Equifax (EFX) will roll out a new “credit locks for life” product in January that will be open to “all Americans, whether or not they were impacted by the cybersecurity incident,” and some consumers may be wary that participating may result in waived rights.
The “lock” is similar to a “freeze,” but is not subject to regulation by states.
Speaking at a Senate hearing today, interim CEO Paulino do Rego Barros Jr. declined to guarantee that consumers would not be forced to give up their rights to sue if they used Equifax products. Equifax’s terms of service includes forced arbitration clauses that waive consumers’ legal rights to sue Equifax.
“I believe consumers have a choice to choose the products that they need,” Barros told Sen. Richard Blumenthal (D-CT). “We work according to the law and we use the tools that the industry uses to have arbitration in place.”
But does this apply to Equifax’s new “credit locks for life” product? Answering the question explicitly, an Equifax spokesperson clarified to Yahoo Finance that “the company does not intend to have the arbitration clause apply to the service.
There is no guarantee that you will keep your right to sue
Consumer advocates remain skeptical due to the broad language on Equifax’s own website.
“Unless they rewrite every other arbitration clause on their website, there is still a substantial risk that consumers who purchase the credit lock program will be subject to arbitration,” said F. Paul Bland, executive director at consumer group Public Justice and an expert in class action suits.
Bland said that if the website arbitration clause is broadly worded — he said last time he checked it was — it could apply to the new credit lock program. And in cases where it’s not clear or there is apparently conflicting terms, it often comes down to the arbitrator deciding if the situation falls under their purview, Bland said.
Equifax has had an arbitration problem before
When news broke of the Equifax security breach, in which 145 million people’s personal information was hacked — including Social Security numbers — the company immediately rolled out a complimentary credit monitoring service called TrustedID that had terms that restricted consumers’ legal rights to sue.
For both the TrustedID program and the new credit lock service, which Equifax says do not bind consumers to arbitration, there is little clarity — something that is needed due to that funneling effect of scared consumers with compromised personal information trying to protect themselves.
Consumers must review the new product’s terms with care
With such an unclear situation, it’s imperative that consumers pay attention before signing up for anything, given that the interim Equifax CEO acknowledged the company’s continuing use of arbitration.
“It’s hard to know what the answer will be without seeing if Equifax amends/changes/rewrites it’s broader (“mother ship”) arbitration clause,” said Bland. “But if they don’t do that, then there is a very high chance that any disputes over the credit lock program will be forced into arbitration, even if the terms and conditions that apply to it deny that there is arbitration there.”
For some consumers, it may simply be better to use a credit freeze, which is regulated by the state. Bluementhal asked Barros whether the company was resorting to credit locks “to avoid state oversight and scrutiny.”
“Not at all. We did it because it’s simple to use — more accessible to use,” Barros said. “It’s easier to understand for the consumer.”