FTC Report on Big Data Outlines Benefits and Risks for Businesses and Consumers

BigData

Written By ESR News Blog Editor Thomas Ahearn

A report released by the Federal Trade Commission (FTC) – Big Data: A Tool for Inclusion or Exclusion? Understanding the Issues – provides recommendations to businesses on how to properly use “big data” analytics while also highlighting the benefits and risks of “big data” for consumers in the United States.

“Big data’s role is growing in nearly every area of business,” FTC Chairwoman Edith Ramirez stated in a press release about the report. “The potential benefits to consumers are significant, but businesses must ensure that their big data use does not lead to harmful exclusion or discrimination.”

According to the report, “big data” refers to a confluence of factors, including the nearly ubiquitous collection of consumer data from a variety of sources, the plummeting cost of data storage, and powerful new capabilities to analyze data to draw connections and make inferences and predictions.

The report discusses the benefits and risks created by the use of big data analytics, the consumer protection and equal opportunity laws that currently apply to big data, research in the field of big data, and lessons that companies should take from the research in the era of big data.

The report also proposes four key policy questions designed to help companies maximize the benefits of big data while limiting possible harms by examining both practical questions of accuracy and built-in bias as well as whether the company’s use of big data raises ethical or fairness concerns:

  • How representative is your data set? – Companies should consider whether their data sets are missing information about certain populations and take steps to address issues of underrepresentation and overrepresentation.
  • Does your data model account for biases? – Companies should consider whether biases are being incorporated at both the collection and analytics stages of big data’s life cycle and develop strategies to overcome them.
  • How accurate are your predictions based on big data? – Companies should remember that while big data is very good at detecting correlations, it does not explain which correlations are meaningful.
  • Does your reliance on big data raise ethical or fairness concerns? – Companies should assess the factors that go into an analytics model and balance the predictive value of the model with fairness considerations.

The FTC encourages companies to apply big data analytics that will provide benefits and opportunities to consumers while avoiding any potential violations of consumer protection laws such as the Fair Credit Reporting Act (FCRA), Equal Credit Opportunity Act (ECOA), equal opportunity laws, and the FTC Act that may apply to big data practices.

The FTC report concludes with a warning to companies to watch their big data usage: For its part, the Commission will continue to monitor areas where big data practices could violate existing laws, including the FTC Act, the FCRA, and ECOA, and will bring enforcement actions where appropriate.

The report draws on information from the FTC’s 2014 workshop – Big Data: A Tool for Inclusion or Exclusion? – as well as the FTC’s seminar on Alternative Scoring Products. The FTC also considered extensive public comments and additional public research in compiling the report on big data.

The FTC works to promote competition and to protect and educate consumers. Consumers may file a complaint online or call 1-877-FTC-HELP (382-4357). To download the complete FTC report on big data, visit www.ftc.gov/reports/big-data-tool-inclusion-or-exclusion-understanding-issues-ftc-report.

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