Pre-Employ Blog

What is a Data Broker?

Posted by Pre-Employ Marketing on October 15, 2018

We all know what a stock broker is, but what about a data broker?

Advances in technology have allowed us to collect and store data at an unprecedented rate. It's not just numbers that are being housed in ever-expanding databases, personal information is too. The influence big data plays in the current digital age has also prompted some to try harnessing these capabilities for commercial gain. Data brokers are becoming more common and more powerful, but as their profile increases, so does the pressure coming down from the federal government.

Who they are
As defined by the Cambridge Dictionary, a data broker is "a person or company whose business is selling information about companies, markets, etc." Part of that "etc." includes individual consumers. Data - or "information" - brokers also mine their caches of intel for personal information that can be commercialized. Plainly, data brokers are companies that collect data, search through it to find relevant points and then sell their information services for other businesses to use.

Data brokers usually operate as online firms that offer services like consumer background reports, address and telephone number lookups, public record searches and even family ancestry databases. The more information exchanged via the internet, the more data brokers have.

Who they sell to
The information gleaned from the heaps of data by such brokers can then be repurposed or repackaged and sold to third-party businesses. Often, information is sold to marketing firms that then use data to pinpoint their consumer base and enhance their marketing strategies. In a recent report, the marketing spend over the last few years was over $11 BILLION dollars.

Some credit reporting data brokers sell to creditors to aid them in tracking down debtors, and other data brokers sell their informatory wares to employers, insurance companies and healthcare providers.

Why the government is tracking them
Because data brokers work in an unregulated environment that is largely invisible to the public eye - consumers don't know what brokers know about them - the federal government has made it their intent to study the industry and its effects on consumers.

The lack of transparency led the Federal Trade Commission to open inquiries into data brokerage in 2012 and the practices companies use to gather and sell information. The federal investigators said they were looking to establish a baseline understanding of the legal practice, but wondered if data brokering was being undertaken in a way that was harmful to consumers and others. The result was a scathing report that identified the shadowy world of data brokers. Today, we have new legislation such as the GDPR as a result, where the EU has taken a much stronger stand to bring control of data back to consumers.

What does it mean to me?
There's nothing illegal about data broker practices, but wouldn't you be upset if you knew things like your address and employment information were being shared, without your knowledge or permission, to anyone who wants to pay for it? If a data broker does not give people the choice as to whether or how their personal information is collected and shared with other parties, we think it's wrong. Employers that use HR services from a known data brokerage firm can open themselves up to public relation disasters if employees find out their own information can be used against them.

Topics: HR Compliance, Background Checks