wildercb/PrivacyTextBooks1.2 · Datasets at Hugging Face

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model works so well for Experian because it isn’t paying all the costs. The
business model is not so ideal for people like Lloyd Sarver, or for you or
me, who can be saddled with some of the costs. Courts aren’t forcing
companies to internalize the costs of the harm that their errors are creating.
Simple economics will readily predict the outcome. Companies will not
devote as many resources to making reports as accurate as possible and will
instead continue with their high-volume business model. Because the
companies don’t have to pay for the harm to Sarver, they can make
mistakes without internalizing the full cost.
The court is essentially telling Experian and similar companies: Go
ahead and process lots of data. The more you process, the more leeway you
will have to make mistakes. We won’t make you internalize the costs of the
harm you cause by these mistakes.
The same set of choices exist for data security. More time could be spent
on security measures, on vetting third-party vendors, and on training
employees. But companies don’t want to spend too much time on these
things. Business processes could be changed in ways to enhance security,
but this might make them less efficient.
The other way to create an incentive is through the law. That’s why
FCRA was so needed. Unfortunately, it’s not strong enough, especially
when courts are so sympathetic to consumer reporting agencies.
Moreover, FCRA provides qualified immunity to businesses and
financial institutions that furnish data to consumer reporting agencies.
These organizations can’t be sued for defamation, invasions of privacy, or
negligence based on their reporting of information to consumer reporting
agencies unless they acted with “malice or willful intent to injure.”42
Many of the problems identity theft victims face is that there are
fraudulent charges in their name. Creditors report this information to
consumer reporting agencies, which is how the pollution starts to tarnish a
person’s records. By failing to hold furnishers of information responsible if
they are negligent, FCRA isn’t holding them responsible enough.
BIG DATA COMPANIES
Another problem is that many modern data-driven companies fall outside
the scope of the FCRA, which hasn’t kept up with information economy.
The FCRA applies to any consumer reporting agency that furnishes a
“consumer report.” A consumer report is a communication that addresses a
person’s “credit worthiness, credit standing, credit capacity, character,
general reputation, personal characteristics or mode of living.”43 A
consumer report must be used to establish eligibility for credit, insurance,
employment, or other uses defined by FCRA. This means that the FCRA
doesn’t cover all Big Data enterprises, just those companies engaging in
furnishing consumer reports.
Companies that analyze data can use it in different ways, many of which
are not for the purposes listed under FCRA. Much of what people think of
as “Big Data” activity, like predicting your shopping habits or major life
decisions, doesn’t involve consumer reports. The result is that the FCRA is
not applicable to many businesses that maintain extensive dossiers about
individuals.
A Big Data company that maintains data on millions of people doesn’t
have as much of a market incentive to give people rights in their data or
provide robust security. The law must provide that incentive. The costs of a
data breach certainly help provide some incentive, but these costs are
artificially low because businesses are not internalizing all the costs borne
by affected individuals or by society.
One of the data security failures of many big data companies is when
they outright sell the data that hackers crave with virtually no
accountability. For example, Brian Krebs reported how a data thief “tricked
an Experian subsidiary into giving him direct access to personal and
financial data on more than 200 million Americans.”44 All the thief had to
do was pose as a private investigator and pay for access to consumer
records using standard cash wire transfers. Once he got the data, the
fraudster disseminated data containing SSNs, date of birth, and other
records on more than 200 million Americans. This wasn’t a case involving
high tech circumvention of networks using exploits; it was just common
fraud that companies have little legal incentive to avoid because selling data
is so lucrative.45
Facilitators
Facilitators are actors that facilitate data breaches by providing handy tools
that help hackers. Most facilitators don’t intend to assist hackers, but they
do so because they are so obsessed with their own goals that they don’t pay
attention to the secondary effects of their activities.
In the mid-1990s, national security officials under the Clinton
Administration developed the Clipper Chip, a special chip to be used by
telecommunications companies that would provide an encryption backdoor
for the government in national security situations. The backdoor would
work via “key escrow”—each chip would have an encryption key that the
government would hold in escrow. National security officials wouldn’t be
able to use the key unless they made the appropriate showing of authority.
The Administration heavily promoted the idea of requiring the chip in
devices. Companies weren’t fond of the idea. Neither were consumers.
Security experts raised alarm bells, pointing out some troubling
vulnerabilities with the system.46 The Clipper Chip idea soon fizzed out.
After a series of coordinated terrorist attacks in Paris in 2015, national
security proponents in the United States and abroad revived the attempt to
push for a backdoor to encryption. British Prime Minster David Cameron
declared: “[T]he question is: Are we going to allow a means of
communications which it simply isn’t possible to read. My answer to that
question is: ‘No we must not.’ ”47 President Obama echoed these
statements: “If we find evidence of a terrorist plot . . . and despite having a
phone number, despite having a social media address or email address, we
can’t penetrate that, that’s a problem.”48 Then-FBI Director James Comey
urged Congress for law enforcement to have special access to encrypted
communications.49
Proponents for allowing government officials to have backdoors to
encrypted communications should read Franz Kafka. Nearly a century ago,
Kafka deftly captured the irony at the heart of their argument in his short
story, “The Burrow.” In the story, an animal builds an elaborate burrow of
underground tunnels. Riddled with fear and insecurity, the creature
constructs the most elaborate burrow—a maze of passages, misdirection,
defenses, and so on. He becomes obsessed with building the burrow,

model works so well for Experian because it isn’t paying all the costs. The

business model is not so ideal for people like Lloyd Sarver, or for you or

me, who can be saddled with some of the costs. Courts aren’t forcing

companies to internalize the costs of the harm that their errors are creating.

