[House Hearing, 116 Congress]
[From the U.S. Government Publishing Office]


                      WHO'S KEEPING SCORE? HOLDING
                       CREDIT BUREAUS ACCOUNTABLE
                     AND REPAIRING A BROKEN SYSTEM

=======================================================================

                                HEARING

                               BEFORE THE

                    COMMITTEE ON FINANCIAL SERVICES

                     U.S. HOUSE OF REPRESENTATIVES

                     ONE HUNDRED SIXTEENTH CONGRESS

                             FIRST SESSION
                               __________

                           FEBRUARY 26, 2019
                               __________

       Printed for the use of the Committee on Financial Services

                            Serial No. 116-3
                            

                  [GRAPHIC NOT AVAILABLE IN TIFF FORMAT]
                  
                              ___________

                    U.S. GOVERNMENT PUBLISHING OFFICE
                    
35-632 PDF                WASHINGTON : 2019                    



                 HOUSE COMMITTEE ON FINANCIAL SERVICES

                 MAXINE WATERS, California, Chairwoman

CAROLYN B. MALONEY, New York         PATRICK McHENRY, North Carolina, 
NYDIA M. VELAZQUEZ, New York             Ranking Member
BRAD SHERMAN, California             PETER T. KING, New York
GREGORY W. MEEKS, New York           FRANK D. LUCAS, Oklahoma
WM. LACY CLAY, Missouri              BILL POSEY, Florida
DAVID SCOTT, Georgia                 BLAINE LUETKEMEYER, Missouri
AL GREEN, Texas                      BILL HUIZENGA, Michigan
EMANUEL CLEAVER, Missouri            SEAN P. DUFFY, Wisconsin
ED PERLMUTTER, Colorado              STEVE STIVERS, Ohio
JIM A. HIMES, Connecticut            ANN WAGNER, Missouri
BILL FOSTER, Illinois                ANDY BARR, Kentucky
JOYCE BEATTY, Ohio                   SCOTT TIPTON, Colorado
DENNY HECK, Washington               ROGER WILLIAMS, Texas
JUAN VARGAS, California              FRENCH HILL, Arkansas
JOSH GOTTHEIMER, New Jersey          TOM EMMER, Minnesota
VICENTE GONZALEZ, Texas              LEE M. ZELDIN, New York
AL LAWSON, Florida                   BARRY LOUDERMILK, Georgia
MICHAEL SAN NICOLAS, Guam            ALEXANDER X. MOONEY, West Virginia
RASHIDA TLAIB, Michigan              WARREN DAVIDSON, Ohio
KATIE PORTER, California             TED BUDD, North Carolina
CINDY AXNE, Iowa                     DAVID KUSTOFF, Tennessee
SEAN CASTEN, Illinois                TREY HOLLINGSWORTH, Indiana
AYANNA PRESSLEY, Massachusetts       ANTHONY GONZALEZ, Ohio
BEN McADAMS, Utah                    JOHN ROSE, Tennessee
ALEXANDRIA OCASIO-CORTEZ, New York   BRYAN STEIL, Wisconsin
JENNIFER WEXTON, Virginia            LANCE GOODEN, Texas
STEPHEN F. LYNCH, Massachusetts      DENVER RIGGLEMAN, Virginia
TULSI GABBARD, Hawaii
ALMA ADAMS, North Carolina
MADELEINE DEAN, Pennsylvania
JESUS ``CHUY'' GARCIA, Illinois
SYLVIA GARCIA, Texas
DEAN PHILLIPS, Minnesota

                   Charla Ouertatani, Staff Director



                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on:
    February 26, 2019............................................     1
Appendix:
    February 26, 2019............................................   103

                               WITNESSES
                       Tuesday, February 26, 2019

Begor, Mark, CEO, Equifax........................................     5
Boundy, Craig, CEO, Experian North America.......................     8
Brown, Jennifer, Associate Director, Economic Policy, UnidosUS...    81
Brown, Thomas P., Partner, Paul Hastings Law Firm................    84
Mierzwinski, Edmund, Senior Director, Federal Consumer Programs, 
  U.S. Public Interest Research Group............................    83
Peck, James M., President and CEO, TransUnion....................     6
Rice, Lisa, President and CEO, National Fair Housing Alliance 
  (NFHA).........................................................    78
Wu, Chi Chi, Staff Attorney, National Consumer Law Center (NCLC).    79

