories. Added to this, many people voluntarily provide data to experian by filling out surveys and questionnaires. These multiple sources of data are aggregated at the household level, then analyzed and modeled to predict household preferences and propensities. Such methods result in a group of consumers receiving messages and advertising that they are more likely interested in responding to. When all is said and done, we help marketers make the best guess about what messages and marketing solicitations a group of consumers hay be most may be most interested in responding to. Finally, i want to emphasize that experian has made every effort to be forthcoming and cooperative throughout the the inquiry launched by the committee. Weve spent considerable time to make sure the documents we provided are helpful to the committees work and understanding the marketplace. To date, experian has provided the committee with eight submissions, and we believe this provides a full description of our products, Consumer Protections. Were here today as the only corporate representative in that spirit of cooperation to help the committee better understand our role in Data Services and the role we play in the economic, in the economy and the lives of consumers. We thank you for your attention and for inviting us to appear here, and we look forward to continuing to work with you, and ill answer any questions the committee might have. Thank you. Thank you, mr. Hadley, very much. I want to get this right. Jerry cerasale. Did i do it right . You did it correctly, thank you. I appreciate it. Im thrilled. You are the Senior Vice President of Government Affairs for the direct marketing association, dma. Thank you. We welcome your testimony. Thank you, senator rockefeller, members of the committee. Dma appreciates the opportunity to be here today ask to talk about this important subject. On a personal note, i want to say that i have testified before this Committee Many times, testified before other committees before congress, and today on my last day of work before i retire, i thank you for this i want to thank congress for the opportunities theyve given me to participate in dialogue here before the congress, and and i appreciate it. Senator rockefeller, i will not be here when you retire at the end of this congress, so i wanted to say personally, we thank you for your service to the United States. Now, to why im here today talking about day. We allowed to ask you questions, or [laughter] you can ask questions. Sadly, they know where to find me to get the questions to me. They say im a phone call away and i promised that they could call me. I didnt promise id answer the phone. [laughter] but thats beside the point. Anyway, data. Every consumer facing business in the United States uses data today. Its important it drives our economy. Its driving our current recovery, and its very, very important to us and to our members. And in that light, dma has created the daydriven Marketing Datadriven marketing institute, and it has commissioned a study to take a look at the value of data and the uses of data in the american economy. And we employed, we used a professor from Harvard Business school and a professor from columbia university, and they conducted this value of data study and found that its, data is worth 156 billion a year to the american economy, 675,000 jobs, and 70 of that influence is related to sharing of data by companies. But even more importantly, this day sharing helps small data sharing helps Small Businesses. It helps break down the barriers to industry so Small Businesses can come in and compete with the big boys, and it keeps them on a level Playing Field once they get a foothold. But this is not new. This has been happening for a long time. Give you a couple of examples. L. L. Bean started with a list of nonresident maine hunters, and thats how that started. The discover card, which is one of the first credit cards that was a reward credit card, began with a list of sears credit card credit holders. Without those lists, those companies wouldnt have started. Those benefits from those two companies would not have been realized. So its important. It is. Personal information thats used. And the United States has some strong privacy laws fair Credit Reporting act, cant spam, hipaa, glb, data pass and so forth and those laws are complemented by selfregulation and by the industry. And i can speak only for dma here, dma has a ear Ethics Committee peer Ethics Committee that meets monthly, handles complaints from consumers and other businesses that are brought to it against members and monomembers. Most of them comply with our guidelines. Those that dont, we publicize them on the web page. If theres a violation of law, we turn it over to state ags, to the federal trade commission, to the postal inspection service, to Law Enforcement. And as we looked at this, the federal trade commission has said that they support this complementary effort by selfregulation, and we want to continue that. And is we continually at dma update these guidelines so that they are live and meet todays real world efforts. One of the things that we can talk about, however, is that all of this is, in fact, working. The American Consumers are voting with their pocketbooks and their feet. And ecommerce is growing, growing multiple times the rest of the economy. Because they have in this process. And think about it, they need trust. Theyre purchasing something without having it on hand and paying for it before they receive it. They need to have that trust, and this economy and this datadriven economy is, in fact, working. Think about the Great American success story, and i mean really Great American success story, amazon. On cyber monday it sold 300 items per second. That shows that americans have confidence in this. Their needs as American Consumers are being met in this datap driven economy. There are clearly concerns. There are concerns about whats happening. Youve heard them, its in the report and oh others, weve heard them today. We should focus on the improper use of data and figure out how to prevent the improper use of data. But one of the things we cant do is pull away and stop responsible uses of data that are driving this economy. Thats something that we have to be very careful of as were part of this dialogue were having today. The american economy, Small Businesses, American Workers and American Consumers rely on and benefit from responsible data use. And america leads the world this that category, and we hope to keep it that way. Thank you very much for this opportunity, i look forward to answering any of your questions. Thank you very much, sir. Ill start out the questioning, and then well do it according to order of arrival. Mr. Hadley, one of the products that your Company Sells to marketers is called choice score. This product targets what you call underbanked consumers. Let me read your description of the underbanked consumers. New legal immigrants, recent graduates, widows, those with a generation bias against the use of credit, followers of religions that historically have discouraged credit and consumers with transitory lifestyles such as military folks. Mr. Hadley, the populations in this group are very vulnerable to financial scams. We have experienced that in this committee because weve done hearings about that particularly with, near military bases where people take, you know, these are relatively young people, theyre overseas, theyre back for a while, and theyre very vulnerable because they need cash, and people can come if and really clean their clocks and do. And we have the testimony to prove that. Last month in this committee we held a hearing about companies that target fraudulent Financial Products to our military Service Members and military personnel are unfortunately vulnerable to scams because of their financial inexperience. And their steady paychecks. So, mr. Hadley, what does your company or why does it single out and sell lists of economicallyvulnerable groups like immigrant, widows and military personnel . Some thats a very important question to me thats a very important question to me because if you set the probable response to whom your, you know, your questions, your