by Jeff Sovern
I've been listening to the several hearings in Washington this week at which former Equifax CEO Richard Smith testified. I haven't finished yet, and may have more to say, but here's a quick observation. Mr. Smith testified at various points that Equifax planned to make things right for consumers. For example, here is a quote from his written testimony before the Senate Banking Committee:
Upon learning of suspicious activity, I and many others at Equifax worked with outside experts to understand what had occurred and do everything possible to make this right.
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[W]e struggled to understand what had gone wrong and to make it right. This has been a devastating experience for the men and women of Equifax. But I know that under the leadership of Paulino and Mark they will work tirelessly, as we have in the past two months, to making things right.
Mr. Smith also described various steps Equifax is taking to make things right, including rolling out a new product in January 2018 which will be free and enable consumers to control access to their credit report. But in response to questioning, Mr. Smith testified before the Senate Banking Committee that Equifax was not offering compensation to injured consumers.
What kind of injuries might there be? Well, the other two big credit bureaus, TransUnion and Experian, can charge for their credit freeze services and many consumers have undoubtedly availed themselves of those services since the breach came to light. Thern there's the risk of identity theft. How likely is it that the hackers will have gone to all the trouble of hacking into Equifax but have no plans to use the data thus disclosed? Consumers whose identities are stolen may suffer significant damages from the harm that Equifax made possible. That's why consumers need the ability to bring class actions against Equifax.
One other note: Senator Warren's questions elicited statements from Mr. Smith to the effect that Equifax might ultimately profit from the breach. For example, according to Mr. Smith, the identify theft protection service Lifelock uses Equifax for some of its services, and so Equfax makes money when people use Lifelock. The Senator observed that Lifelock had increased its customers by a factor of ten since the breach. Equifax stock has lost a lot of value, but its value may go up again after the crisis recedes in the headlines. Consumers have little ability to punish Equifax and so Equifax is unlikely to pay a big price at the hands of consumers. I doubt Equifax will do well as a result of this breach, but it remains to be seen what the long term effect is.