How and Why the Federal Government Should Collect Data – Help, Not Harm
Simply put, the federal government should collect data to help people and improve their quality of life, not hurt people.
One of the most ignominious examples of harm is the recent actions of the Department of Government Efficiency (DOGE) and the Trump Administration to place the records undocumented immigrants in the Social Security’s Death Master file. Once a person’s data is in this file, the rest of the world thinks the person is deceased. The person is unable to function in a modern economy as banks, landlords, and other entities use the Death Master File to protect against fraud by making sure no one is using a deceased person’s records to obtain money illegally.
The Administration is fully aware that the undocumented immigrants they are placing in the Death file are not deceased. They do so in order to render a person unable to function economically and encourage the person to return to his or her home country. Yet, there are many reasons why an undocumented immigrant is here, including fleeing gangs or other dangerous situations. To summarily render people unable to function in the United States is not only incredibly cruel but counterproductive from an economic efficiency perspective. Several undocumented immigrants perform work that many citizens do not engage in, and several others have skills in great demand for the functioning of an advanced economy.
The Big Brother Orwellian fear of federal data collection is ever-present in our country and will only worsen as a result DOGE’s cruelty. It will make it harder for the government to collect data for the purpose of improving people’s lives.
In my field of fair lending, we strive to ensure that families and small businesses have fair access to affordable and sustainable credit so they can buy homes and start or expand small businesses. Since 1975, the federal government has collected data from lending institutions called the Home Mortgage Disclosure Act (HMDA) data. HMDA data records the income level, the race/ethnicity of borrowers, information on loan terms and conditions, and the census tract location of the home being financed. Federal agencies, most recently the Consumer Financial Protection Bureau, go to great lengths to ensure that no personally identifiable information is in the data and that the data cannot be used to track down individuals, harass them, or commit fraud against them. As a result, neither the government nor any private sector actors can use HMDA data to hurt people.
The HMDA data is used to identify any unfairness in the lending marketplace that could be impeding modest income people, women, or people of color from obtaining home purchase, refinance, or home improvement loans. In addition to identifying abusive practices on the part of some lenders, the data is used to identify missed lending opportunities and unmet credit needs. HMDA data used in this way is a win-win. Families and businesses build wealth through homeownership and small business ownership and banks profit by finding more lending opportunities.
I document the success of HMDA and its companion legislation, the Community Reinvestment Act, in combating discrimination and increasing access to credit in my new book, Ending Redlining through a Community-Centered Reform of the Community Reinvestment Act.
Since the passage of HMDA in 1975, I am not aware of any instance of a predatory actor using HMDA data to hurt any consumer. HMDA is a remarkable success story that should be replicated widely. In fact, a new government data requirement, called Section 1071 after a provision of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, was supposed to repeat HMDA’s successes in the small business arena. The federal government was required to collect demographic data and information on loan terms and conditions concerning lending to small business owners. However, the Trump Administration has announced that it will re-write the regulation implementing Section 1071 and is likely to substantially dilute the data collection and reduce its usefulness.
Opponents of the lending data argue that it is too costly to collect for financial institutions and will cause them to reduce lending. The HMDA experience, however, refutes these claims since the data has been collected for almost 50 years without any discernible impact on the growth and lending volumes of financial institutions.
The other claim is that the data will be used to hurt people by enabling fraudsters to identify and victimize people. However, I have used this data since the mid-1990s and I know of no malicious use of HMDA data. Done carefully, the government can prevent any identification of consumers and harms arising from the data as HMDA shows. Done carefully, the data collection helps people. In contrast, abuse occurs when the government is in the hands of officials that want to hurt segments of the population, usually the most vulnerable, with malevolent use of data. The solution is not to halt data collection in general but to demand that entities like the DOGE immediately cease and desist from their destructive and illegal use of the data.