Personalized, Targeted Ads Raise Discrimination Concerns, FTC Told
Consumers are rapidly entering a landscape where mountains of data allow companies to individually tailor marketing efforts, panelists told an FTC workshop on “alternative scoring” Wednesday. Industry backers see this as a positive step. A more personalized experience creates efficiencies for consumers and pumps money into the economy, said Rachel Thomas, vice president-government affairs for the Direct Marketing Association (DMA). “It’s important to remember what this is being used for,” she said. “Relevant marketing -- and that’s it.”
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Consumer and privacy advocates worry relevant government regulation and oversight insufficiently ensure these alternative scoring methods -- using consumer data to categorize and target consumers -- do not discriminate against individuals. “I am very concerned we are moving to a new system of unregulated Wild West companies running roughshod over consumers on the Internet and making decision about what ads to serve you,” said Ed Mierzwinski, consumer program director for U.S. Public Interest Research Group.
The workshop was the second of three FTC privacy symposiums so far in 2014. The first, held last month, focused on the rise of in-store mobile device tracking using a smartphone’s unique identifiers, which FTC Chairwoman Edith Ramirez said would be followed with a report on the issue.
The FTC has been investigating data broker business practices from numerous angles in recent years. Since late 2012, the commission has been at work on an in-depth study of data broker business practices, with a report set for release in the coming weeks, Ramirez has said. FTC Consumer Protection Bureau Director Jessica Rich was a witness during a December Senate Commerce Committee hearing on the issue, and Commissioner Julie Brill has repeatedly touted her “Reclaim Your Name” initiative in an effort to get data brokers on board with an online hub for consumers to access data collected about them.
On Wednesday, panelists debated emerging methods of scoring, or categorizing, consumers. Consumers want more personalization, not less, said DMA’s Thomas, pointing to recent Microsoft research (http://bit.ly/1elZvsa). Nonprofits are using predictive analytics to keep fundraising costs down by tailoring outreach to potential donors that fit the profiles of current donors, she said. Politicians are now using data from streaming music service Pandora to target ads to listeners based on age, location and musical preference, said Thomas. “Marketing data is not used to determine the individual’s likelihood to receive a product or used in any other eligibility decisions."
Many laws protect consumers from discriminatory eligibility decisions, such as the Fair Credit Reporting Act (FCRA), Gramm-Leach-Bliley Act and Equal Credit Opportunity Act, said Stuart Pratt, CEO of the Consumer Data Industry Association, a consumer reporting trade association. “Nobody’s getting around laws,” he said. “If you're engaged in making a lending decision, you're regulated by laws.”
Those laws apply narrowly, consumer advocates argued. They fail to cover some “side-door data brokers,” said Joseph Turow, associate dean for graduate studies at the University of Pennsylvania’s Annenberg School for Communications. Many retailers, while not selling data themselves, allow advertisers to put ads on their sites, then track people and sell that data, he said. “We have to think a little more broadly ... about data brokers and ways in which companies are trying to get around some of the obvious laws."
These alternative scoring methods are often based on inaccurate data, said Claudia Perlich, chief scientist at marketing technology company Dstillery. “Anything I can buy from data brokers is absolutely awful in terms of accuracy,” she said. “My experience has been that the data somebody else has derived somehow is really problematic,” said Perlich, who also teaches a data mining course at New York University Stern School of Business.
One of the more problematic scores is an “aggregate credit score,” or “modeled credit score,” said Pam Dixon, executive director of the World Privacy Forum. While FCRA applies to individual consumers and their credit scores, it does not apply to an aggregate credit score -- created by combining all the credit scores of a specific community or geographical region, she said. Individuals are entitled to free individual credit reports each year, Dixon said. But they have no access to these aggregated credit scores. “I can’t purchase my aggregate credit score ... It’s not regulated,” she said. “It’s a really important eligibility product offering and these are the important scores.”