“Look at them as sleeping giants. They make the financial industry tick,” said Keith Snyder, an industry analyst at CFRA Research. “They’re the rails that the financial train runs on. Without them, everything would grind to a halt.”
.. the scrutiny comes at a time when credit-rating companies had hoped the Trump administration would roll back regulations, including limiting the powers one of its major watchdogs, the Consumer Financial Protection Bureau. Instead, the industry is facing its biggest challenge in decades.
.. Equifax traces its roots to 1899, when two Atlanta grocery store owners, Cator and Guy Woolford, started what was then known as Retail Credit Co. by going door-to-door to collect information about people in their community. Their $25 book, “The Merchant’s Guide,” noted who in the neighborhood typically paid promptly or who shouldn’t be trusted with credit.
.. The guide served as a key reference to local businesses that were grappling with rapid urbanization, said Josh Lauer, associate professor of media studies at the University of New Hampshire. Traditionally, local owners knew their customers, but as people flooded into the city, that had become more difficult, he said. “They were providing a service, trying to make lending safer,” he said.
.. But it also set up an adversarial relationship with consumers that survives today. “Their whole history is about skepticism toward consumers, believing that consumers are trying to get over on the local businesses,” said Lauer
.. Over time, credit bureaus, such as Retail Credit, would often align themselves with law enforcement, Lauer said. Some had desks set aside in their offices for the Internal Revenue Service or Federal Bureau of Investigation, he said. “There was no firewall, no protection for consumers at all.”
.. Retail Credit drew particular scrutiny because of its history of working with health and life insurance companies. When building reports about whether someone should be extended policies, the company would collect information from neighbors and family members about that person’s health, reputation, and sometimes note if they were homosexual, Lauer said.
“Credit worthiness was tied to character,” he said.
.. In 1974, four former employees of the company told a Senate subcommittee that they were forced to falsify credit reports and meet unrealistic goals to keep their jobs, including ensuring there was adverse information about 6 percent to 10 percent of consumers to prove to their business customers that they were being thorough.
.. Instead of simply selling credit reports to the business community, it has branched into new markets, using artificial intelligence, machine learning and other tactics to unearth information, even sweeping up Facebook and Twitter data on consumers to help companies decide whom to lend money to.
.. “You think about the largest library in the world . . . the Library of Congress, we manage almost 1,200 times that amount of content every day, around the world.”
.. Instead of focusing solely on the United States, Smith has pushed Equifax into 24 countries.
.. Early in his tenure, Smith made a risky bet to jump into a new market, buying Talx, which housed the world’s largest repository of employment data.
“Every time an employee was paid, it creates 50 data attributes,” including how much a person earns and how much was comprised of a bonus, Smith said in an August talk. The company could combine that information with data it already had on customers to create new products, he said.
.. It initially required companies to agree not to join a class-action lawsuit to get some forms of help.
“Their game plan is fairly aggressive, so obviously this might put a damper on their aspirations,” Snyder said
.. Smith is facing potentially the biggest challenge of his career when he testifies before a House committee next week. Lawmakers have criticized the company for waiting six weeks after learning of the breach to tell the public