marketing is aimed at, you can fairly well predict the type of product theyre going to get. I mean, youll be offering them a nicer vacation, a less nice vacation, etc. But when you put people in category cans and theyre categories and theyre vulnerable, that is not called the l. L. Bean model. So id like you to respond to that question. Thank you, senator. We would be very concerned if lenders were using that information for scamming purposes too, and we have processes and procedures in place to insure that nobody gains access to that score for that purpose. And how does that work . We have a onboarding system by which we take on a client that gets our information to know who they are, and we also have a mail piece review process to know what theyre going to offer the consumer. And if its anything that looks discriminatory or predatory, we not provide our list to them. Now and this is your selfregulation . This is our selfregulation under dma standards. So if we were to violate that, wed be in violation of of our selfregulatory standards as well as our contractual standards with our clients. Now, whats important here is that there are somewhere between 45 and 50 million americans who are outside the mainstream of the credit markets of the United States. These are underbanked consumers who financial be institutions cannot reach through credit scoring and Credit Report. They dont have financial identities or a big enough or even the presence of a credit file in order to bring them into the mainstream of financial markets. But that doesnt mean that they dont needs access to financial services. So banks use this data to try to reach out to consumers who they can help to empower them, not to scam them. We dont want to do business Financial Institutions who are trying to scam people only to empower them. And this is the best way to find those individuals who are outside the mainstream, immigrants new to credit like recent college graduates, exactly what were talking about here, to give them an offer, an invitation to apply so that then they can make an eligibility determination regarding that application under the fair Credit Reporting act. But this is marketing literature, not eligibility determination. Did i answer that for you . Not entirely. Can you tell me which are the companies that buy this choice score product from you . We asked you that. Yeah. They would be banks and Financial Institutions and members of the financial community. Thats whats called a general answer. Yeah. I cant tell you who our clients are. Thats a proprietary list of ours. Its like our secret ingredient. The ones who would want that most are our competitors. And our counsel has informed me that they dont believe that our ability to give that to you can be shielded from disclosure the through the rules of the senate. If we thought they could be, for example, under a Law Enforcement action where it could be with shielded and protected from foia or other disclosures, we could do that. But not under the situation, under the rules of the senate. And were very sorry about that, but we just simply cant do that. Our counsel wont let us. Oh. Well, there are a lot of counsels out there looking for work. [laughter] my point is that youve got to keep up with your competitors, and my point to you would be you are not necessarily approving of what your competitors are doing. I mean, maybe you want to keep up with them, but maybe theyre doing exactly what youre doing but on a larger scale. We dont want to keep up with those competitors. And a lot of those other companies, incidentally, gave us the precise information which i want from you. I would hope that the focus of the committee and ftc and others interested in these types of uses of data would focus on those data brokers, because its not experian thats doing that. We wouldnt have that within our Business Model. All right. Can you, please, provide the names of the companies that buy lists of economicallyvulnerable consumers from experian . I can tell you the types of categories, and theres a really good but dont you understand how that doesnt work up here . Yeah. The types of categories . But let me tell you [inaudible] let me tell you and i can name a few because theyre public, right . Our mosaic segmentation system reflects the entirety of the economic range of our economy. We dont leave out low income individuals. They exist within the economy and need products and services too. But the most frequent users of that segmentation, the economicallydisadvantaged, senator, are typically Government Agencies and public policymakers who are trying to get a view into them. So that they can deliver them messages and marketing materials about Public Services theyre eligible for. Among the users of those are the West Virginia department of health and human services, the Massachusetts Department of health and human services, the new Jersey Department of health and human services. They want to reach those people, let them know what benefits theyre eligible for so that they can come and and get them. They also use this day to update address in this data to update address lists for their clients. You will admit, wont you, that if a state hhs so to speak will use that information, thats quite a different kettle of fish from a forprofit bottom lineoriented and we would put the departments of hhs through the same review of who they are and what they want that information for. Because we wouldnt want them to use our information to disadvantage those consumers, only to empower them. So it would go through the same review. All right. My time has expired, and you happily engaged an interesting process, you selectively named some of your clients. If you can selectively do it, you can broadly do it. Those are a matter of lick record. Well, thats the point. Right. What should be a matter of public record, this is an oversight committee. This is a serious subject. We have the feeling people are getting scammed or screwed by this feeling. Its up to you to talk us out of that but not by experian. I can assure you, mr. Rockefeller, the experian executives are watching this right now and you hear what youre saying. We respect your do you think theyre all grewed to their no, to their monitors. Oh, okay. So we want to be responsive to you seriously. And so we look forward to the dialogue. All right. Well, anyway, my time has expired, and senator booker, senator booker then senator johnson, then senator blumenthal, then senator markey. This is so we can hold everybody here. Good evening, and thank you very much for your rich testimony. You know, the internet now, the ability for big data to be used is actually a service to many consumers. It serves me every time i go online, every time im shopping and love the fact that i can use this little device and things will be pushed to me that are very valuable. And data sharing helps to fuel our economy, is a service to customers. I cough worries on i do have worries on the back end of that which i think my chairman and senator rockefeller is making a point, and those are the concerns of consumers. Just one quick question about the, you know, what frustrates me when im, you know, that i know my browser history, these cookies are on my computer that are sort of tracking and tracing what im doing, and i understand the upside and the benefit of it, but thats a little problematic to me. Could you mr. Cerasale . Sure. Senator booker, there is a group, dma has started the Digital Advertising alliance online, following where people are. And we have created an icon and a process to have, allow consumers to opt out totally or selectively for any cookies that are used to track their surfing, their browsing activity across unaffiliated web sites. And that icon is a little triangle with an i im sorry to interrupt you no problem. Youre saying the industry is trying to selfregulate yes. We have that. And find a way, because you recognize that this is a rob. Yes. And approximately a little over a Million People have opted out, over ten Million People [inaudible] the exg with en guy, i never heard of this. Thats problematic to me just because im very engaged in the world of so i didnt know there was an optout function and am concerned about