In the wake of the Equifax breach, businesses, lawmakers and individuals are grappling with the issue of protecting personal information – and for Congress, that could mean increased regulation and oversight.
“Typically the credit reporting agencies like Equifax don’t get the same kind of routine oversight [as banks and financial institutions] ... Generally nobody looks at them until something happens,” Scott Vernick, top privacy and cybersecurity expert at Fox Rothschild, told FOX Business. “I don’t think anyone sort of stopped to think about the fact that you only have three credit reporting agencies [and] each of them holds about 200 million records.”
In addition to a congressional hearing, Vernick predicts both the Federal Trade Commission (FTC) and the Consumer Financial Protection Bureau (CFPB) will play a larger role in the oversight of credit reporting agencies moving forward, a transition that would potentially secure the future of the CFPB.
On Monday, a group of Democratic senators wrote a letter to Equifax CEO Richard Smith about the company’s TrustedID forced arbitration clause, citing the incident as proof the CFPB, and its final arbitration rule, are needed now more than ever: “the need for the Consumer Financial Protection Bureau's (CFPB) recently finalized rule that would prospectively limit the use of forced arbitration clauses and reopen the courtroom doors for consumers,” the letter stated.
The rule, which protects the ability of consumers to file class-action suits, is currently at risk of repeal under the Congressional Review Act. But advocates see the Equifax hack as a prime example of why the CFPB needs its resources and independence.
“The Equifax breach shows how we need the Consumer Financial Protection Bureau to continue having all of its tools available to protect consumers and hold financial companies like Equifax accountable,” Mike Litt, U.S. PIRG consumer advocate, said. “The CFPB has done a good job of holding companies … accountable.”
Throughout recent months Republicans have been increasing calls for major reforms to the bureau, which is the invention of Sen. Elizabeth Warren (D-Mass.). Treasury Secretary Steven Mnuchin told FOX Business in June that the bureau’s regulator has too much independence, it’s “improper” that the CFPB is funded out of the Fed instead of by Congress and that it needs to be “subject to proper review.” Mnuchin also said over the long-term, the administration would consider whether the CFPB should even exist as a standalone agency.
Critics also maintain that the final arbitration rule would not have protected consumers in the Equifax case because each circumstance appears to be unique to the individual’s account. According to Alan Kaplisnky and Mark Levin of Ballard Spahr LLP – who have represented clients against the CFPB – the incident “exemplifies why the Senate should vote to repeal the CFPB arbitration rule. The CFPB, the FTC and state attorneys general … got involved almost immediately and will advocate on behalf of consumers more efficiently and effectively than class action lawsuits.”
While the CFPB battle is not purely partisan, Litt says “it is a big guy-little guy issue.”
In the coming weeks, the House Financial Services Committee will hold a hearing on the Equifax breach, though the date has not yet been set.