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Equifax And FICO Team Up To Sell Your Financial Data To Banks (#GotBitcoin?)

Partnership is an effort to diversify beyond the nuts and bolts of credit reports and scores. Equifax And FICO Team Up To Sell Your Financial Data To Banks (#GotBitcoin?)

Two consumer-credit giants plan to start working together to sell consumers’ data to banks, the latest attempt to feed banks’ appetite for more information on customers.

Equifax Inc. and Fair Isaac Corp., creator of the widely used FICO credit score, started pitching each other’s services earlier this month, and the companies announced the partnership Wednesday. Both companies already sell their services to banks, but now their sales employees will pitch each other’s services as well. Sometimes the companies will approach clients together.

Equifax, a credit-reporting giant still trying to recover from its massive 2017 data breach, maintains extensive data on U.S. adults that often includes their income, bank account balances and whether they pay their gas and cellphone bills. FICO’s software analyzes the data to help banks get a better read on loan applicants.

The partnership is the latest effort by companies that have been the bedrock of the U.S. consumer credit system to diversify beyond the nuts and bolts of credit reports and scores.

For decades, most U.S. lenders have reviewed loan applicants’ reports and scores to determine whether to approve them and what interest rate to charge. After years of relatively cautious lending, banks and other lenders are seeking additional consumer data to help them make loans to more borrowers, including people with little credit history or with blemishes. Credit-reporting and -scoring firms have been pivoting to address the demand.

Late last year, FICO and another credit-reporting giant, Experian Plc, said they would begin factoring how consumers manage their bank accounts into credit scores. Soon after, Experian separately said it would add cellphone and utility payments into its credit reports and the FICO scores it sells to lenders. The new methodologies, which are optional for consumers, are designed to boost the number of approvals for credit cards, personal loans and other products.

Equifax and FICO argue that buying their services together will help lenders make underwriting decisions more quickly, especially for borrowers with thin credit histories. They also say that lenders will be able to make more precise decisions about what products to pitch to a customer, such as a plain vanilla credit card versus a premium rewards card, and will be able to better screen people who apply for bank accounts.

But the companies will face competition from data providers and financial technology firms that do the same, and banks’ own in-house analytics resources.

Equifax, Experian and another large competitor TransUnion have for years been amassing growing piles of data about American adults that go far beyond people’s history managing their debts. At Equifax that includes information on people’s employers, their brokerage accounts and other information. Most of that extra data hasn’t made its way into credit reports or FICO credit scores, but credit-reporting firms have been selling that data separately to lenders.

Deciding which loan applicants to approve is complex. Making risky borrowers look more creditworthy can expose lenders to default risk. Denying someone who additional data might prove creditworthy—like someone who pays their cellphone and other non-loan bills on time—would hurt revenue. Approving a consumer whose credit reports and scores look good but has other hidden red flags, such as minimal savings, would elevate the lender’s risk.

The FICO-Equifax deal was spearheaded by the companies’ chief executives. FICO CEO Will Lansing and Equifax CEO Mark Begor have known each other for decades, and Mr. Begor was a FICO board member until he took over Equifax last year.

Equifax has lost business because of the 2017 breach, but the company said it “has made enormous progress” since the hack. Mr. Begor said in an interview last week that Equifax is no longer in the “penalty box” with clients.

Equifax remains under investigation by federal and state regulators over the breach. It has said it is cooperating. Equifax And FICO Team, Equifax And FICO Team, Equifax And FICO Team, Equifax And FICO Team

Updated: 7-25-2019

Equifax To Pay Around $700 Million to Resolve Data-Breach Probes

Credit-reporting firm nears deal to settle investigations into 2017 hack that exposed millions of Americans’ personal data.

Equifax Inc. EFX -1.39% is nearing a deal to settle a slew of state and federal investigations into a 2017 data breach that exposed nearly 150 million Americans’ Social Security numbers and other sensitive personal information.

Under the agreement, the credit-reporting firm would pay around $700 million to settle with the Federal Trade Commission, the Consumer Financial Protection Bureau and most state attorneys general, according to people familiar with the matter. The deal would also resolve a nationwide consumer class-action lawsuit, they said.

The settlement could be announced as soon as Monday, the people said. The amount Equifax ultimately pays could shift based on the number of consumer claims that are eventually filed, they added.

The deal would clear a cloud that has hung over Equifax since it revealed in September 2017 that hackers had penetrated its systems and gained access to consumers’ names, Social Security numbers, birth dates and addresses.

The hack, among the biggest consumer-data breaches, exposed big security flaws at one of the nation’s largest credit-reporting firms and raised cybersecurity alarms among consumers and policy makers alike. Hackers were able to work their way into Equifax’s systems through a software flaw the company had neglected to patch. A malfunctioning scanning tool, meanwhile, allowed hackers to roam undetected in the company’s network for months.

The backlash was swift. Within weeks, the company’s long-serving chief executive retired. State and federal officials launched a spate of investigations. Lawmakers excoriated Equifax executives for waiting six weeks to disclose the hack after it detected suspicious activity and raised questions about how it handles the troves of consumer data it collects.

Equifax and the two other major credit-reporting firms, Experian Plc and TransUnion , compile lengthy financial dossiers on hundreds of millions of Americans that include their credit accounts and repayment histories.

They also have access to addresses, Social Security numbers and other information necessary to apply for credit. Those personal details are what the hackers stole.

The breach highlighted how little control consumers have over their personal data and how it is shared. Much of Equifax’s revenue comes from the credit reports and other products it sells to lenders, which use the information to evaluate potential borrowers. Unlike hacks that have affected consumers who shop at particular merchants or use certain websites, the Equifax breach affected millions of people who never dealt directly with the company.

The settlement would establish a fund to compensate consumers for harm suffered because of the breach, according to people familiar with the matter. A website and call center would be set up to handle the claims, one of the people said.

The settlement would also require Equifax to make additional changes to how it handles and protects consumer data, the people said. The company is on track to spend some $1.25 billion shoring up its security systems and upgrading technology. Regulators in several states last year ordered the company to strengthen its information-security defenses, patches and disaster-response protocols.

Equifax is still working to recover from the hack nearly two years after it was disclosed. New product sales to U.S.-based lenders are lagging, as are sales of its consumer products. The company suspended stock buybacks and froze its dividend in 2017 to prepare for a potential settlement. In a May securities filing, Equifax said it had set aside $690 million to cover expenses pertaining to investigations and lawsuits. Chief Executive Mark Begor told analysts that month that a global settlement was in the works that would cover “many of the significant issues facing the company.”

The breach heightened congressional scrutiny of the credit-reporting industry. Congress passed legislation last year barring credit-reporting firms from charging fees to freeze and unfreeze credit reports.

Some lawmakers have called for tighter requirements on credit-reporting firms to fix inaccuracies in credit reports.

At a House Financial Services Committee hearing earlier this year, Equifax Chief Executive Mr. Begor said the company has taken steps since the breach to help consumers more easily access and fix errors on their credit reports.

“Our culture is shifting,” said Mr. Begor, who testified alongside TransUnion and Experian executives.

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