How Elizabeth Warren Is Trying to Take Advantage of Equifax Scandal
The data breach at Equifax has exposed the personal financial information of up to 143 million Americans—nearly half the country. The scandal has sparked calls for Congressional probes, caught the attention of the Consumer Financial Protection Bureau, and sent millions of consumers scrambling to find out if they are affected—all understandable reactions.
But there is also a risk of overreacting, at both the individual consumer and the federal regulatory level.
For consumers, what exactly is an appropriate reaction?
The Associated Press counsels keeping close tabs on your credit reports and maintaining a general vigilance over your personal financial information for the long term—all prudent actions. But the AP also mentions the possibility of a credit freeze, which would, it says, prevent hackers, or third parties to whom they sell your data, from using your name to get a mortgage or a Platinum credit card in your name.
It sounds like a smart move, but there are downsides.
- It’s not a panacea. If you think a credit freeze will spare you any fallout from the Equifax breach, think again. “I think the biggest risk of a credit freeze is a false sense of security. Just because you freeze your file does not mean you are out of risk,” writes Forbes contributor Nick Clements. That’s because hackers could still raid your open accounts, steal medical or employment information, or commit tax fraud. Clements has tips on how to respond to these risks. (For additional tips see this site as well.)
- It limits your options. Freezing credit prevents hackers from going to town with credit cards in your name. But it also stops you from obtaining new credit cards or loans. Of course, you can always unfreeze your credit but there are fees involved and could take up to three days. In most cases, a freeze is permanent which means that it could come back to bite you later if you’ve forgotten about it.
- Vigilance is the prudent response. Short of freezing your credit—let’s call that the nuclear option—there are plenty of other measures you can take. Simply keeping track of your credit reports will allow you to spot illicit spending and squash it before it spirals out of control and credit card companies ask why you didn’t bother to say something earlier. This may be a bit of a hassle, but it shouldn’t be that hard: an unexpected mortgage for a Newport mansion or an unplanned lavish vacation to Bermuda is kind of the thing that should jump out at you when you screen your credit reports.
- Get a credit fraud alert. Plus, if you’re still worried you can get a credit fraud alert, which requires identity verification before issuing new credit, whether it’s a mortgage, a business loan, or plush new credit card. This option protects your credit without putting one in a straightjacket. For most of the 143 million affected Americans, this should be sufficient to put their minds at ease. (Click here and here to learn more about this option.)
- It may not be feasible right now. If you’re still unconvinced, it may be worth considering multiple reports of the difficulty customers have in getting through to Equifax to freeze their credit. There are already too many people panicking over this. As one Huffington Post writer put it, “Just getting through to Equifax via its website or phone system has become a job for Superman. Mere mortals just can’t do it. Between the site crashing and the phone lines being jammed, The New York Times asked in all seriousness: Do Equifax’s website and phone systems actually [even] work at this point?” Don’t forget you need to all three credit reporting agencies to do this: that means not just Equifax but also Experian and TransUnion.
- You are already being protected. Credit card agencies already take steps to protect you, buy monitoring your spending habits and flagging any unusual purchases or other expenses, as the Huffington Post notes.
Consumer panic is not the only possible overreaction. This is also the risk of government overstepping. Already three congressional committees and two federal regulatory agencies have opened investigations or are contemplating doing so.
Calls for investigations have been followed by legislative action. Sen. Elizabeth Warren, the Massachusetts Democrat, has introduced the Freedom from Equifax Exploitation (FREE) Act which aims to take a number of steps to empower consumers. It allows them to freeze their credit for free, grants them free credit alerts, and “access” to fraud alerts, according to Warren’s op-ed in Fortune. (And credit freezes aren’t that expensive, ranging from about $2 to $10, as Mother Jones notes.)
Warren’s bill itself is modest (Mother Jones, for instance, isn’t impressed.) But there is a possibility that it could be one small step toward a major regulatory overhaul of the industry. In addition to her bill Warren has also written a letter to the Consumer Financial Protection Bureau. In her letter, Warren “asked if the agency has ‘adequate statutory authority to regulate credit reporting agencies and protect consumers’ and solicited the CFPB’s feedback on what other powers it might require to better regulate them,’” as CNBC reported.
The CFPB, Warren’s pet federal agency, remains untested and controversial. Liberals laud the CFPB as a regulatory counterpunch to the Wall Street excesses that led to the financial crisis in 2008. Whether CFPB has achieved any success seems less important than its symbolism.
Meanwhile, conservatives have raised concerns about the agency that are too serious to ignore.
Fears over regulatory overreach seem to have been ratified by a 2016 federal court ruling which declared that the leadership structure was unconstitutional—unlike most other independent agencies that do not report directly to the president, like the SEC, the CFPB is not headed by a commission.
Its lavish office building renovation, at nearly double the original cost, is at odds with the agency’s self-styled image as a force for accountability. And because it draws funding from the Federal Reserve, Congress does not have a say over its budget. Reason magazine has called it “the federal government’s most uniquely unaccountable regulatory agency.”
Even if you’re a fan of the CFPB, this is not the right time to give it new powers. The agency’s leadership is in crisis after its former director Richard Cordray resigned in November and, amid the confusion, two new successors showed up to replace him at the end of the month, as the New York Times reported. (As of this writing, the conflict between Trump’s temporary appointee and the acting director was heading for the courts.)
There are also alternatives at the state level, such as a pair of bills from Pennsylvania state Reps. Brian Ellis (R-Butler) and Mike Driscoll (D-Philadelphia) that would accomplish much of what Warren wants. One of the bills mandates notification of breaches to consumers within 45 days. Credit agencies would also have to inform the Bureau of Consumer Protection in the Attorney General’s office. The other bill also removes the fee for credit freezes.
On the federal level, Sen. Mike Crapo (R-ID) has introduced a bill that also empowers consumers without dragging the CFPB into the mess. Instead of asking the agency to take on more power, the bill asks it to clarify an existing rule on disclosures that need to be made to consumers in the mortgage application process. Crapo and his co-sponsors deserve credit for tackling the Equifax crisis by providing an alternative to Warren’s approach.
The specter of nearly half the country having its private financial information exposed creates conditions ripe consumer overreaction and federal regulatory overreach. The situation calls for prudence, not panic.
Stephen Beale is a freelance writer based in Providence, RI. His work has appeared in National Review, The Washington Times, First Things, The American Conservative, and Crisis Magazine. Email him at email@example.com or follow him @bealenews