FTC: Existing consumer laws govern big data

In a long-promised report released Jan. 6, the Federal Trade Commission reiterated its strategy of using existing consumer protection statutes to go after private firms that could be violating federal law with their big-data practices.

Discrimination is a key concern. For example, big data and analytics offer lenders and other financial services companies the ability to reduce their risk. But FTC officials are concerned that some practices could run afoul of existing non-discrimination rules if they can be shown to have a "disparate impact" on protected classes such as "race, color, sex or gender, religion, age, disability status, national origin, marital status, and genetic information."

The report states that credit decisions based on consumer ZIP codes, marital status or other factors -- regardless of the correlation of a particular data point with a projected business outcome -- could be grounds for FTC action.

The report is the culmination of a flurry of activity in 2014 spurred by the White House to confront the potential consumer harms arising from the explosion of consumer data, growing access to that data by marketers and the increasing ability of computers to process that information at scale.The FTC pledged to keep tabs on the expanding constellation of companies that fall under the Fair Credit Reporting Act's jurisdiction by virtue of their offerings. The report cites the commission's actions against Spokeo and Instant Checkmate (in 2012 and 2014, respectively) as examples of its ability to act in the data-trading space, even against firms that don't advertise themselves as credit agencies.

"As these cases demonstrate, the scope of the [Fair Credit Reporting Act] extends beyond traditional credit bureaus," the report states.

In past reports, the FTC indicated that new legislation might help clarify its authority over big data, but Congress did not cooperate. Still, there are concerns that the FTC's focus on big data could potentially have a chilling effect on innovation.

"Notably, when it comes to the benefits, the FTC describes concrete examples of how big data is being used to create opportunities for low-income and underserved communities," said Daniel Castro, director of the Center for Data Innovation. "But when it comes to the risks, the FTC does not identify any concerns which have not already been addressed by existing consumer protection laws."