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How to Navigate the Legality of Using Customers’ Data

— January 27, 2022

Customer data is a valuable asset for businesses. However, collecting and using this data comes with a legal and ethical responsibility.

As consumers continue to purchase and use more devices connected to the internet, concerns about how companies use the data they gather about customers continue to grow. These concerns have been made worse by high-profile data breaches that have exposed millions of customers’ credit card numbers and other information to unauthorized persons. Ensuring your business successfully navigates the legal aspects of using customer data is vitally important.

Privacy Laws May Be Changing

A patchwork of different laws controls how businesses are allowed to use customer data; however, generally, businesses are allowed to use customer data as long as customers are allowed to “opt-out.” A privacy law passed in Maine in 2019 requires internet service providers to ask for customers’ permission before they can use the customer’s data, rather than the default position being in favor of the data being free game unless the customer opts out. The industry has made attempts to fight the law, but so far have been unsuccessful.

The legislation mirrors privacy rules enacted by the Federal Communications Commission in 2016 but revoked by Congress in 2017. If more states or the federal government were to pass similar legislation that applied to all businesses, those businesses would be required to treat customer data as the property of the customer and obtain permission before using it.

Transparency Is Required

Proactive businesses may want to get ahead of potential shifts in legislation by focusing on a high level of transparency in how they collect, use and protect customer data. Technology policies for systems that utilize, store and collect customer data, such as how to train BERT systems, can be adapted to put the protection of customer data at the forefront. One way to accomplish this is to give customers the option to opt in to having their data used, rather than requiring them to opt-out.

Always clearly communicate how and when you use your customers’ data. This will increase customer trust and loyalty. Make opting out of allowing your company to use customer data at least as easy as opting in.

What Type of Data You Collect Matters

Person pointing at data on graph; image by Goumbik, via
Person pointing at data on graph; image by Goumbik, via

Different types of data come with different legal obligations. The Health Insurance Portability and Accountability Act protects personal health information. If you are collecting health information, you need to be aware of HIPAA restrictions. Additionally, personally identifiable information, such as names, dates of birth and social security numbers is federally protected. Companies are required to provide specific protections for financial information.

How You Store Data is Important

In the past, most customer data was stored in segmented and contained data silos. As computing power has increased, businesses have been shifting to a data lake model. Data lakes are repositories where native formatted, raw data are stored. This allows companies to perform analytics in real-time. This data is valuable to your business and to criminals who may attempt to steal it. You must adhere to regulations that govern protecting customer data from unauthorized access.

How You Use Data Must Be Disclosed

Data that is merely collected by businesses is not very useful. However, to legally and ethically use this data, you must disclose how you intend to use it to customers before you collect it. Some uses, such as phone calls, emails and push notifications are strictly regulated. You must make it easy for customers to opt-out of these communications whenever they want.

Data Use Policies Should Be Future Proofed

It is not only important to understand current privacy and data protection regulations but to anticipate where legislation is trending. This keeps your company from being unprepared for legal changes that may require you to drastically alter how you do business. Try to stay on top of trends and modify your policies and data practices to stay ahead of changing regulations and consumer attitudes.

Customer data is a valuable asset for businesses. However, collecting and using this data comes with a legal and ethical responsibility to safeguard this information and be transparent with consumers about its use.

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