Over the last three decades the financial industry has created a beautiful loop for itself. This “loop” has not only allowed them to dominate financial dealings throughout the world, but has increasingly allowed them to be the most dominate group of organizations on the planet.  So, who is included in this loop?  Well, you have the dozen largest financial institutions in the world, the credit card companies and the three credit reporting agencies (CRA’s).  All of these are huge financial conglomerates that rake in billions of dollars every year and guarantee their prosperity by feeding off one another.  

So are you in this loop?  Of course you are!!  And you don’t have to have an account in one of the largest financial institutions to be included.  Every time you use your credit card or apply for an installment loan or a mortgage, your in. In fact, you, the consumer, create most the day to day activity in this loop simply by making your everyday purchases using those credit cards.

So how does it all work? Let’s say you make a purchase on your credit card.  Almost immediately that purchase is recorded at the bank that the purchase is drawn on and the transaction is forwarded to all three credit reporting agencies. 

The bank that issues the card charges a processing fee to the retailer and the credit reporting agency charges the retailer a fee to post the transaction. These transactions are automatic and occur within twenty four to forty eight hours after you make your purchase.  So how you decide to check your credit? The CRA’s will be happy provide you with a copy of your credit report if you agree to pay a healthy fee.  So, the loop goes round and round and the consumer is an innocent participant in the process even though without them it would be totally unnecessary.

So where is the accountability to the public for allowing this process to occur?

The recent debacle at Wells Fargo amounts to fraud and actual theft perpetrated on 3.5 million of its depositors, up significantly from its original estimate 2.1 million.  For his ignorance of this debacle that went on for months, CEO John Stumpf can “retire’ and receives 5 million dollars in severance for his efforts, or lack of. 

But Stumpf is a piker compared to Richard Smith, newly “retired” CEO of Equifax who received package worth 19 million dollars that could increase to 30 million over the next ten years.  And what about their Chief Information Officer who was handed a revision of their data base that would have plugged at least some of the holes in their data security and let it sit on his desk for almost a month without installing it on the system??  Is he/she still on the payroll?  This “hack” of millions of consumers’ personal info has been called “the mother of all data breaches” by some experts, and the 911 moment of cybersecurity by others.  10.12.17. Breaking news !! Their web site has just been hacked again.

This is outrageous.  Boris Chen, Vice President of engineering at tCell, a company that does web application security, says Equifax, by the nature of its business as one of the top arbiters of consumers’ creditworthiness, should be a trusted guardian of prized identity information such as Social Security and drivers’ license numbers. It’s unclear whether Equifax used a standard security technique of segmenting networks, so even if hackers do get in, they can only gain access to a limited amount of data. 

So here is the bottom line.  Will Equifax as a company suffer any consequences from this gross negligence?  Don’t hold your breath.

There are thousands of pages of regulations assigned to the financial industry that provide constant oversight of their daily operations.  Unfortunately, they seem to do little to affect negligent human behavior of the type we have recently seen with Wells Fargo and Equifax.  Their answer to each of these outrages is to issue a routine apology and move on.

In truth, the consumer has always been largely ignored in the process, especially by the Consumer Reporting Agencies like Equifax.  Prior to the nineteen eighties, it was impossible for a consumer to obtain a copy of their credit report, even if they were turned down for a mortgage loan.  It took an act of Congress called the Fair Credit Reporting Act to force the CRA’s to provide a free copy to the consumer when their loan request was rejected.  Even today, the CRA’s are not very consumer friendly when it comes to obtaining credit information or having errors on their report corrected. 

Why? The consumer is not a generally a paying customer, unless they sign up for the most recent credit monitoring services they now offer.  So, who is their preferred customer? The credit card companies.  Their rise to becoming the most dominant vehicle for purchases has propelled the CRA’s from being relatively small businesses to multi billions dollar corporate oligopolies with zero competition.

Since the scandal the stock of Equifax had dropped by more than half.  Will it remain that low?  It’s doubtful.  They’re in the loop, they continue to rake in billions, and they have a captured market.  US!!

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