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New York Times
Natasha Singer

Ed Mierzwinski, consumer program director at the United States Public Interest Research Group in Washington, worries that federal laws haven’t kept pace with change in the digital age.

“There’s a nontransparent, opaque scoring system that collects information about you to generate a score — and what your score is results in the offers you get on the Internet,” he says. “In most cases, you don’t know who is collecting the information, you don’t know what predictions they have made about you, or the potential for being denied choice or paying too much.”

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The digital scores create a two-tiered system that invisibly prioritizes some online users for credit and insurance offers while denying the same opportunities to others, says Mr. Mierzwinski of the Public Interest Research Group. The decades-old federal law that protects consumers from unfair credit practices, he says, has not kept pace with online innovation.

The Fair Credit Reporting Act requires that consumer reporting agencies, the companies that compile credit data, show people their credit reports and allow them to correct errors. Companies that use the reports must notify consumers if they take adverse action based on information in those reports. But digital marketers, Mr. Mierzwinski says, are able to work around the rules by using alternative financial data to calculate consumer scores. In an article scheduled to be published next spring in the Suffolk University Law Review, Mr. Mierzwinski and a co-author argue that new digital techniques like scoring let sales agents rapidly convert online prospects to customers, blurring the line between marketing and actual credit offers.

“The relationship between marketing and making a distinct offer of credit to a consumer is becoming blurred given contemporary digital marketing practices,” Mr. Mierzwinski and his co-author, Jeffrey Chester of the Center for Digital Democracy, write in the article. Federal regulators, they add, “should ensure consumers know whether and how they have been secretly scored or rated by the digital financial marketers, especially those labeled as less profitable or desirable.”

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