Electronic blacklists raise alarms: From store returns to job offers, computers often accept or reject

By Ariana Eunjung Cha
The Washington Post

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WASHINGTON — Darlene Salerno considers herself a loyal customer of the Express clothing chain, shelling out roughly $2,000 for its trendy outfits each year for the past decade. On a recent shopping trip, she bought a tank top, a button-down shirt and some khaki pants, but realized later that she had similar items in her closet. So she took them back to the store a few days later. She presented the items, the receipt and waited for her money.

Instead, the saleswoman handed her a slip of paper that said "RETURN DECLINED" and told her to call the toll-free number at the bottom for more information. She phoned and was informed her account showed "excessive" returns.

Several major retailers — including KB Toys and Sports Authority, according to store personnel — are rolling out electronic systems that weigh the number of returns and exchanges a person has made, the dollar value of the items, and the dates of the transactions to decide whether a consumer should be granted another. The systems are designed to catch shoplifters and those who "wardrobe," wearing clothes and then returning them for a full refund.

But Salerno, a receptionist at a Manhattan financial firm, said she falls under neither category. She returns things often because she buys things often. She said she feels she has done nothing wrong — the clothes never were worn and the tags still were attached — but that she was treated like a criminal.

"I'm embarrassed to go into the store," said Salerno, 26. "I love their clothes, but I'm afraid to shop there now."

As more personal information is collected into databases, computers have been handed increasing power to make decisions about our everyday lives. The technological systems aim to solve important business problems, but the proliferation of these "electronic blacklists" has alarmed consumer and privacy advocacy groups.

"Technology has made it cheap to do all kinds of surveillance and watch over people and make sure they obey the rules. But when a system makes a mistake, what can you do?" said Richard Smith, an Internet security and privacy consultant.

The Fair Credit Reporting Act of 1970 gives consumers rights concerning information used to make decisions about credit, insurance, employment or other services. Other federal laws impose disclosure requirements on information collected by the medical establishment or the financial-services industry.

But companies increasingly are creating databases not envisioned by such regulations, and there is debate about which laws, if any, apply.
 
Peggy Twohig, assistant director of the Division of Financial Practices of the Federal Trade Commission, which administers the Fair Credit Act, said whether a particular information system is covered by it "depends on the particular facts of each system, and can be a complex legal question."

Among databases being created is one for landlords that purports to list renters who have been evicted. Others claim to identify "known" spammers. St. Louis-based Talx, meanwhile, has compiled more than 100 million employee records that contain names of companies, dates of employment and job titles.

More than 1,000 firms, including American Airlines, FedEx, Hewlett-Packard, Kmart, Marriott International, Microsoft and PepsiCo, make use of the service to speed along the screening process for potential new hires.

But workers worry that some companies, for instance, use the word "inactive" to refer to people who have left the company for any reason; other companies use "terminated," a word that some employees have argued has negative connotations.

Perhaps the most common complaint is that job titles are incorrect. Shelli Isiminger of Dover, Del., said one of her former employers reported that she was a "supervisor" rather than a "call-center manager," a big distinction in her industry.

Mike Smith, vice president for marketing at Talx, said that the company tries to facilitate communication between employees and employers but that it considers itself an agent for the employers and that any changes to records must be made through them.

Another company, DoctorsKnowUs.com, created a database of people who have filed malpractice claims as a resource for doctors. John Jones, a Kaufman, Texas, radiologist who spent seven years compiling the information for the site, said he took it offline after some patients complained that it was impossible to differentiate between those with legitimate claims and those with frivolous ones, and that all could be denied care by those using the list.

Since then, however, Jones has received hundreds of e-mails and phone calls from doctors who want the site back online, and he said he is considering resurrecting it.

A spokesman for Limited Brands, which owns the Express stores, declined to answer questions about its computerized return-authorization system. Mark Hilinski, a co-founder of the Return Exchange, an Irvine, Calif.-based company that provides technology for the retail chain, said the computer denies returns to 1 to 2 percent of customers at most stores.

Even though the database is not subject to the requirements of the Fair Credit Act, he said his company provides consumers a free copy of their report when they ask and it gives them an opportunity to correct inaccurate data.

The company's criteria for judging returns varies from retailer to retailer and is not disclosed because it inadvertently might aid those who want to abuse the system. It's possible, the company said, that a return rejected one day could come in the next day and be approved.

Some consumer- and privacy-rights advocates say they sympathize with retailers' desire to root out fraud but said they are worried that disclosure about the electronic-tracking system has been inadequate. Jordana Beebe, a spokeswoman for the Privacy Rights Clearinghouse in San Diego, said consumers should be told exactly why their return is denied and warned before they hit that point.

Salerno said the report she returned from the Return Exchange showed she had made six returns from June to August for a total of about $375 but that in at least four cases the transactions were exchanges and she actually ended up spending more money on other clothes. She said she contacted the company by phone and by mail to complain. She said she has not received a response.

Hollinger, who consults for the Limited, said such cases represent the "teeny tiny glitches" in the system that he feels will be worked out. "Over the decades, retailers realized they were leaving the door wide open for fraud and a number of the major ones realized that ... there has to be some technological solution to this," Hollinger said.

But for all the money and effort retailers have spent on this high-tech system, there appears to be a low-tech loophole, Salerno discovered. After giving up on trying to clear her record with the company, she enlisted the help of a friend, who was able to return the unwanted clothes without hassle.