Simple economics will readily predict the outcome. Companies will not

devote as many resources to making reports as accurate as possible and will

instead continue with their high-volume business model. Because the

companies don’t have to pay for the harm to Sarver, they can make

mistakes without internalizing the full cost.

The court is essentially telling Experian and similar companies: Go

ahead and process lots of data. The more you process, the more leeway you

will have to make mistakes. We won’t make you internalize the costs of the

harm you cause by these mistakes.

The same set of choices exist for data security. More time could be spent

on security measures, on vetting third-party vendors, and on training

employees. But companies don’t want to spend too much time on these

things. Business processes could be changed in ways to enhance security,

but this might make them less efficient.

The other way to create an incentive is through the law. That’s why

FCRA was so needed. Unfortunately, it’s not strong enough, especially

when courts are so sympathetic to consumer reporting agencies.

Moreover, FCRA provides qualified immunity to businesses and

financial institutions that furnish data to consumer reporting agencies.

These organizations can’t be sued for defamation, invasions of privacy, or

negligence based on their reporting of information to consumer reporting

agencies unless they acted with “malice or willful intent to injure.”42

Many of the problems identity theft victims face is that there are

fraudulent charges in their name. Creditors report this information to

consumer reporting agencies, which is how the pollution starts to tarnish a

person’s records. By failing to hold furnishers of information responsible if

they are negligent, FCRA isn’t holding them responsible enough.

BIG DATA COMPANIES

Another problem is that many modern data-driven companies fall outside

the scope of the FCRA, which hasn’t kept up with information economy.

The FCRA applies to any consumer reporting agency that furnishes a

“consumer report.” A consumer report is a communication that addresses a

person’s “credit worthiness, credit standing, credit capacity, character,

general reputation, personal characteristics or mode of living.”43 A

consumer report must be used to establish eligibility for credit, insurance,

employment, or other uses defined by FCRA. This means that the FCRA

doesn’t cover all Big Data enterprises, just those companies engaging in

furnishing consumer reports.

Companies that analyze data can use it in different ways, many of which

are not for the purposes listed under FCRA. Much of what people think of

as “Big Data” activity, like predicting your shopping habits or major life

decisions, doesn’t involve consumer reports. The result is that the FCRA is

not applicable to many businesses that maintain extensive dossiers about

individuals.

A Big Data company that maintains data on millions of people doesn’t

have as much of a market incentive to give people rights in their data or

provide robust security. The law must provide that incentive. The costs of a

data breach certainly help provide some incentive, but these costs are

artificially low because businesses are not internalizing all the costs borne

by affected individuals or by society.

One of the data security failures of many big data companies is when

they outright sell the data that hackers crave with virtually no

accountability. For example, Brian Krebs reported how a data thief “tricked

an Experian subsidiary into giving him direct access to personal and

financial data on more than 200 million Americans.”44 All the thief had to

do was pose as a private investigator and pay for access to consumer

records using standard cash wire transfers. Once he got the data, the

fraudster disseminated data containing SSNs, date of birth, and other

records on more than 200 million Americans. This wasn’t a case involving

high tech circumvention of networks using exploits; it was just common

fraud that companies have little legal incentive to avoid because selling data

is so lucrative.45

Facilitators

Facilitators are actors that facilitate data breaches by providing handy tools

that help hackers. Most facilitators don’t intend to assist hackers, but they

do so because they are so obsessed with their own goals that they don’t pay

attention to the secondary effects of their activities.

In the mid-1990s, national security officials under the Clinton

Administration developed the Clipper Chip, a special chip to be used by

telecommunications companies that would provide an encryption backdoor

for the government in national security situations. The backdoor would

work via “key escrow”—each chip would have an encryption key that the

government would hold in escrow. National security officials wouldn’t be

able to use the key unless they made the appropriate showing of authority.

The Administration heavily promoted the idea of requiring the chip in

devices. Companies weren’t fond of the idea. Neither were consumers.

Security experts raised alarm bells, pointing out some troubling

vulnerabilities with the system.46 The Clipper Chip idea soon fizzed out.

After a series of coordinated terrorist attacks in Paris in 2015, national

security proponents in the United States and abroad revived the attempt to

push for a backdoor to encryption. British Prime Minster David Cameron

declared: “[T]he question is: Are we going to allow a means of

communications which it simply isn’t possible to read. My answer to that

question is: ‘No we must not.’ ”47 President Obama echoed these

statements: “If we find evidence of a terrorist plot . . . and despite having a

phone number, despite having a social media address or email address, we

can’t penetrate that, that’s a problem.”48 Then-FBI Director James Comey

urged Congress for law enforcement to have special access to encrypted

communications.49

Proponents for allowing government officials to have backdoors to

encrypted communications should read Franz Kafka. Nearly a century ago,

Kafka deftly captured the irony at the heart of their argument in his short

story, “The Burrow.” In the story, an animal builds an elaborate burrow of

underground tunnels. Riddled with fear and insecurity, the creature

constructs the most elaborate burrow—a maze of passages, misdirection,

defenses, and so on. He becomes obsessed with building the burrow,