When an office-supply store sends you a targeted offer for a new printer, the personal data the company uses to tailor its pitch is exempt from numerous consumer protection laws.
Perhaps someone else will get a better offer, the reasoning goes, but you can always shop around.
By contrast, when a credit card issuer is considering whether to approve your application for a new card, its credit-scoring methods are subject to a wide variety of legal protections. The lender can only deny the application on the basis of factors, such as your repayment history, that are deemed fair.
But what about situations that fall somewhere in between those two clear cases? For example, should a credit card company be allowed to use a score assessing the creditworthiness of your entire neighborhood to determine which offers you're shown when you visit its website?
These questions are becoming more important as consumer lenders rely more heavily on big data, and they were the subject of a lively debate Wednesday hosted by the Federal Trade Commission in Washington. The discussion, which occurs at the intersection of privacy and profits in the digital age, pitted consumer advocates against representatives of the data industry.
Pamela Dixon, the executive director of the World Privacy Forum, expressed concern that many credit scores, which may not be subject to legal protections but are nonetheless used in ways that have an important impact in consumers' lives, remain hidden from view.
She cited as examples "aggregate credit scores," which measure the creditworthiness of people in a certain geographic area, and "modeled credit scores," which are used as a proxy for traditional credit scores.
"These are the important scores to focus on," Dixon said. "And they're secret. I can't purchase my aggregate credit score."
Joseph Turow, a communication professor at the University of Pennsylvania, agreed that data brokers are finding ways to get around existing consumer protection laws. "I think we have to expand the notion of a credit score and a data broker," he said.
But he said there's no turning back the clock. "Predictive analytics are the future," he said. "Companies have to do this."
Under the Fair Credit Reporting Act, companies that qualify as consumer reporting agencies must meet certain standards. Some data brokers say they're in compliance with the law, while others argue that the information they sell does not force them to meet the law's requirements.
Ed Mierzwinski, the consumer program director at the U.S. Public Interest Research Group, argued that consumers should be able to block the use of their personal data for certain purposes. "We really need to look at regulating the system of scoring that isn't regulated today," he said.
But industry officials said there's a line between offers of credit, which are subject to consumer protection laws, and marketing pitches, which are bound by fewer legal protections. After all, if consumers who live in less-affluent zip codes only get subprime credit card offers when they go online, they can always call the card companies to find out what other products are available.
"If you don't like the offer that you have, that's not the only offer that's available to you," said Rachel Nyswander Thomas, the executive director of the Data-Driven Marketing Institute.
"I guess the message is, frustrate the analytics companies," added Stuart Pratt, the president of the Consumer Data Industry Association.
Pratt also said that big data offers opportunities to expand access to credit, rather than limiting it. Numerous online lenders maintain that big data can be used to lower the cost of small-dollar consumer credit, though many of the loans they're offering are still quite pricey.
"These data are opportunities to include, not just exclude," Pratt said. "It's got to be done right."
The FTC is currently studying the burgeoning data broker industry. The agency's findings could have a significant impact on the consumer lending industry's use of data. At Wednesday's meeting, FTC officials moderated the debate, but did not express their own views about the appropriate level of regulation.