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Protecting Your Privacy; Credit Card Companies Scour Your Spending Habits; Employers Rely on Data Brokers; Fusion Centers Survey Us

Aired October 3, 2009 - 09:30   ET


GERRI WILLIS, CNN HOST: Hello, I'm Gerri Willis and this is a special edition of YOUR BOTTOM LINE, "Protecting Your Privacy." Your credit card spending habits scrutinized, could your spending limits be cut because of where you shop, and who is watching you? We'll take a peek inside your background file in the big business of privacy data brokers. And what in the world is a fusion center? Answers to all those questions and more, the show that saves you money starts right now.

Let's begin with your credit, indispensable when it comes to getting a home, a loan or even a job. Credit card issuers used to look just at your credit score to determine your risk. Well, not anymore. Recessionary times have prompted the companies to scour your spending habits and if they don't like what they see, the result could be a lower credit limit.


KEVIN JOHNSON, GEORGIA STATE REP CANDIDATE: How are you doing? I'm Kevin Johnson.

WILLIS (voice-over): Kevin Johnson is an entrepreneur and candidate for office.

JOHNSON: Running for state representative.

WILLIS: And, according to American Express, a credit risk. Coming home from his honeymoon last year he was shocked to find Am-Ex cut his credit limit from over $10,000 to just $3,800.

JOHNSON: I've done a very good job, of being responsible paying my bills on time.

WILLIS: Even more surprising, one of the four reasons Am-Ex gave for the decision, other customers who have used their cards at establishments where you recently shopped have a poor repayment history with American Express.

JOHNSON: I was shocked when I read it, because I didn't know that the companies could actually assess your credit worthiness based on others around you.

WILLIS: With more than 10 percent of credit card customers defaulting on their debt, credit card issuers are trying to weed out the risky ones. How? By looking for changes in the way we shop. ROBERT MANNING, AUTHOR, "CREDIT CARD NATION": You're shopping from a middle or upper tier retail store and suddenly it shows a purchase at a dollar store, some form of downshifting, suddenly shopping at Wal-Mart.

WILLIS: Those red flags can lead to a deeper look at your behavior.

MANNING: And if you've suddenly started exhibiting new consumer behavior, and then you've made three or four purchases in a row at a local bar, that would raise some flags that maybe there's some impending financial crisis.

WILLIS: For its part, Am-Ex says, "We don't look at and never have looked at where someone shops to make a line reduction. The primary factor is someone's overall debt level and we also look at payment history with us, credit reports and FICO scores."

Banking industry sources say credit scores are still the most important tool in predicting consumer behavior, but those scores don't reflect sudden life changes, like job loss or divorce.

JEFF SLAWSKY, CREDIT CARD INDUSTRY EXPERT: All they can do is look at the actual volumes and transactions that are coming in, and see changes in that pattern.

WILLIS: For Kevin Johnson, the experience has motivated him to get involved, and perhaps change the way banks work.

JOHNSON: No one should be penalized for the actions of others.


WILLIS: Okay, so Kevin, like many others this year, he's not alone when it comes to dealing with questionable credit card practices. So what is your credit card company looking at, and how can they best protect your bottom line? Let's talk to our panel of experts.

Robert Manning author of "Credit Card Nation" and he joins from us from Montreal. In Washington is Evan Hendricks, the editor and publisher of "Privacy Times."

Welcome to you both. Evan, I'm going to start with you. Just how much info are these companies looking at?

EVAN HENDRICKS, "PRIVACY TIMES": Well, the first problem is that we don't know, we know they're doing it, and one of the ironies in trying to protect your privacy is the first thing is you need transparency so you do know what they're looking at. We know about the American Express case and we know about another subprime credit card company that was lowering limits because people were going to marriage counselors and personal counselors and places to get their tires retread. I think we need stronger policies so consumers know.

WILLIS: Robert, I want to turn to you, now. I mean, millions of us have credit cards, We make hundreds of purchases every year. How can these companies possibly keep up?

