Equifax Hack Spawns Free Credit Data Services

Summary

WSJ Your Money Briefing: "Equifax Hack Spawns Free Credit Data Services"

Date: March 9, 2018
Host: J.R. Whalen
Guest: Lalita Clozell, Wall Street Journal Reporter

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Episode Overview

This episode discusses how the massive Equifax data breach, which impacted nearly 148 million Americans, has paved the way for new consumer protections—most notably, a proposed law that would require credit reporting agencies to offer free credit freezes and unfreezes nationwide. Host J.R. Whalen and WSJ reporter Lalita Clozell explore what the bill means for consumers, the current practices of credit bureaus, and the wider implications for both the industry and consumer security.

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Key Discussion Points & Insights

1. The Equifax Breach and Its Fallout

• Background: The 2017 Equifax data breach exposed sensitive credit information of nearly half the U.S. population.
• Impact: The breach highlighted vulnerabilities in how consumer credit data is managed and spurred legislative action.

2. Pending Legislation: Free Credit Freezes Nationwide

• Proposed Change:
  • The pending bill would establish a national standard for credit freezes.
  • All credit reporting agencies (Equifax, TransUnion, Experian) would be required to offer free freezes and unfreezes to consumers.
  • “The bill would impose a national standard that would require all credit reporting agencies to offer free credit freezes to consumers and free unfreezes...” — Lalita Clozell [00:54]
• Current System:
  • Agencies typically charge for freezing/unfreezing—up to $10—though fees and rules vary by state.
• National, Not State-by-State:
  • The bill would preempt state laws, standardizing free credit freezes across the country.
  • "The change would be pretty broad because it would override any state laws on...credit freezes." — Lalita Clozell [03:34]

3. Consumer Benefits: Why Freeze Your Credit?

• Identity Protection:
  • Freezing your credit file blocks potential identity thieves from opening accounts in your name.
  • "If you freeze your credit report, a potential lender can't go in and ask for the credit reporting firm to verify your credit...they probably wouldn't move forward offering a loan to someone in your name." — Lalita Clozell [01:25]
• Practical Analogy:
  • J.R. Whalen likens it to “putting a lid” on your credit data, making you less visible to fraudsters.
    • “It's almost as if you're leaving your credit data really out there exposed and being able to put a lid on it can kind of turn the spotlight off of it for the bad guys.” — J.R. Whalen [01:58]
  • Lalita Clozell agrees: "That's exactly it. And then they can't use it to apply for loans in your name." [02:08]

4. Industry Pushback and Revenue Loss

• Credit Bureaus’ Response:
  • Freezes are a revenue stream (though not the biggest) for agencies—fees help cover operational costs.
  • Agencies are not keen on losing both revenue and state-level flexibility.
  • "They do charge for the services. In most states in the U.S., they're allowed to charge...typically up to a $10 fee. And if they don't get that source of revenue...they might not even be able to cover the costs of providing the services." — Lalita Clozell [02:25]
• Implications for All Three Major Bureaus:
  • Equifax breach drives reforms that will impact Experian and TransUnion as well.

5. Compliance Timeline: How Quickly Will Credit Files Be Frozen?

• Mandated Response Times:
  • Electronic or phone requests: 1 day to freeze/unfreeze.
  • Mail requests: 3 days.
  • "It depends on if you request electronically or if you do it by snail mail...if you do it electronically, they'd have one day or by phone." — Lalita Clozell [04:12]

6. Potential for Upselling

• New Business Model:
  • Credit reporting agencies may use freeze requests as opportunities to market and sell other paid products to consumers.
  • "...they could at the same time try to sell certain products that they'd be able to charge for." — Lalita Clozell [04:38]

7. Legislative Timeline

• When Will This Happen?
  • The credit freeze measure is included in a larger bipartisan Senate bill focused on rolling back regulations for regional and mid-sized banks.
  • Passage expected "likely...by next week." — Lalita Clozell [05:02]

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Notable Quotes & Memorable Moments

• On the Importance of Freezes:

  "If you freeze your credit report, a potential lender can't go in and ask for the credit reporting firm to verify your credit...That's why a lot of people who suspect they've been victim of identity theft would want to freeze their credit report."
  — Lalita Clozell [01:25]

• On Credit Data Exposure:

  "It's almost as if you're leaving your credit data really out there exposed and being able to put a lid on it can kind of turn the spotlight off of it for the bad guys."
  — J.R. Whalen [01:58]

• On Revenue Concerns:

  "They do charge for the services...if they don't get that source of revenue, then, you know, in some cases they might not even be able to cover the costs of providing the services."
  — Lalita Clozell [02:25]

• On the Scope of Reform:

  "The change would be pretty broad because it would override any state laws on...credit freezes."
  — Lalita Clozell [03:34]

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Key Timestamps

• [00:54] – National standard for free freezes/unfreezes explained
• [01:25] – The consumer value of freezing credit
• [01:58] – Exposing versus protecting your credit data
• [02:25] – Revenue concerns for credit bureaus
• [03:34] – The bill’s national scope and state law preemption
• [04:12] – Compliance timelines for freezes/unfreezes
• [04:38] – Opportunity for agencies to upsell other services
• [05:02] – Timeline for expected passage of the law

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Summary Takeaways

• The Equifax hack has triggered significant legislative reform, ensuring all consumers nationwide can freeze and unfreeze their credit data for free—removing what was once a fee-based service.
• The new law will override a patchwork of state regulations, bringing uniformity and improved consumer protection.
• Credit bureaus are likely to pivot their business models to offset lost fee revenue via new paid services.
• The reform is imminent, incorporated within a larger bipartisan regulatory relief bill expected to pass soon.

