Frothy Chaos: Modern Data Warehousing and Old-Fashioned Defamation

Abstract

A transactional identity, a biography comprising all of our financial transactions, controls many consumers’ ability to borrow money, rent homes, and maintain employment. Mistaken identity, whether caused by identity theft or by accident, can cripple a consumer’s ability to participate in these basics of modern consumer culture, because negative information distorts the consumer’s image, which in turn leads to an unearned reputation that discourages merchants from doing business with that consumer, or encourages them to increase the costs of the privilege. Furthermore, the distortion can damage the individual’s personhood and dignity. To clean up that reputation and undo the damage may not only be arduous, but nearly impossible, given the power, accessibility, and duplicatability of digitized data. The Fair Credit Reporting Act allows data providers and aggregators a “free bite” at defamation by failing to impose meaningful accuracy standards until after a deed has been misattributed to the wrong person, and even then they have benefited from judicial interpretations appropriate to an analog, not a digital, world. In contrast, the common law tort of defamation, if updated to recognize the power that those who traffic in data have over it and the damage that bad data can inflict on individuals, could not only offer consumers redress for initial instances of defamation, but more importantly, it could motivate those who put transactional information into the data sea to take care to attribute events to the right actor.

Keywords: privacy, fair credit reporting act, consumers, surveillance

JEL Classification: K10