Equifax’s role in the biggest consumer data breach in U.S. history isn’t stopping Congress from giving the giant credit reporting company sweeping protection from lawsuits while allowing it to expand its offerings into the mortgage business.

Those favors for Equifax and its peers in the credit reporting industry are among the surprise provisions in a major banking and financial deregulation bill that the Senate is set to pass this week.


The changes, made public only last Wednesday, are providing new ammunition to critics of the banking legislation, which would scale back regulations imposed after the 2008 financial crisis. Congress has yet to pass any laws creating stiffer penalties for companies like Equifax, whose security practices allowed hackers to steal highly sensitive data on as many as 148 million U.S. customers last year.

"This is the credit reporting agencies, one of whom caused more than half of the U.S. adult population to get hacked and to have their Social Security numbers in the hands of thieves," National Consumer Law Center staff attorney Chi Chi Wu said. "They really should not have that political clout right now."

The Senate is on track to pass the banking legislation around the middle of this week after a procedural vote Monday evening. The credit-reporting issues could remain in play when the House takes up the bill.

On the surface, the bill appears to impose a large burden on Equifax, TransUnion and Experian, which would be required for the first time to provide free credit freezes for consumers and free credit monitoring for members of the military.

But lobbyists for the companies quietly prevailed in a months-long fight to secure language that would shield the firms from consumer lawsuits stemming from the free credit monitoring requirement. Another add-on — which could have a considerable impact on the housing market — could give a joint venture operated by the three companies an entry into providing credit scores for aspiring homeowners applying for mortgages.

Equifax has taken criticism not just for the data breach, which it disclosed in September, but also for the way it handled the issue — including the revelation that three high-ranking executives sold stock just after the company discovered it had been hacked but before revealing it to the public. It has also jousted with Sen. Elizabeth Warren (D-Mass.), over her accusation that consumers’ passport numbers were among the data that fell into the hackers’ hands, something the company denies.

The seeds of the latest controversy over the banking bill were planted in December.

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Just before the Senate Banking Committee began voting on an earlier version of the deregulation package, Delaware Sens. Tom Carper and Chris Coons announced they were adding their names to the list of Democratic co-sponsors. They offered their support after persuading the bill's authors to include "quality, free credit monitoring" for all active-duty military service members.

"When it comes to banking legislation, our first priority is to ensure strong consumer protections," they said in the announcement.

The credit-reporting companies quickly learned that in addition to forcing them to give away products for free, the Carper-Coons language would expose them to litigation because it would be folded into the Fair Credit Reporting Act, a 1970 law that allows for class-action lawsuits.

But when Senate Banking Chairman Mike Crapo (R-Idaho) finally revealed the new legislative text Wednesday evening, it included language barring the military service members from suing the credit reporting companies.

Lobbyists for the credit reporting companies and their trade group, the Consumer Data Industry Association, had pushed lawmakers to bar consumer lawsuits by inserting the credit monitoring provision into a different decades-old law.

"We oppose allowing class-action litigation as an enforcement mechanism," the group said in a February letter to lawmakers. "Class-action litigation in the FCRA context generally results in minor awards to consumers, with huge payouts to trial attorneys, while hurting innovation and harming consumers in the long run."

Those arguments found a receptive ear with conservative activists such as Grover Norquist, the president of Americans for Tax Reform, who argued in a letter to Crapo that the proposal would expose the companies to "new liability which the trial bar will certainly try to exploit." Sen. Richard Shelby (R-Ala.), a past Banking Committee chairman, likewise decried class-action lawsuits as arrangements in which “the consumer gets 16 cents and lawyers get $10 million.”

“I don't think that's good for business or good for the consumer," Shelby said last week.

Republicans in Congress hammered a similar theme last year, when they killed a Consumer Financial Protection Bureau rule intended to make it easier for consumers to sue banks and other financial firms.

Under Crapo’s proposal, the Federal Trade Commission would be responsible for enforcing the credit monitoring requirement as part of the Fair Credit Reporting Act, and state attorneys general would retain the authority to take the firms to court. But members of the military, who are entitled to credit monitoring under the proposal, would have little recourse if the companies fail to live up to the mandate thanks to language prohibiting class-action lawsuits.

"Let's say the credit reporting agencies say, 'We're just going to not do this,' or what they offer doesn't really work," Wu said. "Unless a federal or state regulator goes after them, they can get away scot-free."

The carve-out immediately opened a new line of attack against the legislation.

"Equifax is willing to do a little bit for people, just a little bit, but damn it, you can't sue us then," Sen. Sherrod Brown, the Ohio Democrat fighting the legislation, said on the Senate floor Thursday. "That was the deal. We'll give you a little bit of credit monitoring but in return you can't sue us for anything you do."

Francis Creighton, the president and CEO of the association representing the credit-reporting companies, said the group appreciated senators' willingness to "discuss how to get the bill's provisions right and improve the bill."

The other big victory for Equifax and its peers, the credit-scoring provision, also appeared in the version of the banking bill that emerged Wednesday evening.

It would force government-controlled mortgage giants Fannie Mae and Freddie Mac to consider allowing the use of consumer credit score models beyond those provided by FICO, which for years has dominated the space with Fannie and Freddie's blessing. The government-sponsored enterprises play a central role in the way the U.S. housing finance market operates because they buy and guarantee mortgages.

The addition was a win for VantageScore, a credit scoring joint venture from Equifax, Experian and TransUnion. It's the primary competitor looking to enter FICO's turf and has been a vocal supporter of the legislation.

The provision is based on a proposal from Sens. Tim Scott (R-S.C.) and Mark Warner (D-Va.). The bill's backers argue that the legislation is necessary because FICO has been allowed to operate like a monopoly.

The bill represents one of the most substantial legislative changes to the housing finance system since Fannie and Freddie entered government conservatorship during the financial crisis.

"By removing a significant barrier to entry, we could see multiple folks jump in with a scoring system that more accurately reflects the way millions of families across the country pay their bills on time," Scott spokeswoman Michele Exner said.

But FICO senior director Joanne Gaskin said the Senate proposal would circumvent a review process the Federal Housing Finance Agency already has under way and delay its decision on updating the mortgage credit scoring model. FICO had been ramping up lobbying efforts with the legislation looming, including by tapping the Washington firms Glover Park Group and Peck Madigan Jones.

FICO also has concerns that its main competitor is owned by Equifax and the other credit-reporting companies.

"Allowing the credit bureaus to offer a score they own in a system where they are the single point of sale and distribution for both credit reports and scores would not increase competition,” Gaskin said. “It would consolidate their power."