FTC: Consumer Privacy Comments Concerning The Individual Reference Services--P974806/Part 3
Individual reference services provide important societal benefits, including fraud prevention. At the same time, these services present minimal risks. Indeed, as noted above, a recent Federal Reserve Board study of the industry found no evidence that individual reference databases were used in identity fraud. Nonetheless, the leaders of this industry are strongly committed to working together to implement self-regulation to ensure that these risks remain minimal.
To preserve the important societal benefits that flow to tens of thousands of Americans from use of these databases and to avoid serious constitutional difficulties that would ensue from most efforts at regulation, policymakers should rely upon self-regulation, coupled with enforcement of existing laws, to address lingering concerns about these databases. This course of action is the most balanced, and most effective, response to the complex issues surrounding the important role that individual reference services play in American society.
PIPER & MARBURY
Public records information is a cornerstone of many individual reference service products. Efforts to regulate these services would not only jeopardize the numerous public benefits that flow from use of individual reference services, they would also encounter serious constitutional obstacles to the extent that they sought to regulate public record information.
Efforts to regulate commercial collection or distribution of public record information--e.g., banning the publication of social security numbers obtained from bankruptcy, workers compensation, or military tribunal proceedings--are subject to exacting scrutiny under the First Amendment. Efforts to block the distribution of public records information at its principal sources--state and local governments--violate Tenth Amendment protection of state and local sovereignty to decide how to dispose of state and local information. This futility of limiting the distribution of public record information is a compelling reason to prefer self-regulation to government-imposed regulation of individual reference services.
A. First Amendment
Strong First Amendment interests are implicated in the distribution of individual identifying information obtained from public records. Indeed, courts that have been called upon to balance these interests have frequently invalidated government regulations designed to restrict publication or use of public record data.
1. Restrictions on Non-Commercial Use
It has been clear since the U.S. Supreme Court's decision in Cox Broadcasting Corp. v. Cohn(26)
that personal privacy concerns do not permit the government to prohibit the publication of truthful information in the public record.
In Cox, the Court overruled the Georgia supreme court's decision to uphold a plaintiff's cause of action under a Georgia statute that made it a misdemeanor to effect "public dissemination" of the identity of a rape victim. In violation of this statute, the defendant had published the name of the rape victim, ascertained from an indictment that was available for public inspection.
Concluding that the First Amendment prohibited the state of Georgia from making the broadcast of public information the basis of civil liability, the Court went on to state that "[i]f there are privacy interests to be protected in judicial proceedings, the States must respond by means which avoid public documentation or other exposure of private information. . . . Once true information is disclosed in public court documents open to public inspection, the press cannot be sanctioned for publishing it."(27)
Similarly, over a decade later in the case of Florida Star v. B.J.F.,(28) the Court once again held that the First Amendment barred recovery of damages by a rape victim whose identity was obtained lawfully by a newspaper, but was the result of an inadvertent mistake by the sheriff's office, and published despite a state law prohibiting such disclosure of identity. Relying upon Cox Broadcasting and its progeny, the Court held that only "a state interest of the highest order" permits the state to penalize publication of truthful information, and that such a state interest was absent where the information is already publicly available and made available by the government itself.(29)
Several courts have followed this line of reasoning in Cox and Florida Star as demonstrated by the following illustrations:
No invasion of privacy where magazine published individual's personal wealth using information obtained from court files, tax ledgers, and city and federal agency records open for public inspection. Wolf v. Regardie, 553 A.2d 1213, 1221 n.13 (D.C. App. 1989);
No recovery for invasion of privacy based on publication of information obtained from public records such as liens and lawsuits. Goodrich v. Waterbury Republican-American, 448 A.2d 1317, 1332 (Conn. 1982);
No recovery for invasion of privacy for publication of names of persons granted divorce, which were obtained from public records. Doe v. Edward A. Sherman Publishing Co., 593 A.2d 457 (R.I. 1991).
A recent state appellate court applied this First Amendment doctrine to California's consumer protection law banning credit reporting agencies from including in their reports certain information obtained from files of the landlord tenant court. The court files in question in U.D. Registry, Inc. v. State(30)
are available to the public and can be freely reported and copied by any other person, including members of the media. The state court characterized the speech at issue as noncommercial because the communication did not propose a financial transaction. Citing Florida Star, the court found the statute to be impermissibly underinclusive, restricting one type of publication but advancing no justification for "permitting broadcast of the same information by other methods." The California court held that the state's attempt at limiting the free flow of information for fear of its misuse by landlords violated the First Amendment.
