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A Long Time Coming

Long before the Internet and home PCs became staples of everyday life, credit bureaus and junk mailers collected information about consumers from the purchases they made and the warranty cards they mailed. But gathering this data was slow and expensive. Most of it had to be input by hand, making the task of cross-referencing other information sources virtually impossible.

All that has changed. Personal computers, sophisticated database software, and electronic information networks have transformed the slothful business of poring over mainframe records into a high-tech industry that compiles, cross-references, and exchanges private data instantaneously.

At the same time, the amount of available information about us has increased astronomically. When we buy books and groceries, rent movies, or pay bills with credit and debit cards, we give away information about ourselves. Each time we visit a Web site, we unwittingly leave traces of who we are. As a result, data gathering (or data mining) has become a booming business, with scores of firms pooling what they know about us.

Wells Fargo Bank, for example, has teamed up with a grocery chain in California (the bank declines to say which one) to cross-reference people's shopping patterns with their financial records--a process called cluster analysis . This helps the bank predict which of its services a person may be interested in, based on shopping habits.

"The aim [of the project] is to be able to promote, for instance, a self-directed IRA to everyone who makes over $50,000 and buys Arabica bean coffee every week," says a Wells Fargo Bank marketing vice president, who requested anonymity.

The top data aggregators--companies like Metromail, First Data Solutions, and Acxiom--each maintain information on more than 90 million households and 140 million people. Their databases store such tidbits as when we were born, how often we travel, what we buy, which prescription drugs we use, and whom we call.

"In a perfect world, companies would have to get people's consent before they shared information about them," says Evan Hendricks, editor of the Washington, D.C.­based newsletter Privacy Times. "But this isn't a perfect world."

The most obvious results of data mining are extra junk mail and unrelenting telemarketers who call at dinnertime. But this free flow of information can also have sinister consequences. The things you tell your doctor could keep you from getting a job. Your reputation can be made or lost depending on what your electronic profile--accurate or not--says about you. And an unlucky few may have their identities stolen by computer-age criminals who obtain victims' credit files and make purchases in their names, leaving them in financial ruin.