. merges can charge you more than others for products raised on teachers they tagged you with you do not know they shared. by -- buygularly anti-acids. that is great news to travel company searching online for those types of people. using personalized coupons, the physical and virtualized stores whathange prices based on they know about you. they can add your lifetime value and the results can dictate the kinds of items you see and how much the discount will be. connecticut -- negative data brokers said know how long you wait for customer service and being rejected as a customer and offering coupons for not nutritious foods. with on engagement addressable ads, they can change

the news and entertainment offerings you sees. you systematically see different worlds from your friends or work colleagues because of the stories brokers tell about you. many of these examples are already taking place and all of them are quite plausible. they trumpet they often make individuals they sell anonymous. anonymity is not reassuring. if i am followed online and off- , it doesuckets of data not matter what my name is. and with our full personal information, data brokers are engaging and encouraging a world of data- driven discrimination that is becoming widespread precisely because it comes with all sorts of advertising. surveys i have conducted consistently suggest americans worry about what firms learn and think about them. i have heard people say they will change activities or how

they talk about themselves better bybe treated marketers. the difficulty is that it is often impossible to know whether and how that will work. we are only at the beginning of a data-driven century. data brokers will be central to how we think of ourselves and how we lead our lives. for the sake of democratic ideals and relationships, let's limit how much they can collect and share until as a society, we know how to create regimes of data respect, where people have control over the most important elements of their identity. thank you. >> thank you very much. >> experienced senior vice chair. we welcome you. >> thank you. good afternoon. and i am theny vice president of government affairs and policy.

andading provider of data information services that brings significant value to consumers and the economy. committee'she interest and dialogue in the marketing data industry and the to describe how we collect and use data. i have submitted a fuller statement but i will summarize a couple of points. believee truly 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 anductivity, innovation, ability to compete in the global marketplace. we shared data to help make consumers and small-business lending more efficient. help facilitate

access to fair and affordable credit. protect consumers from fraud, including identity theft. greaterconsumers gain financial literacy. and to help companies reach consumers with a timely and relevant communications and marketing offers. marketing data in particular brings lower prices and greater consumers byo strengthening competition. nonprofit organizations and government agencies also depend on consumer data. to serve the needs of people and citizens. important, experienced data allows small companies, including many in the state of west virginia and other states around the nation, to compete with larger companies who maintain very sizable consumer databases. it provides small businesses with the same

datasets larger competitors have so they can compete and grow companies. a significant point i would like to make also is that operations of marketing services and the data it collects and uses and shares is completely separate from experience operations as a consumer credit euro. no eligibility of the terminations were able to credit insurance, employment, housing, or any other decision, is ever made with marketing data. experience has in place strict policies, as well as technological management, procedural controls to make sure there is complete separation. it shares data responsibly by carefully safeguarding compliance with all privacy and consumer protection laws and industry self-regulatory standards. we even for most -- promote new regulatory standards.

the committee has also sought for pacific information about clients and data sources. experience provides market data to a wide for -- wide variety in the private, government, and nonprofit sectors, that market to consumers through multiple channels, both online and off- line. sectors we serve are retail, media, and financial services. our products were used i nearly all sectors of the economy. include the sources for specific products, in which the kitty hat -- the committee has expressed interest. most of our data comes from and publiclys available information, such as zip code level census information, local property records, and telephone directories. added to this, many people voluntarily provide data to

experience by filling out surveys and questionnaires. these multiple sources of data are aggregated at the household level and then analyzed and modeled for household preferences and propensities. such methods result in a group of consumers receiving messages in advertising that they are more likely interested in responding to. done, weis said and help marketers make the best about what messages and marketing solicitations a group mostnsumers may be interested in responding to. finally, i want to emphasize it has made every effort to be forthcoming and cooperative throughout the inquiry launched by the committee this year. we have spends -- considerable time and resources to make sure the information and documents we have provided are helpful to the committee's work in understanding the marketplace.

