The Federal Reserve must not read much. Why else would they act as if a few more details in Home Mortgage Disclosure Act data would constitute a privacy concern?
You may been reading the recent series in the WSJ about privacy in the digital age. The basic message is: there is no privacy. Here are a few of the tidbits:
- Upon visiting a web site, those companies can pull your data in 1/5th of a second. The price is about 1/10th of one cent. They use that data to suggest a product choice. One visitor (their example is a rural working class senior citizen) is encouraged to buy a $250,000 life insurance policy. Another (college-educated high income suburbanite) is prompted to look at a $2 million policy). The possibilities for steering people into sub-prime loans are pretty obvious.
- You can remove cookies, but you cannot remove "beacons," which serve as data aggregators. They can cross-tab your visit histories with information in the other beacons that are already on your computer.
- There is little or no anonymity. Most sites collect specific data so specific that even without a name, the identity is clear: address (from your last online purchase), age, gender, marital status, health concerns (WebMD!), income, zip code, travel interests, and education. These sites can claim that they do not reveal personal information if they do not pass on your name.
All of this should be considered in the context of how the Federal Reserve is implementing the data directives from Congress that were included in the Dodd-Frank Bill. Congress wants that information to be out there, but the rule-making process will ultimately determine how fully those instructions are implemented.
Precedent for New Data
In the wake of the subprime crisis, people are asking what could be done to give regular people a better chance to understand and comment on problems with mortgage markets. For years, data has been available for the asking to anyone that wanted to analyse how loans were being made. Many people have an interest in knowing what is going on. It isn't just a few wonks. All kinds of people, from homeowners to local governments to neighborhood associations, are known to go to HMDA data for information about their markets.
Unfortunately, that data has fallen behind the times. We know what constitutes a "risky" mortgage - all of those exotic deals that are waiting to cause trouble. That would include the option-ARM, or the loan with the huge balloon payment, or when a lender never checked on the income of a potential borrower. These things were all too common, and now they are the common culprits in our mortgage crisis. "If only we could have known about this," is a common refrain. People want to stop "the fire next time." They want better data.
Unfortunately, the Federal Reserve is pushing back. There are a few essential points to their argument, but they all boil down to this: we don't want to let consumer information get out into the public.
Read the Wall Street Journal's series about privacy in the digital age. It will scare you. If you have used a web browser, then the chances are that companies know everything about you. Go to Yahoo's Ad Interest Manager (the beta version) to get an initial glimpse into your profile. That's just the tip of the iceberg. Credit card companies are going to firms like [x + 1] to get incredibly detailed data about consumers. It takes one-fifth of a second for [x + 1] to reveal not just your credit score, but your gender, your medical history, your family size, your income, your outstanding debt....then they will link that with all kinds of preference information. They'll know if you're searching for details on a trip to Italy, or what kind of video game you might buy next, or if you've been scanning dating sites. They'll know if you're doing it at home, or at work. Heck, they even know the resolution of the screen that you are using to do all of this searching.
Nielsen/Claritas has its own spin. It will readily put you in a box. They have 66 boxes. We're all in one. I cannot know what box they say I am in, although they will tell me the most frequent boxes that people in my neighborhood are put in to by their firm. I wonder, am I an "up and comer" (24th best consumer class) or a "family thrift" (63rd best). I hope my mother never sees this data. She lives in "upper crust" (number one) and "blue blood estates" (number two.) Oh, how far I have fallen.
We are at a place and time where there are "data have nots" and "data haves." If you are a regular person, then you're probably a have not. If you are a corporation, then you can be a have, and it won't even cost you very much. Check out the pricing on a simple marketing site like InfoUSA. They'll sell you a list of 400 doctors in Colorado that read cooking magazines and travel for leisure at least twice a year. They'll sell you a list of 500 Latino singles in Raleigh that are shopping for a used car and have a sub-660 credit score. You want it, they've got it.
Congress told the Fed that they have to let the public know more. The Fed's response appears to be that they will provide this data, but at every step of the way, they are going to report those numbers in the most aggregated way. Congress wants the public to see if banks are asking for higher credit scores in order to make loans in certain neighborhoods. The Fed's response is that they'll publish "average credit scores." Look around your neighborhood and ask yourself how narrow the bank of credit scores is likely to be. I am willing to bet that we're all living near people with vastly different scores.
The logic that would seem to drive the Fed's policy is that your personal information should be private, unless someone is willing to pay for it. Anyone can collect your data, and anyone can sell it.
Consumers do have a choice. You can remove those cookies. Of course, you can't remove those beacons. One possibility: you could never touch a web-enabled computer again.