Equifax Hack Puts Deregulators On Defensive

Equifax Hack Puts Deregulators On Defensive

The massive data breach at Equifax is threatening to obstruct the financial industry's latest push to relax government regulations, a campaign that has already been in doubt after a series of scandals affecting millions of Americans.

In the House, the author of a bill that would cap damages available to consumers who have suffered wrongdoing under credit-reporting laws has asked the committee that's considering the proposal to hold off, pending an investigation of the matter.

In the Senate, the incident poses another hurdle for Republicans who have been struggling to find the votes to block a Consumer Financial Protection Bureau rule that would make it easier for customers to sue banks and credit card companies.

The episode has also rekindled anger at executives of major financial institutions.

In this case, questions are swirling about whether it was appropriate for Equifax executives to sell stock in the credit-monitoring company after the firm discovered the breach but before it notified the public.

"If that happened, someone needs to go to jail,” Sen. Heidi Heitkamp (D-N.D.) said.

“It’s a problem when people can act with impunity with no consequences."

It’s the latest political distraction for a policy agenda that’s been weighed down by recurring revelations of how Wells Fargo, the nation’s third largest bank, opened up potentially millions of fake accounts and saddled customers with auto insurance they didn’t need.

 

“It always seems that consumers are paying the cost of mistakes made by big data collectors or credit audit agencies and other lenders," Sen. Chris Van Hollen (D-Md.) said in an interview. "It’s time the burden of those mistakes fall on those who made them and not just the victims.”

When Equifax disclosed its breach Thursday, it had an immediate impact on policy proposals moving through Congress.

The timing of the announcement coincided with a House Financial Services Committee hearing on legislation that would ease rules for the finance industry.

On the agenda were a pair of bills dealing with credit reporting. One by Rep. Barry Loudermilk (R-Ga.) would cap the legal liabilities for companies under the Fair Credit Reporting Act. It had a wide array of industry support from groups including the American Bankers Association and the Retail Industry Leaders Association.

The bill’s prospects are now in doubt.

The congressman instructed the committee that "he would like to see no further action on H.R. 2359, pending a full and complete investigation into the Equifax breach,” according to Loudermilk spokeswoman Shawna Mercer.

A spokesman for the Financial Services Committee said no further work on the bills featured at Thursday’s hearing has been scheduled. Committee Chairman Jeb Hensarling (R-Texas) and House Judiciary Chairman Bob Goodlatte (R-Va.) plan to hold hearings on the breach. 

“This could get in the way of some good potential legislation that we’ve been working on because it was so egregious and so large and so many people were affected by it,” said Rep. Bill Huizenga (R-Mich.), who chairs a subcommittee with jurisdiction over financial markets.

In the Senate, the breach and Equifax's response to it has become another roadblock for Republicans who are trying to kill a new CFPB rule that restricts financial firms from forcing their customers into arbitration during disputes.

GOP lawmakers are racing against a deadline set by the 1996 Congressional Review Act under which they can block the regulation without having to rely on Democrats. Assembling enough Republican votes has been a challenge.

Compass Point analyst Isaac Boltansky said consumer concern about Equifax's use of mandatory arbitration agreements has weakened congressional efforts to reverse the CFPB regulation.

"We're going to have some additional discussion," said Sen. Mike Rounds (R-S.D.), a member of the Senate Banking Committee, on Tuesday when asked about the impact on the CFPB issue. "Let's get the facts first and let this thing clear a little bit."

Equifax denies that it was trying to prevent consumers from filing lawsuits.

"Enrolling in the free credit file monitoring and identity theft protection products that we are offering as part of this cybersecurity incident does not prohibit consumers from taking legal action," company spokesperson Meredith Griffanti said in an email.

"We will not apply any arbitration clause or class action waiver against consumers for claims related to the free products offered in response to the cybersecurity incident."

Separately, a bipartisan group of 36 senators asked the SEC, the Justice Department and the FTC to investigate Equifax executives' sale of Equifax securities after the company learned of the breach.

The letter was led by Sens. Jack Reed (D-R.I.) and John Kennedy (R-La.), who sit on the Banking Committee. Eleven other members of the panel, including its top Democrat, Sen. Sherrod Brown (D-Ohio), signed on. In total, more than half of the committee put its weight behind the request.

"We request that you spare no effort in your investigations and in enforcing the law to the fullest extent against anyone who is found to be at fault," they said in a letter to the agencies.

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