today, the committee has been provided with eight submissions, totaling over 3000 pages. we believe this provides a full description of our products, services, and we are here today as the only one in the -- in this. the role wederstand play in the economy and the lives of consumers, thank you for your attention. appear invited guests to here. we look forward to continuing to work with you. i will answer any questions the committee might have. thank you. >> thank you very much. i want to get this right. jerry. did i say your name right? >> you did it correctly. thank you. i appreciate it. >> i am thrilled. the senior vice president of government affairs for the direct marketing association.

we welcome your testimony. >> thank you. dmaers of the committee, appreciates the opportunity to be here today and to talk about this important subject. on a personal note, i want to say i have testified before this committee many times, testified before other committees before congress, and, today, my last day of work before i retire, i -- i want to thank congress for the opportunities they have given me to participate in dialogue here before the congress. i appreciate it. senator, i will not be here when you retire at the end of the congress, so i want to say, personally, we thank you for your service to the united states. back to why i am here today talking about data. >> are we allowed to ask you questions? >> you can ask questions. sadly, they know where to find me. to get the questions to me.

phone call away and i promised they could call me and i did not promise i would answer the phone. anyway, data. every consumer facing business in the united states uses data today. it is important. it drives our economy, driving our current recovery. it is very important. to our members. in that light, dma has created drivena -- data- institute. to take a look at the value and -- and uses of data in the american economy. we employed -- we used a professor from harvard business school and a professor from columbia university and they conducted this data study and worth 150 $6 billion a year to the american economy, 675,000 jobs. influence is related

to sharing of data i companies. even more importantly, the data sharing helps small businesses and it helps write down barriers to entry so small businesses can come in and compete with the big boys. once they get a foothold, it keys them on a level playing field. it is not new. this has been happening for a long time. i will give you a couple of withles. l.l. bean started a list of nonresident main hunters. that is that -- that is how they started. of thecover card, one first credit cards, a reward credit card, began with a list of sears treaded caught -- credit holders. without those lists, the companies would not have started. the benefits from the two companies would not have been realized. it is important. it is. personal information that is

used. strongted states has privacy laws. the online privacy protection act, hippo, data task, and so forth. those laws are complemented by self-regulation by the industry. i can speak only for dma here. dna has a pure ethics committee that meets monthly and handles complaints from consumers and other businesses brought to it against members and nonmembers. most of them comply with our guidelines. those that do not, we publicize them on the webpage. if there is a violation of law, we turn it over to the federal trade commission and the postal inspector -- inspection service. as we looked at this, the federal trade commission said they support the complementary effort by self-regulation. we want to continue that. we continually update the today'ses so they meet

real world efforts. the things we can talk about, all of this is in fact working. the american consumers are voting with pocket books and feet. e-commerce is growing. it is growing multiple times the rest of the economy, because, they have trust in the process. think about it. they need product -- trust. they are purchasing something theyaying for it before receive it. they need to have that trust. ins data-driven economy is fact working. think about the great american success story. really great american success story, amazon. on cyber monday, it sold 300 items per second. that shows americans have confidence in this. their needs as american consumers are being met in the data-driven economy.

there are clearly concerns. there are concerns about what is happening. you have heard them and it is in the report. we have for them today. the improperus on use of data and figure out how to prevent the improper use of data. one of the things we cannot do and stopway responsible uses of data that are driving the use of the economy. that is something we have to be very careful of as we are part of the dialogue we are having today. the american economy, small businesses, american workers, and american consumers, rely on responsiblefrom data use. america leads the world in that category and we hope to keep it that way. thank you very much for the opportunity and i look forward to answering any of your questions. >> thank you very much. i will start the questioning and then we will do it according to order of arrival.

mr. hatley, one of the products your company sells to marketers is called "choice score." targets under banked consumers. let me read your description of the under banked consumers. new legal immigrants, recent graduates. widows. followers of religions that historically have discouraged credit. transitoryrs with lifestyles such as military folks. mr. hatley, the populations of this group are very vulnerable to financial scams. we have experienced that in this committee because we have done hearings about that, particularly with near military bases, where people -- these are