                                APPENDIX

Prepared statements:
    Begor, Mark..................................................   104
    Boundy, Craig................................................   111
    Brown, Jennifer..............................................   113
    Brown, Thomas P..............................................   123
    Mierzwinski, Edmund..........................................   138
    Peck, James M................................................   155
    Rice, Lisa,..................................................   168
    Wu, Chi Chi..................................................   179

              Additional Material Submitted for the Record

Waters, Hon. Maxine:
    Written statement of Starn, O'Toole, Marcus & Fisher.........   225
    Written statement of the National Apartment Association and 
      the National Multifamily Housing Council...................   283
    Written statement of the National Association of Consumer 
      Advocates..................................................   285
    Written statement of the National Association of Federally-
      Insured Credit Unions......................................   288
    Written statement of the National Housing Law Project........   290
Garcia, Hon. Sylvia:
    Written statement of various undersigned consumer, civil 
      rights, and advocacy groups................................   293
    UnidosUS Fact Sheet dated December 2018......................   295
Begor, Mark:
    Written responses to questions for the record submitted by 
      Representative Beatty......................................   299
    Written responses to questions for the record submitted by 
      Representative Lynch.......................................   302
Mierzwinski, Edmund:
    Written responses to questions for the record submitted by 
      Representative Beatty......................................   303
    Written responses to questions for the record submitted by 
      Representative Foster......................................   306
Peck, James M.:
    Written responses to questions for the record submitted by 
      Representative Lynch.......................................   308
    Written responses to questions for the record submitted by 
      Representative Beatty......................................   310
Rice, Lisa:
    Written responses to questions for the record submitted by 
      Representative Foster......................................   313
    Written responses to questions for the record submitted by 
      Representative Beatty......................................   314
Wu, Chi Chi:
    Written responses to questions for the record submitted by 
      Representative Foster......................................   316
    Written responses to questions for the record submitted by 
      Representative Beatty......................................   318
    Written responses to questions for the record submitted by 
      Representative Lynch.......................................   320

 
                      WHO'S KEEPING SCORE? HOLDING
                       CREDIT BUREAUS ACCOUNTABLE
                     AND REPAIRING A BROKEN SYSTEM