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Transcript

[Commercial Announcer]

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[J.R. Whalen]

this is yous Money Matters from the Wall Street Journal. Welcome to youo Money Matters. I'm J.R. whalen in New York. For the nearly 148 million Americans affected by the an Equifax data breach, there's a bit of good news. They're in line for freezes and their credit data free of charge. Wall Street Journal reporter Lalita Clozell joins us from our Washington bureau to explain the significance of this. So, Lalita, there's a bill making its way through Congress and it would affect all credit reporting agencies. What would it specifically require those agencies to do?

[Lalita Clozell]

So the bill would impose a national standard that would require all credit reporting agencies to offer free credit freezes to consumers and free unfreezes, meaning once your credit freeze has been implemented, when you want to turn it off, if you know you're applying for a loan, for instance, then that would be free as well.

[J.R. Whalen]

And what exactly is the value to consumers of this freezing of access to their credit data? What kind of benefit is there for them to freeze it and then unfreeze it?

[Lalita Clozell]

In order to make sure that someone doesn't steal your identity, you want to make sure that they can't go in and apply for a loan in your name when you freeze your credit report. That means that a potential lender can't go in and ask for the credit reporting firm to verify your credit. So ultimately they probably wouldn't move forward offering a loan to someone in your name when you freeze your credit report. And that's the value. That's why a lot of people who suspect they've been victim of identity theft would want to freeze their credit report.

[J.R. Whalen]

Oh, okay. So it's almost as if you're leaving your credit data really out there exposed and being able to put a lid on it can kind of turn the spotlight off of it for the bad guys.

[Lalita Clozell]

That's exactly it. And then they can't use it to apply for loans in your name.

[J.R. Whalen]

And the credit reporting agencies aren't particularly thrilled about this idea of this new law about freezing and unfreezing because putting a freeze on credit data currently is a strong source of revenue for these companies.

[Lalita Clozell]

Right. So it's a source of revenue, not probably the largest source of revenue, but they do charge for the services. In most states in the US they're allowed to charge for the services. Typically, it'll be like up to a 10 doll fee. And if they don't get that source of revenue, then, you know, in some cases they might not even be able to cover the costs of providing the services.

[J.R. Whalen]

And in your story in the Wall Street Journal, you spoke to somebody who said that if it were not for the Equifax data breach, this whole idea of being able to freeze and unfreeze data would not have come around. This sort of added a whole new level of oversight to protecting the consumers.

[Lalita Clozell]

There are three major credit reporting firms in the U.S. equifax, TransUnion and Experian. So the breach affected Equifax. But obviously those reforms are going to affect the entire Industry and TransUnion and Experian as well. So as you can imagine, they're not too happy about having to deal with this additional oversight as a result of the Equifax hack. And the bill would be a pretty big change because it would preempt state law. So the change would be pretty broad because it would override any state laws on crime, credit freezes. And there's dozens of state laws that describe how credit reporting firms, how much they can charge for these services. And now it would be just a blanket across the country, no charge.

[J.R. Whalen]

All right. We're speaking with reporter Lalita Clozell, and you're listening to youo Money Matters from the Wall Street Journal. Welcome back, everybody. So, Lalita, if a consumer requests a freeze on access to their credit data under this proposed law, the reporting agencies have just a couple of days to comply. They can't stop and think about this.

[Lalita Clozell]

Would they have a specific time period within which they have to comply and freeze your credit report? It depends on if you request electronically or if you do it by snail mail, for instance, they'd have three days. If you do it electronically, they'd have one day or by phone.

[J.R. Whalen]

And while the credit reporting agencies will lose out on revenue tied to freezing of credit data, they are also very likely to offer consumers other services during this process. Is that right?

[Lalita Clozell]

Some of the credit reporting firms have indicated that they'd be able to piggyback on those requests. Right. If a consumer calls and tries to request a credit freeze, then they could at the same time try to sell certain products that they'd be able to charge for.

[J.R. Whalen]

Okay. And any idea of a timeline as to when this proposed piece of legislation would become law?

[Lalita Clozell]

So this is actually a provision that's part of a broader bill in the Senate, a bipartisan bill that is mainly focused on easing regulations on some regional and mid sized banks. So the bill is likely to pass by next week.

[J.R. Whalen]

Okay. That's Wall Street Journal reporter Lolita Clozell joining us from our Washington bureau. Lolita, thanks for being with us.

[Lalita Clozell]

Thank you so much.

[J.R. Whalen]

And thank you for listening to youo Money Matters. I'm JR Whalen in New York for the Wall Street Journal.

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