Financial Regulator To Propose New Restrictions On Data Brokers

The Consumer Financial Protection Bureau plans to propose new regulations that would sharply restrict data brokers' ability to sell identifiable information about consumers for ad-targeting purposes.

“Reports about monetization of sensitive information -- everything from the financial details of members of the U.S. military to lists of specific people experiencing dementia -- are particularly worrisome when data is powering ‘artificial intelligence’ and other automated decision-making about our lives,” Rohit Chopra, the agency's director, stated Tuesday.

He added that the bureau “will be taking steps to ensure that modern-day data brokers in the surveillance industry know that they cannot engage in illegal collection and sharing of our data."

While full details about the potential restrictions won't be available until September, the financial regulator stated Tuesday that it will propose banning data brokers from selling “credit header” information -- such as names, addresses and Social Security numbers -- for ad targeting, or to train artificial intelligence.

Instead data brokers would only be allowed to sell that type of identifiable information for purposes authorized by the Fair Credit Reporting Act -- such as credit or insurance underwriting, job applications, and government benefits applications.

Earlier this year, ad industry organizations argued that the Consumer Financial Protection Bureau lacked authority to issue sweeping privacy regulations on data brokers. 

“Congress is the sole body vested with the authority to enact comprehensive federal privacy legislation that would ensure ethical and responsible data practices continue to flourish, while barring misuses of personal data that put consumers at risk of harm,” the Association of National Advertisers wrote in comments filed with the agency last month.

That organization also said the Consumer Financial Protection Bureau can only regulate specific types of companies -- such as financial institutions or businesses that create credit reports about consumers.

But privacy advocates including the Electronic Privacy Information Center argued that the agency is empowered to regulate data brokers under the Fair Credit Reporting Act and related financial protection laws.

That organization also said data brokers harm consumers in several ways, including by enabling companies to prevent ads from being shown to people based on demographics.

“The profiles that data brokers amass, share, and sell to advertisers enable advertisers to precisely specify and target which categories of users to include or exclude from their marketing campaigns,” the group wrote in its comments. “Moreover, the inclusion of automated tools in ad delivery can reinforce discriminatory prejudices and biases related to race, gender and socioeconomic status.”

On Tuesday, that group cheered news of the potential regulations.

“For far too long, data brokers have been allowed to profit off Americans' personal data with little to no oversight, compromising people's privacy and safety,” Ben Winters, Senior Counsel at Electronic Privacy Information Center, stated.

He added that the agency's move “will bring much needed transparency and accountability to the data broker market.”

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