MANNING: Well, the key is that the companies have been refining their cognitive behavior analysis and data mining...

WILLIS: Whoa that, sounds very technical.

MANNING: ...for a long time but the key issue it was OK when they were satisfying our desires to take a summer cruise, and they were going to tell us where we'd prefer to go and what kind of wine we wanted to have at dinner. Their problem was that when charge-offs went from five percent to 10 percent, the same executives that didn't anticipate the recession, suddenly panicked for new tools to identify consumers in financial distress and of course these tools are misapplied. They're very inaccurate.

WILLIS: You were talking about merchant codes, though, where they put numbers on certain types of purchases. Help me understand that one.

MANNING: Well, in other words, when you make a transaction, the consumer actually sees a statement at the end of the month, of what you purchased. You don't understand that there's actually a code associated from the merchant you purchased it from. If you went to a pawn shop and bought a necklace, you'd see a necklace as maybe the charge, you wouldn't identify that the merchant code was from a pawn shop, which is crucial important in these data mining activities.

WILLIS: So they're looking at a lot of information. They know exactly where we are, what they're doing. They own the information at the end of the day because you're using a credit card. Evan, can you fight back?

HENDRICKS: Well, you should not be shy about communicating with your credit card company, because most of us have a choice of credit cards, and like Robert said, they're in panic mode right now anyway, and you can remind them that you're a good customer, and that you want to know what their policies are and by the way, you need to lower my interest rate because it's too high. And we're finding -- a company I know out in Denver that's starting to do this on behalf of consumers, and they're having great success just by asking for these sorts of pro-consumer actions.

WILLIS: Robert, Evan, stick around. Up next, data brokers, we'll take inside your personal background file.


WILLIS: Well, if you're like most of us, you probably haven't given much thought to the data broker business, but employers rely on reports from data brokers which track everything from past due loans to police records to determine whether their hiring decisions are sound. Now, it sounds simple, but as one Georgia family found out the information isn't always right.


UNIDENTIFIED FEMALE: Yeah, with all the good stuff.

WILLIS (voice-over): A job offer with good benefits, a dream for this woman's husband that suddenly turned into a nightmare.

UNIDENTIFIED FEMALE: You know, he did the drug test, and of course that was fine, and all we need was the background check and that was supposed to turn out fine.

WILLIS: But his background check revealed two felony convictions, and like that, the job offer was gone. She wants her identity hidden it avoid further problems for her husband.

UNIDENTIFIED FEMALE: And we just were in shock.

WILLIS: In shock, because the records belonged to another man, with the same name, and same birthday as her husband.

UNIDENTIFIED FEMALE: How did they put these two together? You know, how could they miss this?

WILLIS: The report came from ChoicePoint, one of the nation's largest commercial data brokers, part of a multibillion-dollar industry that sells your personal information, obtained from public and private records to employers and law enforcement.

WILLIS: Privacy advocate Lillie Coney says most people have no clue what's in these databases that can include incorrect or outdated information.

LILLIE CONEY, ELECTRONIC PRIVACY INFO CTR: Let's say it was an arrest that was based on faulty information, and it was resolved, and there was no trial, no conviction, they still have that original arrest record that may be in a database somewhere that is being passed along repeatedly to people outside of your knowledge.

SEN PATRICK LEAHY (D), VERMONT: I think most of us don't know how exposed we are.

WILLIS: Senator Patrick Leahy has introduced legislation to make those data bases more accessible and more secure.

LEAHY: I want to know what's in my records and how to stop misinformation in my records and today people cannot do that with surety.

WILLIS: For it's part, Choice Point says that under the Fair Credit Reporting Act, "individuals may obtain copies of previously prepared reports about them, as well as public record information used for such reports and correct such information, as appropriate." The company says those corrections typically take two weeks. Time this woman says her husband didn't have.

UNIDENTIFIED FEMALE: I called the department of justice, and the FBI.

