FTC Eyes Data Brokers, And That Could Raise Retailers' CRM Costs

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Data brokers are now in the sights of the U.S. Federal Trade Commission (FTC), and that could affect some retailers' customer-information systems. The FTC sent out letters last week warning that some brokers might be violating federal law by collecting and selling information on individuals, even if the information is publicly available, the Washington Post reported.

Last week's letters, which went to nine data brokers and one employment agency, warned that the companies might be collecting and using the information without meeting the requirements of the Fair Credit Reporting Act (FCRA). Despite the name, that law regulates how private companies can use personal information in areas other than credit, including employment, eligibility for insurance, and the ability to meet minimum financial criteria.

Those 10 letters went out after FTC staffers pretending to be customers contacted dozens of brokers to see whether the companies were following federal rules.

There's no indication that any retailers are being targeted directly by the FTC. But increasingly, retailers that collect large amounts of customer data through CRM or loyalty programs are using additional data they acquire from brokers to fill in the gaps as they build a picture of customers. Some chains even use data as minimal as a name and Zip code, plus broker-provided data, to get a complete CRM record on a customer from a single transaction.

A crackdown on data brokers could raise prices on some of that customer data or make it unavailable in the future. One likely source of increased cost is the FCRA's requirement that individuals have the opportunity to correct errors in the data sold about them. Because many data brokers use automated systems to scour public records for information and then aggregate it, the cost of supporting (and verifying) individual corrections could jack up prices significantly.