relatively young people overseas and back for a while. they are very vulnerable because they need cash and people can come in and really clean their and we have testimony to prove that. last month, we held a hearing about companies that target fraudulent financial products to service members. they are honorable because of their financial inexperience. and their steady paychecks. mr. hatley, what does your company, or why does it single out and sell lists of economically vulnerable groups like immigrants and widows and military personnel? it is a very important question to me. you set the probable response to whom your questions are aimed in your marketing is

aimed at, you can fairly well predict the type of product you will get. a nicer vacation, a less nice vacation, etc.. when you put people in categories and they are that is not the l.l. bean model. i would like you to respond to that question. >> thank you. very concerned if lenders were using that information for scamming purposes. and procedureses in place to ensure nobody gains that purpose. for >> how does it work? >> we have and on boarding 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 they will offer the consumer. if it is anything that looks

predatory,ory, or, we will not provide a list to them. >> this is your self-regulation? >> this is our self regulation under dma standards. if we were to volley -- violate that, we would be under violation of regulation and contractual standards within clients. important is there are somewhere between 45 and 50 million americans outside the marketsam of the credit in the united states. these are under banked and whorserved consumers financial institutions cannot reach through credit scoring and credit report. they do not have financial identities. or a big enough or even the presence of a credit them intoder to bring the mainstream of financial markets. it does not mean they do not eat -- need access to financial services. this data to try to

reach out to consumers, who they can help to empower them and not scam them. we do not want to do business with financial institutions trying to scam people, only to empower them. this is their best way to find those individuals outside the mainstream, immigrants. new to credit like recent college graduates. to give them an offer, and in -- invitation to apply, so then they could make an eligibility determination regarding that application, under the fair credit reporting act. this is marketing literature, not eligibility determination. >> can i add to that for you? >> not entirely. can you tell he which are the companies that buy this choice score product from you? would be banks and financial institutions and members of the financial community. >> that is a general answer. >> yes.

i cannot tell you who are clients are. that is a proprietary list of hours. it is like our secret ingredient. the ones who would want that most are our competitors. our counsel has informed me they do not believe our ability to give that to you can be shielded from disclosure to the rules of the senate. if we thought they could be, for example, under a law enforcement action, where he could be fromded and protected disclosure us, we can do that, but not under the situation under the rules of the senate. we are sorry about that here and we simply cannot do that. our counsel will not let us. >> there are a lot of councils out there looking for work. keepint is you have got to up with competitors. my point to you would be i am not necessarily approving of what competitors are doing. maybe you want to keep up with them but maybe they are doing

exactly what you're doing but on a larger scale. upwe do not want to keep with those competitors. >> a lot of other companies gave us the precise information that i want from you. >> i would hope the focus of the committee and ftc and others interested in these types of uses of data would focus on those data brokers. it is not experience at his doing that. we would not have that within our business model. >> all right. can you please provide the names of the companies that buy lists of economically vulnerable consumers from experiencing echo >> i can tell you the types of categories. good -- a really >> do you not understand how that does not work appear? the types of categories? buys themtell you who and that -- i can name a few because they are public. reflectsntation system the entirety of the economic range of our economy.

we do not leave out low income individuals. economyst within the and need products and services, two. the most frequent users of that segmentation, the economically disadvantaged senator are typically government agencies and public policymakers trying to get a view into them. so that they can deliver them messages and marketing materials about public services they are eligible to. among the users of those are the west virginia department of health and human services, the services.tts health the new jersey health and human services. they want to reach those people. theyhem know what benefits are eligible for so they can come and get them. they also use this data to for theirress lists clients. >> you will knit that -- you

will admit that if a state hhs, so to speak, will use that information, that is quite a from ant kettle of fish for-profit bottom-line oriented -- >> we would put the departments of hhs through the same review of who they are and what you want that information for. we would not want them to use our information to disadvantage those consumers. only to empower them. they would go through the same review. >> all right. my time has expired. you happily engaged in a process . you selectively named some of your clients. you can selectively do it, you can broadly do it. >> those are a matter of public record. >> that is the point. what you do should be a matter

