Federal Trade Commission Privacy Report Recommends Legislation to Regulate Data Brokers

The Federal Trade Commission (FTC), the nation’s chief privacy policy and enforcement agency, recently issued a final report – ‘Protecting Consumer Privacy in an Era of Rapid Change: Recommendations For Businesses and Policymakers’ – urging businesses to adopt best practices to protect the privacy of American consumers and contains important recommendations regarding data brokers and give them greater control over the collection and use of their personal data. One recommendation in the FTC report, available at http://www.ftc.gov/os/2012/03/120326privacyreport.pdf, is that Congress consider enacting data broker legislation.

In the report, the FTC calls on data brokers to make their operations more transparent by creating a centralized website to identify themselves, and to disclose how they collect and use consumer data. In addition, the website should detail the choices that data brokers provide consumers about their own information. The FTC report notes that data brokers often buy, compile, and sell highly personal information about consumers who are often unaware of their existence and to how their data is used.

To address the invisibility of – and the lack of consumer control over – the collection and use of consumer information by data brokers, the FTC supports legislation that would provide consumers with access to information about them held by data brokers. To further increase transparency, the FTC calls on data brokers that compile data for marketing purposes to explore creating a centralized website where data brokers could:

  • Identify themselves to consumers and describe how they collect and use consumer data and
  • Detail the access rights and other choices they provide with respect to the consumer data they maintain.

While Congress considers such privacy legislation, the FTC urges individual companies and self-regulatory bodies to accelerate the adoption of the principles contained in the privacy framework if they have not already done so. The FTC will work to encourage consumer privacy protections by focusing on greater transparency whereby companies should disclose details about their collection and use of consumer information and provide consumers access to the data collected about them.

The FTC report recommends companies to develop clear standards regarding privacy and train their employees to follow them. Trade associations and self-regulatory groups also should be more proactive in providing guidance to their members about retention and data destruction policies. Accordingly, the FTC calls on industry groups for data brokers and other sectors – including the online advertising industry, online publishers, mobile participants, and social networks – to do more to provide guidance in this area.

According to the report, data brokers are “companies that collect information, including personal information about consumers, from a wide variety of sources for the purpose of reselling such information to their customers for various purposes, including verifying an individual’s identity, differentiating records, marketing products, and preventing financial fraud.” However, the FTC also noted that consumers “are often unaware of the existence of these entities, as well as the purposes for which they collect and use data.”

According to background check expert Attorney Lester Rosen, CEO of background screening firm Employment Screening Resources (ESR), another troublesome issue regarding information compiled by data brokers, particularly criminal record data used for employment background checks, is that the information may not be accurate.

“The issue is that when a data broker does a download of criminal information, and a year later a consumer goes back to court and the judge modifies or sets aside the case, the data broker still has the old information and may report incorrect results,” says Rosen, author of ‘The Safe Hiring Manual,’ a comprehensive guide to employment background checks. “That is because data brokers typically do not modify information once uploaded with changes. Data brokers deliver ‘data dumps’ and there is not an effort made to track a particular case and modify it with acquired information.” 

Rosen explains that a background screening firm operates under the federal Fair Credit Reporting Act (FCRA) and has legal obligations to ensure information is accurate and applies to the applicant so there are safeguards in place. But if an employer uses a data broker and bypasses a background screening firm, then there is a significant risk of error.

“Many of the complaints about inaccurate criminal records really stems from data brokers that amass massive amounts of raw data form courts, law enforcement, states and prison systems,” says Rosen, a frequent speaker on background checks issues. “They are not in the business of building an information system that tracks and updates individual cases.”

Rosen says the issue becomes even more complex because the FCRA in section 613 does allow a background screening firm to use a database, but in the event of a criminal finding that may adversely affect employment of a job applicant, the screening firm must send a letter of notice to the applicant at the same time the criminal finding is reported to the employer. “This is an escape valve so that a consumer knows something negative was reported about them,” Rosen says.

However, according to Rosen, despite the ability of background screening firms to use databases:

  • Background screening firms still have a general obligation to use “reasonable procedures for maximum possible accuracy,” which means that a screening firm cannot assume that information form a data broker is correct without taking some precautions.
  • California does not allow the letter option and a background screening firm must take steps to ensure the data is complete and up to date at the time its reported, which usually means going to a county court house.
  • Over 140 Consumer Reporting Agencies (CRAs) – another name for background screening firms – have joined Concerned CRAs (http://www.concernedcras.com/) to oppose the practice of using databases without confirming the information first at the courthouse.

For more information about criminal database issues, read the article ‘Criminal Databases & Pre-Employment Screening: The Good, the Bad, and the Ugly’ by Attorney Lester Rosen at http://www.esrcheck.com/articles/Criminal_Databases.php.

For more information on background checks, visit Employment Screening Resources (ESR) – ‘The Background Check Authority’ and nationwide background screening firm accredited by the National Association of Professional Background Screeners (NAPBS®) – at http://www.esrcheck.com/ or call ESR at 415.898.0044 or toll free at 888.999.4474.

Source: 
http://www.ftc.gov/opa/2012/03/privacyframework.shtm
http://www.ftc.gov/os/2012/03/120326privacyreport.pdf

About Employment Screening Resources (ESR):
Employment Screening Resources (ESR) – ‘The Background Check AuthoritySM – provides accurate and actionable information, empowering employers to make informed safe hiring decisions for the benefit for our clients, their employees, and the public. ESR literally wrote the book on background screening with “The Safe Hiring Manual” by Founder and CEO Lester Rosen. ESR is accredited by The National Association of Professional Background Screeners (NAPBS), a distinction held by a small percentage of screening firms. By choosing an accredited screening firm like ESR, employers know they have selected an agency that meets the highest industry standards. For more information about Employment Screening Resources (ESR), visit http://www.esrcheck.com/ or call 415.898.0044 or 888.999.4474.

About ESR News:
The Employment Screening Resources (ESR) News blog – ESR News – provides employment screening information for employers, recruiters, and jobseekers on a variety of topics including credit reports, criminal records, data privacy, discrimination, E-Verify, jobs reports, legal updates, negligent hiring, workplace violence, and use of search engines and social network sites for background checks. For more information about ESR News or to send comments or questions, please email ESR News Editor Thomas Ahearn at tahearn@esrcheck.com.

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