Newspaper headlines continue to focus on the NSA; its surveillance programs; and how they may or may not impact the lives of ordinary citizens. What we tend to focus less on, is the impact that companies that collect massive amounts of data about us can have on our lives. So- called data brokers or data aggregators include traditional credit-reporting companies like Experian, TransUnion, and Equifax, but also include other companies that buy information about us—from both public records and private sources—to compile large digital dossiers on us, which can then be used by employers, creditors, and landlords, among others, to make decisions about us.
What should be of more concern, however, is the fact that errors exist in our consumer records, and some of these errors can lead to adverse consequences for us—from being denied a job, to getting a worse rate on a loan. And the problem with correcting errors in various types of consumer profiles is that the burden rests with the consumer to demonstrate that the information that companies have on file is inaccurate, and/or not about them. This is easier said than done.
How does one prove a negative? How can you show that you were not the Jane Smith that subscribed to Cosmopolitan magazine and did not pay her bill? Or that you are not the same John Jackson who skipped town and did not pay his last month’s rent? Yet that is exactly what a consumer has to do in order to clean up his or her digital dossier. In the old days, that might have been easier, because fewer types of data were collected for credit-scoring, but today the numerous types of information that are compiled about us are astounding, and with the large compilations of data, ultimately more and new types of errors will arise.
In this column, I will discuss some of the startling statistics relating to errors in consumer-data collection, and also analyze a recent court case that highlights the perils to consumers of data errors. I will also discuss a proposal by Julie Brill, a commissioner at the US Federal Trade Commission, that is an important conversation-starter on this issue.
Credit Reporting, Data Brokers, and Errors
Data brokers are companies that collect thousands of details about consumers on topics like their religious and political affiliations, household income, shopping preferences, hobbies, and even health concerns. Why? Because this helps other companies better target their marketing for existing and potential customers. It also allows them to sell their data to decisionmakers such as landlords, employers, and potential creditors. Even the government is a client for different types of data about us.
Some of these companies do allow people to “opt out” of some types of marketing, but many data brokers do not have transparent systems to allow consumers to see their digital dossiers and to correct inaccuracies.
The new generation of companies, data brokers, collect information beyond what was traditionally compiled by the big three credit-reporting firms. They look primarily at our earnings history, our use of credit, and our ability to pay debts on time. In contrast, data brokers gather personal data on millions of Americans: Where you live. The names of your family members, friends and lovers. What you Tweet. Where you shop. And even the political party with which you are registered. However, many of the dossiers that they sell about you contain errors. At times, they show data that has nothing to do with you at all, mixing in data from another person’s life into your own—or making associations that are incorrect. For example, someone who lived in a dorm room next to you might be classified as a “roommate” and given the same street address as yours. Or, a data broker could easily mix up information on two people with similar or identical names.
We don’t yet know the extent of the errors in these newer, more detailed digital dossiers that data brokers are compiling on us. Studies focused on ordinary credit reports, however, provide a cautionary tale
In 2013, the Federal Trade Commission (FTC) published its most recent study on credit- report accuracy. This was an eight-year study that involved 1,001 consumers and reviewed 2,968 credit reports. The FTC study found that 26% of consumers had a material error on at least one of their three credit reports. This amounts to one in four consumers. What was even more shocking was the fact that 5% of the consumers in the FTC study had an error on their reports that, when corrected, placed them in a different credit-risk category, which could lead to their getting a lower interest rate on their car, home, or credit-card loans.
The Fair Credit Reporting Act (FCRA) gives consumers the right to see the information on their credit reports. By reviewing this information, consumers can see whether their credit reports contain errors that could lead to higher interest rates than they would otherwise receive, or to denials of loans or jobs. The FCRA is meant to apply to the new generation of data-brokerage companies only if they serve as a “credit reporting agency” and provide information to decisionmakers like landlords, employers, or other creditors. But consumers may not know that these companies exist—or how to contact them to request a copy of their files. Thus, consumers may not know and accordingly may not exercise, their rights when it comes to the lengthier dossiers possessed by the new wave of data brokers. And if a data broker compiles and sells information for other purposes, then the FCRA does not apply.
In a news release, an FTC spokesman said that its own 2013 study was “eye opening,” and urged consumers to check their credit reports. Four out of five consumers who filed disputes had their credit reports modified. Unfortunately, credit-reporting agencies do not always correct errors. A 2009 study by the National Consumer Law Center found that credit agencies were conducting investigations in an “automated and perfunctory manner.” According to the Center, the credit agencies were translating detailed written documents submitted by customers into short codes and then sending these codes off to the organization that furnished the information.
A Recent Case with Equifax Highlights the Cost of Error
For a consumer, an error on a credit report is annoying but an inability to get the error corrected is maddening. When credit-reporting agencies negligently or willfully fail to remove erroneous information from your credit reports, you may be able to hold them accountable under the FCRA. But that requires hiring a lawyer and going to court. A recent case highlights what can go wrong when a consumer’s identity is merged with other people’s data.
For two years, an Oregon woman tried without success to get errors on her Equifax credit report fixed. In August 2013, a jury awarded her $18.6 million for the hardship she had endured. According to her legal complaint, her troubles began in 2009, when she was denied credit from Hubbard Bank based on her Equifax credit report. She requested, and eventually received, a copy of her report, which she discovered that it contained false personally identifying information, an incorrect Social Security number, a false birthdate and false, delinquent collection accounts that were erroneously attributed to her. She began disputing these inaccuracies starting in 2010. According to her complaint, she repeatedly contacted the company, and was repeatedly told that Equifax needed further information before it could process her dispute. Later in 2010, Key Bank, based on her Equifax report, denied Miller credit.
