The report, The Scoring of America: How Secret Consumer Scores Threaten Your Privacy and Your Future was published April 2, 2014.

Report authors: Pam Dixon and Bob Gellman.

You are at the report main page, where you can download the full report in PDF format.

Report Links:

• Download Full Report (PDF, 90 pages).

• Read the Report Front Matter, Introduction, and Findings & Recommendations, below.

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Brief Summary of Report

This report highlights the unexpected problems that arise from new types of predictive consumer scoring, which this report terms consumer scoring. Largely unregulated either by the Fair Credit Reporting Act or the Equal Credit Opportunity Act, new consumer scores use thousands of pieces of information about consumers’ pasts to predict how they will behave in the future. Issues of secrecy, fairness of underlying factors, use of consumer information such as race and ethnicity in predictive scores, accuracy, and the uptake in both use and ubiquity of these scores are key areas of focus.

The report includes a roster of the types of consumer data used in predictive consumer scores today, as well as a roster of the consumer scores such as health risk scores, consumer prominence scores, identity and fraud scores, summarized credit statistics, among others. The report reviews the history of the credit score – which was secret for decades until legislation mandated consumer access — and urges close examination of new consumer scores for fairness and transparency in their factors, methods, and accessibility to consumers.

About the Authors

Pam Dixon is the founder and Executive Director of the World Privacy Forum. She is the author of eight books, hundreds of articles, and numerous privacy studies, including her landmark Medical Identity Theft study and One Way Mirror Society study. She has testified before Congress on consumer privacy issues as well as before federal agencies. Robert Gellman Robert Gellman is a privacy and information policy consultant in Washington DC. (www.bobgellman.com.) He has written extensively on health, de-identification, Fair Information Practices, and other privacy topics. Dixon and Gellman’s writing collaborations include a reference book on privacy Online Privacy: A Reference Handbook, as well as numerous and well-regarded privacy-focused research, articles, and policy analysis.

About the World Privacy Forum

The World Privacy Forum is a non-profit public interest research and consumer education group focused on the research and analysis of privacy-related issues. The Forum was founded in 2003 and has published significant privacy research and policy studies in the area of health, online and technical, privacy, self-regulation, financial, identity, and data brokers among other many areas. www.worldprivacyforum.org.

The Scoring of America: Introduction

To score is human. Ranking individuals by grades and other performance numbers is as old as human society. Consumer scores  — numbers given to individuals to describe or predict their characteristics, habits, or predilections — are a modern day numeric shorthand that ranks, separates, sifts, and otherwise categorizes individuals and also predicts their potential future actions.

Consumer scores abound today. Credit scores based on credit files receive much public attention, but many more types of consumer scores exist. They are used widely to predict behaviors like, spending, health, fraud, profitability, and much more. These scores rely on petabytes of information coming from newly available data streams. The information can be derived from many data sources and can contain financial, demographic, ethnic, racial, health, social, and other data.

The Consumer Profitability Score, Individual Health Risk Score, Summarized Credit Statistics that score a neighborhood for financial risk, fraud scores, and many others seek to predict how consumers will behave based on their past behavior and characteristics.

Predictive scores bring varying benefits and drawbacks. Scores can be correct, or they can be wrong or misleading. Consumer scores – created by either the government or the private sector – threaten privacy, fairness, and due process because scores, particularly opaque scores with unknown ingredients or factors, can too easily evade the rules established to protect consumers.

The most salient feature of modern consumer scores is the scores are typically secret in some way. The existence of the score itself, its uses, the underlying factors, data sources, or even the score range may be hidden. Consumer scores with secret factors, secret sources, and secret algorithms can be obnoxious, unaccountable, untrustworthy, and unauditable. Secret scores can be wrong, but no one may be able to find out that they are wrong or what the truth is. Secret scores can hide discrimination, unfairness, and bias. Trade secrets have a place, but secrecy that hides racism, denies due process, undermines privacy rights, or prevents justice does not belong anywhere.

