Consumers have little understanding of how so-called ‘data brokers’ are collecting and sharing information on their web browsing and personal habits, says a new Federal Trade Commission (FTC) report.

“This is an industry that largely operates in the dark,” said FTC Chairwoman Edith Ramirez in a statement. “We want to shed the veil of secrecy that surrounds data broker practices.”

The average consumer knows little about data brokers, but data brokers know an awful lot about them. The FTC report studied nine of the biggest in the business, noting they collect the vast majority of their information in the real world – from retailers, property records, the Department of Motor Vehicles, credit reporting agencies and so on. But increasingly, these brokers are combining this data with information collected online via cookies, which keep a record of the sites people visit, their web searches, and so on.

Now, the FTC has outlined legislation it thinks Congress should consider as a way to make the data broker industry more transparent. It chose nine companies to study for its report, representing a “cross-section of the industry”. These are Acxiom, Corelogic, Datalogix, eBureau, ID Analytics, Intelius, PeekYou, Rapleaf, and Recorded Future. Its report follows an earlier warning from the authors of a White House-backed Big Data study, urging greater consumer awareness.

According to Ramirez, data brokers do serve legitimate business needs, notable targeted advertising and fraud prevention which “benefit consumers and our economy more generally”.

Even so, the public should be aware of the vast trove of data these brokers are collecting about them in order to do their jobs. This includes sensitive information about people’s race, incomes, health conditions and political leanings. Consumers should also be aware of how they’re categorized by data brokers, and how this could potentially lead to them being discriminated against. Such categories are usually given ambiguous names like “mobile mixers” and “urban scramble”, which are predominately made up of African-Americans and Latinos with low incomes. Another category called “rural everlasting” is made up of people aged over 66 years, with “low educational attainment and low net worths.” While the data brokers aren’t breaking any laws categorizing people in this way, it’s unlikely that anyone would be too pleased to find themselves in one of these groups.

The FTC says targeted advertising could result in some consumers being denied access to certain products and services. “Will some consumers see only ads for subprime loans, while others see ads for credit cards?” Ramirez asked.

While it’s not calling for a ban on any of this data-gathering, the FTC wants Congress to force brokers to be much more transparent than they are now. It argues that brokers should be ordered to disclose where they source their data from, allow consumers access to any data held about them, and create a centralized website where people can learn more about how they collect data on them.

Additionally, the FTC wants consumers to be allowed to “opt-out” or “suppress the use of their data”. In the case of sensitive data like people’s health conditions, retailers should be required to obtain “affirmative express consent” before they can share this with brokers. At present, data brokers are allowed to trawl through purchasing records to identify consumers who might be diabetic, or pregnant, for example. While diabetics probably don’t mind too much about being targeted with health product advertisements, “they would undoubtedly mind if an insurance company used that information to classify them as high risk,” said Ramirez.

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