of public record. this is an oversight committee and a serious matter. we have the feeling people are getting scammed or screwed by this feeling. it is up to you to talk us out of that. >> not by experience. i can assure you the experience acted as our watching this right now i'm hearing what you're saying. we respect your point of view. responsive to you. seriously. thee look forward to dialogue. >> anyway, my time has expired. johnson,ooker, senator then senator blumenthal. hold everybody here. >> good evening and thank you very much for your wrist -- rich testimony. the internet now, the ability for big data to be used is a service to many users. it serves me every time i am going online and shopping. i love the fact i can use this little device and things will be

pushed to me that are very valuable. data sharing helps fuel our economy. so many great advantages. i have worries on the backend of that. and senatorhairman rockefeller is making a point. those are the concerns of consumers. .ne quick question what frustrates me, that i know my browser history, these cookies are on my computer and they are tracking and tracing what i am doing, and i understand the upside and the benefit of it. that is a little problematic to me. >> sure. there is a group that we are part of, the digital advertising alliance online, following where people are.

we have created an icon and a to allow consumers to ,pt out, totally or selectively from any cookies used to track their browsing activity across unaffiliated websites. that icon is a little triangle with an eye. >> usa the industry is trying to and find a way because you recognize this is a problem. >> i am a tech savvy guy and i never heard of this peer that is problematic to me. i am in fair -- i am very engaged in tech. so the industry is trying to correct what they know is a problem.

>> you give consumers a choice, absolutely. >> ok. i am curious. there is so much positive year. the opportunity for big data to enrich our lives gets me excited about the future. these businesses have a wonderful public purpose but i worry about the darker side in the way my chairman is discussing. as sayingas simple chance heresy. this is -- transparency. how were you planning on using act tothority under ftc study and stay abreast of the industry and see if there are needs and opportunities like in this one where the industry is or selfecting regulating where we can get them to the point where we are

balancing all of these incredible positives of big data with obvious downsides? >> we think about this every positives but the also protecting consumers. in this case, i think the first step is pretty simple. there is very little transparency about data brokers. transparency, it is pretty basic. it is not a technological issue. circumstances, the way we balance is we engage in a constant learning process and we do workshops and are always learning about industry and we meet with consumer groups and business groups. we areything we do, always trying to develop flexible standards. we are thinking about, what about 20 years from now,

especially with the orders we get, will this last and will this be able to grow with innovation? we make a lot of effort in that regard. i want to bring it back. we have got basic steps to bring about some transparency that should not undermine the data- driven economy and, there is nothing in that study, that how privacy would undermine the data-driven economy. >> so much of what i am doing for free on the internet is made free. you are saying there is a chairman this and larger degree of transparency that needs to be given to the public. >> and we think, transparency, and we were talking about this a few minutes ago, is completely consistent with the growing

economy. consumers are increasingly demanding more information about how their data is being used. when you give them information, they often develop more trust. we think it is in both consumer and business interest to provide more information. >> i would love to see -- to hear if they have any resistance to the increased transparency. i am the new kid on the block. i will yield. >> you are always on the good side of the chairman. 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 booker's 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. datanot know how to define broker. i have never seen a definition of data broker that would not sweep in tens of thousands of companies. everyone exchanges data and shares data and sells data with in the echo system. 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 one-time 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 one-time 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 they're 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.

macy's might want to know what nordstrom's 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 you're 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 naïve. 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 i'm 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. >> i'm 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 long-term 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 should've. 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 consumer's 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 off-line 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. >> let's go to the blurry line that has been allowed to create -- be created and what is responsible for consumers. let's 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 pseudo-score, 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. >> let's 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 people's 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 you're 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. >> let's 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. >> i'm talking about now. about you. >> let me say that this person would not have gained access to experian data. >> what would've stopped them? >> we would've had a on-site 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 fly-by-night 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. >> thank you senator mccaskill. users of yourbig services is the federal government, correct? can you give us some areas in which you can identify how the federal government uses your services? of experianst users now are the department of health and human services. we operate on healthcare.gov to authenticate the identities of individuals writing up for health care. we are attempting to eliminate fraud on that site. do not want imposters acting in someone else's name.

we also have a contract with the social security administration. people onlineg for online accounts, from paper- based accounts. they want people to move online to get their statements. toauthenticate individuals have online accounts with the social security administration. we believe that hhs could be a good user of our marketing data. we want to reach out to people to see if they are eligible for health care and try to determine how to market that process to them. they have not done that yet. the state agencies are far ahead in that regard. they are using these economic segments to reach out and inform consumers of benefits that are available to them. >> for purposes of obamacare implementation, they are using you to authenticate the people who are applying, but not to market at this moment? -is exactly right.

