senate finance subcommittee on social security looks at ways to sustain the benefits for seniors while encouraging others to save money separately for retirement. she was everyone's soul sister. everyone thought they knew erma. she laid her life out for everybody to see. she told us about what life was like in suburbia. throughn in the 1960's 1990's. one of the wonderful things about her -- she wrote mainly humor. it was humor that was accessible to everyone. it was humor that happened in everybody's lives. they might not recognize it until they saw it written. because funny things happen to us all the time, but we have to be on the lookout for them.

she was the one that focused our attention on the funny things that happened. things that at the moment seems like craziness and driving you nuts. when you look back at them, you think that was really funny. that is a real gift. that is a literary gift. the life and times of erma bom beck this weekend. c-span2.noon on >> c-span. we bring public affairs of ends from washington directly to you. when you in the room at congressional hearings and white house event. offering complete gavel-to-gavel coverage of the u.s. house. all as a public service of private industry. the cable tv industry 34 years ago.

headed by your local cable or satellite provider. now, you can watch us in hd. >> on wednesday, the commerce committee looked at the collection and distribution of consumer information online. it is the subject of a report compiled by the community. they found data brokers collecting huge volumes of information. information of medical history. they joined privacy advocates and representatives from private industry to testify in this two-hour hearing. dais, >> at this point there are two people sitting at the dais, but two more wonderful people, senator blumenthal, center car, senator fisher, and senator warner will all be here, but this is the day that we almost load on the budget, actually. not quite. on the budget, actua.

not quite. we always find a way to do it. you have a motion to proceed? to whatever? and tomorrow at some point we vote on a budget. just be grateful you are in private life. [laughter] ok, you are all welcome. the disclosures about u.s. intelligence activities over the past few months have sparked a very public bait in this country about the kinds of information the government should be gathering and how we protect the privacy of the americans where we have done something -- nothing wrong. these disclosures have harmed the country's national security, but made americans safer than ,sual over how their lives online and off-line, can be tracked, monitored, and analyzed. people are aware of that. not to the extent in great

britain, where they are so accustomed to being videotaped while they do everything, but we are still adjusting to that. i am glad that we are talking about these privacy issues in general and today we have all benefited from rapid advancement in computer technology but also there is personal freedom. we always use the word cherished, but we do, and it is a complicated subject. we want to be able to protect ourselves and loved ones from the unwanted gaze of the , and of our neighbors. what has been missing from this conversation so far is the role of private companies in collecting and analyzing our personal information. a group of companies known areectively as data brokers gathering massive amounts of data about our personal lives and selling this information to marketers.

about thehear a lot private sector data broker industry, but it is playing a large and growing role in our lives. last year the data broker industry generated 106 ilya and dollars in weapons, 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, like it, or not exceeded difference. one of the largest data brokerage companies, axion, recently boasted to investors that they can provide multi- sourced insight into approximately 700 million customers worldwide. government or law

enforcement agencies collect arermation about us, they restrained by our constitution and laws and are subject to the oversight of courts, inspectors, general united states congress intelligence committee, the senate, and the house. i have served on the intelligence committee since he for september 11 and i can tell you that without a single that nsathe protection provides to security and secrecy is far better than what we will be talking about today. they have rules. they have all kinds of judges, who is that you have to jump through. the fbi is involved. the doj. it is very tight. every day you read the paper in you would think it does not exist, that it is just a government gone wild, but particularly when it comes to 215, it isection

very tightly monitored. there is never content, there is never e-mail, and there is never a name. there is never a name. just a telephone number. but data brokers go about their business with little or no oversight. are laws on the books to protect the privacy of americans health and financial information, they do not cover data brokers marketing activities. collecting consumer information for marketing purposes is not a new business. for decades before the internet was invented, retailers, marketers, and yes, political candidates, compiled many lists that they used to send coupon books, catalogs, and other materials to potential customers, but the data broker industry has been revolutionized theecent years by

tremendous advances in computing and data analysis. more and morepend time socializing and shopping online, they are generating rich new streams of personal data to collect and analyze. these days data brokers do not just know our address, our income level, our political affiliation, most probably, they probably know the weight of everyone in the family. they have collected thousands of data points about each one of us . and we are simply not aware of it. except in hearing. they know if you have diabetes or suffer from depression. they know if you smoke cigarettes. reading habits.

