Equifax to pay at least $575 million in FTC settlement
Equifax will pay at least $575 million in a settlement stemming from one of the biggest data security failures ever.
Equifax shared inaccurate credit scores of United States consumers applying for home and auto loans during a three-week period this spring, the credit reporting agency acknowledged this week.
The credit reporting agency sent the credit scores to several bank and nonbank lenders, including JPMorgan Chases & Co., Wells Fargo & Co. and Ally Financial Inc., from mid-March to early April, according to the Wall Street Journal.
Trade publication National Mortgage Professional first reported the errors in May.
Here’s what to know:
Equifax shared erroneous credit scores of about 300,000 individuals applying for auto loans, mortgages and credit cards to a variety of lenders between March 16 and April 6. Some scores were off about 20 or more points in either direction, which was enough to alter interest rates or result in a consumer’s loan application being rejected, according to the Journal.
The company notified customers and resellers of the errors in May, according to a statement to National Mortgage Professional.
How did this happen?
Equifax blamed the inaccurate credit scores on a “technology coding issue” that resulted in potential miscalculations of specific attributes used in their model calculations, according to a statement on their website.
Mark Begor, Equifax’s CEO, acknowledged the error at a June investor conference.
“We had a coding issue that was a mistake made by our technology team, in one of our legacy applications that resulted in some scores going out that had incorrect data in it,” Begor said. “We fixed the issue. We have been working with our customers over the past five or six weeks to really collaborate with them about what impacts there may be.”
Diversity in the boardroom: Only two Latinas have been CEO of a Fortune 500 company. Why so few Hispanic women make it to the top
Why does it matter?
Credit scores are rates of an individual’s credit risk based on payment history, current debt and additional financial information. These rates help determine the interest rates on a loan or whether an individual is even given one.
“A credit score is super important to a borrower because first and foremost it dictates what (interest) rate they’re going to get,” Joe Leffe, a mortgage loan officer at Citizens Bank, told USA TODAY.
Equifax is among the country’s three largest consumer credit reporting agencies and is often one of the factors lenders use to determine a consumer’s average credit score.
“If a lender determined that they had a lower credit score because of this, that person would be offered a higher mortgage rate. They’d have to pay more to borrow,” Daryl Fairweather, Redfin’s chief economist, said.
“That could cost them, depending on how much the score change was, it could be 10s of dollars to hundreds of dollars a month difference,” she added.
What can consumers do?
Equifax sought to reassure American consumers that
- The issue was limited to fewer than 300,000 individuals.
- The errors were in reports beginning March 17.
- The errors were corrected by April 6.
“We are collaborating with our customers to determine the actual impact to consumers,” Equifax wrote in a statement.
Equifax customer service is available at 1-888-Equifax or online at equifax.com/personal/contact-us.