FTC: Big Data Practices Could Violate Federal Laws (Jan. 25, 2016)
Big data has proven to be a useful tool for retailers and financial services providers seeking to identify customer habits and preferences—but federal regulators are warning that certain uses of consumer information may potentially violate consumer protection laws. In a recent report, the Federal Trade Commission (FTC), notes that it’s monitoring “areas where big data practices could violate existing laws … and will bring enforcement actions where appropriate.”
The report details how big data operations potentially could run afoul of the Fair Credit Reporting Act (FCRA), the Equal Credit Opportunity Act (ECOA) and other federal laws under the enforcement purview of the FTC. The report identified the trend of companies acting as data brokers by compiling and providing predicative analytics products used, for example, by potential employers to determine hiring eligibility. Although such products often use non-traditional characteristics—such as ZIP code, social media usage and shopping history—companies who provide that data nonetheless may be subject to FCRA disclosure and accuracy requirements.
Similarly, the report warns that certain uses of big data could violate the FTC Act, which bars unfair or deceptive acts or practices, including omitting information that could result in misleading a consumer. As an example, the report cited a 2008 FTC enforcement action in which a provider of subprime credit cards was found to be in violation of the FTC Act by failing to disclose to customers that their credit lines would be reduced for taking out cash advances or by using their cards for certain types of transactions, including purchases at bars or pawn shops. The FTC also cautioned that companies that collect and maintain consumer data are responsible for the security of the data.