                              ----------                              


                       Tuesday, February 26, 2019

             U.S. House of Representatives,
                   Committee on Financial Services,
                                                   Washington, D.C.
    The committee met, pursuant to notice, at 10:05 a.m., in 
room 2128, Rayburn House Office Building, Hon. Maxine Waters 
[chairwoman of the committee] presiding.
    Members present: Representatives Waters, Maloney, 
Velazquez, Sherman, Meeks, Clay, Scott, Green, Cleaver, 
Perlmutter, Foster, Beatty, Heck, Vargas, Gottheimer, Gonzalez 
of Texas, Lawson, San Nicolas, Tlaib, Porter, Axne, Casten, 
Pressley, Ocasio-Cortez, Wexton, Lynch, Gabbard, Adams, Dean, 
Garcia of Illinois, Garcia of Texas, Phillips; McHenry, Wagner, 
Posey, Luetkemeyer, Huizenga, Duffy, Stivers, Barr, Tipton, 
Williams, Hill, Emmer, Zeldin, Loudermilk, Mooney, Davidson, 
Budd, Kustoff, Hollingsworth, Gonzalez of Ohio, Rose, Steil, 
Gooden, and Riggleman.
    Chairwoman Waters. The Committee on Financial Services will 
come to order. Without objection, the Chair is authorized to 
declare a recess of the committee at any time.
    Today's hearing is entitled, ``Who's Keeping Score? Holding 
Credit Bureaus Accountable and Repairing a Broken System.'' I 
now recognize myself for 4 minutes to give an opening 
statement.
    Today, this committee convenes for a hearing on repairing 
the nation's broken credit reporting system, and holding the 
major consumer credit bureaus accountable. In October of 2017, 
committee Democrats convened a Minority Day hearing on ensuring 
the integrity of our country's consumer reporting system, and 
safeguarding consumer data. As ranking member of the committee, 
I invited chief executive officers of Equifax, Experian, and 
TransUnion to that hearing. All three declined to appear and 
testify.
    I must share that since that time, I have met with at least 
two of the chief executive officers. So this hearing with the 
CEOs from the major credit bureaus is long overdue.
    In 2017, Equifax experienced a data breach that exposed the 
sensitive, personally identifiable data of approximately 148 
million individuals, around half of all Americans.
    In 2015, Experian discovered a breach that affected 15 
million consumers who applied for T-Mobile service.
    In 2013, all three major consumer credit bureaus, including 
TransUnion, identified unauthorized access to sensitive data 
that they held relating to high-profile individuals.
    Consumers did not choose to entrust these companies with 
their personal information. And they do not have the option 
today of choosing a different company to maintain their 
consumer credit data records by having their information 
deleted from the major credit bureaus' databases, even 
following these egregious breaches.
    To make matters worse, three of the major consumer credit 
reporting bureaus have used this breach of consumer data and 
consumer trust to sell products they themselves are marketing 
as identity theft protection. It certainly appears they are 
capitalizing on consumers' fear and desperation despite the 
fact that there are many free tools that consumers can use to 
protect their credit.
    These data breaches are deeply troubling because credit 
bureaus collect reams of information on millions of Americans. 
The more information they collect, the more people are at risk. 
When that information is not properly protected, even worse 
than credit bureaus vacuuming up of consumer data is a lack of 
control that consumers have over this data. If a consumer is 
dissatisfied with one credit bureau, they can't take their 
business to a competitor.
    To credit reporting bureaus, consumers aren't consumers; 
they are commodities. This commodification of consumers and 
their personal data is a core reason why our nation's consumer 
credit reporting system is broken. In this broken system, 
credit reports are routinely filed with errors that are 
difficult for consumers to correct, negative information stays 
on for periods much longer than its predictive value, and 
medical debt continues to harm the credit standings of 
otherwise creditworthy consumers. These problems are pervasive 
in the credit reporting system.
    Credit ratings directly impact how much we pay for a car 
loan, whether or not we can get a mortgage, and, in some cases, 
whether or not we can get a job. America's consumers deserve 
better than this. That is why, for several Congresses, I have 
put forth my bill, the Comprehensive Consumer Credit Reporting 
Reform Act. My bill is intended to repair the existing system 
by shifting the burden of removing mistakes from credit reports 
onto credit bureaus and furnishers and away from consumers, 
placing limits on credit checks for employment purposes, and 
reducing the time period that negative items can stay on credit 
reports, among other reforms.
    Today, we will also discuss legislation to protect innocent 
consumers who have been affected by the Federal Government 
shutdown from having their credit damaged. While these are all 
critical reforms to the existing system, I believe that we need 
to ask whether the system is so beyond repair that we need to 
completely rebuild the entire consumer credit reporting sector 
to truly put consumers first.
    With that, the Chair now recognizes the ranking member of 
the committee, the gentleman from North Carolina, Mr. McHenry, 
for 5 minutes for an opening statement.
    Mr. McHenry. I want to thank the chairwoman for yielding, 
and I want to thank you for holding this hearing.
    I do agree with you, Chairwoman Waters, that this hearing 
is a long time in coming, and is necessary.
    The system is broken. While the credit scoring system 
provides us with a foundation, and it allows millions of 
Americans to access credit quickly and efficiently, the credit 
reporting system is in need of major repair.
