Thanks to a new Senate Commerce Committee report, we now have a picture of how that process works — and it's not pretty. The paper, released this week, is the result of a year-long study of the major credit reporting agencies — Experian, Equifax and TransUnion — as well as lesser-known marketing firms like Axciom, Epsilon, Datalogix and Reed Elsevier. These companies maintain huge lists on consumers, the report says. Axiom told the committee it has at least some insight on 700 million consumers around the globe, including "over 3,000 propensities for nearly every U.S. consumer." Datalogix said its database covers "almost every U.S. household."
The enormous amount of data these firms collect on individual consumers raise obvious concerns about privacy, but one particular finding in the study could add to the alarm: The companies categorize each consumer by income -- in very specific ways. For example, descriptions of the financially insecure consumer groups targeted by these firms include "Ethnic Second-City Strugglers" and "Rural and Barely Making It."
Who's in these categories? Experian described the group "Hard Times" to the committee: "Older, down-scale and ethnically-diverse singles typically concentrated in inner-city apartments ... This is the bottom of the socioeconomic ladder, the poorest lifestyle segment in the nation. Hard Times are older singles in poor city neighborhoods. Nearly three-quarters of the adults are between the ages of 50 and 75; this is an underclass of the working poor and destitute seniors without family support ... One-quarter of the households have at least one resident who is retired.”
There are also categories for more affluent consumers, who are less likely to be enticed by secured-credit card offers but perhaps more likely to respond to other commercial promotions. Among those groups are the "Established Elite," "Power Couples" and "American Royalty," with the latter made up of "wealthy influential and successful couples and families living in prestigious suburbs," Experian explained.
"I am disturbed by the evidence showing that that data brokers segment Americans into categories based on their incomes," said Sen. Jay Rockefeller (D-W. Va.). "I want to know how and why data brokers are putting Americans consumers into categories like these."
On the one hand, these categories make a certain amount of sense if you're trying to make sure your advertising dollars are going to the right people. In the abstract, one could argue that by targeting certain groups with products that appear to be more affordable to them these companies are encouraging consumers to spend in a more efficient manner. But the apparent casualness that they take in describing and categorizing huge swaths of the public could rub some people the wrong way.
"It's this integration of information, and using the fact that they know so much more about us than we know about their practices, to take advantage of consumers who may be vulnerable," said the American Civil Liberties Union's Chris Calabrese. "Consumers' information is being gathered without their consent and it's being harmed or lost when it's stolen."