On September 15, 2014, Arent Fox was in attendance at the Federal Trade Commission’s (FTC) public workshop on so-called “Big Data” that was designed to explore how its use is impacting American consumers. Although no new regulatory initiatives were announced at the workshop, panelists and speakers repeatedly expressed concern that the growing use of Big Data could lead companies to discriminate against economically disadvantaged consumers.
“Big Data” is a term used to describe the exponential growth in the volume, velocity, and variety of data in the marketplace. With the proliferation of smartphones, wearables, and other networked devices (as well as improvements in data analytics), companies today are collecting massive amounts of data on consumers — which, in turn, is being used for everything from advertising to medical research. The advent of Big Data has also led to a burgeoning data industry, including companies known as “data brokers” that collect and maintain data on hundreds of millions of consumers.
Despite the widespread agreement that Big Data presents tremendous opportunities for consumers, businesses, and the economy, numerous workshop participants expressed concern that some companies are pushing the boundaries of acceptable data practices. In particular, some companies are using Big Data to create consumer profiles which can then serve as an alternative to traditional FICO credit scoring. Such practices could implicate consumer credit laws, such as the Fair Credit Reporting Act or the Equal Credit Opportunity Act, if the profiles are used as the basis for decisions about whether to extend or deny consumer credit. Panelists also noted that — as advertising and marketing become increasingly targeted — there may be a growing disparity between high income consumers receiving favorable offers and low income consumers receiving unfavorable offers.
The focus on discrimination, particularly in the context of consumer credit, should be a wake-up call to companies that collect consumer data and use that data for marketing purposes. Although the FTC announced no new regulatory initiatives, it encouraged companies to be transparent with consumer data and ensure that existing uses of data do not have a discriminatory disparate impact on certain consumer groups. Until new laws or regulations are enacted, the FTC made it clear that it will use any authority it has under existing laws to keep companies in line.