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Washington, DC: U.S. PIRG Education Fund and the Center for Digital Democracy (CDD) released a comprehensive new report today [http://www.uspirgedfund.org/reports/usf/big-data-means-big-opportunities-and-big-challenges] focused on the realities of the new financial marketplace and the threats and opportunities its use poses to financial inclusion. The report examines the impact of digital technology, especially the unprecedented analytical and real-time actionable powers of “Big Data,” on consumer welfare. The groups immediately filed the report with the White House Big Data review headed by John Podesta, who serves as senior counselor to the President. The White House is to issue a report in April addressing the impact of “Big Data” practices on the public, including the possible need for additional consumer safeguards.
In addition to the undeniable convenience of online and mobile banking, explains the report, the new financial environment poses a number of challenges, especially for lower-income consumers. Increasingly, the public confronts an invisible “e-scoring” system that may limit their access to credit and other financial services. “We are being placed under a powerful ‘Big Data’ lens, through which, without meaningful transparency or control, decisions about our financial futures are being decided,” the report explains.
“Will big data tools be used to help banks and other financial firms offer lower-cost products that help the unbanked and underbanked join the insured financial system and build assets, or will big data simply make it easier for payday lenders and others seeking to extract money from consumers to win?” asked U.S. PIRG Education Fund Consumer Program Director Ed Mierzwinski. “We intend the report to stimulate a healthy debate among policymakers, industry and consumer and civil rights leaders.”
Among the issues examined in the report, “Big Data Means Big Opportunities and Big Challenges: Promoting Financial Inclusion and Consumer Protection in the ‘Big Data’ Financial Era,” are the following:
- the plight of “underbanked and unbanked consumers,” who face special challenges in the new financial marketplace;
- the impact of data collection and targeted advertising on all Americans, most of whom have no idea that their personal data shape the offers they receive and the prices they pay online;
- the use of murky “lead generation” practices, especially by payday lenders and for-profit trade schools, to target veterans and others for high-priced financial and educational products; and
- the need for new regulatory oversight to protect consumers from potentially discriminatory and deceptive practices online.
The report, co-authored by Ed Mierzwinski, Consumer Program Director of the U.S. PIRG Education Fund, and CDD Executive Director Jeff Chester, reflects on the role that online financial marketing played in the recent economic crisis, and provides a blueprint for how such problems can be avoided in the future.
“Technological advances that collect, analyze, and make actionable consumer data,” the report concludes, “are now at the core of contemporary marketing. The public is largely unaware of these changes and there are few safeguards in this new marketplace. Economically vulnerable consumers, and especially youth, will be continually urged to spend their limited resources. Conversely, there are opportunities to use the same tools to urge consumers to budget, save and build assets.”
“Consumers increasingly face a far-reaching system that uses data about them to predict and determine the products and services they are offered in the marketplace. Federal safeguards that protect privacy and ensure members of the public are not subject to unfair and discriminatory financial practices are long overdue,” explained CDD’s Jeff Chester. “The White House ‘Big Data’ report should call for strong measures to ensure that the changing financial services marketplace operates in a fair and equitable manner.”
The Center for Digital Democracy is a nonprofit group working to educate the public about the impact of digital marketing on financial services, public health, consumer protection, and privacy. It has played a leading role at the FTC and in Congress to help promote the development of legal safeguards against behavioral targeting and other potentially invasive online data collection practices.
U.S. PIRG Education Fund works to protect consumers and promote good government. We investigate problems, craft solutions, educate the public and offer Americans meaningful opportunities for civic participation.
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