Broader transparency for consumer scores with limited secrecy may offer a middle ground. Knowing the elements but not necessarily the weights of a scoring system provides a partial degree of openness and reassurance. Knowing that there is a scoring system and how and when it is used helps. Knowing the source and reliability of the information used to make a score helps. Being able to challenge a score and correct the data on which it is based helps. Knowing that some types of information will not be used for scoring helps. Knowing that data collected for one purpose will not be used for another or in violation of law helps. Knowing that the person running the scoring system is accountable in a meaningful way helps.

The history of the credit score provides a useful model for the new batch of predictive consumer scores. Developed in the 1950s, the credit score became part of consumer credit granting. The credit score was largely secret to the consumers that it scored and affected until 2000, when a long and well-documented history of unfair uses and abuses finally culminated in the credit score being made available to consumers. Eventually, public pressure caused the credit score’s use and even its underlying factors to become public. The use of factors such as race, gender, and religion were prohibited and this was spelled out in detail in law.

No similar protections exist for most consumer scores today. Consumer scores are today where credit scores were in the 1950s. Data brokers, merchants, government entities, and others can create or use a consumer score without notice to consumers. For various reasons laws governing credit scores do not typically extend protection to the new consumer scores. We need rules that will make consumer scores fair, accountable, accurate, transparent, and non-discriminatory.

This report discusses and explores consumer scores, what goes into them and how they are made, how they are used, the regulations in place that control some but not most new consumer scores, and how scores affect broader privacy and fairness issues. The discussion of findings and recommendations points toward solutions and reforms that are needed.

Summary of Findings and Recommendations

Key Findings:

Consumer scores are expanding in type, number, and use because of the growth of predictive analytics and the ready access to hundreds and thousands of factors as raw material. Just as credit scores were secret for decades until state and federal legislation mandated that consumers could see their credit scores, today consumer scores are largely secret.

While new scores multiply, consumers remain in the dark about many of their consumer scores and about the information included in scores they typically don’t have the rights to see, correct, or opt out of. A primary concern is how these scores affect individuals and meaningful opportunities available to them. Another area of concern is the factors used in new consumer scores, which may include readily commercially available information about race, ethnicity, religion, gender, marital status, and consumer-reported health information.

• Unregulated consumer scores – as well as regulated credit scores – are both abundant and increasing in use today.

• The information used in consumer scores comes from a large variety of sources. Some scores use thousands of factors or consumer attributes.

• Many consumer scores, the ranges of the scores, and the factors used in them are secret.

• A consumer score may, without any public notice, rely on an underlying factor or attribute that has discriminatory implications (e.g., race or gender) or that most consumers consider sensitive (e.g., health or financial).

• Consumer scores in use today affect a consumer’s marketplace opportunities. Some of these opportunities are major (e.g., financial, employment, health,), some are minor (e.g., receiving a coupon, spam, or junk mail), and many are in between. Consumers are adversely affected by scores that are kept secret, and consumers are adversely affected when they do not have rights to correct scores.

• Consumer scores are found in a wide array of “offline” arenas, including businesses, health care providers, financial institutions, law enforcement, retail stores, federal and state government, and many other locations. Some of the more social consumer scores may be online, but mostly consumer scores are not solely focused on just online activities.

• Consumers usually have no way to know what the scores predict or how the scores are used.

• Consumers typically have no notice or knowledge about the data sources used in scores predicting their behavior or characterizing them. Consumers typically have no rights over the data about themselves, and consumers usually have little to no ability to control use of the data.

• Consumers typically do not have the right to opt out of being the subject of a consumer score or to prevent use of a consumer score.

• Except where the Fair Credit Reporting Act applies to a consumer score, most  consumer scores are not subject to any regulation for privacy, fairness, or due process. A lack of transparency makes it difficult or impossible to determine if creation or use of the scores violates a law that prohibits discrimination.

• Consumers who are victims of identity theft can have their credit or consumer scores affected thereby and may have little recourse even though errors may have major consequences for their ability to function in the economic marketplace can be major. Other consumers can also have their lives affected by the use of consumer scores to determine eligibility for important opportunities in the marketplace. Some consequences may be less significant.

• Consumers have remedies under state and federal law with respect to correcting and seeing their credit reports, but not necessarily with respect to the many records that contribute to consumer scores. Secret consumer scores do not provide consumers with correction rights of underlying information.