WILLIS: And her congressman, who was able to get ChoicePoint to quickly correct the mistake. Her husband got the job but she's still concerned.

UNIDENTIFIED FEMALE: Because this will happen again, if my husband ever has to have a background check for maybe if he ever changes jobs, that record is out there.


WILLIS: So, if you're trying to get that job, how can you be sure your record is accurate? Joining us now is Lillie Coney from the Electronic Privacy Center -- Information Center, that is, and back with us once again is Evan Hendricks.

Welcome back to you both. Good to see you. You know, Evan, I want to start with this. How often is this info wrong? I mean, you see the consternation going on with that family, you know, how often do they just have stuff that's not right?

HENDRICKS: Right, we don't have the research to give us really strong numbers on that, but we know it has to be pretty bad, because with credit reports, which is much more standardized and much more advanced than the evolution, we have a 25 percent to 30 percent error rate.

Now, with these background checks the companies, like ChoicePoint, and they're not the only one, there's a whole bunch of them, they're like knuckle-draggers, they're sitting there, like in this case, they'll produce a record based on a name and date of birth match and they won't go to see, well gee, do they live in the same social security number, do they live in the same state?

And I've been involved in five or six cases where the same thing happened, people pinned with felonies because companies like ChoicePoint and these background check companies are in such a hurry to sell this information that they can't even bother to do one more check to make sure they don't mess up somebody's life.

WILLIS: That is amazing. Lillie, you know, tell me, it seems to me like it's in my best interest to get the report and scan for errors. Is it easy to get it? ChoicePoint says they make these available all the time to consumers.

CONEY: It's very important to understand you want to see the report that they may have shared with a business. Evan is absolutely right, using only a birth date and a name, you're going to pull up a lot of errors. There is an application process that ChoicePoint has established for its own record system, where individuals can submit additional information to the company, and it's more information than just your name and birth date, they ask for social security number and current address.

They even ask if you've had, filed into bankruptcy or any contact with the criminal justice system, which creates another opportunity for the company if it's not using proper policies regarding privacy, to take that information and add it into their records system, but it's important to see the information in order to begin the process of protecting yourself. WILLIS: Evan, can you get this info corrected? Is it hard?

HENDRICKS: Well, you have a right to correct it, because of the work of the Electronic Privacy Information Center, we know that ChoicePoint says some of the records are beyond the reach of the law, and this is why a company that I'm working with called ID Watchdog, and others like it, are actually providing services to make it easy for people, for a fee, to get all of these records together so they can review them before they go in for that employment application.

WILLIS: Eye-opening information. Lillie Coney and Evan Hendricks, thanks so much for joining us.

Coming up, you may not know what a fusion center is, but chances are your personal information is already a part of it. We'll tell you everything you need to know.


WILLIS: It's no secret that the government holds a lot of information on your personal life, and in the wake of 9/11, fusion centers were set up to track terrorists bringing together information from local, state and federal law enforcement. But critics say these centers are really domestic surveillance agencies, watching all of us even if we haven't violated the law.



WILLIS (voice-over): It was the morning of Connecticut Governor Jodi Rell's inaugural parade.

KRAYESKE: I pulled out my camera and I just shoot Governor Rell, about 23 shots.

WILLIS: Moments later, Ken Krayeske was stopped by Hartford police officers, handcuffed, arrested and jailed.

KRAYESKE: I said well, what did I do? And they said you shouldn't have been making those threats.

WILLIS: Local police had been on the lookout for him after state police gave out a security bulletin with his photo on it. Officials wouldn't comment pending a civil lawsuit. Court documents reveal state police were alarmed by Krayeske blog posts. "Who's going to protest the inaugural ball with me?" and "No need to make nice."

KRAYESKE: Why do I have to be nice to a political figure simply because she won an election?

WILLIS: Police began digging for more information, mining public and commercial databases. They learned Krayeske had been a Green Party campaign director, had protested a gubernatorial debate and had once been convicted for civil disobedience. He no history of violence. Law professor Daniel citron says police aren't supposed to gather information on citizens who aren't suspected of a crime.

