10 May 2014

Big Data, Credit Profiling and the FCRA

The crisp 'How the Fair Credit Reporting Act Regulates Big Data' by Chris Jay Hoofnagle, for the Future of Privacy Forum's Big Data and Privacy: Making Ends Meet event (September 2013) offers
two observations concerning "big data." First, big data is not new. Consumer reporting, a field where information about individuals is aggregated and used to assess credit, tenancy, and employment risks, achieved the status of big data in the 1960s. Second, the Fair Credit Reporting Act of 1970 (FCRA) provides rich lessons concerning possible regulatory approaches for big data. 
Some say that "big data" requires policymakers to rethink the very nature of privacy laws. They urge policymakers to shift to an approach where governance focuses upon "the usage of data rather than the data itself." Consumer reporting shows us that while use-based regulations of big data provided more transparency and due process, they did not create adequate accountability. Indeed, despite the interventions of the FCRA, consumer reporting agencies (CRAs) remain notoriously unresponsive and unaccountable bureaucracies. 
Like today's big data firms, CRAs lacked a direct relationship with the consumer, and this led to a set of predictable pathologies and externalities. CRAs have used messy data and fuzzy logic in ways that produce error costly to consumers. CRAs play a central role in both preventing and causing identity fraud, and have turned this problem into a business opportunity in the form of credit monitoring. Despite the legislative bargain created by the FCRA, which insulated CRAs from defamation suits, CRAs have argued that use restrictions are unconstitutional. 
Big data is said to represent a powerful set of technologies. Yet, proposals for its regulation are weaker than the FCRA. Calls for a pure use-based regulatory regime, especially for companies lacking the discipline imposed by a consumer relationship, should be viewed with skepticism.