my so the industrys trying to correct what they know is a rob. Right. To give consumers a choice, absolutely. Okay. So, ms. Rich, and im pronouncing that right, correct . Yes. So im just curious, there is so much positive here. I mean, the opportunity for big data toen rich our lives gets me excited about what the future is. So these businesses in some ways have a wonderful public purpose, but i do worry about the darker side in the way that my chairman is discussing. And i really want to know its not simply saying more transparency or its difficult to create a Regulatory Framework thats nimble. This is such a changing environment. So really i just want to know for you like how are you planning on using your authority under ftc to study and stay abreast of this industry and see if there are needs or opportunities like in this one where the industry is not correcting or selfregulating, where we can get them to the point where were balancing all of these incredible positives of big data with the obvious downsides . Um, in we think about this every day, balancing the positive and, but also protecting consumers. In this case, though, i think the first step p is Pretty Simple which is theres really very little transparency about data brokers, and thats and providing that transparency wouldnt, you know, is pretty basic. Its not a technological, um, issue. In more complex, in more complex circumstances, the way we balance is we engage in a constant learning process. We do workshops, were always learning about industry. We meet with consumer groups, we meet with business be groups, and we also in everything we do were always trying to develop flexible standards. Were thinking about, you know, years from now especially in the orders we get, you know, will this last, will this be able to grow with innovation. And we make a lot of effort in that regard. But i do want to bring it back to weve got some basic steps here to bring about some transparency that shouldnt undermine the datadriven economy and, in fact, theres nothing in that study that dma did that addresses how privacy be would undermine datadriven economy. Right. And so much of what im doing for free on the internet is made free was folks are shooting ads at me that are targeted to my interests or needs or what have you. But youre saying theres just a tremendous, larger degree of transparency that needs to be given to the public. And we think that transparency and we were talking about this a few minutes ago is completely consistent with the growing economy. I mean, consumersing are increasingly demanding more information about how datas being used. When you give them information, they often develop more trust in the businesses theyre engaging with, and we think its in both consumers interests and business interest to provide more information. I would love to hear what mr. Hadley or mr. Cerasale have, if they have any resistance to that increased transparency, but im trying to stay on the good side of the chairman. Im the new kid on the glock, on the block, so i will yield. You can charge right ahead. You would love that opportunity. We will go to senator johnson, followed by senator blumenthal. Thank you, mr. Chairman. An excellent discussion. A very good hearing. I appreciate senator bookers good questioning. Up ont i want to pick transparency. I want to know exactly what the ftc wants to do in terms of, what is your fix and what is transparency to you . Context, we recommended the data brokers allow consumers to access to the kind of information they maintained. How . We recommended in a privacy report last year, possibly through some centralized website, where consumers can go. Dma has Something Like that. Daa has developed a centralized website for online tracking and we have recommended that. Will be on the information plaything . What would be on their . The names of data brokers. And then he would be able to find out what kinds of information they collect and would be able to potentially opt out of the use of their data. Can you tell me what that sounds like to you and what problems you have with that and how restrictive that would be e first, we want to be responsive and be more transparent. We are trying to figure out more of what that means in a meaningful way to consumers. Regarding an opt out website, here is the problem as i see it. I do not know how to ive never seen a definition in tens ofin a suite thousands of companies. Because everyone exchanges datao andt shares data and sells data within the internet ecosystem. I. That is how the Business Model of the echo system is. Would we have a website with an entire industry on it . Be would that really meaningful to a consumer . If you throw the those companies up . Of course it would be on that but so would 10,000 other companies. It is not a meaningful way of providing transparency. What we are trying to ask for is, how can we make the exchange and sharing of information responsibly, more meaningful to consumers. We think one of those steps. Ould be working with the users let me stop because i have limited time. Get aailing lists, you onetime use. I was following what you are talking about. It sounds like you have a system where you are making sure this material is not misused because that is the real problem. Of misuse and improper use that information. For every time you sell data, is that restricted to a onetime use that you have already determined is not a misuse . Or do you sell the data and they can use it for years . A it is sold pursuant to contract in some cases one time and in some cases as a license over numerous times, but we always have procedures in those situations so we know how theyre using the data and what they are it for. It is strictly limited to marketing purposes. Information, you were saying it is from public records, sometimes, surveys. Is it also from cookies and are you also getting it from the other internet applications and you have agreements with different people who gather all of these cookies . Much larger data gathering than what we were talking about earlier . We collect Information Online in that realm. Aggregated and anonymous data. There is no personally identifiable information attached. Where might we might be able to know what type of consumer is visiting x website versus another website, so we can share that for the industry. Macys might want to know what nordstroms Shoppers Look like. So that they can compete against one another and vice versa. There are incredible benefits by people using the internet. We take a look at, do you agree to look at the website . Most people agree and they do not really read 300 pages of all of the information saying, hey, we will share this information. If you want to use this phenomenal free application, you subject yourself to a certain lack of privacy. Is there anyway to get around it . There is. I think the icon i was says to add choices and click on and it tells you what is happening following red there is ad then link about ads and info. A website where you can opt out. Is how we are looking at mobile apps and small screen and how do you let people know what type of information youre collecting. List, one not call time, and you are covered . Or is this application after application. It is one time and you are covered and it 96 ofy affects about targeted ads. We have that many people who have signed up for it. The icon is located where . Usually right around the ad targeted. We have contracts with canada and eu. Australia,ing on starting with latin america, to try to make that worldwide. Thank you. Good questioning. Senator blumenthal . Thank you, mr. Chairman. Thank you for having this meeting. Thank you for pursuing this issue withimportant such a far ranging consequences for both good and ill in our society. Staff for thise truly remarkable study for to define doubts how a data broker. I recommend the report. A review of the data broker industry, collection use, and sale of consumer data for marketing purposes. There is now an industry in this very far reaching and far ranging collection use and marketing of data. One is almost every day, in the news, we, and in the read about what the nsa is doing in the collection and use of data about citizens in this