Credit Chief Slams Free Reports 

02:00 AM Jun. 29, 2005 PT

Equifax's chief executive says he opposes federal legislation that lets consumers obtain a free copy of their credit report to help them monitor financial accounts for fraudulent activity.

CEO Thomas Chapman called the legislation unconstitutional and un-American because it cuts into profits that Equifax and two rival credit reporting agencies -- Experian and TransUnion -- earn from selling credit reports and monitoring services. Equifax maintains credit data on 220 million Americans. The company earned $1.27 billion in revenue last year.

"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. "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.

Chapman has chaired Equifax since 1999 and plans to retire at the end of the year. He initiated his appearance before the public affairs group after a recent spate of data security breaches made headlines and exposed the personal information of millions of consumers to identity thieves. The data industry is facing increased legislation as a result.

An Equifax spokesman said the company hopes to combat the loss of confidence consumers feel toward credit card companies and data brokers. On the other hand, the company would like to prevent "legislative overkill" that could dull the competitive edge of American business.

He discussed recent data breaches and the California notification law that requires companies to tell consumer when they experience a security breach -- a law that many credit with making consumers aware of data breaches that previously went unreported. Chapman said his company "has notified people for a long time."

But when pressed for clarification afterward about whether this meant his company had experienced data breaches, Chapman was coy.

He knocked on a wood table and said, "We haven't had one of any significance ... at least in my time."

In defining what a significant breach might entail, he replied, "We're looking at millions of files, three million files now in these so-called breaches (in the news).... I don't think you've seen our name in the news."

When pressed to say whether his company had notified consumers when it experienced insignificant breaches, he replied, "I'm not going to go there. I'm not going to answer that question. We have been notifying and engaging in communication with customers, consumers, for a long time. We're known for that. We're known for our stand on privacy."

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.

Chapman said he wouldn't oppose national legislation that would let consumers freeze their credit report from unauthorized parties in order to help protect them against identity theft, but he opposes "federal legislation that shuts down our economy." Preventing creditors from accessing information could affect the economy, he said, and if a consumer froze and unfroze their accounts repeatedly, it could lead creditors to view the consumer as having a lack of stability.

California was the first to adopt a law granting consumers that right. Consumers can control who gets to see their credit report by placing a lock on it and releasing it only to specific landlords, employers and creditors who have a legitimate reason to view the data.

Currently, nine other states have similar legislation and an additional 20 states are considering such a measure. Federal legislators are mulling over national legislation that would give the same right to all consumers in the United States.