Under this sort of analysis, an attempt to prohibit the publication of social security numbers obtained from bankruptcy, workers compensation, or military tribunal proceedings would be subject to exacting scrutiny under the First Amendment. If, as in U.D. Registry, the accurate reporting of information in public records is deemed to be non-commercial speech and thereby entitled to full First Amendment protection,(31) then such a measure would fail because there are less restrictive alternatives to a ban on publication.(32)
2. Restrictions on Commercial Use
Other important and relevant cases turn on the issue of the constitutional protection afforded to "commercial speech"--expression related solely to the economic interests of the speaker and its audience. Since the U.S. Supreme Court's 1976 decision in Virginia State Board of Pharmacy v. Virginia Citizens Consumer Council,(33) in which the Court struck down as unconstitutional a statute that effectively prohibited the advertising of prescription drug prices, restrictions based on the commercial use of public record data--like the restrictions placed on the non-commercial use of public records--have often been found to run afoul of the First Amendment.
Under the test first set forth in Central Hudson Gas & Elec. Corp. v. Public Serv. Comm'n of New York,(34) the U.S. Supreme Court requires a governmental body wishing to regulate truthful, lawful commercial speech to demonstrate that the "asserted governmental interest is substantial . . .[that] the regulation directly advances the governmental interest asserted, and [that the regulation] is not more extensive than necessary to serve that interest."(35) In applying this test during the past seventeen years, the Court has struck down nearly every restriction on commercial speech that it has examined.
Virginia State Board of Pharmacy and Central Hudson, which postdate adoption of the federal Fair Credit Reporting Act (FCRA), are additional reasons cautioning strongly against extending FCRA-style regulation to public record information. In Equifax Servs. v. Cohen,(36)for example, the Maine supreme court struck down a provision of the state's FCRA that prohibited inclusion in consumer reports of certain public record information that was more than seven years old. In concluding that this restriction on the reporting of truthful, accurate public record information was unconstitutional, the Maine court underscored two points. First, it observed that the federal FCRA--after which the state's statute was modeled--had been enacted at a time when different First Amendment principles controlled, specifically "at a time when commercial speech was afforded no constitutional protection whatever." Second, it concluded that neither statute's public records prohibition could survive the closer scrutiny now required under the First Amendment.
The court in Equifax concluded that if the concern was that users of consumer reports would most probably be improperly influenced if the prohibited information was included in the consumer reports, then a narrowly tailored fix would have been to prohibit users of reports from basing their decisions on particular kinds of information deemed "suspect." By banning constitutionally protected commercial speech, rather than focusing on the decision-making process itself, the statute ran afoul of the First Amendment.
Other courts have had the opportunity recently to apply the Central Hudson test to statutes attempting to curb the use of another public record: traffic accident report information. For example, in Speer v. Miller,(37) an attorney filed suit seeking a permanent injunction against the enforcement of a Georgia statute that prohibited the inspection of traffic accident reports for the purpose of commercial solicitation. In vacating and remanding the trial court's earlier dismissal of the suit, the court of appeals admonished the state's attempt to prohibit only certain uses of public information noting that "any privacy arguments the state asserts are disingenuous in light of the fact that the statute carves out an exception for the media to place any information they obtain on the front page of any newspaper in Georgia."(38) On remand, the trial court in Speer concluded that the restriction's exceedingly narrow scope "betrays the statute's true focus and its inability to serve the state's asserted interest."(39) The statute's underinclusiveness "betrays it as a statute designed not to protect privacy but, instead, to prevent solicitous practices."(40) Consequently, the court concluded that the statute's ability to advance the state's asserted interest "is anemic" and "advances that interest hardly at all."(41)
