U.S. PIRG and the Center for Digital Democracy
District of Columbia
FTC to Examine Effects of Big Data on Low Income and Underserved Consumers at September Workshop; Project No. P145406
U.S. PIRG Education Fund and the Center for Digital Democracy (CDD) submit this comprehensive report 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. 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, is a key focus of this study. Among the other issues examined in the report 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.