your browsing habits. much you and your family members way. igh.eu that numbern know of whiskey drinks you have had in the last several days. we would not reveal that, would we? >> [inaudible] >> as a mosaic, these are startlingly detailed profiles of consumers. under the current law we have no right to see these pictures of ourselves. that these companies have created. we have no right. committeest year this has been trying to bring some much-needed oversight to the data brokerage industry. where is the copy of the report? under here. we have been pushing

them to answer the same kinds of questions that many americans have been asking the government since the snowden disclosures. what information are you collecting about us? how are you using the information? this hearing is the first time we are publicly discussing that we are learning what we are learning in this investigation. conference committee staff has prepared a report for me and for the ranking member on the progress of this investigation. it is thus. more to come. aask unanimous consent to put copy of this report in the record of this hearing. things we have learned in this investigation is that data brokers engage in many unobjectionable activities. they do what marketers have always done. they help businesses find potential customers.

found someo practices that raise serious consumer protection concerns. in particular i am disturbed by the evidence showing that the segment americans, categorize them into categories, name 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, that is one of their categories. top start, young single parents. rough retirement, small-town and rural, seniors. -- zero member 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 it is totally innocuous and benign. i don't start out excepting that, but maybe it is. it is why we are doing this investigation. some companies in the data brokerage industry have responded positively to our oversight efforts. when i became chairman here we went over ago, to henry waxman and stole a couple of his best people and set up in investigations unit that for some reason we never had and we gave ourselves subpoena power, something we had never done. it is a powerful tool when you are doing investigation, which is what we tend to doing here. want to know which companies are buying these lists to target their marketing to those groups. datacompanies in the

brokerage industry have responded positively to our oversight efforts. over the past -- the past year they have provided complete answers to my questions, even the tough ones, but several of the largest brokers, specifically cap salon, action, and experient, are continuing to resist oversight. today they have not given me complete answers about where they sell and get their customer data on consumers and to whom they sell it. i am putting these companies on notice today that i am not satisfied with their responses and i am considering further steps. i have steps that i can use, that i can take to get this information. have oversight over this activity in american commerce. oversight, to

intelligence or this, you do it seriously or with the purpose of getting the truth. i am putting these companies on notice that i am not satisfied and i have further steps i can take to get this information. i want to assure them that oversight efforts in this committee, which we have started, will continue. i now call on my distinguished friend from a similar urban state. senator john thune. >> that is right. thank you for holding this hearing, thank you also to the witnesses for coming here today. our economy is increasingly data-driven and data brokers lay . go -- growing role data or information brokers are companies that collect data, including personal information about consumers from a wide variety of sources, like public records, retailers, selling the

information for the purposes of preventing fraud, marketing products. as the chairman noted in his initial letters to several data brokers in 2012, the purpose of the inquiries to better understand the industry and i look forward to each hearing as we focus cap on how the information collected by the brokers is used for marketing purposes. without question this can provide greater benefit and convenience to consumers, lowering the cost of business to target more precisely, helping businesses create products that consumers actually want, lowering startup costs for new businesses. data-driven is one reason that many of us are able to use search engines and e-mail accounts for free, allowing search engines to promote the targeting of resources to reduce the amount of junk mail catalogs tailored to a consumers particular interest. at least that is the goal.