The analysis in Speer underscores that a statute too narrow in scope--in effect, a measure that restricts too little speech--can undermine a regulation's effectiveness in advancing the government's asserted interest. It can even diminish the credibility of the government's rationale for restricting speech in the first place. For example, in City of Cincinnati v. Discovery Network,(42) the Supreme Court rejected a selective ban on commercial newsracks on the ground that such newsracks posed no greater threat to safety and aesthetics than noncommercial newsracks. And, in Rubin v. Coors Brewing Co.,(43) the Court struck down a federal statute barring brewers from disclosing on beer containers the alcohol content of their beers, reasoning that the "irrationality" arising out of the exceptions for the advertising of beer and for the labeling of distilled spirits "ensures" that the beer labeling ban "will fail" to achieve its goal of suppressing "strength wars" by beer brewers.(44)
Speer also highlights a pattern that emerges in privacy cases where the regulation is treated as a restriction on commercial speech: the regulation will be sustained only if the restriction is narrowly tailored to serve the state interest and it provides effective support for the state's purpose.(45)
Consequently, federal or state attempts to regulate the distribution of public record information would be subject to probing First Amendment scrutiny regardless of whether courts considered the regulation to be directed at non-commercial or commercial speech. For example, an attempt to prohibit the publication of social security numbers obtained from bankruptcy, workers compensation, or military tribunal proceedings would be scrutinized every bit as much as the restrictions on public records in Equifax and Speer. If, as in Equifax and Speer, such activity is viewed as proposing a commercial transaction that is subject to the less exacting Central Hudson analysis, the restriction would still be far too underinclusive to protect the privacy interests of the individuals because of the wide availability of social security numbers from state motor vehicle departments and other sources.
B. Tenth Amendment
To overcome the problem that certain measures might be far too underinclusive to pass First Amendment muster, the Congress could attempt to dictate to the states what information in their public record systems the states could make available to the public. Federal regulation of state disclosure of state public records, however, is clearly the sort of interference with state functions that raises serious Tenth Amendment problems.
The Tenth Amendment restricts the federal government's ability to direct state or local governments to limit or somehow regulate a person's access to public records that have been compiled at taxpayer expense. This amendment provides that "[t]he powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people." During the past decade, the Supreme Court, as well as several lower courts, have revived the Tenth Amendment, giving its protections of state autonomy broad interpretation.
1. The United States Supreme Court Cases
Renewed scrutiny of federal incursions on state government operations began with the case of Bowen v. American Hosp. Association.(46) In Bowen, the Court invoked the Tenth Amendment in striking down federal regulations directing state agencies to establish specific procedures to prevent unlawful medical neglect of handicapped infants. These regulations required the states to adopt procedures relating to the reporting and review of suspected instances of unlawful medical neglect of handicapped infants.(47) The Court concluded: "State child protective services agencies are not field offices of the HHS bureaucracy, and they may not be conscripted against their will as foot soldiers in a federal crusade."(48)
The Court reiterated this view in New York v. United States,(49) striking down a provision in the Low-Level Radioactive Waste Policy Amendments Act of 1985, "which, among other things, impose[d] upon [s]tates, the obligation to provide for the disposal of waste generated within their borders, and contain[ed] three provisions setting forth 'incentives' to States to comply with that obligation."(50) In concluding that the Tenth Amendment prohibited Congress from compelling the states to enact or administer a federal regulatory program, the Court specifically noted that:
States are not mere political subdivisions of the United States. State governments are neither regional offices nor administrative agencies of the Federal Government. The positions occupied by state officials appear nowhere on the Federal Government's most detailed organizational chart. The Constitution instead "leaves to the several States a residuary and inviolable sovereignty."(51) Elsewhere, the Court concluded: "Where a federal interest is sufficiently strong to cause Congress to legislate, it must do so directly; it may not conscript state governments as its agents."(52)
Thus, while the First Amendment prohibits state regulation over the distribution of information contained in public records, the Tenth Amendment offers similar protection against the federal government's ability to impose regulations directing the state governments to somehow limit the distribution.