    The Fair Credit Reporting Act (FCRA)--the principal statute 
of governing the industry and I would dare say creating and 
enhancing the standing of the three before us today--was 
written for another time, a pre-internet era. There is no 
better example than the oligopoly that was created than the 
three that are sitting before us here today.
    Our credit reporting system should be well-served by 
increased competition. It should allow for innovation that 
mirrors the changes we see in the financial services space 
generally and society more dramatically. The dispute resolution 
process should be more consumer-friendly, and more user-
friendly. A clear regulatory regime should be instituted. The 
chairwoman and I have drafted legislation over the years to 
modernize FCRA and create a better process for consumers.
    While our approaches may be very different, we both know 
that we need to find a way that works better for the people we 
represent. Part of our focus should be to understand what 
happens to the massive amount of data that flows into credit 
bureaus.
    The reality today is that if you have a credit file, your 
information probably is on the dark web. That is a result of 
the Equifax data breach of last year which put two out of every 
five American's most sensitive personally identifiable 
information at risk. Moreover, for me, the breach demonstrated 
the complacency and the technological inadequacies of a 
corporation that in many cases knows more about the people 
generally than it does about themselves. That is unfortunate.
    So it is incumbent on each of us to understand where the 
data goes, how it is used, how it is protected, and how we can 
more efficiently determine its accuracy.
    And let us not forget that while the system works for many 
American households, millions more have no or very thin credit 
histories leading to inaccuracies. We need to assess whether or 
not the information that is collected is still predictive of a 
consumer's ability to repay loans. I think that is an important 
discussion for this hearing.
    One of the best ways to help people rise above the poverty 
line is to allow them to build more thorough financial records. 
That means expanding the information that is collected that 
consumers can build so that they can be deemed creditworthy. 
The bottom line is that we must do more in striving for 
innovation and a more consumer-facing process. I think that 
means more competition. I think that means not simply 
nationalizing these three before us or creating a government 
bureau to do it but having greater competition, forcing 
industry to compete for consumers' participation and for 
opportunities to enhance their bottom line over the long term.
    I hope today's conversation is a productive one. I thank 
both panels, both that are already here and those that are in 
the audience waiting for the second panel, I thank them for 
their testimony and for their time on this important matter.
    Chairwoman Waters, thank you for holding this hearing. I 
hope that we can work together to build a consensus on ways 
forward to enhance what was an important statute in 1970, but 
is in much need of reform. With that, I yield back.
    Chairwoman Waters. Thank you very much. The Chair now 
recognizes the subcommittee chair, Mr. Meeks, for 1 minute.
    Mr. Meeks. Thank you, Chairwoman Waters, for calling this 
most important hearing. With my 1 minute, I will be very brief, 
framing what I see as the three fundamental issues for us to 
consider today and going forward.
    First, consumer reporting agencies behave like de facto 
utilities but are not subjected to oversight or regulations 
comparable to that of utilities. CRAs capture data on two 
thirds of the American population and nearly every household. 
It is nearly impossible to circumvent them and the industry is 
concentrated in just three companies.
    Second, consumers or the data, the source of conflicts but 
not the clients; the entire industry is built on capturing, 
analyzing, quantifying and trading consumers' personal 
information yet consumers don't even own their own data and 
have very limited access to it.
    And third, errors and imperfect information impact the 
working poor disproportionately by depriving them of access to 
credit and at times hurting their ability to get a job or be 
approved for rent or a better apartment.
    Thank you. And I look forward to questioning the witnesses.
    Chairwoman Waters. Thank you very much. We will now turn to 
our witnessesw.
    Today, we have two panels. I want to welcome the first 
panel: Mr. Mark Begor, CEO of Equifax; Mr. James M. Peck, 
president and CEO of TransUnion; and Mr. Craig Boundy, CEO of 
Experian North America.
    Mr. Begor was named chief executive officer of Equifax in 
April 2018. Mr. Begor previously served as managing director in 
the industrial and business services group at Warburg Pincus, a 
private equity firm based in New York City. And prior to that, 
Mr. Begor spent 35 years at General Electric.
    Mr. Peck joined TransUnion in December 2012 as president 
and chief executive officer. Prior to TransUnion, Mr. Peck was 
at Reed Elsevier, a FTSE 100 company where he served as CEO of 
the LexisNexis Risk Solutions business from 2004-2012.
    Mr. Boundy is CEO of Experian North America. He joined 
Experian in November 2011 as managing director of Experian U.K. 
and Ireland. Prior to joining Experian, Mr. Boundy was CEO of a 
U.K.-based management and information technology consulting 
firm.
    Each of you will have 5 minutes to summarize your 
testimony. And without objection, your written statements will 
be made a part of the record. When you have 1 minute remaining, 
a yellow light will appear. At that time, I would ask you to 
wrap up your testimony so we can be respectful of both the 
witnesses' and the committee members' time.
    Mr. Begor, you are now recognized for 5 minutes to present 
your oral testimony.