but as the industry is at the center of something that the commerce committee cares about, commerce, it is data-driven marketing widely used across all sectors of the economy. used by nonprofits, governments, and political campaigns. many media outlets have noted how commercial resources help the president's reelection campaign in 2012. as we will hear from the direct marketing association, they are also helping to fuel job creation with technical innovation in our slowly recovering economy. while the industry creates many benefits, there are also important questions about the implications of data broker activity, 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 sold, resulting in calls for more transparency into data

broker practices. advocates of also raised concerns that they create profiles on individual consumers based on the aggregation of sensitive and sometimes personal data, like health conditions. rapidly changing marketplace, the federal trade commission has done important work concerning these brokers privacy issues, including educational efforts. they have also brought enforcement action under the fair credit reporting act. also completing a study of 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 report that i understand will be submitted as a part of this hearing as well as something to help inform this committee. i will be asking witnesses how the data brokerage practices may impact consumers positively and negatively and i am he interested in hearing from our witnesses how the industry can

work the balance the private industry concerns with the needs of privacy in the economy. thank you to all of our witnesses here today, i wanted to add a special note of thanks to tony from experient. .- experion having one of those companies testify is a good way to keep the number of witnesses manageable. i am sure that many of the other companies are also grateful for your willingness to testify and advance our understanding of the dater -- data broker industry. i know i certainly am. thank you for having this hearing and i look forward to hearing from our witnesses. >> thank you very much, senator. we have -- i will just do it one by one. jessica? ms. rich is the director of the bureau of consumer protection and the federal trade commission . i will go down the line.

could you give your testimony, please? >> [inaudible] a you have got to push button. it is called technology. >> yes, i assure you i know something about technology. my name is jessica rich, director of the consumer of bureau per to -- director of the bureau of consumer protection. this is a highly opportune time to examine the practices of data and technological developments that allowed for the dramatic increase and collection of consumer information. data brokers collect personal information from consumers from a wide variety of sources and resell it for a wide variety of purposes without any consumers knowing of their existence much less the variety of practices in which they engage. many of these practices, as you noted, fallout side the scope of existing loss. laws.sting

chairman rockefeller, we commend you for your leadership on this issue and stand ready to work with the committee in congress on ways to improve the transparency of these practices. the report from today is a key effort, as is the study requested from gao. 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, went into the enactment of 1970 of the fair credit reporting act. since then the commission has been examining the preface of data brokers. we used three primary tools in the effort. first, we bring in enforcement actions when company practices violate the law. perhaps our most well-known case

involved a choice point, where we obtained 10 million dollars in penalties and $5 million in redress for consumers. it lacks privacy security incedures, resulting sensitive consumer report information winding up in the hands of known identity thieves. more recently we entered into a consent decree with an online data broker. according to our complaint, they collected personal information from hundreds of online and off- line sources, including social networks, combining the data into detailed personal profiles. we alleged that they marketed resource use by human departments, making the consumer reporting agency subject to the fair credit reporting act, but it was failed to be revived by the accuracy privacy requirements. includes strong belief in the civil penalty. second, the commission conducts research and issues reports

addressing data brokerage issues. for example, the 2012 privacy report named best practice conditions for consumer practice -- consumer privacy. among other things, the report reiterated a long-standing commission recommendation that data brokers provide consumers with access to the data that they maintain and depending on how it is used, the ability to correct it. or recently in order to shine a light on the industry we issued orders requiring nine data brokers to provide information on how they collect and use consumer data. the commission is close to completing a report based on this information and expects to release it in the coming months. in the spring of next year we plan to host a series of privacy workshops, including a seminar on what is called alternative products offered by data brokers , that is products that companies use to predict consumer behavior and shape of a market to particular consumers.

, educatingool businesses and consumers on privacy issues and the practices of data brokers. for example, we recently sent letters to multiple data brokers that provided services and warning them about their duty to comply. for consumers we recently produced a video on data brokers and have published frequent posts and updates on issues related to the industry. in closing, as the collection and use of this data continues to explode, we share the commitment to continue to examine data brokers and we stand ready to work with the committee on this critical issue. >> thank you. >> thank you very much. >> mystic and is the executive director of the world privacy report. you are on. >> she is loading. [laughter] >> chairman rockefeller, members of the committee, thank you for

the opportunity to share what i have learned about the data brokerage industry today. i appreciate it very much. moderate in the privacy debate and 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 per name. of a list ofprice rape sufferers that was recently sold. 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 what is being sold and circulated today. it is a far cry from visiting a website and seeing an ad. what it is is a sale of the personally identifiable information and highly sensitive information of americans. would like to make three points. first, scoring. scores thatow pseudo- are comprised of factors that are not financial. i should say, non-credit report based. these pseudo-credit scores are used in lou of actual credit scores, because they completely circumvent the fair credit reporting act. so, if a business or an employer, or an insurer can

