Call it ironic that on the very day Equifax went public with news of its massive data breach, Congress was holding hearings on reducing the regulations imposed on U.S. credit bureaus. Long before the recent breach that exposed confidential data affecting about 143 million Americans, Equifax had been lobbying aggressively on issues involving data security and breach notification, as well as proposals to limit exposure to lawsuits. These lobbying efforts have cost the credit reporting agency a reported half million dollars, as Equifax tried to drum up support from lawmakers in Congress. Democrats have been vocal in their opposition to legislation that limits credit agencies’ exposure to class-action lawsuits. Sen. Elizabeth Warren (D-MA), who introduced legislation aimed at cracking down on credit bureaus, and New York Gov. Andrew Cuomo, who wants to expand the state’s strict cybersecurity standards for the financial sector to include credit reporting bureaus, are two Democrats who have taken up the fight on behalf of consumers.
Irony aside, the Equifax situation is a good example of what happens when theory and practical application in the real world collide. From the get-go, the Trump administration has highlighted excessive government regulations as an unnecessary drag on business profitability and economic growth, and has made loosening regulations on banks and other financial institutions a major priority. Few people want more red tape in their daily business dealings; but on the other hand, most people want more accuracy in reporting and more accountability from the credit agencies that play such a major role in our country’s financial sector.
Credit agencies are integral to the financial infrastructure of the United States. When problems arise, the implications are serious. Apart from a major data breach like the recent one at Equifax, credit-reporting agencies’ errors can cause significant difficulties for consumers who cannot buy homes and autos or get bank credit without good credit ratings. A Federal Trade Commission report published in 2013 showed that 5 percent of all consumers had errors on one or more of their credit reports that could cause them to pay more for transactions like auto loans and insurance. Consumer complaints, which have increased 1,700 percent over the past 20 years according to the U.S. Chamber of Commerce, have grown exponentially as the agencies’ reliance on technology has soared. Industry critics believe the credit agencies should be held as accountable, and face as much scrutiny, as regional banks.
For their part, anti-regulation Republicans argue that abuses in the court system can adversely affect not only a business, but also its employees, customers and vendors. A bill to cap penalties resulting from class-action lawsuits and to eliminate punitive damages leveled against credit agencies, introduced by U.S. Rep. Barry Loudermilk (R-GA), was derailed by the Equifax data breach and by the agency’s subsequent delay in making the news public. Given the extent of the data breach and vocal criticism of the company’s handling of the situation, public opinion and sentiments on Capitol Hill most likely will be tipped in favor of the pro-regulation faction for the time being.