             STATEMENT OF MARK BEGOR, CEO, EQUIFAX

    Mr. Begor. Chairwoman Waters, Ranking Member McHenry, and 
members of the committee, thank you for the opportunity to be 
here today. I am Mark Begor, and I have served as chief 
executive officer of Equifax since last April.
    Let me begin by expressing my personal regret for the 
disruption that our 2017 cyber attack caused on millions of 
Americans.
    I am here today because we recognize there are things we 
can do better. Credit reporting agencies like Equifax are 
trusted to protect personal data we hold to help consumer's 
access credit, and to help financial institutions make risk 
decisions. By having their credit data at Equifax, consumers 
have access to more affordable credit through loans that are 
regulated by Federal and State laws.
    Last year in the U.S., Equifax delivered 2.3 billion 
consumer credit files to lenders. And during this hearing 
today, with the help of lenders, nearly a million transactions, 
including mortgages, credit cards, apartment rentals, and auto 
loans will be completed.
    As you well know, consumers are at the core of what we do. 
And Equifax is taking significant steps to become a more 
consumer-focused credit bureau.
    Since the 2017 cybersecurity incident, Equifax has invested 
more than $80 million to assist impacted consumers. When we 
announced the incident in September of 2017, we offered an 
identity theft protection and credit monitoring service free 
for all Americans, regardless of whether they were impacted by 
the cyber incident.
    Last November, when that service was coming to an end, 
Equifax decided, voluntarily, to extend that protection for 
another year. Going forward, we are investing over $50 million 
to make it easier for consumers to interact with us, both over 
the internet and in our call centers. We are simplifying our 
online dispute process, improving our phone systems, and 
reducing the time to answer phones.
    We want to make sure that we are the consumer-friendly 
bureau at every step of the way. Credit bureaus, lenders, data 
furnishers, and consumers all share an interest in maintaining 
accurate credit data.
    The current regulatory framework requires credit reporting 
agencies to promptly investigate any dispute or inaccuracy, and 
also expects that lenders provide credit reporting agencies 
with accurate information. Let me be clear, a single error on a 
consumer's credit report is one error too many.
    And I understand how frustrating it can be for a consumer 
to feel helpless when dealing with a credit bureau like 
Equifax. When I hear stories about consumers who have 
difficulties dealing with us, it strengthens my resolve to push 
Equifax further to improve our consumer support.
    I would like to conclude by reinforcing our focus around 
data security. We are committed to building a culture, within 
Equifax, where security is a part of our DNA. And I have made 
it a personal commitment that we will be an industry leader 
around data security.
    We have added experienced senior leaders and board members 
to enhance our security and technology skill sets. And in 2018 
we added nearly 1,000 incremental IT and security professionals 
to our team. I also want you to know that we are putting our 
money where our mouth is. We are increasing our technology and 
security budgets by 50 percent, totaling $1.25 billion between 
2018 and 2020.
    We recognize that part of being an industry leader is 
actively sharing our security learnings and best practices. 
Last year we established a number of meaningful partnerships 
that will raise the bar for the entire security community by 
leveraging our joint learnings.
    We look forward to continuing collaboration around security 
in 2019, and beyond. To close, I would like to thank Chairwoman 
Waters for holding this hearing.
    Equifax is committed to our mission to help consumers 
manage their financial lives in a secure way. We are investing 
unprecedented resources in technology, security, and people, as 
well as making it easier for consumers to manage their credit 
reports with Equifax. Thank you, again, for the opportunity to 
testify, and for your dedication to American consumers.
    [The prepared statement of Mr. Begor can be found on page 
104 of the appendix.]
    Chairwoman Waters. Thank you, Mr. Begor.
    Mr. Peck, you are now recognized for 5 minutes to present 
your oral testimony.