country protected by the fourth amendment. One of our justices once defined the right of imc as the right to be let alone. That samedo not have right against this industry because it is not the government. Privacy interests may be just as as theyrisk and abused are by the government and that is what brings us here today. Not only the vast potential for good, but also the downside and the dark side and the danger of collection and use. I did not expect anybody to come here today and say, we are using this data to exploit people. I am not that naive. But i think you need to recognize that others could use it for that purpose. All you need to do is turn to page 24 of this report and see the categories sometimes used for marketing purposes. Let me give you two very concrete examples of why i think people ought not to be compelled to surrender privacy as the price of admission for the use of the internet. That is what we are talking about. As therifice of privacy price of admission to the internet. In december 2012, the wall street journal ran a story entitled, websites, very prices and deals taste on the users information. It stated in part, websites art adopting techniques to glean information about visitors to their sites in real time and then deliver different versions of the web to different people. Prices change. Products get swapped. Wording gets modified and there is little way for the typical website user to spot it when it happens. ,o, if you prefer Hilton Hotels and the wrong company gets its hands on the information, you could be charged more for staying at one hotel then another then a person walking in off the street. I assume, mr. Hadley, that you such join me in feeling marketing practices and pricing practices would be offensive and should be made illegal, perhaps . I would agree that should not be happening. I am not asking about experience and im not expecting you to tell us that is involved in these kinds. Dynamic pricing does exist. You have to look at the hotel and airline industry. They have variable pricing. We do not provide products and services to allow them to undertake dynamic pricing. It is their choice because they are marketing their product or service. Do you think it is fair to the consumer . Wouldi would not it i not want it to happen to me but i know it does. The fact it does is why we are here today. I am not sure it is illegal. Im not asking for i am not asking for your legal opinion. What do you think about the practice . Dynamic pricing, changes in price all the time. Frequent flyers get different prices. Grocery stores. People have different prices. Part of where we are today, i think if it is his crematory and so forth, it goes back to what i said. You want to look at use and not the data itself or the collection of it, but use. If there is improper use. You would agree with me discriminatory pricing that charges people more because they are regarded as more vulnerable, and without their knowing it, would be, at best, unethical. Yes. I believe there are laws on that. I am rushed for time and i will use my last four seconds to about aa question second area where i think discrimination, the prospect of discrimination, and exploitation, is raised. Postingsn terms of job and screening of job applicants. I do not mean to tell anybody in about theing devastating impact of longterm unemployment in this country. I have joined senator warren in a bill that would prohibit the use of Credit Scores of job seekers in a discriminatory way during the hiring process. Let me ask you whether an employer could buy information from your company, for example, postingit to target job in a way that discriminates against certain job applicants, using the information that might be attainable from your company. Marketing data cannot be used for employment screening and job eligibility. Under the fair Credit Reporting act. They would have to obtain a Credit Report and all of the Consumer Rights would accrue to that marketing. What would prevent an from asking for information from your company, and then, on its own, using it in a discriminatory way. . Leslie would know who they are and why they were asking and we would know what they are going to use it for and we would forbid them in our contract with them for using it for any purpose under the fair Credit Reporting act, including employment purposes. What if is a violation, they said to you, it is not a violation . Class we would disagree with them. We would disagree with them. It is a Standard Practice among those who practice good standards. I cannot vouch for all of them. We know the bright line between those. What your company does, but from the information provided to my office, not all companies do. Class than it is a violation of law and the ftc should take action. Our guidelines. It is unethical, but maybe the law would be clarified so everybody understands it is illegal. I apologize for exceeding my time. I tried to move quickly. I want to apologize the witnesses for perhaps interrupting you, mike senator booker. I am still a new guy on the block. I did not say at the outset i would show stop when i shouldve. I know i am on your bad side now. You are clearly just sort of settling into this role of being a licensed lawyer. [laughter] from ttorney general attorney general. Lawyer. A recovering i apologize. Thank you. Senator booker can learn from you. Thank you. Bottom line is digital dossier or is being collected on every american right now. Companies represented at the table, and, there is a lot of promise on that. Compromise, families can go on sale across the country and across the world. Companiese is no should be allowed to do that if the individual does not want the compromise. They should have a right to control the data. No company should be allowed to cap play fast and loose with the information they have gathered. I had a caucus meeting in congress on the house side this year and we had some of the gentlemen here today over there for that. We began to talk about propensity scores. Oft is the practice attaching a propensity score to individuals, hundreds of thousands and millions of americans. The scores are created without the consumers knowledge and without the consumers consent. For then become the basis targeting offers, benefits, products to certain consumers. High prep high value products may receive discounts,etails and while others may not. They may be dismissed as low value. Dangers attached to . Millionst upon tens of of americans. The real problem with propensity scores is that, unlike a credit score told. These scores are not covered under the act. If they are healthy scores, they are not covered under it the and not being held under the provider. You can be tagged with these characteristics in these characteristics are not under any regulation. There is no law that says there is an employer to determine jobs eligibility. Orlaw that says an employer an insurer cannot use these scores to determine rates. These are not regulated scores. The propensity scores are of great concern. Do not have the opportunity to learn about these scores. They are secret scores. The consumers do not have the opportunity to opt out, as they would if the scores were recovered under the act. We have got to do something about that. We are entering language about, that might not be illegal. We can actually pass a law and make it illegal. That is what this committee is all about. Now, let me go back to you again. Thank you for that. We know data brokers categorize people into market segments. Seniors, suffering burdened by debt singles, credit crunch city families, and these are the real labels that actual data brokers used to describe who they will be talking to. That categorization can cause harm, including racial discrimination. The fact is, actually a term not just redlining, but web lining. We use the web for the wrong income and racial group and , whatever. Sex there are enough laws on the books to protect people. Can you talk about that and what the need is to fill in that document as well . There is an interesting situation going on. The dma report came to the conclusion offline information and online information are now thoroughly merged. As a result, web lining is real life lining