Data Mining

Zip Codes can determine retirement communities and then market hearing aids to residents.

Zip codes do more than tell the postman where to deliver your mail.

Data companies and retailers use the zip to accumulate an amazing amount of personal data you thought only you and your hairdresser knew for sure. Such as your body type, your marital status, your health habits, educational level, how many children you have (including if you are expecting) and their age groups, if your home is for sale, your political preferences, if you are getting divorced, etc., etc., etc.

Acxiom, one of the country’s biggest data brokerages, for instance, reports that it has information generated by zip codes on 190 million Americans. The company’s largest competitors, Datalogix and CoreLogic, have similar databases.

These companies can tell, by combining the swipe of your credit card and your zip code, whether you are the Jane Doe who lives in Denver, or the Jane Doe who resides in Cascade, Montana. They can use the information to predict what you are likely to buy next. It’s called predictive analysis or predictive modeling. For instance, if you’re buying maternity clothes, the merchant knows that baby supplies are next. He can start bombarding you with specifically directed ads.

Those who use the data say it’s good business. It helps the merchant to target advertising to certain customers, saving advertising money and giving better service to those who buy. On the other side of the scales are those who argue that the trade-off in indiscriminate use of personal information is unacceptable.

Once the information gets into their databases, the users may swap among themselves so that you go from the merchant to the insurance salesman to the financial institutions, hotel chains, auto manufacturers and even Facebook. “Some of these data brokers know us better than we know ourselves,” said Pam Dixon, executive director of World Privacy Forum.

What makes it easier for retailers is of major concern to folks such as Dixon whose primary objective is to protect your privacy. They are concerned not only that your personal information is up for grabs, but at the prospect of what could happen if it gets into the wrong hands.

A growing number of merchants, including the grocery store and even the gas station, are asking for the customer’s zip code. You probably don’t have to give it. In Massachusetts, the Supreme Court ruled that zip codes are personal information that purchasers don’t have to share. California has a similar law. It’s possible to ask that the data brokers not share your information, but few people know that or act on the knowledge.

The Federal Trade Commission has become involved and is asking the nine major data brokers to explain how they collect, store and share the information they gather. Most of the companies report that they don’t reveal information such as Social Security or drivers license numbers. But the oversight agency wonders what would happen if the databases were hacked, opening a huge can of identity theft concerns.

With technology finding new and interesting ways to learn everything there is to know about everyone in every context, striking a balance between information and privacy is likely to get more attention.

With our data, analysts can predict what we will do in the future with a high degree of accuracy.

Data brokers make a living by tracking the financial well-being of Americans and sharing the information with companies that specialize in services to those who are struggling.

It’s tricky. Sometimes the information is used by unscrupulous businesses that target the poor and elderly, including telemarketers who peddle scams via the telephone. Referring someone who already is in debt to a high-interest loan company for additional debt may not be doing them a favor. Lawmakers are wary and keeping an eye on the situation.

In its less worrisome guise, Big Data directs information to businesses that have legitimate interests in helping those who are in a bind. These include payday lenders, debt consolidation firms and other marketers.

Among the sources the brokers use to glean data are websites you browse, the credit cards you apply for and surveys to which you respond. Certain zip codes can suggest a high proportion of people who are in a financial bind. By tracking these and other sources, the brokers can then sell the information to the interested companies.

One data broker, List Connection, is adept at finding potential customers by learning who is at least 90 days in arrears on payments. According to its website, it can generate leads that are excellent prospects for payday loans, secured credit cards, debt consolidation, sub-prime credit and other financial assistance.

The List Connection data is intended for firms that are genuinely interested in helping people with bad credit, said Ken Wood, vice president for management.

Because of the potential for unscrupulous use of personal financial data, U.S. Senator John (Jay) Rockefeller, West Virginia, who heads the Senate Commerce Committee, has developed legislation that would allow customers to read and, if necessary, correct their information. The ability to opt out of the lists is included.

Rockefeller named one broker, Multimedia Lists, as one that offers such “get-rich-quick” schemes as questionable promotional offers, sweepstakes, contests and other dubious opportunities that might raise unreasonable expectations in those who are desperate.

The Fair Credit Reporting Act prohibits marketers from using sensitive credit information, such as credit scores, unless it is to make a firm offer of credit, such as a credit card or auto loan. But those who collect personal credit data argue that some information, such as whether you are facing foreclosure or have been denied a credit card, should be allowable information for their uses.

The delicate balance between legitimate uses of the data and the potential for misuse has become a serious issue for privacy advocates.

Ed Mierzwinski, consumer program director for the U.S. Public Interest Rearch Group, is one who believes in stronger safeguards. “We shouldn’t use our most private information for just any marketing purpose. We need additional protections,” he said. His group is pushing for more transparency as to who is buying information and how they are using it.

Some of the larger brokers, such as Epsilon, respond that they have built-in guidelines and assure that their clients use them. The Direct Marketing Association also insists that clients adhere to its guidelines and reports those that do no to the Federal Trade Commission.

As the debate heats up, it appears likely that more curbs may be put on the way your personal financial information can be used.

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