The Growth of Big Data and Consumer Protection

Big Data, according to PC Magazine’s online encyclopedia, refers to the massive amounts of data that companies collect over time about their customers, which can be so large that they cannot be analyzed using traditional database management tools.  The National Law Review reports that in January, 2016, the Federal Trade Commission (FTC) issued a report titled “Big Data: A Tool for Inclusion or Exclusion,” in which the Commission examined whether big data usage can run afoul of federal laws and regulations in ways that may be harmful to consumers.

Big Data’s Benefits

The FTC’s report describes several benefits that big data usage can provide to consumers and to society at large.  Some of these benefits include:

  • More effectively matching products and services to consumers;
  • Targeting educational opportunities to low income and underserved populations;
  • Providing access to credit through nontraditional methods, e.g., by using newly-developed alternative credit scoring methods; and
  • Providing healthcare tailored to individual patients’ characteristics.

Big Data’s Risks

Along with its potential benefits, big data carries big risks for consumers.  According to the FTC, some of these risks include:

  • More individuals mistakenly being denied credit based on the actions of others.  The Commission gives the example of credit card companies lowering a consumer’s credit limit based not on that consumer’s repayment history but on an analysis of other consumers with a poor repayment history who shopped at the same places that consumer shopped.
  • Creating or reinforcing existing inequalities.  For instance, low income consumers who might be eligible for certain credit offers may not receive them because those offers are targeted elsewhere.
  • Assisting unscrupulous companies to target vulnerable consumers for fraud.
  • Creating new justifications for excluding certain consumers.

As the National Law Review explains, the FTC’s report further expresses concerns that certain uses of big data might violate federal statutes designed to protect consumers and others. 

The Fair Credit Reporting Act

As this blog has discussed, the Fair Credit Reporting Act (FCRA) regulates how consumer reporting agencies (CRAs) collect, distribute and manage your information.  According to the FTC, companies using big data might in certain circumstances be considered CRAs and therefore subject to the FCRA’s requirements. 

The Equal Credit Opportunity Act and other Equal Opportunity Statutes

The Equal Credit Opportunity Act (ECOA), along with other federal equal opportunity and civil rights laws, prohibits discrimination on the basis of “protected characteristics,” which include gender, race, color, religion, age, disability, and others.  Using a big data model to treat consumers differently on the basis of these protected characteristics would be illegal.  Additionally, using big data analytics in a way that disproportionately impacts individuals who share a protected characteristic would violate some of these laws.

The Federal Trade Commission Act

The Federal Trade Commission Act prohibits unfair and deceptive practices in or affecting commerce.  One way this law could be violated, according to the National Law Review’s article, is if an organization breaks a promise to consumers not to share data, or fails to disclose material information related to that data’s use.

Consult a Philadelphia consumer protection attorney

The Kim Law Firm, LLC, stands up for the rights of consumers in a variety of matters, including violations of the FCRA and the improper release of personal or sensitive information through a data breach.  Contact The Kim Law Firm today for a consultation on your case.