as well. What happens on the web now happens in real life. If there is a discriminatory problem, we will experience it elsewhere. It is a circular process. We cannot just go online and block our cookies. Any reasonable consumer shredding Social Security number and blocking cookies and surfing the web responsibly, they can aill not evade being put on list of data brokers according to their health condition. Lets go to the blurry line that has been allowed to create be created and what is responsible for consumers. Lets go to a line between Credit Reporting agencies and data brokers that market Financial Products. An atmosphere of ambiguity and what some fraudsters could do real harm to people. Alk about that a little bit. The pseudoscore, they are made up of about 1500 factors. Noncredit file factors. They do not fall under the act. They could include factors that could be prohibited under the equal credit opportunity act. This is deeply troubling. We do not know everything that goes into these scores. We need to. We need to know how the scores are being used and we do not want them being used to target underserved americans with predatory offers. Lets just move on to the next category. Sale of talk about the people with particular diseases. Listsst circulate those so market its marketers know who not to get anywhere near. We will get all the different people with these different diseases we were able to compile and just make a list of it and make sure they are over here. Talk a little bit about that and what it means for our country. I was stunned when i found lists of people who were rape sufferers, people who were people aziz sufferers, who were victims of domestic violence. It was deeply troubling to me and i was shocked. Happening is through survey instruments operated online and other methods typically consumer generated, people will volunteer this information to websites, thinking they are getting help from a website. They will volunteer and they have no idea this information is going to be attached to not just a cookie, but their name, their home addressed, and the phone number. Lawyer, but i never had any clients. I will be careful on how i rule here. It seems to me it is kind of on its face a violation of the federal trade commission act. Over there at the federal trade commission, what can you do about it . I think, for all of these scenarios you describe, especially the particular disturbing ones involving discrimination, we would obviously, if we had specific targets, we were looking at taking a close look to see if it violated the Credit Reporting act, we would not give up on that. , ourhing i want to say laws are limited, as i mentioned in my opening statement. For the reporting act, the data has to be collected and used and the ftc act has to allow us to go after deceptive practices. There is nothing in our laws that would require the entities. Massing that is the limitations of our laws. Thank you. Nothing like a little section five action. , weare saying beyond that have got a real issue here. A real invitation for us to act. We have put on the books the language. I have stretched it to a point where we are very unhappy but she will be more unhappy , i call on the senator it is terrific to have the senator on this committee. He has obviously worked on this issue in the house. We will benefit from the amount of time and effort. I want to hone in on a couple of things. , you purchased the company, court ventures. In the spring of 2012. For more than a year after the time you purchased the company that had all this data, you are wire transfers from singapore. Your company did nothing. Transfersut the wired were coming from a man in vietnam specialized in Identity Theft and was marketing the toormation you owned criminals, to ruining peoples lives. So my first question to you is, you were quoted as saying, we would know who is buying this. You were getting wire transfers from singapore on a monthly basis and no one bothered to check to see who that was . I want to be clear this was not Marketing Data. This was experienced authentication data. A different company. I want you to know. Class i do not understand it that distinction. It is a distinction without a difference. It is data you owned. You purchased this data. Toy had, in fact, sold it someone else. Let me clarify for you. Response toa full that question to the committee and it is part of the eight submissions we have given. I have to say it is an unfortunate situation. The incident is still under investigation by Law Enforcement agencies. I am extremely limited in what i can say publicly about it. But i want to say this. Obtainsect in the case data controlled by a third party. That was u. S. Info search. Not an experienced company. Bought, courty we ventures, prior to the time we acquired that company. No data was ever access. I understand what youre saying. You had u. S. Info search. No. U. S. Info search existed and courts existed. They decided for commercial combine reasons to their information. They had a sharing agreement. These two companies had a sharing agreement and then you bought one of those companies. So now you owned it and you stood in their place. Are you a lawyer . I understand what you stood what you said. This lawyer will back me up. There. U are now, you said in your earlier testimony that we would know who is buying this. You are now part of their transactions. You were receiving the benefit of the monthly wire. During the Due Diligence process, we did not have total access to all information we needed in order to completely event that. By the time we learned about the malfeasance, nine months had expired. The secret service came to us and told us of the incident and we immediately began cooperating with the secret service to bring this person to justice. We are continuing to we were a victim and scams by this person. We will make sure they are protected. There was no allegation that any harm will come. We close that down. We modified our process. Lets talk about that process. This person, this man they and is to guam to arrest now facing criminal charges in they posed as an American Private investigator. What is your vetting process . Court ventures would have added this. Im talking about now. About you. Let me say that this person would not have gained access to experian data. What wouldve stopped them . We wouldve had a onsite inspection. We would have known that business and its record, and why they wanted that data and to what purpose. That would have been enshrined in our contract. We would have known the kind of systems they have in place to protect the data that they gained. That is incumbent upon us under the act. I understand that this was not a crime that began under your watch of stop but you did by the company and you got wire transfers in singapore. The secret service knocked on your door. I do not know how long those wire transfers would have gone on. I do not have confidence that it would have stopped at all. My point is that i do not feel as strongly about others on this panel that behavioral marketing is evil. I believe it is a reality and frankly the only reason we have everything we have on the internet for free is because of behavioral marketing. I do not see that evil unto it felt. What i do see is in desperate need for congress to look at how consumers can get this information. What kind of transparency is there. And whether or not companies that allow wire transfers from singapore from a criminal who is trying to rip off Identity Theft, whether they should be held liable for no Due Diligence on trekking those wire checking those wire transfers. That is what we need to be looking at. Some of my friends on the other side of the aisle used to be trial lawyers. I break out in a sweat. The truth is that if there were liability in this area, it would be amazing how fast people could clean up their act. Unfortunately, in too many instances, there is no clear liability. You, not mean to pick on but this is a great example and you are not a flybynight company. If this is happening under your watch, can you imagine what is going on with companies that are not as established as yours . It is a huge problem. It is serious and significant and we