Additionally, to the extent the government attempts to cloak its regulation under the guise of Commerce Clause authority, it is clear that nothing in the Constitution "authorize[s] Congress to regulate state governments' regulation of interstate commerce."(53)
2. Recent Lower Court Cases
In Koog v. United States,(54) a federal court of appeals struck down the interim provision of the Brady Handgun Violence Protection Act,(55) which "require[d] local law enforcement officers to conduct background checks, provide written explanations of denials to prospective purchasers, and to destroy records of the local background check."(56) Relying on the rationale in New York, the court reasoned that the interim duties imposed were "tantamount to forced legislation" and served to "effectively bypass the state legislative process and substantively change the enacted polices of state governments."(57) The court further stated, "No matter how powerful the federal interest involved, the Constitution simply does not give Congress the authority to require the States to regulate. . ."(58) Furthermore, in Printz, et. al v. United States,(59) a case argued this term, the Supreme Court is scheduled to rule on a challenge to the Brady bill's state reporting requirement provisions, and may issue another major decision on Tenth Amendment prohibitions against federal incursions into state sovereignty. Similarly, in Board of Natural Resources v. Brown,(60) another federal court of appeals struck down a federal mandate that states administer certain federal timber-export policies. In particular, the Forest Resources Conservation and Shortage Relief Act required that states issue certain regulations in order to implement the export bans on unprocessed timber.(61) Relying on New York v. United States, the Court concluded that the "provisions of the Act and the Secretary's [of Commerce] orders violate the Tenth Amendment as interpreted by New York. They are direct commands to the states to regulate according to Congress's instructions, and thus violate the principle that the 'Federal Government may not compel the States to enact or administer a federal regulatory program.'"(62)
Just as the federal government may not dictate the manner by which a state manages its waste disposal operations, regulates timber exportation, or proscribes the policies and practices of its law enforcement personnel, the Federal Government may not dictate the manner by which a state disseminates the information contained in public records, such as prior addresses, social security numbers, etc. Although the federal government has attempted to cloak these impermissible regulations under the guise of the Federal Government's authority to regulate interstate commerce, it is clear in light of the foregoing cases that any attempt by Congress to regulate the dissemination of public information by directing the states themselves to impose restrictions on dissemination, will fail as a direct violation of the Tenth Amendment.
3. The Case Still Pending
Federal efforts to regulate disclosure of information in public records, such as prior addresses or social security numbers, are very likely to trigger litigation from state or county officials who would be burdened by such regulation and might risk losing revenue from the distribution of the records in question.
Indeed, the State of South Carolina late last year filed a Tenth Amendment action challenging the validity of the Drivers' Privacy Protection Act ("DPPA"), which restricts states from disclosing or disseminating state driver's license and motor vehicle records.(63)
Relying upon New York v. United States, South Carolina contests Congress' "enlist[ing] the states to control the dissemination of motor vehicle information in the manner which Congress believes appropriate."(64) It also vigorously disputes that the DPPA is a valid federal regulation of interstate commerce under the Commerce Clause, arguing that "[s]ince the Act requires the states to regulate in a manner based on the states' status as sovereigns rather than as market participants, it has no support in the Commerce Clause."(65) Similar challenges are almost certain to flow from other federal efforts to regulate of dissemination of state or county records.
1. This White Paper has been developed with the assistance of the following eight companies: CDB Infotek, a division of ChoicePoint, Database Technologies, Inc., Experian, First Data InfoSource/Donnelley Marketing, West's Information America, IRSC, LEXIS-NEXIS, and Metromail Corp. These companies are referred to jointly in this White Paper as "the individual reference service industry." While there are others active in this industry, the seven companies that participated in development of this White Paper are industry leaders.
2. Pub. L. No. 104-231 (1996).
3. 62 Fed. Reg. 10271, 10272 (rel. Mar. 6, 1997).
4. Richmond Newspapers, Inc. v. Virginia, 448 U.S. 555, 572-73 (1980).
5. Pub. L. No. 104-231.
6. Pub. L. No. 104-104, § 702, codified at 47 U.S.C. 222(e).
7. In early 1993, the Federal Trade Commission entered into an agreed order amending its 1991 consent order against TRW Inc. (FTC v. TRW, Inc., 784 F. Supp. 361 (N.D. Tex. 1991)), restricting TRW's ability to engage in target marketing, the practice of using information from consumer reports to develop and sell direct marketing lists. The amended order provides that TRW may, in the sale or distribution of lists of consumers, use the following identifying information from its consumer reporting database: name, telephone number, mother's maiden name, address, zip code, year of birth, age, any generational designation, social security number, or substantially similar identifiers or any combination thereof.