purchase these scores and use them with no ill consequence, or , thisnsequence at all needs to change. secondly, health. ofre are lists of millions people that are categorized by the diseases that they have, ranging from cancer to alzheimer's -- terrible diseases, some of them benign, some of them relating to mental illness. there are lists of millions of people and what prescription drugs they take. entirelyts exist outside of hippa. >> what? federal data -- federal health data protection. it does not apply.

this industry that is selling these lists, there has been a lot of mention made of marketing lists.s for these these lists are being sold without constraint. we do not know if employers are buying them, if insurers are buying them. we do not know who is buying them. but the lists are being sold apparently for billions of dollars, which suggests to me that we need to find out who is buying these lists. terms 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 drop under the fair credit reporting act so that consumers can exercise the same rights that they would have if the credit score had been pulled. if the information is as statistically accurate and has the same effect as a credit score, why is it not regulated

under the fair credit reporting act? this should be a bright line here and i do not think that that is too terribly difficult to draw. to be -- actually, there is an urgent need for a national data broker requirement for an opt out. out that isopt highly granular so that consumers do not always have to take the nuclear option and get entirely off of 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, the number of children she has, or maybe she does. the point is that consumers need to know when they are on a list and make choices about what appears on the list. andeed to re-examine hepa

decide if health information that is not held by health care providers deserves health care protections in privacy. i believe they do. is going to be the beginning of an important public dialogue that is going to be incredibly important or all of us to engage in. if we have an industry that is by the sale of names of everyone with highly sensitive information for 7.9 cents per name, then we have not done enough. thank you for this opportunity and i look forward to your questions. >> thank you, and you are exactly right. this is the beginning. the beginning of a dialogue. deeply,eed to pull without fear. without fear of consequence. and then we need to do something about it. that will be a judgment that we will have to make, but as you ,uggested, a change in hippa

which is to be sacred, and still is, but not in all cases. i thank you for your testimony. professor? the associate dean for graduate studies at the annenberg school for communication at the university of pennsylvania. >> thank you, chairman rockefeller, members of the community. i would like to address two key questions about the collection of data for market purposes. first, if we take sensitive -- first, if we take sensitive topics like health unemployment out of the equation, what possible harm could come from using this data for marketing purposes? we are talking about targeting for product advertising. second, had these lessons not been around for a century? what makes it different from the past? let's start with a history question. the compiled list of prospects goes back to the 19th century.

the lists became more detailed in the 20th century, but the difference between the lists of 35 years ago and today are extreme. the distinction is the amount of information that brokers have now and how they deal with it. lists from the old a's were static. the number of data points the company had was small. today data brokers can collect huge amounts of information, tens of millions of people, even hundreds of millions of people. they update the information frequently and they use high- speed computers and advanced to state six to draw conclusions that previous generations could hardly have imagined. consider the recent data catalog. it contains 41 pages of information about individual america and sold to marketers. the information ranges from the amount of money taken to the amount of vacations taken to the number of friends on social media to the value of neighbors to diseases to how tall they are

to whether they gamble, to the media uses and much more. they sell any number of items tailored to markets from different industries. in addition, the data broker has created a kind of universal follow people and across desktops, laptops, mobile, and 10 -- tablets. like axiom, other data brokers continually run programs that connect the dots for marketers and then attach them to other ideas marketers have about us. the brokers bring together pieces of information people did not expect would emerge when they disclosed them separately to various online and off-line entities. the results are buckets of descriptions and stories of our lives and economic value and potential we did not know exists .

