Data collected on airline travellers to help in the fight against terrorism should not then be used for any other purposes, peers have warned.
A report from the Lords European Union committee said restrictions on sharing passenger name record (PNR) information with the US must be tightened.
Tuesday's study comes as negotiations continue between America and Europe on a new PNR agreement.
The committee said that data must be collected accurately, analysed correctly, and used only for counter-terrorism and related crimes.
And they warned that the current PNR agreement with the US fails to guarantee these standards, with the data being used for investigating crimes other than terrorism.
The data is distributed without appropriate safeguards and the US authorities are avoiding their current undertakings. The peers said that this "cannot be allowed to continue".
Setting out the framework for a new agreement, they said that airlines must inform passengers about what happens to their personal information, including who receives it and under what conditions.
The data being shared should now allow for categories such as 'general remarks', which allow open-ended sharing of information.
Lord Wright of Richmond, chairman of the Lords EU sub-committee on home affairs, said: "We accept that the sharing of PNR data can be valuable in protecting the public from the very real threat of international terrorism.
"However it is crucial that any new agreement does not prejudice the rights of law-abiding travellers.
"Their personal data must be used only for fighting terrorism and other equally serious crimes. It must be kept safely and not used for other purposes.
"The PNR agreement between the EU and Canada strikes the right balance between safety, security and privacy. The agreement being negotiated with the US must do the same."
