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ChoicePoint's total revenue in
2005 was a record $1.1 billion, a 15 percent increase over the previous
year. Lee says data acquisition is the company's largest cost. All
that public information may be free, but it's far from cheap; last
year, ChoicePoint paid $644 million to state governments for motor
vehicle data alone.
Because data brokers are a business-to-business provider,
they tend to be invisible to the consumer. In insurance, for instance,
they aggregate underwriting information from the insurance carriers
(which cannot share the data directly due to anti-trust laws) and
sell it back to them. But when you apply for a job, a loan, an apartment,
a mortgage or insurance, it's likely a commercial data broker database
that cuts the waiting time from what was once days and even weeks
to a few seconds today.
"They like that they can walk into a retail store
and walk out with a flat-screen TV, but they don't see the ghosts
in the machine that allow them to do that," says Lee.
When commercial data brokers do happen to be thrust
into the spotlight, it's usually because of an embarrassing data
breach, as happened last year to ChoicePoint.
While the public was quick to pass judgment on data brokers in general,
Lee says the numbers don't support the charge.
"There were 140 incidents publicly reported last
year, and three of those involved information companies, but the
public impression is that most or all involved information companies,"
he says. "The reality is, most of them were incidents involving
colleges and universities, which accounted for half, or government
agencies. But the public perception is very, very different."
Data stream pollution
Deborah Pierce, a San Francisco lawyer and executive director of
the data watchdog group Privacy
Activism, has one big problem with data brokers: data pollution.
In a study that Privacy Activism conducted on behalf
of 11 participants that was too small to be statistically significant,
it found that 73 percent of ChoicePoint's reports and 67 percent
of rival Acxiom's
contained significant errors in biographical information. The group
is preparing to launch a second study.
"We were actually shocked," Pierce says.
"It wasn't that every one of those errors was going to result
in somebody not getting hired or losing a job, but it was just the
notion that with that much data coming from so many different sources,
there are problems in every single file that we saw, and some of
those would keep people from getting jobs."
In Pierce's own 20-page report, she found a
variety of odd listings: cars she never owned, addresses where she
never lived, a recommendation to check Texas for criminal records
even though she'd only been there two times, briefly, at conferences.
It also confused her father with her brother and in one entry got
her birth date wrong.
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