Equifax Gets the Profits, We Get All the Risk

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Equifax Gets the Profits, We Get All the Risk

There are three numbers that control your life. This number determines whether you get financing for your business, the mortgage for the real estate you want—even whether you get financing for your business.

This number also determines the interest you get charged on your loans, your credit cards and even the amount you pay for insurance. It may even impact whether you get the job you have applied for.

And you don’t have any control on how the information about you is gathered or distributed—or even if it’s correct. And all that information is turned into this most important number—the credit score provided by the credit bureaus, like Equifax.

What’s worse—Equifax just allowed all that information to flow to hackers who can now create havoc in your life by identity theft.

You feel angry and vulnerable. So is there anything that you can do?

Your First Steps

First you need to take steps to protect yourself and your business. Read my blog What Your Business Can Learn from the Equifax Hack which provides specific strategies that you can implement to protect your own credit and protect your business from being hacked.

Consider putting a fraud alert and a credit freeze on your personal accounts at all three credit bureaus.

The next step is to contact your legislators and make sure that they take steps to regulate the security of your personal and financial information—because today the bureaus are not regulated.

Find Your Elected Officials can help you identify your elected officials and lists how to contact them.

In at least 40 other countries — including Belgium, France, Germany, Italy and Spain — credit reporting is handled through a public credit registry. It is usually operated by a central bank that already oversees the financial institutions that feed information into the reports.

These reports tend to be more accurate because the operators have a legal right to demand data from banks as well as a mandate to ensure it is correct and that errors are fixed. Data on late payments and defaults are erased once a consumer has settled up.

There are many models that can be established that will protect our most valuable personal information.

What’s Happening Right Now

This is the most egregious of all the hacks we have been made aware of. And the repercussions are beginning to show themselves:

  • Equifax has been named in 50 class action suits
  • Lawsuit filed by the Attorney General of Massachusetts
  • Federal Trade Commission has started an investigation for unfair and deceptive trade practices
  • The Department of Justice is investigating for insider trading which is joined by 32 other state attorneys general
  • Both Houses of Congress are demanding information, with Equifax’s CEO expected to testify in the next weeks
  • Canadian and British regulators are beginning investigations

Sounds great doesn’t it. But don’t get too excited.

Why the Credit Bureaus Get Away with Murder

The Equifax hack, which affected over 143 million people’s personal and financial information, is very different—and much more of a watershed event than the many other hacks that we read about constantly.

  1. None of the 143 million people affected gave their sensitive information to Equifax.
  2. The credit bureaus (Equifax, Experian and TransUnion) collect your personal information—without your knowledge or permission—from credit card companies, banks, mortgage lenders and any other organization that extends credit. They collect your financial information as well as your date of birth, Social Security number and credit score. So the effect of the hack is just staggering.

  3. Equifax is one of the big three credit bureaus that have almost total control of the personal information ecosystem.
  4. Not only do they collect our personal information without our permission, they sell that information to anyone that will pay for it.

    The credit bureaus wield enormous power to ruin our lives — if not through a data breach, then through errors on our credit reports. One in four consumers has an error on his credit report that could affect his scores, yet it can be very difficult to correct the record.

  5. The credit bureaus are not regulated.
  6. Many people assume that the credit bureaus are government bureaus or highly regulated like banks. Neither of those assumptions is true. The credit bureaus are private businesses that generate over $10 billion annually and are not regulated by the government.

    In fact, during the months since Equifax knew about the hacks, but before they reported it to us, they were pushing legislation in Congress to stop them from being held liable for any breach, and the Republicans were poised to pass the bill—until the newspapers reported the extend of the breach.

    Additionally, the top executives in the company started selling their stock well before they reported this major breach. After the hack was announced Equifax stock has fallen some 30 percent. This made these executives huge profits by selling their stock before this information was provided publically.

  7. The agencies that oversee the credit bureaus lack authority.
  8. The Federal Trade Commission and the Consumer Financial Protection Bureau are the agencies that are supposed to oversee the credit bureaus. But neither agency has broad power to punish the credit bureaus.

    The credit bureaus have no economic incentive to improve the system because their main customers are the creditors, not consumers.

  9. Consumers are not considered their customers—we are the product!
  10. Their customers are the companies that purchase our information. Since the credit bureaus don’t consider us their customers, it will be hard to prove the class action suits that we are the aggrieved plaintiffs. In other words, Equifax will argue it does not have any obligations to the affected individuals, but only to their corporate customers.

    Many corporate customers may be reluctant to get into the legal fray. And individual consumers may have a difficult time proving that actual harm was done—which is the legal standard for standing in a suit. This "standing" argument is rooted in constitutional law and has been the loophole that many data breach litigations have failed.

Stand Up For Your Rights

We need to take a stand to take back our rights to our personal information. This means taking the time to contact our legislators and tell them what we want. Use the site Find Your Elected Officials today.

The credit bureaus have proved to be failing at protecting the public’s information. Let’s demand that we get our personal information back!

DianeWekler-sml-for-postsDiane Weklar, the Authority on Accelerating Business Growth, is the CEO of the Weklar Business Institute. She is the author of the award winning book, Mastering the Money Maze: 10 Secrets to Winning Business Financing,which is also an Amazon #1 Best Seller. This book provides practical insight to build a successful business and the practical steps to raise capital to help your firm grow. She can be reached at Diane@Weklar.com.

 

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