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Lawmakers call for tougher rules forcing firms such as Equifax to fix inaccuracies

By Yuka Hayashi 

This article is being republished as part of our daily reproduction of WSJ.com articles that also appeared in the U.S. print edition of The Wall Street Journal (February 27, 2019).

WASHINGTON -- Lawmakers on Tuesday launched a new attack on consumer credit-reporting companies, a year and a half after the data breach at Equifax Inc. exposed personal financial details of millions of Americans.

A hearing before a Democratic-led House panel resulted in calls for new legislation to impose tougher requirements on companies to fix inaccuracies in consumers' credit reports. Several House Democrats said errors are pervasive and boost costs of mortgage and auto loans for millions of consumers.

Tuesday's hearing before the House Financial Services Committee brought together chief executives of the nation's top three credit-reporting companies with some of Congress's toughest critics of their industry. Those included Rep. Maxine Waters, the committee's head, and Rep. Alexandria Ocasio-Cortez (D., N.Y.), one of the panel's new members who has called credit reporting a "broken system."

Summoned to the hearing were Mark Begor of Equifax, James Peck of TransUnion LLC and Craig Boundy of Experian PLC's North America unit.

Some committee Republicans also said consumers needed more protection. Rep. Patrick McHenry (R., N.C.), the committee's most senior Republican, said Tuesday's hearing was long overdue. "The credit-reporting system is broken," he said.

The industry has escaped tougher oversight in the wake of the Equifax breach, but that might change under the Democratic-controlled House. Some key Senate Republicans, whose support is needed for passing any legislation, have expressed interest in changing credit-reporting companies' practices.

"So consumers own their data but credit bureaus collect their information without their consent," said Ms. Ocasio-Cortez as she questioned the executives. "There is no way they can prevent you from collecting it."

Ahead of Tuesday's hearing, Ms. Waters, a longtime industry critic, introduced a 199-page bill calling for wide-ranging measures to overhaul the industry. Among them are a new right for consumers to challenge errors in their credit reports, bars on employers using credit reports to screen job applicants and greater power for the Consumer Financial Protection Bureau to regulate the industry.

"While these are all critical reforms to the existing system, I believe that we need to ask whether the system is so beyond repair that we need to completely rebuild the entire consumer credit-reporting sector to truly put consumers first," Ms. Waters said at the hearing.

The industry executives pushed back against the need for new legislation, saying they have made significant improvements to their systems and practices in recent years.

Equifax's Mr. Begor said since the hack at his company, it has increased technology spending by $1.2 billion, including hiring nearly 1,000 technology and security staff. The company is investing more to help consumers access their data and fix errors more easily.

"Our culture is shifting," Mr. Begor said. "One credit-reporting error is one too many."

As a result of 2018 legislation, consumers can now freeze and unfreeze their credit reports free of charge, including those for children.

Analysts say some of the steps proposed by Ms. Waters have a chance of becoming law eventually. That will depend on whether Democrats, who have a majority in the House, can get the support of Republicans in the Senate, where Sen. Mike Crapo (R., Idaho), chairman of the Senate banking panel, has expressed interest in legislation to change industry practices.

Jaret Seiberg, an analyst for Cowen Washington Research Group, said Tuesday's hearing confirmed there is bipartisan support for legislation to overhaul the industry. "While there may not be agreement on exactly what should change, there was broad support to giving consumers more power to fix mistakes and to control the data," he said in a research note.

While lawmakers renew their interest in the sector, regulators are continuing their efforts to investigate the Equifax breach. The company disclosed in a securities filing last week that the Federal Trade Commission and the Consumer Financial Protection Bureau intended to seek legal remedies, including civil penalties in the case of the CFPB. The company said it is cooperating with investigations, adding that these may lead to charges that affect its financial results.

Write to Yuka Hayashi at yuka.hayashi@wsj.com

(END) Dow Jones Newswires

February 27, 2019 02:47 ET (07:47 GMT)

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