need to look at it. Hank yator mccll. Thank you, mr. Chairman. Mr. Hadley, one of the big users of your services of the federal government, correct . Yes. Theres in areas in which you can identify how the federales . Government uses your service is . Certainly. The biggest users of experience that in the government or the department of health and human services. Right now, we operate on healthcare. Gov to authenticate the identities of individuals signing up for health care toinp make sure that fraud is eliminating, to make sure that tony is getting an account come establish an account and not an imposter with this thing. We also have a contract with the Social Security administration as they move persons online for online accounts from paperbase, accounts. D accoun. We all get our Social Security o statement in the middle. They want people to move onlinee to get those so we authenticate individuals to have online accounts with the Social Security administration. We believe that hhs could be awa good use of our Marketing Data, particularly in the lower economic echelons to reach out to people to see if they are eli eligible for health care and trying to determine how tohow t market that process to them. They havent done that yet butge the state agencies are far ahead of them in that way. Th of using these economic segments tore reach out and inform consumers of benefits that are available to them. U so for purposes of obamacareg implementation, they are using you to authenticate people who are applying but not at this moment to market . To ma thats correct. Some have concerns about the profiles that data brokers compile on consumers that they will have a long lasting impacta and put these consumers at a disadvantage, especiallespeciall y if information is correct. Id like to ask you to respond to that Incorrect Information issue or concern. Yeah. Our data is highly accurate. Ry t it comes from very reputable sources. We know what sources they are and we checked those sources to make sure the integrity of that data. Marketing profiles are notot st. Static. This is very important. Oung they change. When i was a young man with Young Children i used to get a lot of ads for diapers. Then my sons grew up and i got solicitations and they got solicitations for college. Soon soon i, got solicitations for home equity loans because they knew i might want to finance my sons college education. Now im getting solicitations for varetirement planning and fs vacations. So my marketing profile has mkeg changed with my age and my Family Status and the interests that ive expressed to data brokers. I want to make one point thats very clear with Health Information. Experience has Health Information from consumers, but only, only on an opt in basis. It they have said and clearly opted into telling us what their hrement art and saying, im anat arthritis sufferer, i want too w know about new products andducts g onto the market to help me, or i suffer from migraines. These are not used though, never used for health care eligibility. They are used so that Consumer Product companies can offer solicitations and coupons for overthecounter drugs for the most part. So intts always opt in with health for experian, clear and conspicuous opt in. Mr. Cerasale, there have alse been concerns raised aconsumers should not have the ability to t see what information is collectedbo about them from marketing purposes but also have the ability to correct them. And wondering what your thoughts are on that . On first look that sounds like a great idea. However, as you delve deeper into it, as you look at access and then correction for Marketing Data, this f is data,m tony has said, mr. Hadley has said its not used for s eligibilityai purposes. But as you looking to access to Marketing Data, it requires youg to authenticate who is coming in. In other words, is it mr. Cerasale or is it an imposter . And in order to have that data, in order to be able to authenticate you need more data. So in the absence of access and then correction is going to require more data, more accurate data, because you can have inaccuracies in Marketing Data. Tony says its great but its not as precise as fair Credit Reporting data it because its not for eligibility. Mines what it determines what ad i will receive, what type of offer i received and if a marketer is off, 95 correct, thats okayit because its not worth the expensewo to go to 100 . Whereas if youre a Credit Reporting you needed. So having access in direction requires more data and, of course, its, therefore, more expensive ase well. Lets be truthful here, but i think it goes against the idea youre worried about what data because youre going to greatman more dgata on the marketing side atd requiring it to be morecise. Precise and, therefore, thats an issue. You need to have one bit of information more than the imposter in order to prevent thf kind of fraud in that area. So it raises that problem. A ms. Rich, the report on Consumer Privacy in 2012 that recommended and i quote companies should provide reasonable access to the inta consumer data and maintain to the extent of access should be proportionate to the sensitivity of the date and the nature ofth maeting. The report continues that for Marketing Data, the commission placed the cost of providing individual access to consumersct ikely outweigh the benefits. Can you comment on that statement, expand on what the costs and benefits would be toan have individualized access to Marketing Data . What we said in the report elude tot, and, obviously, the report was a prelude to further discussion and potentially congress acting, becausere of te time we are recommending legislation. What we said in the report we saw difference between Marketing Data and, for example, fraud mitigation and identityentity v verification products. And for Marketing Data it might be appropriate to not only give consumers access to the categories of data that is coll collected about them but tot allow them to suppress use of the data but not necessarily tod get in individualized access. We we didnt say there shouldnt access at all. We said access to the categories a data and an ability toe in suppress use of the data. The da and the ftaor other products itd may be appropriate to give it m individualized information about the data. But the calculation you made is according to this, the individuals access to consumers would likely outweigh the benefits of . Wo. R consid yes, but for furtherwe did se consideration also by congress but yes, we did see a difference. We did see a distinction between marketing uses and other uses. Mr. Chairman, thank you. Thank you. Senator fischer. Thank you, mr. Chairman, and Ranking Member. Ms. Rich, in your testimony you referenced the commissions activities with regard tnyo enforcement. Can you describe to me what you think the focus of the enforcement activity should be . R well, we always come in our enforcement, focus on uses of data that have the potential to harm consumers. And most of our Enforcement Actions have been in the area of the fair Credit Reporting act because thats where we have our strongest tool. When data is used for purposes covered by the it can be used to deny consumers important benefits like employment or credit. Do you think the ftc has done a good job with its existing authority to address whats been the number one Consumer Complaint . For the past 13 years running, and thats fighting Identity Theft. We are trying our hardest. We dont have the authority to go after the perpetrators of Identity Theft, but one of the main reasons we are so strong on our Data Security enforcement is wiki believe that its the responsibility of companies to protect Sensitive Information and maintain and protect it from getting into the hands of identity thieves. Are you able to identify the feeds themselves . What happens to them . How does that work of . Many are overseas. We do work with criminal authorities, and sometimes they are investigating the kelo we are investigating the companies that failed to maintain reasonable procedures to protect the data. Often the feeds are never caught because they are in russia or china but if a company does not maintain regional procedures to protect data we have some