>> that is exactly right. >> some have concerns about profiles and that they will have a long-lasting impact and put these consumers at a disadvantage. i would like to ask you to respond to that incorrect information. data is highly accurate. it comes from very reputable sources. we know what sources they are and we checked those sources to make sure that the integrity of that data is correct. profiles are not static. this is very important. 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, i got solicitations for home equity loans because they knew that i might want to finance my sons'college

education. now i'm getting solicitations for retirement planning. and i'm getting solicitations for vacations. i marketing profile has changed with my age and my family status and my interests that i have expressed to data brokers. want to make one point very clear here. what health information, -- with hasth information, experian held information from consumers, but only on on opt in basis. they have to clearly opt into telling us what their ailments are and say, i am an arthritis sufferer and i want to know about new products and services coming onto the market to help maples -- help me. these are never used for health care eligibility. they are used so that consumer product companies can offer

solicitations and coupons for over the counter drugs for the most part. it is always often withheld for our company. it is clear and conspicuous opt in. raisede are concerns that consumers should not only have the ability to the what information is collected about them for marketing purposes, but they should have the ability to correct it. what are your thoughts on that? >> on first look, that sounds like a good idea. however, as you delve deeper into it, as you look at access and correction for marketing has said ithadley is not used for eligibility purposes. you look into access for marketing data, it requires you to authenticate who is coming in.

is it an imposter? data, into have that order to authenticate, you need more data. of access andce correction, it will require more data and more accurate data. you can have inaccuracies in marketing data. is not ast, but it precise as reported data. it is not for eligibility. it determines what ad i will receive and whether a marketer is 95% correct that is ok. it is not worth the expense to go to 100%. correctionscess to requires more data. it is therefore more expensive as well. you must always be truthful here. it goes against the idea that you are worried about with data.

you will create more data on the marketing side and it will require you to be more precise. that is an issue. have one bit of information more than the imposter in order to prevent that kind of fraud in that area. >> a report was released on consumer privacy and 2012. it recommended that companies should provide reasonable access to consumer data that they maintain. access should be proportionate to the sensitivity of the data. the report continued that for marketing data, the cost to consumers would likely outweigh the benefits. can you comment on that costsent? what would the and benefits be to have individualized access to data? --will be said in the report obviously the report was a prelude to further discussion

and potentially congress acting. at the time, we were recommending legislation. we said that we saw a difference between marketing data and, for andple, fraud mitigation identity verification products. for marketing data, it might be appropriate to not only give consumers access to the categories of data that is collected about them, but it allows them to suppress use of the data, but not necessarily to give them individualized access. we did not say there should be no access at all. there should be in ability to suppress use of the data. for other products, it may be more appropriate to give individualized use of the data. >> the calculation you made is that individualized efforts towards consumers would outweigh the benefits. >> yes, but for further

consideration by congress. we did see a difference and we did see a distinction between marketing uses and other uses. >> thank you. >> thank you. testimony,ith your you reference the entities with regards to enforcement. can you describe to me what the focus of the enforcement activity should be? >> in our enforcement, we focus data that have the potential to harm consumers. most of our force that actions have been in the area of the fair credit reporting act. that is where we have our strongest tools. used for these purposes, it can be used to deny consumers important benefits like employment or credit.

