Tierney Cross via Bloomberg Images
Takeaways from the Key Notes
- The Consumer Financial Protection Bureau proposed a rule that would clarify and limit how data brokers can use consumers' financial data.
- More data brokers have emerged that collect and sell sensitive and private information about consumers, which could threaten a consumer's personal safety.
- This proposed regulation would impose regulations on data brokers under the Fair Credit Reporting Act.
Consumer Financial Protection Bureau has proposed a rule that will limit data brokers access to financial information of consumers.
According to the CFPB, data brokers include companies who collect, aggregate and sell consumer information, including credit histories, criminal records, rental histories, etc. The information collected by the data brokers is often used to inform decisions made about consumers by creditors, insurers and employers.
In 1970, Congress passed the FRCA to protect consumer privacy. The CFPB has said that data brokers now exist who circumvent the FRCA regulations and use consumer information to sell and buy, without the consent of the consumers.
Customer Information is highly Sensitive
Many data brokers collect private and sensitive consumer information, including from cookies and financial services providers. They can also gather this information through retailers, websites and other technologies. The CFPB stated that the information can be used not only to tailor marketing campaigns, but also for other nefarious reasons.
The CFPB stated that foreign adversaries can purchase information on military personnel or government workers, and use it for blackmail or espionage.
Scammers may also create profiles of vulnerable customers using information obtained from data brokers. Fraudsters can target people with low incomes, the elderly and those who are more vulnerable.
Data brokers also provide current addresses and telephone numbers. It can be used to provide confidential contact information, especially for professionals who may face harassment because of their job, including judges, government officials, and police officers. Data brokers can also put domestic violence survivors at risk of stalking or harm because the abuser bought their data.
What the Proposed Rule Would Do
The FCRA already covers national consumer reporting agencies such as Equifax, TransUnion Experian and other data brokers. Other data brokers, however, have avoided the FRCA regulations by claiming that they do not fall under the definition of consumer reporting agencies.
The proposed rules of the CFPB will clarify what a consumer report is, including personal identifiers like name, address date of birth social security number and phone number. Data brokers selling consumer reports will be regulated under the FCRA.
It would clarify, too, that the information collected from consumers’ reports may only be used for purposes of preventing identity fraud and theft or where criminal investigations require it.
"While this data can be used to detect fraud, it can also be used to perpetrate fraud," Rohit Chopra, CFPB Director, said on a conference call with reporters. "Congress crafted the Fair Credit Reporting Act to ensure that law enforcement personnel have the data they need to work criminal investigations and pursue those at home and abroad who break the law."
Currently, the FCRA allows the use of consumer reports if a company has a "legitimate business need for the information." In the proposal it was stated that marketing wouldn’t be considered a legit business requirement.
Also, data brokers will have to provide consumers with clear and obvious disclosures in order for them to give their consent. FRCA will limit the way consumer reports are obtained, retained and used. They also allow consumers to withdraw consent at any point.
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