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 authority under ftc your authority under ftc act to study and stay abreast of the industry and see if there are needs and opportunities like in this one where the industry is not correcting or self 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 day, balancing the positives but

also protecting consumers. in this case, i think the first step is pretty simple. there is very little transparency about data brokers. providing that transparency, it is pretty basic.. it is not a technological issue. in more complex 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. in everything we do, we are 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 addresses 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. i can't -- i want to pick up on 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? >> in this 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 define data 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? how would that really be 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 could be working with the users. >> let me stop because i have limited time. with mailing lists, you get a 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. the misuse and improper use of 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? >> it is sold pursuant to a 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? is there a much larger data gathering than what we were talking about earlier? >> we collect information online in that realm. it is all aggregated and anonymous data. there is no personally identifiable information attached. 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 expressing says to add choices and click on and it tells you what is happening following red browsing and then there is a link about ads and info. a website where you can opt out. that type 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.

>> on a do not call list, one time, and you are covered? or is this application after application. >> it is one time and you are covered and it probably affects about 96% of 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. we are working on australia, 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

profoundly important issue with such a far ranging consequences for both good and ill in our society. thank you to the staff for this truly remarkable study for anyone who doubts how to define 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 involved in this very far- reaching and far ranging collection use and marketing of data. one is almost every day, in the headlines, and in the news, we 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. consumers do not have that same right against this industry because it is not the government. privacy interests may be just as much at risk and abused as they 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. the sacrifice of privacy as the 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. so, 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 would join me in feeling such 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? >> i would 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 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 ask you a question about a second area where i think

discrimination, the prospect of discrimination, and exploitation, is raised. that is in terms of job postings and screening of job applicants. i do not mean to tell anybody in this building about the 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, and use it to target job posting 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. that is a case 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 employer from asking for information from your company, and then, on its own, using it in a discriminatory way? >> we 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. >> if it is a violation, what if they said to you, it is not a violation? >> 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. >> than it is a violation of law and the ftc should take action. >> it violates 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 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] he was attorney general. >> i am a recovering lawyer. 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. bottom line is no companies

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 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. that is the practice of 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. they then become the basis for targeting offers, benefits, products to certain consumers.

as a result, high-value products may receive marketing details and discounts, while others may not. they may be dismissed as low value. what are the dangers attached to? the impact upon tens of millions 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.

no law that says an employer or an insurer cannot use these scores to determine rates. these are not regulated scores. the propensity scores are of great concern. consumers 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. so-called suffering seniors, 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 wrong sex, whatever. 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 still not evade being put on a list of data brokers according to their health condition. >> let's go to the blurry line that has been allowed to 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. that is an atmosphere of ambiguity and what some fraudsters could do real harm to people. talk about that a little bit. >> the pseudo-score, they are made up of about 1500 factors. they aren't -- 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. we could talk about the sale of people with particular diseases. and just circulate those lists so 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 genetic aziz sufferers, people who were victims of domestic violence. it was deeply troubling to me and i was shocked. what is 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. >> i am a 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. one thing i want to say, our 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 amassing. that is the limitations of our

laws. >> thank you. nothing like a little section five action. you are saying beyond that, we 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 when 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. the case, 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 taking monthly wire transfers from singapore. your company did nothing. it turns out the wired transfers were coming from a man in vietnam specialized in identity theft and was marketing the information you owned to 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. >> i do not understand it -- that distinction. it is a distinction without a difference. it is data you owned. you purchased this data. they had, in fact, sold it to someone else. >> let me clarify for you. we provided a full response to 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. the suspect in the case obtains data controlled by a third party. that was u.s. info search.

not an experienced company. true, a company we bought, court 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 reasons to combine 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 said. this lawyer will back me up. now, you are there. 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 cooperate with the law enforcement in that realm. person in studio next to me is

we have modified our process. is no facingn criminal charges in new hampshire. they posed as a american based private investigator. what is their bidding process? it would've been court ventures. that person would not have gained access if they had gone through our bedding process pride to the acquisition. a >> what would have stopped them? >> we would have had a physical on-site inspection of that company, we would have known who that businesses and what that businesses record is we would have known exactly why they wanted that that and it would have been enshrined in our