DANIELLE CITRON, PRIVACY EXPERT: If we're interested in someone because they're an advocate for a Green Party candidate and think they're suspicious because they want to get others to protest someone's ideas, but not because there's a true threat to their lives, I think that's just troubling.

WILLIS: Today law enforcement collects and shares more information than ever, and much of it goes on its state intelligence centers called "fusion centers."

(on camera): Fusion centers were started after 9/11 to help federal, state and local law enforcement connect the dots and stop a terrorist attack. The Department of Homeland Security says they are a critical tool in keeping the nation safe.

JANET NAPOLITANO, HOMELAND SECURITY SECY: In a typical fusion center, an FBI agent might be sitting next to a state highway patrol officer. They don't merely share space, they share databases and techniques.

WILLIS (voice-over): But what's going into those databases has critics worried. The ACLU says there's evidence some fusion centers have targeted Muslim groups and peace activists for surveillance.

MIKE GERMAN, ACLU: Collecting information about people that has no relevance to whether or not they're breaking the law.

RICH KELLY, REGIONAL OPERATIONS INTELLIGENCE CTR: We're in the center of analysis element...

WILLIS: The director of New Jersey's fusion center says law enforcement works hard to balance national security with individual privacy.

KELLY: We, in law enforcement, and certainly in fusion centers, are very attuned to the Bill of Rights. We are not in the business of investigating first amendment or constitutionally protected rights.

WILLIS: But Ken Krayeske thinks police in his town crossed the line.

KRAYESKE: The police did not determine the difference between who was dangerous and who was merely expressing protective constitutional -- constitutionally protected viewpoints.


WILLIS: Well, you don't have to be a political activist to be watched these days. Whether you're a blogger or just a member of a social network, everyone from law enforcement to your employer could be searching the Web for information on you.

Danielle Citron is a professor of law at the University of Maryland, and Liz Lynch is the founder of Center for Networking Excellence.

Welcome to you both. Danielle, you've spent a ton of time with fusion centers. I know people out there are wondering, oh my gosh, should I be worried about this? How concerning is it for the average American?

CITRON: I think it's concerning to all of us, quite frankly, and the problem is we're not going to know what fusion centers have on each and every one of us because their practices are not transparent and there's really very little oversight.

WILLIS: All right, OK, well, let's broaden out the conversation a little bit. I also want to talk about employers, friends, social networking sites. Liz, you've got a really good list of do's and don'ts when it comes to social networking. Tell me what I should be doing and what I should avoid.

LIZ LYNCH, CENTER FOR NETWORKING EXCELLENCE: Well, basically, if you wouldn't say it in an auditorium with the general public, then don't post it online. So don't bad mouth your company, colleagues or customers, don't share private company information. No off-color jokes or provocative photos. Don't over share.

WILLIS: Danielle, though, there's also employers who are looking out there. And, you know, lot of people are asking me, oh, it's not their right to look at my social networking site, but guess what, they do it anyway.

CITRON: Yeah, and you know they absolutely, legally can. There's nothing prohibiting them from doing it and in a sense it's smart for them to, to make sure that their employees aren't people that they -- they want their people, they want their clients to be able to look at, right, and see online.

So, in a sense, from a business perspective, it makes sense for them to be looking at this information. Nearly 50 percent of all employers readily admit that they're looking at your social network activity in assessing your employment application.

WILLIS: All right, Liz, I want to turn to you. You know, it's not so simple, it's not just what I just post. Other people talk at you online, on blogs, on the Web, blog posts. There's stuff other people share about you that you would seem to have no control over. How do you take care of that so that you put your best face forward to an employer, maybe to the federal government?

LYNCH: Exactly. Well, the first thing you need to do is Google yourself. So, see what comes up when people search on your name and clean up anything on any pages that you control your social networking profiles, take off any provocative photos, inappropriate comments and any of the pages that your friends control, ask them to take that down, too. You know, you can't completely clean up your past, but what you can do going forward is to really be mindful of what you post.