8. See 15 U.S.C. § 1681g (1982 & Supp. 1997).
9. Letter from Thomas M. Regan, Counsel, Trans Union National Fraud Center, to William W. Wiles, Secretary, Board of Governors of the Federal Reserve System, 1-2 (Jan. 30, 1997), submitted in Federal Reserve System Study, Docket No. R-0953 ("TUNFC Letter"). More specifically, bank check fraud losses are estimated at between $7-$10 billion annually; mortgage fraud costs lenders up to an average of $30 billion per year; insurance fraud (property and casualty) amounts to an estimated $20 billion in losses per year; and health care fraud is estimated at over $83 billion annually. Id. These estimates, combined with other industry estimates, are now considered to be in excess of $500 billion annually. Id.
10. Id. at 2.
11. Letter from Jack H. Reed, First Vice President, National Council of Investigation and Security Services, to William W. Wiles, Secretary, Board of Governors of the Federal Reserve System, 2 (Jan. 31, 1997), submitted in Federal Reserve System Study, Docket No. R-0953 ("NCISS Letter") (stating that "preventing, detecting and combating fraud would be virtually impossible" if the availability of personally identifiable information was drastically restricted").
12. See Comments of The Association for Children for Enforcement of Support, Inc. ("ACES"), Data Base Workshop-Comment, P974806, Federal Trade Commission, submitted Apr. 15, 1997, at 1.
13. 29 C.F.R. § 4050.4(B)(3) (July 1, 1996).
14. See Comments of The Reporters Committee for Freedom of the Press, Data Base Study-Comment, P974806, Federal Trade Commission, submitted Apr. 15, 1997, at 2-3.
15. Id. at 3.
17. Letter from Steven Alan Bennett, Senior Vice President and General Counsel, Banc One Corporation, to William W. Wiles, Secretary, Board of Governors of the Federal Reserve System, 1 (Jan. 31, 1997), submitted in Federal Reserve System Study, Docket No. R-0953.
18. Letter from Patrick M. Frawley, Director, Regulatory Relations, NationsBank, to William W. Wiles, Secretary, Board of Governors of the Federal Reserve System, 4 (Jan. 31, 1997), submitted in Federal Reserve System Study, Docket No. R-0953.
19. Letter from Colleen Kelly, Regulatory Affairs, Credit Union National Association, to William W. Wiles, Secretary, Board of Governors of the Federal Reserve System, 2 (Jan. 31, 1997), submitted in Federal Reserve System Study, Docket No. R-0953.
20. Board of Governors of the Federal Reserve System, Report to the Congress Concerning the Availability of Consumer Identifying Information and Financial Fraud, at 21 (March 1997).
21. Id. at 18 & n.14.
22. See, e.g., In the Matter of Consumer Identity Fraud Meeting at 12, 20-21, 21-22, 47-48 (August 20, 1996) (testimony before the Federal Trade Commission discussing the ease with which identity fraud may be committed through these avenues).
23. Letter from Marcia Z. Sullivan, Director, Government Relations, Consumer Bankers Association, to William W. Wiles, Secretary, Board of Governors of the Federal Reserve System, 3 (Jan. 31, 1997), submitted in Federal Reserve System Study, Docket No. R-0953.
24. Letter from Michael T. Whealy, General Counsel, First Data Corporation, to William W. Wiles, Secretary, Board of Governors of the Federal Reserve System, 2 (Jan. 30, 1997), submitted in Federal Reserve System Study, Docket No. R-0953.
25. Letter from Thomas M. Regan, Counsel, Trans Union National Fraud Center, to William W. Wiles, Secretary, Board of Governors of the Federal Reserve System, 2 (Jan. 30, 1997), submitted in Federal Reserve System Study, Docket No. R-0953.
26. 420 U.S. 469 (1975).
27. Id. at 496
28. 491 U.S. 524 (1989)
29. Id. at 537-39 (citations omitted).
30. 34 Cal. 4th 107; 40 Cal. Rptr. 2d 228 (Cal. 1995).