good tools to hold them liable although we continue to recommend passage of a strong Data Security law that was given Civil Authority and strengthen those tools. Have you brought those forward before this committee . Im a new member on the committee. Has ftc suggested those in the past . Yes. Senator rockefeller would be very chairman rockefeller would be very familiar with our advocacy for Data Security and data breach legislation. Thank you very much. Mr. Turow, when we talk about the data broker, and you had a definition of the data broker as somebody who connects the dots for marketers, is that correct, in your testimony . Thats not my only definition but they can do that. One thing id like to point out, i dont know that weve had a discussion about today, which is its not just discrete bits of information thats going on more and more. And they are sold. Its not just the aggregation of these. Really whats happening is the industry and so much of our world is turning into an actuarial activity. It really is a Predictive Analytics that are changing the ballgame. A person can be giving out the most benign sounding pieces of data and that could turn against him or her a in an instant if it gets put into an algorithm that comes up with than either accurate or inaccurate sense of who that person is. We have no way to deal with this at this point and no way ive been told in the industry the word soccer mom, that ive had people tell me they dont know necessarily how a person is tagged as a soccer mom. The number of data points that are involved in designating a soccer mom, the person said to me was such that they couldnt tell me where they got that designation from. Now, if its true, thats very complicated. And if its not true, thats a problem in itself. Trying to figure out why is at the companies cant tell people where particular labels come from. Now im being told more and more its the algorithm. Its predictability. With your definition or an expanded definition, how Many Private Companies do you think can be classified just in the United States . How Many Private Companies . I havent seen a definition but i would agree that more and more we are dealing with companies of all sorts. It could be like any Small Business . I wouldnt worry about a Small Business but i would worry about the big supermarkets. I would worry about a box stores. I would worry about a whole lot of companies that we havent talked about retail outlets and the fact that the internet inside a store and the connecting of online and offline is taking place increasingly as people walked or looking at products. The socalled moment of truth, and how that relates to the algorithms ive been discussing. What does it mean to Predictive Analytics stare you in the face while youre deciding diapers . Or something even more important, and, in fact, the notion come it may be that experian doesnt deal with overthecounter drugs with our companies that in one way or another take what people purchase overthecounter and solicit opinions through sweepstakes about their Health Activities and purchases and sell them. What i hear you say and this is what i believe, really almost any retailer could be classified. If they share data. And how then do you believe the government should become involved in private business in this country when you have that it makes it much more complicated and thats why ive begun to believe that at least as a start there may be some useful public discussion in asking how many data points firms are allowed to buy and sell about us at a time, and how they can be merged to other data points. So that we wont have continual flows of data being attended to our lives. It is with an existing difficulty that you bring up. Aside from the fact, for example, if you go to krogers website and look at their Privacy Policy, i couldnt figure out head nor tail whether they sell that stuff because they use words like affiliates and subsidiaries, and it is done in such a way that it is excluded difficult to tell. I know of one company that sells bracelets for health, where i looked at the website and basically at one point after they say what data they can get out of the bracelet, they say some of these data might indicate poor health on your part. Another issue is what do they do with it . We dont know. You cant tell. Thank you. Mr. Chairman, could ask ms. Rich is you want to Say Something . I was trying to stay within my time limit, seriously. Thank you, mr. Chairman. I just wanted to add something to the point youre making about the number of data brokers. One of the things, the way we think about at the ftc to make it more manageable issue is to focus on the nonconsumer facing data brokers because, after all, the issue is really about transparency, at least thats where the concerns are the greatest. The consumers dont even know who those come invisible behind the scenes companies are. Although i think theres been a lot of discussion about how the definition is so broad, you know, we can work on data but i think its kind of proof of the problem, not that there isnt a solution because the fact that pam says theres thousands of data brokers and the Committee Report says hundreds and industry says hundreds. I think thats part of the problem is we dont know all these entities are and w we dont have a handle on it and thats part of the proof there really isnt transparency in this industry. Would you say that just about any website that a person goes to, they are in danger of having information gathered that they may not want to have either private companies or the government know about . Well, i mean, as i was saying, were talking about the data broker issue, we would prefer to focus on the nonconsumer facing sites where they are truly not transparent. We have other recommendations for consumer facing websites. We think there should be choices and opt outs there so that consumers have some ability to prevent sales to third parties if they so choose. But for this data broker problem, we at the ftc would really like to focus on the nonconsumer dating sites. Thank you very much. Thank you, mr. Chair. Thank you, senator fischer. We have a vote at 4 30 p. M. I would like to ask one more question. And this is coming right at you, dr. Turow. Even taking all kinds of notes. So you are ready. Id like to further explore the notion that data brokers are selling products to help marketers target pages to the specific person personal needs of consumers. Lets take a product called relying on aid. This is a grouping of consumers that the data broker defines as follows, these single retirees are limited means and meager retirement savers, are just barely able to make ends meet. The description goes on to say with only a High School Education at best, its been hard to get ahead. Poorly insured and medicare, medicaid dependence, they are generally pessimistic about their economic situation, and incidentally, about themselves. My question to you, professor turow, in your testimony you highlight some other Ways Companies may be using such consumer lists that dont necessarily involve product pages, such as deciding who should have to wait longer for Customer Service, who should be rejected as a valued customer or what should be offered who should be offered coupons for only nonnutritious food. What thoughts come to your mind when your data breakers are marketing descriptions like relying on aid to potential consumers . Its not unpredictable. Its been going on for years. It is a problem i agree and it will get worse as the baby boomers get older. I think we are only beginning to see the tip of the iceberg your. But i think one of the issues is also that as we get more individualized what do you mean tip of the iceberg . I think were going to have this huge generation of older people in 15 years that are going to be divebombed with these kinds of offers, and as i was beginning to say its going to be more particular eyes. Thing about that category, chairman rockefeller, is that it is a category. More and more that will become anachronistic. And what is going to be is a particular person who can be maybe even more persuasive because of other characteristics that predict that. So that category will low selfesteem . Yes, and a