Consumer watchdog moves to regulate data brokers under privacy law

In the United States, a significant initiative was announced by the Consumer Financial Protection Bureau (CFPB) to address the practices of data brokers. On a Tuesday announcement made in the recent weeks, the agency unveiled plans that would leverage the Fair Credit Reporting Act (FCRA), a crucial privacy law established in 1970, to implement stricter oversight of the data broker industry. The CFPB indicated that its proposal aims to mitigate the threats posed by data brokers, which are accused of enabling scams, violence, and compromising national security through the sale of sensitive personal information. As these firms often collect and sell data like credit scores, financial information, and personal identifiers, the CFPB's proposed measures would seek to ensure that data brokers adhere to necessary standards of accuracy and privacy in their operations. The proposed rule mandates that data brokers obtain explicit, separate consent from individuals before collecting or sharing sensitive information. This aims to counter practices where permissions are obscured within lengthy legal contracts that consumers seldom read. Furthermore, it shines a spotlight on the potential risks tied to data that unintentionally facilitates malicious behavior, such as stalking and data-driven scams. In recent months, various stakeholders, including nonprofits, have been calling for enhanced regulation of data brokers, emphasizing the urgent need to protect personal information amidst a volatile political climate that increases the risks associated with data abuse. The CFPB's efforts may face challenges, however, as political changes loom following the election of president-elect Donald Trump. His administration is expected to prioritize the reduction of perceived waste and fraud within government agencies, which could threaten the future of the CFPB's oversight capabilities. There have been vocal critics of the agency's intentions, including significant figures from Silicon Valley, who argue that such regulations could hinder innovation and place burdens on startups looking to navigate the banking landscape. Notably, Elon Musk and venture capitalist Marc Andreessen have criticized the CFPB's approach, describing it as detrimental to entrepreneurship. Amidst these conversations, the focus remains on the critical issue of data privacy and the risks associated with the current status quo in the data broker industry. The CFPB's proposal underscores that the protection of sensitive information is not just a matter of individual privacy, but also a national security issue. There is a growing recognition of the need for regulatory measures that not only safeguard personal data but also tackle the complex issues surrounding how that data is accessed, used, and potentially exploited in ways that threaten the safety of individuals and the integrity of the wider society.