How the post office sells your address update to anyone who pays (and the little-known loophole to opt out)

by Adam Tanner, Forbes

Have you ever wondered how junk mail follows you so easily when you move to a new address? How do credit card companies, catalogs, charities seeking money and everyone else all know when you have moved across town or across the country entirely?

Whenever you fill out a change of address form with the United States Postal Service, the USPS adds your new details into a database of 160 million previous address changes over the past four years. The USPS has deals with data brokers to sell this data to anyone who pays, provided they have your old address. That means data firms cannot buy the address of Leroy Jones in Cincinnati, but can obtain his new address if they know where he used to live, which they usually do anyway.

It’s all there in the fine print when you sign up for a change of address: “We do not disclose your personal information to anyone, except in accordance with the Privacy Act.” Then it lists a number of exceptions including “to mailers, if already in possession of your name and old mailing address, as an address correction service.”

The Postal Service set up its current National Change of Address program, sometimes abbreviated as NCOA, in 1986. Until 2002, the USPS licensed to just 22 companies. After complaints about privacy violations, they reformatted the data to assure only those with the former address could obtain the new information, according to spokesman Roy Betts. That change allowed the postal service to distribute the address changes more widely. Today they license to about 500 companies, he said.

“Either weekly or monthly we distribute an updated file of change-of-address data to the licensed companies,” Betts said. “Mailers submit their address lists directly to these commercial data processors who update the information and return to the mailer.”

A full license with four years of data costs $190,000.  The post office also sells cheaper licenses with 18 months of data.  The Postal Service makes about $8 million a year licensing its change of address data, according to James Wilson, the USPS manager of address management. But the program results in big savings by avoiding additional cost of forwarding mail. “The ability to update customer address information through NCOALink has been previously estimated to save the USPS and the postal rate payer in excess of $1 billion annually,” he said, referring to what they call undeliverable-as-addressed mail. ” This amount does not include the savings to the mailing industry for wasted postage, production costs, and lost customers.”

The Postal Service lost nearly $16 billion in fiscal year 2012, then another $3.1 billion in the first half of fiscal 2013.

When the Direct Marketing Association holds its annual convention, the USPS sets up a large stand to pitch the service in a giant hall alongside the country’s biggest data brokers. Last fall, that’s where I met Bob Eide, an affable direct mail specialist who has been with the postal service since 1973. He told me about a fifth of the U.S. population moves every year, and that the sale of new addresses to data brokers saves the postal service money by reducing the amount of mail they have to forward to new addresses.

Among those buying full licenses are some of the country’s most prominent data brokers including Acxiom , Epsilon, FICO, Harte Hanks, InfoUSA, Merkle and KBM Group. Licensees in turn sell that data to direct marketers. Prices vary; a few I looked at charge around $1,000 to update one million address records. Other companies incorporate the information into their comprehensive dossiers on almost all Americans (one leader in the field, Acxiom, recently said it would allow consumers to see their individual dossiers for the first time from the end of the summer).

If you want to forward your mail, the USPS does not offer an option to opt out of sharing the data, or even paying for the privilege of opting out. Members of Congress have from time to time proposed creating an opt-out option, but to date such initiatives have failed. Some continue to lobby for the idea.

“There’s nothing terrible about NCOA, but people should be given a choice,” says Bob Gellman, a privacy expert who worked for many years as a Congressional subcommittee staff member. “New movers are fodder for data brokers, who sell mailing lists to marketers and who also maintain lifetime files on every household in America.  NCOA is a prime source of this information.”

“USPS justifies the program on the grounds that they don’t ‘sell’ the list but license its use. That is a subterfuge.  Supposedly, you only get a new address if you have the old address already.  Because data brokers have every household in America in their files, the information goes from NCOA to the data brokers, who flag every change and resell lists of new movers to anyone. “

There is, however, a loophole that keeps data brokers from accessing your updated address. When you fill out the online form to change an address, you can indicate a temporary change that provides six months of forwarding that can then be extended for another six months.  That information, unlike the changes marked as permanent, is not included in the master list sold to data brokers.

Even if you do not file a change of address with the post office, data brokers often learn that you have moved when you update your magazine subscriptions, deed registrations, phone connections, credit card details or have transitions with other companies. Then they include you into a list of ‘new movers.’ Data brokers such as Experian sell such lists to doctors and dentists, lawn maintenance services, furniture and appliance dealers and others who want to lure the business of the new kid in town.

“Given that a customer has the option to submit a change-of-address or to make alternative arrangements to have their mail forwarded, along with the option of submitting a temporary change-of-address, we believe providing an opt-out from allowing the updating of outdated address information yields minimum benefits while it can result in significant cost increases,” said Wilson of the USPS. “Also, since customer address information is routinely compiled and disseminated by a whole host of channels outside of the USPS change-of-address program, adding an opt-out option to the USPS change-of-address program significantly burdens the mailing industry with little effect on preventing the disclosure of customer information by these other means.”