April 2 --Unlike credit scores, consumer scores remain largely unregulated and concealed from consumers, according to a report released April 2 by the privacy advocacy group World Privacy Forum.
Created by feeding consumer characteristics, past behaviors and other information into a predictive model, a consumer score “describes an individual or sometimes a group of individuals (like a household), and predicts a consumer's behavior, habit, or predilection,” the report said.
Consumer scores are accessed by a variety of users, including employers, financial institutions, retailers and federal government agencies, according to the report.
Major categories of consumer scores include: financial and risk scores; fraud scores; custom scores, which are tailored to a business's needs and/or proprietary data about a customer; regulated credit and financial scores; identity and authentication scores; smart grid and energy scores; social scores; tax scores; law enforcement scores; and environmental scores.
“These scores offer predictions that can become consumers' destiny, whether they are right or wrong,” Pam Dixon, the World Privacy Forum's executive director, said in the forum's statement.
“Fair use of scores that consumers can see and correct is one thing, but secret scores can hide discrimination, unfairness, and bias,” she said. “Trade secrets have a place, but secrecy that hides racism, denies due process, undermines privacy rights, or prevents justice does not belong anywhere.”
“While new scores multiply, consumers remain in the dark about many of their consumer scores and about the information included in scores they typically don't have the rights to see, correct, or opt out of,” the report said.
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Besides the secrecy of the scores, other important issues include score accuracy, the effect of identity theft, unfairness and discrimination, the use of sensitive health and lifestyle information and the lack of informed consent to use a consumer's data, according to the World Privacy Forum.
Consumer scores are generally not subject to regulation, the forum said, except in instances where the Fair Credit Reporting Act applies.
The creation of aggregated consumer information by data brokers was criticized by Senate Commerce Committee Chairman Jay Rockefeller (D-W.Va.) in a December 2013 report, which said the data broker industry operates behind a “veil of secrecy,” collecting and selling vast amounts of sensitive consumer information with limited regulatory controls or public awareness (12 PVLR 2129, 12/23/13).
“Consumer scoring is not inherently evil,” the World Privacy Forum said in the report. “When properly used, consumer scoring offers benefits to users of the scores and, in some cases, to consumers as well.”
But the forum also urged Congress and other policy makers to establish consumer protections. Its recommendations included:
• giving consumers access to their consumer scores and the information used to generate the scores;
• making sure that factors regulated under other laws, like the Civil Rights Act and the Equal Credit Opportunity Act, aren't used in consumer scores; and
• providing consumers with an opportunity to challenge and correct their scores.
The World Privacy Forum recommended particular actions by the Federal Trade Commission and the Consumer Financial Protection Bureau, two federal agencies whose missions include protecting consumers. For example, the report suggested that the FTC “establish (or require the scoring industry to establish) a mandatory public registry of consumer scores because secret consumer scoring is inherently an unfair and deceptive trade practice that harms consumers.”
The FTC made oversight of data brokers a priority for 2014 (13 PVLR 271, 2/10/14), and there is legislation before Congress that would limit the use of consumer data without consent (13 PVLR 329, 2/24/14).
The report, “The Scoring of America: How Secret Consumer Scores Threaten Your Privacy and Your Future,” is available at http://www.worldprivacyforum.org/wp-content/uploads/2014/04/WPF_Scoring_of_America_April2014_fs.pdf.
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