After filing further protests with Equifax about the inaccuracies in her report, Equifax representatives told Miller that her data had become “mixed” with another person’s. They told her that she would need to dispute the false information directly with her creditors. In all, Miller tried eight times to get her report corrected. Finally, she brought suit in U.S. District Court in Oregon in 2011.
Miller’s failure to qualify for credit due to the uncorrected errors in her account cost her in several important ways: She wasn’t able to help her brother, who is disabled and who wasn’t able to get credit on his own. She was unable to help her husband, who needed a shop to be added onto the Millers’ home. Asked what parts of Miller’s ordeal carried the most weight with the jury, Miller’s attorney told the press, “She did what you’re supposed to do. She didn’t go running straight to the courthouse.” Instead, her attorney says, she tried and tried again to get Equifax to fix its mistakes.
Her attorney also says that he discovered that Equifax wasn’t even handling Miller’s complaint in-house. He commented, “We found that when complaints would come in, they’d run them through a scanner and then send them overseas.” Miller’s complaint, in particular, her attorney says, was sent for processing to a subcontractor in the Philippines.
And this is the crux of the problem: Miller had problems with a traditional credit- reporting agency. What happens when you try to clean up a much larger file that lists data that includes your potential political affiliations, friends and relatives, magazine subscriptions, health and lifestyle issues, and other details? If the information is wrong, how do you track down the source so as to be able to convince them, “That’s not me”? And why should the burden rest with the consumer to have to prove that information is, in fact, erroneous, when the source of the data itself may be unknown?
A Potential Solution: Reclaiming Your Name
Even if errors are present in a credit report, if they could be corrected easily—then we as consumers might be more sanguine about the issue. But here’s the real problem: As outlined above in Miller’s case—it was difficult and time-consuming for Miller to prove that incorrect data was, in fact, incorrect. The burden rested with Miller to prove the point and she had to try repeatedly to reclaim her identity in its true and error-free form. At the same time, data brokers have no affirmative obligation to verify the data that they buy—or, at times, mistakenly meld together—and consumers have no way of knowing the origin of various parts of their new digital dossiers. Did the incorrect listing of one’s political party come from a petition that was signed by someone else with a similar name?
Earlier this summer, Julie Brill, an FTC Commissioner gave an interesting speech in which she called for a new policy giving consumers control over their information gathered by data brokers. She called her proposal “Reclaim Your Name,” and explained it as follows: “Reclaim Your Name would empower the consumer to find out how brokers are collecting and using her data; give her access to information that data brokers have amassed about her; allow her to opt-out if she learns a data broker is selling her information for marketing purposes; and provide her the opportunity to correct errors in information used for substantive decisions—like credit, insurance, employment, and other benefits.”
Brill’s proposal, focused on transparency, is meritorious, but requires further delineation. Would data brokers have a duty to reveal how they obtained data—which source they purchased it from, or what database it comes from? Tagging and coding the origins of data is crucial if consumers are going to have any hope of being able to pursue information trails and figure out how mistakes on their credit report got made. But this leaves open a larger question: What duties should information brokers have themselves, to try and verify data on which they base decisions. Can data that is collected somehow be tagged for its reliability so we know whether something has been verified multiple times? Can brokers also be rated based on their reliability or the incidence of error in their consumer files? Put more bluntly—can we make brokers more accountable for the compilations they create that meld and blend data to create erroneous pictures of who we are.
Acxiom’s “About the Data”: Not Quite Reclaim Your Name, but an Interesting Start
One of the world’s largest data brokers, Acxiom, has launched a new project aimed at allowing consumers to see their data files and to correct errors. Skeptics sat that this just turns us all onto unpaid worker-bees working on an unpaid data-quality project. Acxiom collects data from a vast range of sources and sells its products to both government and private-sector clients. Acxiom does, admit that it has an image problem. Its CEO and President Scott Howe wrote that “Companies like ours haven’t historically done a good job of educating people on what we do with data about them. Largely because of that, misperceptions abound.”
Acxiom’s answer is a new website, AboutTheData.com that lets American consumers look up and correct data themselves. You gain access to your digital dossier only after completing a detailed registration process that collects more data including the last four digits of your Social Security Numbers. Howe promises that sign-on data is not used for marketing purposes. Some news reports allege that Acxiom’s databases are full of errors that range from the minor to absurd. A Forbes article notes that in a small sample of individuals reviewing their dossiers, errors were found in myriad categories including nationality, household income, marital status, and even number of children.
Will Regulation Give Us a Right to Reclaim Our Names?
In September, the federal Consumer Financial Protection Bureau (CFPB) gained new authority to write and enforce rules for the credit-reporting industry and to monitor the compliance of the three reporting companies. Prior to that, the reporting agencies weren’t subject to ongoing monitoring by federal examiners. Some of the FTC’s prior authority is now delegated to the CFPB by virtue of the Dodd Frank Wall Street Reform Act The CFPB hasn’t yet taken any action against any of the agencies. However, it is now accepting complaints from consumers who discover errors on their reports, or struggle to get mistakes corrected. The credit-reporting firms have 15 days to respond to the complaints with a plan for remediation; consumers can then dispute that response. By contrast, the FTC can only take action if there is an earlier indication that a company has violated the FRCA. It cannot demand information from, or investigate companies that appear to be following the law. Some data brokers will fall under the CFPB’s jurisdiction, but for the larger group that are collecting information, without oversight, the Reclaim Your Name Concept is an important and much-needed first step.