Key Recommendations:

Consumer scoring is not inherently evil. When properly used, consumer scoring offers benefits to users of the scores and, in some cases, to consumers as well. Some uses are neutral with respect to consumers. Consumer scores can also be used in ways that are unfair or discriminatory. The goal of these recommendations is to protect the benefits of consumer scoring, guarantee consumer rights, and prevent consumer harms.

• No secret consumer scores. No secret factors in consumer scores. Anyone who develops or uses a consumer score must make the score name, its purpose, its scale, and the interpretation of the meaning of the scale public. All factors used in a consumer score must also be public, along with the nature and source of all information used in the score.

• The creator of a consumer score should state the purpose, composition, and uses of a consumer in a public way that makes the creator subject to Section 5 of the Federal Trade Commission Act. Section 5 prohibits unfair or deceptive trade practices, and the FTC can take legal action against those who engage in unfair or deceptive activities.

• Any consumer who is the subject of a consumer score should have the right to see his or her score and to ask for a correction of the score and of the information used in the score.

• There are so many consumer scores in existence that consumers should have access to their scores at no cost in the same way that the law mandates credit reports be available at no cost, as mandated by Congress. Otherwise, if a consumer had to pay only one dollar for each meaningful score, a family could easily spend hundreds or thousands of dollars to see the scores of all family members.

• Those who create or use consumer scores must be able to show that the scores are not and cannot be used in a way that supports invidious discrimination prohibited by law.

• Those who create or use scores may only use information collected by fair and lawful means. Information used in consumer scores must be appropriately accurate, complete, and timely for the purpose.

• Anyone using a consumer score in a way that adversely affects an individual’s employment, credit, insurance, or any significant marketplace opportunity must affirmatively inform the individual about the score, how it is used, how to learn more about the score, and how to exercise any rights that the individual has.

• A consumer score creator has a legitimate interest in the confidentiality of some aspects of its methodology. However, that interest does not outweigh requirements to comply with legal standards or with the need to protect consumer privacy and due process interests. All relevant interests must be balanced in ways that are fair to users and subjects of consumer scoring.

• The FTC should continue to examine consumer scores and most especially should collect and make public more facts about consumer scoring. The FTC should establish (or require the scoring industry to establish) a mandatory public registry of consumer scores because secret consumer scoring is inherently an unfair and deceptive trade practice that harms consumers.

• The FTC should investigate the use of health information in consumer scoring and issue a report with appropriate legislative recommendations.

• The FTC should investigate the use of statistical scoring methods and expand public debate on the proprietary and legality of these methods as applied to consumers.

• The Consumer Financial Protection Bureau should examine use of consumer scoring for any eligibility (including identity verification and authentication) purpose or any financial purpose. CFPB should cast a particular eye on risk scoring that evades or appears to evade the restrictions of the FCRA and on the use and misuse of fraud scores. If existing lines allow unfair or discriminatory scoring without effective consumer rights, the CFPB should change the FCRA regulations or propose new legislation.

• The CFPB should investigate the selling of consumer scores to consumers and determine if the scores sold are in actual use, if the representations to consumers are accurate, and if the sales should be regulated so that consumers do not spend money buying worthless scores or scores that they have no opportunity to change in a timely or meaningful way.

• Because good predictions require good data, the CFPB and FTC should examine the quality of data factors used in scores developed for financial decisioning and other decisioning, including fraud and identity scores. In particular, the use of observational social media data as factors in decisioning or predictive products should be specifically examined.

• The use of consumer scores by any level of government, and especially by any agency using scores for a law enforcement purpose, should only occur after complete public disclosure, appropriate hearings, and robust public debate. A government does not have a commercial interest in scoring methodology, and it cannot use any consumer score that is not fully transparent or that does not include a full range of Fair Information Practices. Government should not use any commercial consumer score that is not fully transparent and that does not provide consumers with a full range of Fair Information Practices.

• Victims of identity theft may be at particular risk for harm because of inaccurate consumer scores. This is a deeply under-researched area. The FTC should study this aspect of consumer scoring and try to identify others who may be victimized by inaccurate consumer scoring.

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