31. E.g., United Home Rentals, Inc. v. Texas Real Estate Comm'n, 548 F. Supp. 566, 575 (N.D. Tex. 1982) (holding that, because a rental information service is analogous to service provided by newspaper classified advertising, First Amendment prohibited state agency from subjecting service to real estate requirements), rev'd on other grounds, 716 F.2d 324 (5th Cir. 1983), cert. denied, 466 U.S. 928 (1984). See Legi-Tech, Inc. v. Keiper, 766 F.2d 728, 730 (2d Cir. 1985) (database company distributing public record is "an organ of the press"). See also Federal Election Comm'n v. Political Contributions Data, Inc., 943 F.2d 190, 196 (2nd Cir. 1991) (same); Cubby, Inc. v. CompuServe, Inc., 776 F. Supp. 135, 140 (S.D.N.Y. 1991) ("computerized database is the functional equivalent of a more traditional news vendor"); Daniel v. Dow Jones & Co., 137 Misc. 2d 94, 102, 520 N.Y.S.2d 334, 340 (N.Y.Civ.Ct. 1987) (computerized database service "is entitled to the same protection as more established means of news distribution" such as public libraries, book stores, and newsstands).
In the context of granting a publisher a fee waiver under the federal FOIA, a federal appeals court stated that the term "representative of the media" refers, "in essence," to "a person or entity that gathers information of potential interest to a segment of the public, uses its editorial skills to turn the raw materials into a distinct work, and distributes that work to an audience." National Sec. Archive v. U.S. Dep't of Defense, 880 F.2d 1381, 1387 (D.C. Cir. 1989), cert. denied, 494 U.S. 1029 (1990).
32. Cf. Greidinger v. Davis, 988 F.2d 1344, 1355 (4th Cir. 1993) (Because conditioning a person's right to vote on the disclosure of his social security number created an intolerable burden on his exercise of the fundamental right to vote, the state of Virginia must either to drop the requirement that registrants disclose their social security numbers or to delete social security numbers from voter registration records open to public inspection).
33. 425 U.S. 748 (1976).
34. 447 U.S. 557 (1980).
35. Id. at 566.
36. 420 A.2d 189 (Me. 1980), cert. denied, Cohen v. Equifax Servs., 450 U.S. 916 (1981).
37. 864 F. Supp. 1294 (N.D. Ga. 1994).
38. Id. at 1011 n.7.
39. 864 F. Supp. at 1302.
41. At least one other accident report statute has failed to survive the scrutiny required by the First Amendment. See Zackheim v. Forbes, 895 P.2d 793 (Or. Ct. App. 1995).
42. 507 U.S. 410 (1993).
43. 115 S. Ct. 1585 (1995).
44. 115 S.Ct. at 1593.
45. Central Hudson, 447 U.S. at 564 ("the regulation must directly advance the state interest involved; the regulation may not be sustained if it provides only ineffective or remote support for the government's purpose").
46. 476 U.S. 610 (1986).
47. Bowen, 476 U.S. at 616.
48. Id. at 642.
49. 505 U.S. 114 (1992).
50. Id. at 144.
51. Id. at 188 (citations omitted).
52. Id. at 178.
53. Id. at 166; see also United States v. Lopez, 514 U.S. 549 (1995) (striking down the federal Gun Free School Zones Act as unconstitutional on the grounds that the Act neither regulated a commercial activity nor contained a requirement that the possession of a firearm be connected or related in any way to interstate commerce.); cf. United States v. Minnick, 949 F.2d 8, 10-11 (1st Cir. 1991) (upholding regulation prohibiting a felon's receipt of firearms through interstate commerce, noting that "the statute is not directed at states as such, but at individual behavior.").
54. 79 F.3d 452 (5th Cir. 1996).
55. 18 U.S.C. § 922(s) (Supp. V. 1993).
56. Id. at 453.
57. Id. at 458.
58. Id. at 461 (quoting New York, 505 U.S. 144, 178); see also Romero v. United States, 883 F. Supp 321 (W.D. La. 1995) (striking down as unconstitutional under the Tenth Amendment provisions of Brady Handgun Violence Protection Act).
59. No. 95-1478 and No. 95-1503.
60. 992 F. 2d 937, 947 (9th Cir. 1993).
61. Id. at 941.
62. Id. at 947.
63. Condon v. Reno, C.A. No. 3:96-3476-19 (D.S.C. Feb. 21, 1997).
64. Plaintiff's Memorandum in Opposition to Motion to Dismiss, Condon v. Reno, C.A. No. 3:96-3476-19 at 9 (Feb. 21, 1997).
65. Id. at 10.