   STATEMENT Of JAMES M. PECK, PRESIDENT AND CEO, TRANSUNION

    Mr. Peck. Chairwoman Waters, Ranking Member McHenry, and 
distinguished members of the committee, thank you for the 
opportunity to appear before you today. My name is Jim Peck, 
and since 2012 I have been fortunate to be the president and 
CEO of TransUnion.
    TransUnion is a global company headquartered in Chicago 
with nearly 4,000 employees in the United States, and over 
7,000 worldwide. Consistent with our mission, we seek to help 
people through the power of information. We strive to ensure 
fairness for consumers in the marketplace, and help our 
businesses identify underserved markets and mitigate business 
risks.
    Our work helps ensure that the economy is built on a solid 
credit foundation. I believe in TransUnion's mission, and will 
continue to be proud of the progress the company has made under 
my leadership after I retire from my position on May 8th.
    Many people at TransUnion have introduced innovative new 
products to advance financial inclusion, and enable more 
consumer access to free credit information and education, and 
substantially enhance the company's cybersecurity program.
    We appreciate the committee's foresight in asking how we 
can make the credit system even better. We particularly 
appreciate the chairwoman's leadership on these issues.
    The credit bureaus and all entities who provide the 
information included in the system have a primary objective of 
ensuring that the information is accurate.
    TransUnion processes more than 2 billion credit updates to 
our database monthly, and matches these to more than 230 credit 
active Americans. While we achieve accuracy in almost every 
instance, given the extraordinary volume of the information we 
receive, it is inevitable that sometimes errors occur.
    We recognize that no statistic of excellence matters to an 
individual who has been impacted by an error on their credit 
report. We work hard to prevent errors, and to address them 
quickly and efficiently when they occur. We hold ourselves 
accountable. We learn from our mistakes. And we try to improve 
every day.
    We know that inaccuracies in credit files are most often a 
result of incorrect information provided to the credit bureaus 
by data furnishers, or of legitimate disagreements between 
consumers and lenders. That is why we continue to invest to 
simplify the process for consumers to resolve disagreements 
with their lenders.
    I would also like to share some suggested improvements that 
TransUnion believes would further reduce inaccuracies and 
consumer disputes, and increase financial inclusion.
    First, more timely reporting of key credit events like loan 
payoffs could enhance credit report accuracy, and resolve 
issues before consumers need to dispute them. Second, the 
process for reporting of student loan information should be 
enhanced to provide better support for our nation's student 
borrowers. Third, stakeholders should expand the use of 
alternative data such as positive cell phone data and utility 
payment data, as this has the potential to substantially 
increase the credit eligible population.
    Through innovative solutions incorporating alternative and 
trended data, TransUnion has helped over 60 million credit 
invisible or credit-disadvantaged people gain greater access to 
credit, many on significantly better terms, and some for the 
very first time.
    TransUnion also believes that individuals should have 
access to their credit information, and should be empowered to 
lock or freeze their credit wherever and whenever they choose. 
We are proud of the fact that each year over 166 million 
Americans have taken advantage, either directly or through our 
partners, of free access to their TransUnion credit 
information.
    Critically, I want to finish my remarks today by discussing 
what we at TransUnion consider an absolute imperative: the need 
to keep consumers' data safe.
    I can confirm that TransUnion has not had a material event 
that has resulted in the loss of consumer credit information. 
Virtually every industry in government is under perpetual 
attack by ever-evolving and more sophisticated cyber criminals, 
and faces new vulnerabilities that need to be addressed. Ours 
is no different.
    TransUnion follows the guidelines of the National Institute 
of Standards and Technology (NIST). We have significantly 
ramped up resources and capabilities over the last six years 
and are consistently upgrading systems to keep pace. We would 
support and participate in a task force of government and 
private industry to work collaboratively against cyber crime.
    In closing, I am proud of the innovations TransUnion 
continues to bring to the marketplace to expand credit to 
millions of hardworking people. Thank you for the opportunity 
to testify here today and I look forward to your questions.
    [The prepared statement of Mr. Peck can be found on page 
155 of the appendix.]
    Chairwoman Waters. Thank you Mr. Peck.
    And Mr. Boundy, you are now recognized for 5 minutes to 
present your oral testimony.

