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Senate Banking Committee Hearing on Data Brokers and Privacy

Senate Banking Committee

“Data Brokers and the Impact on Financial Data Privacy, Credit, Insurance, Employment and Housing”

Tuesday, June 11, 2019

Key Topics & Takeaways

  • Data Brokers: Cackley said data brokers hold vast amounts of information and play a significant role, which impacts an individual’s ability to make financial decisions. Dixon said targeted efforts by data brokers, such as predatory lending or “modern day” redlining, have increased due to these “secret,” unregulated scores. Dixon said Congress should implement best practice standards on data brokers to fill the gaps of protecting consumer information, especially for sensitive information.
  • Framework: Cackley said Congress should consider the need to merge the sectorial U.S. framework with a comprehensive framework, like in the General Data Protection Regulation (GDPR), to grant basic privacy rights and control. Dixon said the buy-in for either type of structure is difficult and there should be a multi-factorial approach that includes best practice standards for data collection along with guardrails to address the gaps not addressed in the current framework.
  • Consumer Rights: Cackley said it is important for individuals to make the choice about what data they do and do not want to share, and said access, control, and the ability to correct are critical elements to include in a privacy framework. She said a duty of care would be a good element to include through a more comprehensive approach that covers different platforms and provides the ability for valuation and portability. Dixon said there should be a set of “rules of the road” with agreed upon principles for data brokers to follow.

Witnesses

Opening Statements

Chairman Mike Crapo (R-Idaho), Senate Banking Committee

In his opening statement, Crapo said that in a digital economy with so much personal information available, Congress needs to address how consumer information is collected, whom it is shared with or sold to, and how it is used and secured. He stated that the vast majority of Americans do not know the collection practices or purpose of private data collection, particularly of data brokers and technology companies. Crapo said the current statutory framework fails to personalize standards for the growth of new technology and the marketplace. He referenced a 2013 Government Accountability Office (GAO) report that recommended a framework that reflects marketplace technological changes. Crapo also referenced a 2014 Federal Trade Commission (FTC) report that emphasized the role of data brokers in the economy, largely without consumer knowledge of their data collection and storing practices. He asked Dixon and Cackley to address data broker predictive consumer scoring and gaps in the current law, such as in the the Fair Credit Reporting Act. Crapo said the committee is focused on promoting practices that are accurate, fair, and protect consumer information.

Ranking Member Sherrod Brown (D-Ohio), Senate Banking Committee

Brown expressed his concerns about the collection and sale of data in the shadow data collection industry, including the practices of data brokers. He said consumers expect their information to be protected, but the reality is that data is tracked and recorded daily and sold to data brokers who sell their information to Silicon Valley. Brown said this reminded him of the time when corporations, which had no business being in the lending industry, decided to sell loans to Wall Street. He stated that data brokers undermine the data collection industry and exercise enormous influence on the economy with little to no penalty. Brown emphasized the importance of a bipartisan framework that targets the private sector and government practices of data collection and use.

Testimony

Dr. Alicia P. Cackley, Director, Financial Markets and Community Investment

In her testimony, Cackley discussed the GAO report on information resellers, internet privacy, data protection, facial recognition, and financial technology. She referenced two major areas of focus from the report: the of a lack of an overarching federal privacy law that governs data collection and use, and gaps in consumer privacy protections. Cackley said there are no laws for how resellers should address the sale of products or how to maintain information. She said current laws are narrowly tailored to address specific purposes, types of information, situations and entities. For example, Cackley said the Fair Credit Reporting Act requires the protection of sensitive consumer information and restricts how it can be shared, but only for credit, employment and insurance information. She added that Gramm Leach Bliley restricts how certain financial information is shared, but only for specific financial institutions. Cackley said there is need for a comprehensive privacy law that grants consumers the ability to access, control, and correct their information. She also said there is a need to address how information is tracked and collected online, mobile device software use, and the rising use of Fintech.

Pam Dixon, Executive Director, World Policy Forum

In her testimony, Dixon said the discussion about the Fair Credit Reporting Act, data brokers, and privacy is “very” meaningful. She said the committee struck a “blow” to consumer transparency when it passed the Fair Credit Reporting Act, saying the legislation has lost its importance over time. Dixon stated three reasons for the diminishing of the law are: 1) the unregulated use and sale of credit and other scores; 2) advanced machine learning that affects the accuracy of unregulated scores; and 3) scores created without due process for consumers. She said Congress must act to expand regulations for scores that are unregulated, especially in the financial sector.

Question & Answer

Data Brokers 

Sens. Bob Menendez (D-N.J.), Brian Schatz (D-Hawaii), Catherine Cortez Masto (D- Nev.), Brown and Crapo asked about the practices of data brokers and for recommendations for clarifying their role and right to protect information. Cackley agreed with Crapo’s assessment that data brokers hold vast amounts of information and play a significant role, which impacts an individual’s ability to make financial decisions. Dixon said there is a need for good industry practice and scores from data brokers and credit bureaus. She said targeted efforts by data brokers, such as predatory lending or “modern day” redlining, have increased due to these “secret,” unregulated scores. Dixon said ultimately consumers are locked into a marketing bubble that does not allow them to make the best financial decisions. She said Congress should implement best practice standards on data brokers to fill the gaps of protecting consumer information, especially for sensitive information.

Consumer Rights

Sens. John Kennedy (R-La.), Mark Warner (D-Va.), Jack Reed (D- R.I.), Schatz, Cortez Masto, Brown, and Crapo asked about consumer right to access, ability to correct, opt-out clauses, licensing, and control. Cackley said it is important for individuals to make the choice about what data they do and do not want to share, and said access, control, and the ability to correct are critical elements to include in a privacy framework. She addressed Kennedy’s concern about licensing, stating there would be nothing wrong with it but said licensing would have an impact on who could collect data. Cackley, in response to Schatz, said a duty of care would be a good element to include through a more comprehensive approach that covers different platforms and provides the ability for valuation and portability. Dixon said she is persuaded that opt-out is not possible because it does not address the financial system. She said Congress should focus on restricting negative uses of data and create strong standards for collection and use. Dixon said there should be a set of “rules of the road” with agreed upon principles for data brokers to follow.

Unregulated Scores

Sens. Tim Scott (R-S.C.), Mike Rounds (R-S.D.), Krysten Sinema (D-Ariz.), Cortez Masto, and Crapo asked about ways to reform the Fair Credit Reporting Act and include regulation for all scores, aside from just credit scores. Dixon said small changes would be meaningful such as household level scores, transparent scores, opt-out clauses of discriminatory collection efforts for scores, and accurate assessment of the type of information collected. Cackley said scores can influence how companies offer certain products and prices to individuals and there should be transparency of information included in these scores.

Framework

Sens. Crapo, Brown, Rounds and Schatz asked for recommendations for a federal framework. Cackley said Congress should consider the need to merge the sectorial U.S. framework with a comprehensive framework, like in the General Data Protection Regulation (GDPR), to grant basic privacy rights and control. Dixon said the buy-in for either type of structure is difficult and there should be a multi-factorial approach that includes best practice standards for data collection along with guardrails to address the gaps not addressed in the current framework. She told the Senators she would provide them more detailed responses in writing for how she believes a framework should look.

For more information on this hearing, please click here.