Profit and Proper aren’t mutually exclusive

There have been many stories of potential identity theft and fraud making the news in recent months. (Here’s one of the most recent, just as an example.) An individual’s ability to protect himself is possible, though this ability seems to fade with each new technological advance. The reach of information is almost beyond comprehension. Yet, there is one tool, however primitive, that can be used: the Fair and Accurate Credit Transactions Act.

The FACT Act allows consumers to request one free credit report every 12 months. Right, I’m thinking the same thing everyone is. Nice baby step, but when my data can be stolen by a diligent hacker with little more than an internet connection, how am I supposed to protect myself with that? That’s valid, and the consumer information industry should be doing everything it can to protect us police its business model. If it doesn’t… Okay, even if it does, legislation is coming. But we have to start somewhere and the credit report is the simplest method.

Equifax CEO Thomas Chapman doesn’t like this. Consider:

“Our company felt, and still does … that it’s unconstitutional to cause a public company who has a fiduciary responsibility to return profit to shareholders to give away the product,” Chapman said to reporters following a speech at the Commonwealth Club of California in San Francisco on Monday [6/27]. “Most of my shareholder group did not think that giving away our product was the American way.”

Chapman was referring to the Fair and Accurate Credit Transactions Act, which since last December has required credit agencies to provide consumers with a free copy of their credit report every 12 months to check for inaccuracies and fraudulent activity. Chapman said that viewing a credit report once a year wouldn’t protect consumers against fraud.

“That’s like turning on the smoke alarm once a year,” he said.

His point is correct but wrong. Once per year is not enough and it won’t really do much to protect fraud. It will, however, allow individuals to see the information sold, at a profit by companies like Equifax, that could affect whether or not they can purchase renter’s insurance, to name an example that erroneously happened to me. So, even though it won’t likely prevent fraud, it can help to clear mistakes. Except, it’s notoriously hard to “encourage” credit reporting agencies to fix mistakes. But Equifax is now motivated to do the right thing for its business model.

Or does it?

To ward off excessive legislation, Chapman supports the idea of tougher industry standards pressuring companies to encrypt data. He suggested that increased funding for enforcement of data-theft laws would help reverse a trend in which few identity thieves are ever prosecuted.

Chapman also discussed the need to educate consumers about monitoring their credit records on a regular basis and being wary of giving out sensitive information. He noted that during a recent visit to a museum with his grandchildren, the cashier asked for his social security number as well as his home address and phone number when he tried to buy tickets with his credit card.

To ward off excessive legislation. May I offer protecting consumers (your supply) as a worthy goal from the beginning rather than only when something goes wrong? Where business fails to protect in accordance with reasonable standards (and even where it protects, but that’s a different rant), government steps in with regulation. Welcome to America in 2005. And if you think a business subject to high profile “disasters” is going to escape extra scrutiny and governmental “care”, you’re smoking something now regulated by interstate commerce, even when it doesn’t cross state lines. As for educating consumers to monitor their credit records on a regular basis, the technology exists, but you didn’t do it because it didn’t improve the bottom line. I seem to believe that’s why Congress, correct solution or not, passed the FACT Act. And it only gets worse from here, especially if you pursue this line of logic instead of catching up to your real starting point. Just a hunch.

(Consider reading No Place to Hide by Robert O’Harrow, Jr. for more insight into many of the issues surrounding information sharing. There are examples relevant to this story. Also, request a free credit report every 12 months from