Monday, September 25, 2017

Getting Rid of Equifax


Negligent data-breach victim Equifax ironically warning its corporate customers that their data could be breached

by Gaius Publius

The massive data breach suffered by Equifax, one of the nation's three credit data reporting agencies, caused by what looks for all the world like negligence (see below), has gotten everyone's attention, including the other two credit agencies. Experian is running commercials as we speak offering to help.

But concerns about protecting financial data deal with only half the story. Why do companies like Equifax, TransUnion and Experian exist to begin with?

After all, as many writers have recently pointed out, you the consumer are not their customer — you're their product. It's you and your data that's being sold to their actual customers, anyone who wants it and will pay.

You actually have no financial relationship with any of these companies at all, and they have no — repeat, no — obligation to serve your interest. Equifax, in fact, suffered a prior data breach last March and told no one about. After the most recent breach, their corporate executives sold several million in stock and options before reporting it. And despite the fact that the "fix" for the current data vulnerability was available months before the breach, Equifax didn't install it. Negligence, in other words, but with no possibility of recourse by those injured — you.

Consumers have no rights at all with respect to these companies — no right to forbid them access to their financial data, no right to force them to correct errors, and no right to limit where they sell their collected data (to your employer, for example).

One can only conclude that Equifax — and in fact that whole industry — performs a private service, but no public service whatsoever, and arguably does public harm, all for the profit of its CEO and shareholder class.

Why do they exist at all? The answer lies in their history.

Why Does Equifax Exist?

The reason Equifax exists is revealed by a look into its history. Via writer Bryce Covert at the New York Times (emphasis mine):
Equifax is the oldest of the Big Three credit reporting bureaus, and it got its start as a private investigator in the late 1800s. A client — a business or a bank — would ask it about a consumer, and it would go about digging up dirt on things like marital problems and convictions. That client would then pay it for its services.

This questionable business model raised eyebrows in the 1960s, when the companies were still compiling information on people’s “moral character” such as affairs or drinking problems. At the time, the reports weren’t available at all to the subjects themselves. That changed with the Fair Credit Reporting Act, which was signed in 1970. But even that reform put virtually no oversight on the bureaus’ practices.

Things haven’t changed all that much. Those who want to dig up dirt via a credit report pay one of the Big Three companies and voilà, they have a dossier of financial information.
In other words, Equifax, TransUnion and Experian exist to "dig up dirt" on ordinary people so people with money can decide what to do with them — whether to loan them money, to employ them, to insure them, to sue them, or not. This industry acts as a protection agency for the wealthy, in that it serves only to protect their wealth.

Equifax et al are like the sleazy private detective loitering about with a camera wherever you go, checking to see if you're seeing someone other than your spouse — except that the dirt these companies are digging up can do much more damage than a divorce. This dirt can keep you unemployed and unemployable for more than a decade.

Are Credit Data Collection Agencies Needed?

The answer to that question is Yes, but they don't have to exist as for-profit companies accountable to no one but their owners and top executives. Collecting credit data can most easily — and accurately — be done be a government agency. It is in fact done by government agencies in the largest countries in Europe.

Covert again:
In at least 40 other countries — including Belgium, France, Germany, Italy and Spain — credit reporting can be done by 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’s correct and that errors are fixed. Data on late payments and defaults are erased once a consumer has settled up.

Many of these public registries leave out things like medical debt, tax information and personal details like marital status, focusing only on loan amounts. Only about 40 percent of registries collect consumers’ addresses, and two-thirds collect taxpayer IDs — the kind of information leaked in the Equifax breach. [emphasis mine]
The benefit to government taking over this function would not just be greater accuracy, but social responsibility. Do you want your employer — or potential employers — to access your credit data? After all, nothing about your credit data predicts how you will perform on the job. Government control of this function would limit who can request this information to those who actually need it, not those who merely want it.

The Neoliberal Profit-Protection Racket

Of course, the opposition to such a proposal is the same as the opposition to Medicare For All, despite its obvious cost- and outcome-benefit to American citizens. Post-war neoliberals in both parties see the job of government as proactively protecting the profit of large companies and investors (click if you don't see why; the link takes you to an excellent interview with Philip Mirowski, Economics professor at the University of Notre Dame and an expert on this subject).

On the Republican side of the neoliberal sales job, it's called "freedom." On the Democratic side it's called "wealth creation," with the (deliberately false) implication that jobs will follow.

Would the nation be better off without the jobs in the credit reporting industry? Of course; the industry is not that large an employer to begin with, and if they could lay off half of their employees tomorrow and still make money, they would. Every large company in America, in fact, would do the same at the drop of a hat.

In the same way, the nation would be better off without the jobs in the health insurance industry — and there would be one huge added bonus. The net effect of Medicare For All would be a financial stimulus so large that those lost jobs would be more than offset by the giant economic stimulus the nation would experience every year due to the very large net savings — a net increase in each family's bottom line of thousands of dollars per year.

Elizabeth Warren has introduced a bill that would make it illegal for employers to request credit data on employees or prospective employees. A start, but that solves only the edges of the problem. Someone should introduce a bill making credit data collection and reporting a public function.

Any progressive Congress people willing to take that risk and reap the reward in massive public support? Now's the time to step up.


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