FTC Defends Its Consumer Privacy Proposal

The Federal Trade Commission filed court papers Friday in defense of its proposal to restrict credit bureaus from selling a consumer’s name, address and Social Security number to marketing firms and others.

Credit bureaus and information vendors are suing the FTC in federal court to block the proposed rule, which is set to take effect in July.

The dispute centers on the top portion of a credit report, referred to as the “credit header,” which includes a person’s name, address, birth date, telephone number and Social Security number. Though credit report data concerning debts and bill-paying habits must be kept confidential, credit bureaus have found a growing demand for this header information, which has been purchased by marketing firms, private investigators, law enforcement agencies and media organizations.

Now government regulators, with the support of privacy advocates, say legislation approved last year gives them the power to stop the practice of using credit reports as a kind of national tracing service. Reversing an earlier stance, the FTC issued new rules in May that would give consumers the opportunity to prevent their header information from being disclosed, except to creditors and those authorized to view credit reports.

“Under the rule, if a [credit bureau] wants to use the information for another purpose, it needs to get clearance,” said John Daly, assistant general counsel at the FTC.

Credit header data has grown into a big business for credit bureaus such as Experian and Trans Union. The names, addresses and phone numbers in credit reports typically are far more accurate and up-to-date than telephone directories or government databases, such as voter-registration or driving records. Consumers may not immediately alert the Department of Motor Vehicles when they move, but they usually make sure their bank or credit card company knows how to reach them.

The FTC rule would hurt a variety of businesses that have come to rely upon the data, including junk-mail firms, debt collectors and police agencies.

Opponents of the FTC rule--who filed suit this fall in federal courts in Texas and the District of Columbia--note that credit header information also is used to combat fraud and identity theft, to locate missing children or heirs and to find participants in medical studies. “There are many positive uses for this information,” said Don Girard, a spokesman for Orange-based Experian.

Attorneys for Experian and the Individual Reference Services Group, a trade group of information companies, insist that the FTC has gone too far in its interpretation of last year’s Gramm-Leach-Bliley Act, a sweeping bill that broke down the walls between the banking, insurance and securities industries. In addition, the law gave consumers new powers to protect their personal financial information.

Under the FTC interpretation of the law, a consumer’s name, address and Social Security number is considered to fall under the law’s definition of “personally identifiable financial information” because it was provided by a consumer to his or her financial services provider, which in turn shared it with the credit bureau.

Information companies counter that names and addresses, often available from numerous other public sources, are unrelated to a person’s finances.