There are many appalling aspects to a recently revealed data breach at consumer credit reporting giant Equifax. But the primary lesson from the scandal is the need for strong federal oversight of financial institutions.
This runs counter to the wishes of many in Congress, with Republicans arguing that consumer protections should be rolled back. In June, the House of Representatives passed the Financial CHOICE Act, which would reverse many of the provisions passed in the wake of the nation’s 2008 financial collapse; the Senate is working on its own version of the bill. Meanwhile, the Consumer Financial Protection Bureau, created as part of the reform legislation known as Dodd-Frank, has been a frequent target of criticism from conservatives.
If members of Congress have any desire to embrace the populist agenda that helped lead to President Trump’s election, if they have any concern for the public, they will recognize the importance of protecting consumers rather than promoting the wishes of Wall Street. And if they have any doubt about such a need, they will examine the situation unfolding at Equifax.
On Sept. 8, officials announced a data breach in which the names, addresses and Social Security numbers of 143 million Americans were exposed. That leaves more than half the adults in the country at risk for identity theft that can become a lifelong burden. Credit information can play a role in determining who gets hired for a job, mortgage rates for home buyers, and credit card approvals. Under the American system of capitalism, the ability to secure credit is essential for the accumulation of wealth.
Equifax officials discovered the breach in July, and three executives reportedly sold some of their stock before alerting the public to the hack six weeks later. That should draw intense interest from regulators and from lawmakers interested in accountability for financial institutions. In addition, Equifax initially allowed consumers to sign up for free credit monitoring — an offer that included fine print saying customers could not sue the company. That caveat generated criticism, resulting in changes to the offer as a data hack turned into a public-relations nightmare.
Equifax, along with Experian and TransUnion, is one of three major credit reporting agencies in the United States, giving it much power while being subject to little oversight. Credit reporting companies adhere to the same security rules as banks but do not face the same scrutiny. That becomes problematic when, as CNN reported, Equifax “has been quietly collecting financial histories of hundreds of millions of people for decades” and when the company is unable to keep that information secure.
Last week, Sen. Elizabeth Warren, D-Mass., and 11 other Democratic senators introduced a bill to help consumers deal with the fallout from the breach. “Credit reporting agencies like Equifax make billions of dollars collecting and selling personal data about consumers without their consent, and then make consumers pay if they want to stop the sharing of their own data,” Warren said. Meanwhile, experts have recommended that consumers place a freeze on credit accounts with the three major reporting agencies, making it more difficult for others to open an account in their name.
That is a good start, but in the long run the situation should result in Congress bolstering the power of the Consumer Financial Protection Bureau. That might be unlikely under a Republican-controlled Congress, but it is essential for restoring faith in our financial system and for safeguarding the public.