contract and we would have known the kinds of systems they have in place to protect the data they have gained. us.e are all incumbent upon >> i understand this is not a crime that began under their watch. getting the wire transfers in singapore and the only reason you question them was because the secret service knocked on your door. i don't know how long those private transfers would have gone on. i don't have confidence it would have stopped at all. maybe do not feel as strongly as others that behavioral marketing is evil. i believe behavioral marketing is a reality and the only reason we have everything we have on the internet for free is because of behavioral marketing. i don't see it as an evil unto itself. in desperate is 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 monthly wire transfers from a criminal who is trying to rip off identity theft, whether or not they should be held liable for checking those wire transfers. that is what i think we need to be looking at. the truth is if there was some it would in this area, be amazing how fast people could clean up their act. there's not clear liability because we haven't set the rules of the road. of i did not mean to pick on you but this is a great example, and you are not a fly-by-night company. can you imagine what is going on with companies that are not as

established as yours? it is serious and significant and we need to look at it. >> thank you. >> one of the big users of your services is the federal government, correct? can you give us some of the areas in which you can identify how the federal government uses your services? >> the biggest users of experian 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. we do not want imposters acting in someone else's name. we also have a contract with the social security administration. they are moving people online for online accounts, from paper- based accounts.

they want people to move online to get their statements. we authenticate individuals to 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. >> our 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 health information, experian has 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. >> there are concerns raised 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 data -- mr. hadley has said it is not used for eligibility purposes. as you look into access for marketing data, it requires you to authenticate who is coming in. is it an imposter? in order to have that data, in

order to authenticate, you need more data. with the essence of access and correction, it will require more data and more accurate data. you can have inaccuracies in marketing data. it is great, but it is not as 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%. so having access to corrections 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. you must 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. the extent of 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 statement? what would the costs 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 example, fraud mitigation and

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. ms. rich, with your testimony, 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 on uses of 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. when data is 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. >> are you able to identify the fees themselves? what happens then? >> many of the feeds -- thieves are overseas. we investigate the companies that failed to maintain reasonable procedures to protect the data. often be theives are never caught -- the thieves are never caught. we continue to recommend passage of a strong data security law

that would give us a penalty. >> have you brought that forward before this committee? >> yes. senator rockefeller would be -- 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 out -- i do not know we've had enough discussion about this

today. it is not just discrete bits of 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 that are teaching -- it is 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. the word soccer mom, i am heard people tell me that they do not know necessarily how a person is branded a soccer mom. the number of data points that 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. >> with your definition, comedy 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. what does 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 counter and solicit information 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. if you go to 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. the definition is so broad, but we can work on that.

it is proof of a problem. the fact that 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 transparency in this industry. >> would you say that any website a person goes to, they are indeed you're having information gathered that they -- in danger of having information gathered that they w about? 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. >> we have a 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. let's take a product called 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.

the description goes on to say, with only a high school education at best, it has been hard to get ahead. poorly insured and medicare 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, who should wait in line, what thoughts come to your mind when you hear data brokers or marketing descriptions like relying on 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 tip of the iceberg? >> will have a huge generation of older people in 15 years who are dive bombed 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 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 under. the same category divided into millions of people. >> what should we do about it? >> these are social questions and we should worry about the kind and amount of data. i think 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 majority -- the majority of americans said that they think this information is illegal.

-- think that price discrimination is illegal. we continually find that people 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. studies have shown, including ones we did a few years ago, that americans have no clue that it exists most of the time. i suggest, and that is how i got 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. that 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. i, 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. >> i want to come back to -- 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.

this affects anybody, everybody. the nsa knows. they are only likely to interact at a point -- at a .000001% for people to conclude need further observation. this is everybody, anybody. it is divided into race, economic activities, education. there is something i cannot wrong, butove it is there is something unfair about it. or lessody is poor i come from west

virginia where a lot of people face these problems. they are stigmatized. they have to live with it. this system is stacked against them. a lot of people are making money out of it. one of them is data brokers. the bell just went off. i'm here to say this is a serious situation. i think everyone agrees this has not been talked about. we've done investigation. ftc has looked at it. you have looked at it. we have to continue on this thing. know, the slogan of one of the companies became a -- the committee reviewed in this castigation says it lives by the following words, " just because you can does not mean you should." i have been thinking about