WILLIS: All right, guys, Danielle, Liz, thanks for that. Don't move, the daily assaults on your personal privacy continue, what you can do about it, next.


WILLIS: Back now with final thoughts from Robert Manning, Liz Lynch and Evan Hendricks.

Evan, I want to start with you. You know, we've talked to people for a long time about shredding documents, shredding things you get in the mail, credit card offers, to protect your privacy, but that's just not enough these days. What do you think folks should be doing?

HENDRICKS: Well, like Liz says, Google yourself, I say make sure you understand where information is about you in databases starting with your credit reports, starting with the other kind of consumer reporting agencies that keep these employment background check data. Exercise your rights to go get those records and see what's in there about them. There's a high inaccuracy rate, it can really hurt you. That's a great place to start.

WILLIS: Robert, you know, the credit card issuers, it's like taking drugs. The more you use the credit cards, the more you want them, and everybody thinks they absolutely have to have them. But, how can we even the playing field between the credit card issuers and the consumers?

MANNING: There are two real key issues right now, Gerri. One is for consumer is that on your contracts there's the default of opting out in sharing information and being marketed. We need to get Congress to change the law, that it would be an opt in, so fewer people would have information that would be more desirable for this kind of data mining.

And right now because of the enormous backlash against the credit card industry, both the Federal Reserve and the U.S. Congress are talking about accelerating the implementation of the new credit card reform legislation, and part of it is a provision that asks the question, is there abuse of behavioral profiling and that this should be reported to Congress one year after the implementation of this legislation.

WILLIS: Liz, how can we be more smart when it comes to protecting your identity?

MANNING: Well, you know, the key is...

WILLIS: That's all right.

MANNING: ...whenever you don't have something you want shared with other people, don't charge that speeding ticket.

WILLIS: Don't charge the speeding ticket. I love that advice. That's smart. Liz, what would you say about being smart?

LYNCH: You know, there's a survey by Career Builder that said that 45 percent of employers use social networking sites to research job candidates. And a third of them did not make the hire based on what they read online. So, defiantly clean up all of your profiles, present yourself in the best light at all times.

WILLIS: You know, Evan, when we talk about credit card issuers, and Robert just mentioned the new law that's supposed to go into effect early next year, may happen earlier, is this enough for us to protect us when it comes to privacy, when it comes to credit card practices? Do you think more needs to be done?

HENDRICKS: Oh, clearly more needs to be done. Not only, like Robert says, we need to shift the default to opt in so the burden is on the credit card company to convince us to really consent to sharing our using our data beyond our relationship with them. The other thing people don't realize is credit card companies also have files on you. When you call in, they keep a running history of communications with you, and sometimes that cannot make you look so good either. So, being able to access the information they keep on us is another protection we need in place.

WILLIS: Already, Liz, last word here. I think people want a take-home sheet. What do I do today, what do I do tomorrow to make sure that my credit is sound and to make sure that my privacy is protected?

LYNCH: Well, you know, we've had so many examples in the last 10 to 15 years of people sending salacious e-mails from one friend to another and that getting forwarded all over the world and someone getting fired. So, we learn to become more careful about what we put in e-mail and now we have to put that same thought as to what we post online.

WILLIS: All right. Robert, Evan, Liz, thank you guys so much, fantastic information. Really appreciate your help today.

As always, we thank you for spending part of your Saturday with us. YOUR BOTTOM LINE will be back next week right here on CNN. You can also catch us on HLN every Saturday and Sunday at 3:30 p.m. Eastern Time. And hear much more about the impact of this week's news on your money on a special edition of YOUR MONEY from Chicago with Christine Romans and Ali Velshi today at 1:00 p.m. Eastern and tomorrow at 3:00, right here on CNN.

Don't go anywhere, your top stories are next in the CNN NEWSROOM. Have a great weekend.