Kevin Drum makes a helpful comparison between your credit history and your medical history:
In the same way that medical records are available only to people with a legitimate medical need, I think that credit records should be available only to those who actually extend credit. Beyond that, they're private. Employers don't get them, the FBI doesn't get them, journalists don't get them and my neighborhood association doesn't get them. I don't care how much each of these people really, really thinks it would be handy to have a peek at them. Short of a subpoena or a court order, my financial records are my business. You can't have them.
… The credit reporting agencies [have] been placed in a privileged position where they're allowed to collect sensitive private information — just as doctors and banks and census takers are. That privileged position means they have a heightened responsibility for maintaining privacy, not a license to use their databases for anything that can make them an extra buck or two.
I think that's exactly right.
It also seems to be exactly the opposite of the current relationship between citizens and credit reporting agencies.
Right now, the credit reporting agencies are permitted to collect and evaluate sensitive private information about anyone and everyone. (Although, again, "evaluate" may be too elevated a term for the crude reductionist number-crunching of their secret "scoring" formulas.) Almost no information about you and your money and how it is spent is off-limits to them. They are further permitted to sell this information to anyone to whom they wish to sell it, repackaging and marketing your private financial information for sale to insurance companies, your boss or your prospective employer.
They've also created an entirely new industry based on selling your private financial information back to you. This is where the idiot in the pirate hat comes in. Freecreditreport.com is actually Experian — one of the three credit-reporting and credit-scoring agencies — and their supposedly "free" credit report was free only to those signing up for Experian's $14.95-a-month credit-monitoring service.
That credit-monitoring service, Experian says, will help you to improve your credit score and will protect you from identity theft. The catchy ads for this free $180-a-year "service" illustrated the ever-expanding scope that Experian, Equifax and Transunion imagine for the use of their credit-scoring — just look at the various misfortunes inflicted on their slacker-troubador protagonist. He was denied an auto loan due to bad credit, which falls within the reasonable scope of Experian's business. But he was also unable to acquire a cell-phone, was forced to take a series of demeaning jobs and wound up unhappily married. The implication from these ads seemed to be that it is reasonable and acceptable for utilities, prospective employers and even prospective spouses to hire Experian to run credit-checks on just about anyone for just about any reason.
Both of Experian's claims about the benefits of credit-monitoring are vastly overstated. Since their monthly reports still don't reveal the calculations that go into their magical credit-scoring formula, such reports will at best only help you to make a slightly more educated guess as to what might improve your score. It's highly unlikely that this information would improve your credit standing more than, say, using that $14.95 a month to pay down your debt instead of sending it to Experian.
But Experian's claims about identity theft "protection" are even less true. Credit-monitoring has nothing to do with preventing the theft or misuse of your information. Nor does it have anything to do with preventing errors in your credit history. All it promises is a slightly faster heads-up to inform you that such theft, misuse or errors have occurred. And when theft, misuse and errors occur, Experian says, it is solely your responsibility to address the problem.
Kevin Drum, again, pointed out years ago the upside-down and backwards insanity of the idea that you are responsible for correcting and preventing their errors. Well before pirate-boy picked up his guitar, Kevin wrote a 2005 Washington Monthly article on the subject: "You Own You: When identity thieves open an account in your name it should be the bank's problem — not yours," which was the first place I recall seeing it pointed out that the credit-protection service offered by the credit-reporting agencies was modeled precisely after a protection-racket shakedown:
For their part, the major credit-reporting bureaus — Experian, Equifax and TransUnion — don't seem to care much about the accuracy of their credit reports. In fact, they actually have a positive incentive to let ID theft flourish. Like mobsters offering "protection" to frightened store owners, credit-reporting agencies have recently begun taking advantage of the identity-theft boom to offer information age protection to frightened consumers. … In effect, customers are being asked to pay credit agencies to protect them from the negligence of those same agencies.
Five years later, Kevin's argument that "The banks or credit-card issuers that improperly offered credit to the thieves, and the reporting agencies that unfairly downgraded [the victims'] credit" ought to be responsible for cleaning up the mess of ID theft still reads like something revolutionary. And his call for holding those negligent lenders and agencies responsible for paying back the money and reputation rightly belonging to the victims — money and reputation the agencies and lenders carelessly gave away without the victims' knowledge or permission — still seems like a pipe dream.
But the one aspect of this that gives me hope was something else Kevin argued back in that 2005 article: Protecting consumers from the cost of identity theft and ID-theft protection scams ought to be a political winner.
There are at the moment Democratic attorneys general in 31 states. Of those, I'm guessing, about 31 are hoping some day to be governors or senators. Advocating for their constituents against the costly and predatory negligence of credit-reporting agencies seems like a promising step toward fulfilling such ambitions. (I forget who it was who first observed that some seek power in order to enact policies while others seek policies in order to attain power, but I think this should appeal to those in either category.)
The Federal Trade Commission estimates that about 9 million Americans are victims of identity theft every year, so it's a safe bet that each of these AGs (or A's G) has thousands of constituents whose credit histories are scarred by such theft and who are therefore being forced to pay premium rates for everything from mortgages to consumer loans to insurance and utilities. Some of these constituents may have been denied employment or promotion on the basis of these lucratively inaccurate and uncorrected credit scores.
These costs are real and therefore they can be measured and quantified and added up into a single Very Large Dollar Amount — the amount that constituents have been inaccurately and unfairly overcharged due to the negligence and irresponsibility of others. That VLDA is the basis for the class-action lawsuits that these attorneys general ought to be filing on behalf of their constituents.
Whether or not such lawsuits ca
n succeed in achieving restitution for the millions
of citizens who have paid dearly for the carelessness of the credit-reporting agencies, the lawsuits ought to be able to achieve at least a bit more of what is desperately needed and sorely lacking in the current system: accountability and transparency.
Without transparency and accountability, the power that credit agencies have will be abused and expanded and extended until its abusive presence is felt, as Matt Lauer put it, in "all portions of your life."
State lawsuits will allow AGs to subpoena information on the calculations and variables that go into the credit-reporting agencies secret-formula scores. Such information would empower consumers to improve those scores beyond what is currently knowable from the best-guesses of hack finance writers and "credit-monitoring" scams.
More importantly, the state lawsuits would allow the AGs to subpoena information on the marketing of citizens private financial information — to gauge the full scope of the credit-reporting agencies' plans for the use of this private information beyond the realm of actual credit. Informed attention to the misuse of this information for employment decisions or by insurers or utilities would likely lead to the sort of outcry that would make limits on such misuse a legislative priority.
And that could lead to a situation in which the misuse or sale of private financial records is as obviously illegal — and unthinkable — as the misuse or sale of private medical records.
Ad-Free & Subscriber Log-In