17 October 2006

Buyer Beware: The Risk of Private Data...

Operational Risks are being found in places that a CxO would not have at the top of their list when it comes to mitigating threats to the institution. Human Resources, Information Systems, Accounting make the list near the top yet Marketing always seems to be a few steps down. This is a big mistake and a renewed interest in auditing the sales and marketing organization could open up a real "Pandora's Box".

Fidelity Federal Bank and Trust (West Palm Beach, Fla.) has been ordered to pay a $50 million settlement for buying more than half a million names and addresses from the Florida Department of Highway Safety and Motor Vehicles. The Electronic Privacy Information Center (EPIC), which filed an amicus brief in favor of the plaintiffs in the case, announced the decision in late August.

EPIC said the $4 billion-asset bank bought 565,600 names and addresses for use in direct marketing, claiming that the purchase violated the Drivers Privacy Protection Act. The federal law was enacted in 1994 to prevent the distribution of drivers' personal information.

From 2000 to 2003, Fidelity purchased the data containing the personal information of drivers living in Palm Beach, as well as Martin and Broward counties, for only $5,656, or a penny per driver record, according to papers filed in Kehoe v. Fidelity Federal Bank and Trust. The bank sought the information for car loan solicitations, according to the class-action lawsuit.

When this is one is all over you can bet that many organizations will be reexamining where they get their marketing data. The direct marketers sell and resell data on a daily basis including some companies you would not think are even in that business, namely your own state. Buying your drivers license information should be highly accurate as we are all required to report change of address to DMV shortly after we move to a new location. That is why this data is valuable to the direct marketers, fewer pieces of returned mail.

Where does your marketing department get all of the information that they use for outbound direct marketing? Via postal mail, e-mail, outbound phone calls and even personalized content on the web site each time I log in to get my latest statement. These days a valid e-mail address may be even more valuable than a phone number due to the "Do Not Call" list and the fact that people just don't answer their phone if they don't have the person calling in their personal contact list.

As an example, this one hit the in-box the other day from Equifax:

Your entire credit history in one easy-to-read report plus your FICO® credit score for only $29.95

Taking charge of your credit standing could pay big dividends when applying for a loan or negotiating an interest rate down the road. Because you are one of our most valuable customers and understand the importance of actively monitoring your credit, we are offering you our deepest discount - $10 off your 3-in-1 Credit Report with Score Power® - which includes your credit history as reported by all three credit reporting agencies plus your FICO® credit score - the score lenders use most.

When you apply for a loan, lenders can pull your credit file from any or all of the 3 major agencies, so it's important to know what information they have about you. Your 3-in-1 Credit Report allows you to see your entire credit history in one easy-to-read report. A quick and convenient way to ensure that your credit history is in order!

Where Equifax obtained this e-mail address is anybodies guess. They must have bought a list from a company that was doing a survey for a client who was selling products to people in the zip code 22102 and drive black SUV's. At the end of the day the marketing and sales organizations in your enterprise are just doing what you expect of them in generating new market share and revenues. Be careful what you wish for because all of those new found customers and sales could be erased in an instant with a well planned plaintiff class-action lawsuit.

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