Senators Demand Equifax Insider Trading Probe

Thrity-seven senators want regulators to investigate execs' trading while Rep. Waters reintroduces credit reporting reform act

The fallout from the massive Equifax hack of potentially 143 million consumers' personal information continues, with lawmakers and consumer advocates continuing to demand further action.

A bipartisan group of 37 U.S. lawmakers urged the Securities and Exchange Commission, the Department of Justice and the Federal Trade Commission Tuesday to investigate potential insider trading of Equifax securities by company executives before the breach was publicly announced on Sept. 7.

Equifax CEO Richard Smith agreed Wednesday to testify before the House Subcommittee on Digital Commerce and Consumer Protection on Oct. 3 about the breach.

The senators want the regulators to probe what they say are “disturbing reports” that senior Equifax executives sold more than $1.5 million in Equifax securities within days of the cybersecurity breach. 

Reports say that Equifax “also lost control of an unspecified number of driver’s license numbers, along with the credit card numbers for 209,000 consumers and credit dispute documents for 182,000,” the senators told the SEC, DOJ and FTC.

“As part of your investigations, we request that you conduct a thorough examination of any unusual trading, including any atypical options trading, for violations of insider trading law,” the senators said in their letter.  

Meanwhile, Rep. Maxine Waters, D-Calif., ranking minority member on the House Financial Services Committee, reintroduced on Wednesday her Comprehensive Consumer Credit Reporting Reform Act, which seeks to reform the U.S. credit reporting system, by, among other things, “fixing” the dispute process so that credit bureaus, not consumers, bear the burden to prove the accuracy and completeness of credit information and allowing consumers to opt out of credit bureaus holding their information.

More than 18,000 consumers have signed a Care2 petition urging Equifax to identify and inform all customers who were affected by its breach instead of demanding they investigate on their own using a “faulty website.”

Care2 states that the Equifax site is spitting out erroneous information. “Some users are reporting that they are getting different answers when entering their information multiple times. Others are reporting that they have tried inputting false information and are getting results,” the Care2 petition reads.

The Consumer Federation of America is urging the public to, among other measures, protect themselves from potential identity theft as a result of the data breach by activating a “security freeze” on their credit file so that prospective lenders, landlords or employers can’t access their credit report. This step also ensures that if a criminal applies for a loan using someone else’s information, the lender will deny the application.

New York Attorney General Eric Schneiderman along with other consumer advocates lambasted Equifax’s “rip-off clause” that blocks consumers from joining together in class-action lawsuits against the company.

Schneiderman, who launched a formal investigation last week into the hack, tweeted Friday that he’s already told Equifax the anti-arbitration clause is “unacceptable and unenforceable” and to remove it.

He said Tuesday that following conversations with his office, Equifax updated the language on its website to make “explicitly clear” that no consumer will be required to waive his/her legal right to a class action lawsuit as a condition for enrolling in the company’s free credit monitoring and identify theft protection products.

News also broke last week that in the months before revealing a data breach that potentially exposed the personal information of nearly half the adult U.S. population, Equifax Inc. turned to the firm Akin Gump Strauss Hauer & Feld in Washington to help persuade U.S. lawmakers to reduce penalties for companies that violated the federal fair credit-reporting law.

Sen. Elizabeth Warren, D-Mass., released on Wednesday responses from the CEOs of 16 of the largest consumer banks in the U.S. who support the Consumer Financial Protection Bureau’s embattled rule limiting banks’ ability to require customers to resolve disputes in arbitration.

Warren asked the CEOs on Aug. 11 to tell her about the firms’ use of arbitration clauses in consumer agreements as well as the outcomes of their arbitration proceedings.

“Despite the claims of their paid lobbyists, not a single one of the 16 CEOs I wrote was willing to defend efforts to gut the CFPB’s pro-consumer arbitration rule," Warren said in Wednesday statement announcing the results of the survey. “As the Wells Fargo fake accounts scandal and the recent Equifax data breach show, consumers need more legal tools to hold financial firms accountable, and that's exactly what the CFPB rule gives them.”

--- Check out Equifax Breach Causes Uproar in Financial Services Community on ThinkAdvisor.

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