online privacy, privacy, security, cat, lolcatFederal regulators need to ensure that the protections in the Fair Credit Reporting Act apply online, particularly on social networks, said consumer groups in a letter sent earlier today to Federal Financial Institutions Examination Council.

“The regulatory structure has not kept pace with social media developments, the increasing use of sophisticated and largely non‐transparent ‘social intelligence’ techniques, and the impact of these techniques on consumer decision-making,” wrote Jeffrey Chester, executive director of the Center for Digital Democracy, and Edmund Mierzwinski, director of the consumer program at the U.S. PIRG Education Fund.

Drawing from marketing material released by advertising networks and social networks, the letter suggests that consumers are ranked according to their financial health based on their behavior on social media. While credit reporting is strictly regulated, financial institutions and the data brokers and advertising networks with which they work can create informal scoring systems that have the same practical effects.

The scores indicate whether consumers “may have positive or negative future financial prospects, or should be given a higher rate of interest,” according to the letter.

Chester and Mierzwinski explain how the use of “data-mining, machine-learning, and predictive analytics,” allow financial institutions to create such “digital profiles” and target particular types of consumer across websites and devices and even, in some cases, offline.

For example, when consumers mention brands or financial institutions on social networks without first creating privacy walls around the content, brands capture those references and can adapt their advertising strategies in real time. They also include this activity in their customer relationship management databases.

The letter cites a claim from Exelate, MasterCard’s data partner, that it builds consumer profiles using “hundreds of millions of cookies” to track “tens of thousands of attributes,” for example.

The FFIEC promotes uniformity among the agencies that oversee financial institutions. It asked for feedback as it prepares to write an educational document on the interactions between financial institutions and consumers on social media.