>> do you think the ftc has done a good job addressing what has been the number one consumer complaint for the past 13 years running? that is fighting identity theft. >> we are trying our hardest. we do not have the authority to go after the perpetrators. one of the main reasons that we are so strong on our data security enforcement is that we do believe it is the responsibility of companies to protect sensitive information from getting in the hands of identity thieves. identify thele to fees themselves? what happens then? thieves of the feeds -- are overseas. we investigate the companies that failed to maintain reasonable procedures to protect the data. es are neveriv ieves are the theive are

never caught. recommend passage of a strong data security law that would give us a nlt -- penalty. >> have you brought that forward before this committee? >> yes. be --r rockefeller would chairman rockefeller would be very familiar with our advocacy for data security. >> thank you very much. >> let me talk about the data broker. you had a definition of the data broker as somebody who connects the dots for marketers. is that correct? >> that is not my only definition, but it can be used.

one thing i would like to point i do not know we've had enough discussion about this today. e bits of just discret information. it is not just the aggregation of these. what is happening is the industry and so much of our world is turning into an actuarial activity. it is a predictive analytics it isre teaching -- predictive analytics that are changing the ballgame. benign data can turn against someone in an instant if they get put into an algorithm that comes up with an either accurate or inaccurate sense of who that person is. we have no way of dealing with that at this point. am heardsoccer mom, i people tell me that they do not know necessarily how a person is branded a soccer mom.

thatumber of data points are involved in designating a soccer mom and ad agency was such that they could not tell me where they got that designation from. if it is true, it is very complicated. if it is not true, that is a problem in itself. why cannot companies tell people where these particular labels come from? i am being told more and more it is the algorithm. it is predictability. , comedyyour definition private companies do you think can be classified -- how many private companies can be classified as this in the united states? >> more and more we are dealing with companies of all sorts that are connecting the dots. >> could it be a small business? >> i would not worry so much

about a small business, but i would worry about big supermarkets. big-box stores. i would worry about a whole lot of companies. they have not talked about retail outlets and the fact that the internet is inside a store and the connecting of our online and off-line lives is taking place increasingly well people walk through and look at products. we should discuss how that relates to the algorithms. it mean to predictive analytics dear you in the face will you are deciding on diapers or something even more important? the experience may deal with over-the-counter drugs, but there are companies that take what people purchased over the informationsolicit about their health activities and sell them. >> what i hear you saying is what i believe, that almost any retailer could be classified.

>> if they share data. >> how should the government become involved in private business in this country? >> it makes it much more complicated. i have begun to believe that at least is a start, there may be some useful public discussion and asking how many data point firms -- how many data points firms are allowed to buy and sell. and how they can be merged to other data points. we should not have continual flows of data appended to our lives. it is an interesting difficulty that you bring up. kroger's website and look at their privacy policies, i could not figure out head nor tail of whether they sell that thou. they use words like affiliates and subsidiaries and it is done in such a way that you did extremely difficult to tell.

i know one company that sells bracelets for health, and they look at their website, and basically at one point after they say what data they can get out of the bracelet, they say that some of the data may indicate poor health. then the issue is, what do they do with it? we can't tell. >> thank you. let me ask ms. rich if she wants to say something? and i was trying to stay within my time limit, seriously. >> i want to add to the point you are making. one of the things that we think about at the ftc to make it a more manageable issue is to focus on the nonconsumer facing data brokers. if the issue is about transparency, at least that is where the concerns are the greatest. consumers do not even know who is invisible -- who those

invisible behind-the-scenes companies are. broad, bution is so we can work on that. it is proof of a problem. pam says there are thousands of data brokers and the committee were forced that there are hundreds and the industry says hundreds, that is part of the problem. we do not know who all of these enemies are and we do not have a handle on it full out there's no trans rarity in this industry. -- transparency in this industry. >> would you say that any website a person goes to, they are indeed you're having information gathered that they do not want people to know about? >> for talking about the data broker issue, we would prefer to be focused on sites that are surely not transparent. we have other recommendations

for consumer websites. we think there should be choices and opt out there. consumers should have some ability to prevent sales by third parties if they so choose. for this data broker problem, we would like to focus on the nonconsumer sites. >> thank you very much. vote at 4:30 p.m.. i would like to ask one more question. this is coming right at you dr. turow. you have been taking all kinds of notes, see you are ready? >> i would like to explore the notion that marketers are targeting pitches to the specific needs of consumers. calledake a product relying on aid. this is a grouping of consumers that are defined as follows:

the single retirees with meager means and savings are barely able to make ends meet. say,escription goes on to with only a high school education at best, it has been hard to get ahead. medicaresured and dependent, they are pessimistic about their economic situation. my question to you is, and your testimony, you highlighted some ways that companies may be using such consumer led that do not involve prior pitches -- product pictures. who should be offered coupons, line, whatwait in thoughts come to your mind when you hear data brokers or marketing descriptions like aid to potential

consumers? >> it is not unpredictable. it has been going on for years. it will get worse as the baby boomers get older. we are only seeing the tip of the iceberg here. one of the issues is also that as we get more individualized -- >> what do you mean by individualized? >> will have a huge generation of older people in 15 years who d with these kind of offers. the thing about that category is that it is a category. it will become anachronistic. instead it will be a particular person who can be made to the persuaded because of other characteristics that were tricked that -- that predict

that. >> they will target low self- esteem? >> yes, among other things. you will not even be able to point to the category in the catalog anymore. it will be something that you are not able to easily track down. those people will be targeted increasingly because of the situations they are enter -- under. the same category divided into millions of people. >> what should we do about it? questionsare social and we should worry about the kind and amount of data. is a very important social discussion. at this point in time, we have not had that discussion. people do not even know this stuff is going on. people know they are being tracked, but when you ask them basic questions of how this stuff works and how they think it works -- we did a 2005 study

in which americans that that the ofority -- the majority americans said that they think this information is illegal. that peoplely find see the word privacy policy on a website and they think it means -- we have done this five times -- they think the word privacy policy means that the site cannot share information about you without your permission. it is a great idea, but it does not work. includingve shown, ones we did a few years ago, that americans have no clue that it exists most of the time. gotggest, and that is how i to the algorithm thing, the idea for an icon that i had originally was that when you clicked on an ad that was tailored to you, you could find out who gave you the ad. you could find out why you got that particular ad at that moment.

data is considered to proprietary and then people tell me that the algorithms don't help. there's nobody who wants to volunteer to give that information. >> these barcoding, don't they? names addresses and other stuff. >> even if you are anonymous -- a short example that happened to me. it shows the direction. i was at chicago o'hare and i had to switch planes when one of my planes was canceled. i went to the customer service place of the affiliated airline and they asked me to permit barcode in and they give me a number. on the side of the screen it said, the amount of time it will take to serve you will be based upon your priority in terms of your status with our loyalty program. fortunately, had a lot of points. i was served pretty quickly. some people were just sitting there. that meant they did not get the

flight that they could have gotten. that is why take american. they preferred it to what will happen to them by virtue of the circumstances. although research has been done to put them in that situation so they can control how they maximize their product. >> i have something i want to say. >> go ahead. to --ant to come back before 9/11, i was on the intelligence committee. i would wake up to seven newspapers with nothing but nsa headlines. i'm here to tell you, as one of the offers of fisa, the patriot act, and all the rest of it, the nsa is so secure in its protection of privacy that he has been compared to this group

that we are talking to, these data brokers. it is not even close. anybody, everybody. the nsa knows. they are only likely to interact .000001% for at a people to conclude need further observation. this is everybody, anybody. it is divided into race, economic activities, education. there is something i cannot prove this wrong, but there's something illegal about it. it is unfair -- illegal --

lethal about it. it is unfair. if somebody is poor or uneducated -- i come from west virginia and a lot of people face these problems. stigmatized and they have to live with it. the system is stacked against them. a lot of people are making a lot of money. .'m not asking for an argument the belgians went off. i'm here to say that this is a very serious situation. everyone here agrees that it has not been talked about. we have looked at it. you all have looked at it. we have to continue on this thing. the slogan of one of the companies that we reviewed in this investigation, they live by the following words. just because you can, doesn't mean you should.

unfortunately, i have been thinking about this because today's testimony and the inquiries show that the industry as a whole is falling short of that and are. it appears to be following fall short of that standard. brokers saydata .hat we can and we will they are full of optimism. we heard about the lists generated by data brokers about disease sufferers, products that seem tailored to businesses seeking to take advantage, i hate that. i personally am are bolted by that. i have seen it in the treatment of coal miners. i 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 doesn't 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 self-esteem. that is not the america we want. this hearing is adjourned.