In late May 2014, the Federal Trade Commission (FTC) released a report recommending that Congress enact legislation that would create greater transparency around the activities of companies that collect and sell consumers’ personal information (FTC 2014). These companies, commonly known as data brokers, typically collect data from a variety of public and non-public online and offline sources and sell information to other entities for marketing, risk mitigation, and people search purposes. In addition to collecting raw data, data brokers often create and sell derived data, or data that is inferred from a person’s actions or choices. For example, a data broker may assume an individual’s hobbies or interests based on the individual’s magazine subscriptions. Some companies may also use an individual’s locations or activities to infer more sensitive information, such as race and ethnicity or income level.
In its report, the FTC analyzed the work of nine data brokers and determined that most of the data that data brokers collect is done largely without consumers’ knowledge and can have negative implications for the consumers’ every day transactions, such as how an insurance company may classify consumers’ risk profiles or the types of advertisements that they receive. The FTC report proposed legislation that would require data brokers to provide consumers access to their personal information and allow consumers to opt out of having their information shared for marketing purposes. The proposed legislation would also require data brokers to disclose that they draw inferences from raw data and provide the names of their data sources so that individuals can correct their information.