lot of other things. What kind of car they drive. So you wont even be able to point to the category in the catalog anymore. It will be something that you wont be able to easily track down and yet those people will be targeted increasingly because of the situations they are und under. The same category only divided up into millions and millions of people and personalized. So what will you do about the . As i said, well, these are social questions and i believe that we have to worry about the kind and the amount of data that gets combined. I dont have an answer for that. I think its a very important social discussion. At this point in time we havent had that social discussion. People dont even know this stuff is going on. Our studies have shown that people know theyre being tracked, but when you ask people basic questions about this stuff works and how they think it works, we did a 2005 study in which american clear majority of americans said that they think that price discrimination is illegal. We continually find that people see the word Privacy Policy on a website, they think it means, and weve done this five times in national surveys, they think the word Privacy Policy means that the site Cancer Information about you without your permission. The ad icon is a great idea, but it doesnt work. The studies have shown including when we did a couple of years ago that americans, like senator booker, have no clue that it exists most of the time. I suggest and that sucker into the algorithm thing, the idea for an icon that i had originally before this one came out was that when you click on an ad that was tailored to you could find out who gave you the ad, what were the elements of the ad, why did you get that particular ad just at that moment. But those data are considered to proprietary, and people tell me the algorithm doesnt tell. So at this point in time theres nobody who wants to volunteer to give that information. And people use barcodes, dont they . Well to find the names and addresses and other stuff. And even if your anonymous. A short example that happened to me, not quite the same but it shows the direction. I was at ohare and i had to switch planes and one of my planes was canceled. So i went to the Customer Service place of the affiliated airline. They asked me to put my barcode in, and they gave me a number. On the side of me on the screen it said the amount of time it would take to serve you will be based on your priority in terms of your stature with our loyalty program. And so i fortunately had a lot of points. I got served pretty quickly but i noticed there were people who are just sitting there. That meant that they didnt get to the flight that they could have gotten. Its segmenting americans. It is pretty predicting what will happen to them by virtue of the circumstances by which they fall, and all the research has been done to put them in that situation so they can control how the market, maximize their profit and maybe end up getting a horrible expense to that consumer. Agree. Senator thune, ive got something i want to say. You are important around here. Do you want go ahead. I want to come back, before 9 11 ive been on the intelligence community, and every day i wake up to seven newspapers with nothing but nsa headlines. And im here to tell you, as one of the offers of flies and the patriot act and all the rest of it, that the nsa is so secure in its protection of privacy as compared to this group that were talking to, these data brokers. Its not even close. This affects as was pointed out anybody, everybody. Who knows . Nsa knows. They are only likely to interact at a. 00001 of people that they conclude need further observation. This is everybody, anybody, but more than that, divided into race, economic activities, education. And theres something i cant prove its wrong, but theres something lethal about it. Theres something unfair about it. It Something Like, you know, making if somebody is poor or less educated, and this is i come from West Virginia, a lot of people face these problems. That they are stigmatized. They have to live with it. The system is stacked against them. And a lot of people are making a lot of money out of it and one of them are data brokers. Im not asking for an argument because the belt just went off. But im here to say this is a very serious situation but i think everybody agrees this has not been talked about. Weve done an investigation of it. You all have looked at it. You certainly have. And weve got to continue on this thing. You know, the slogan of one of the companies of the committee reviewed in this investigation, the company says its live it was by the following words. Just because you can doesnt mean you should. Unfortunately ive been thinking about this because todays testimony and the committees inquiry shows the is as a whole is falling far short of that standard. It appears to be falling fall short of best and, in fact, it seems to me the number of data brokers is we can damato is we can and, indeed, we will. Full of optimism. We heard from ms. Dixon about the list generated by data brokers from genetic disease sufferers and dementia suffers the payday loan respond, topics that seem tailored made for businesses seeking to take advantage. I hate that. I personally am revolted by that. Have seen it in every aspect of life in the state i come from and elsewhere. I do not like it. I think it is our job as government to minimize that possibility and to bring out into sunlight what is going on. Senator booker does not know this is happening to him. He does now. And he doesnt like it. Senator mccaskill really nailed something that could not be responded to. We are going to continue on to that track. It is serious and it is a dark underside of American Life which people make a lot of money and causing a lot of people to suffer even more. And then they have even lower selfesteem. That is not the america we want. This hearing is adjourned. [inaudible conversations] [inaudible conversations] [inaudible conversations] tonight on cspan2, booktv in prime time. At 8 eastern, Kristin Carroll on her book arguing that the Islamic Revolution in iran and the election of Margaret Thatcher both in 1979 signaled the end of liberalism in the west. Then former auto executive bob lutz who has worked for bmw, ford and gm. And later, Craig Stephen wilder, author of ebony and ivy. I think radio is the longest and the best form of media thats left. What were doing right now is an hourlong conversation, only cspan does that anymore. You and charlie rose are the only ones who read books the way i read books in order to talk to the authors seriously. And its tremendously revealing when an authors had their book read these days because they dont get many people who have read their books and know what theyre talking about with page notes. And its so rewarding to them, that i get a great deal of satisfaction, in fact, the highest compliment is thats the best interview ive had on this book tour. Just got it from charles krauthammer, and love the interview on things that matter, his new collection of essays. That makes my day. I like radio. Three hours is an abundance of time, and i can do so many different things. More with hugh hewitt, sunday night at 8 on cspans q q a. Now a conversation on food waste and ways to reduce the wasten including education outreach programs, finding buyers of unsold crops and few technologies to convert waste into energy. From the local food lab in san francisco, this is just over an hour. [inaudible conversations] ladies and gentlemen, let me welcome you here tonight at the consul general well, thats me. [laughter] and the organization we have here at the 31st floor of this magnificent building. Sorry its dark outside. I invite you to come back here during the daytime. Its magnificent view of the bay. But thats not the topic of in this night. We will speak about food waste, sorry to be in front of the panel, but im afraid the microphone would collapse. Let me start with a quote from a dutch ceo from unilever which is one of the biggest retail, food retail offices in the world, i think. Its a dutchanglo company. He had been invited by ban kimoon to be part of the sustainability goals for the whole world