     STATEMENT OF CRAIG BOUNDY, CEO, EXPERIAN NORTH AMERICA

    Mr. Boundy. Chairwoman Waters, Ranking Member McHenry, and 
members of the committee, I am Craig Boundy, CEO of Experian 
North America, and I thank you for inviting me here today. I 
appreciate the opportunity to discuss Experian's important 
work, our efforts to make consumers a central focus of our 
business, and how we are investing to improve the credit 
reporting system.
    Let me begin by stating why credit bureaus exist and how 
consumers benefit. Credit bureaus accurately compile 
individual's payment histories from creditors so that lenders 
can use this data to make better lending risk decisions. Good 
lending decisions for credit cards, autos, and mortgages mean 
fewer defaults, and fewer defaults mean lower costs of credit 
for consumers and greater availability of consumer credit 
across the economy.
    Credit bureaus help stabilize the safety and soundness of 
the nation's consumer lending sector. What we hear most often 
from consumers, Members of Congress, and regulators is that 
everyone wants us to focus on three clear objectives: ensure 
the information we hold on consumers is secure; make credit 
reports accurate; and manage a data dispute system that is easy 
for consumers to use.
    Experian has clearly heard and responded to this call, and 
significantly shifted its focus to the consumer. The number one 
priority of Experian is keeping consumer information safe and 
secure.
    We began increasing our investments in data security well 
before the Equifax breach and we continue to do so. Experian is 
committed to achieving the highest possible levels of data 
security and integrity and will continue to work on our own 
initiative and with our regulators to find opportunities for 
improvement.
    We support enactment of a Federal data security standard 
and breach notification law and have supported such since 2005. 
Experian also supports the committee's goal of helping 
underserved consumers. Many consumers may not have a mortgage 
or credit cards, but they do make rent, telephone, and utility 
payments.
    Experian recently announced an opportunity for consumers to 
include certain information from their bank accounts onto a 
credit report. This free program, called Experian Boost, allows 
consumers to opt in to sharing utility and telephone payment 
information directly to their credit files and improve their 
credit score, including their FICO score.
    A consumer can grant permission to contribute information 
from their banking accounts including the length of time 
accounts have been open and frequency of activity. This is 
particularly helpful to consumers who are new to credit or have 
had financial challenges.
    We want to work with the committee to find more ways to 
expand financial inclusion. Experian also supports the 
committee's goal of enhancing the accuracy f credit reports.
    We believe the best way to achieve and maintain 
improvements on behalf of consumers is through a robust and 
continuously supervised examination program administered by the 
Consumer Financial Protection Bureau (CFPB).
    This program should continue to focus on ongoing 
improvements by both credit bureaus and lenders as well as 
other entities that furnish information to credit bureaus or 
use information from credit bureaus.
    We are equally focused on data accuracy. Our goal is to 
reach as close to 100 percent accuracy as is possible. We have 
invested heavily to move closer to achieving that goal.
    Our data quality team of more than 100 people manage a 
rigorous process of vetting data sent to us by lenders. We 
apply more than 400 data error checks on each record submitted 
by a lender and summarize a report back to the lender each 
month.
    If data provided to us by a lender does not meet our 
standards, we reject it. An important component of accuracy is 
to make credit reports accessible for consumers to review and 
easily dispute data.
    In March of last year, Experian introduced a new online 
dispute portal, including a mobile optimized version to make it 
easier for consumers to submit disputes and to receive the 
results of those disputes.
    I would like to close by saying that Experian is proud of 
the improvements we have made. Our employees come to work every 
day wanting to help and empower consumers to create a better 
future for themselves. We are committed to the continuous 
improvement of our business for the benefit of consumers, 
lenders, and the economy.
    Thank you for inviting to me to testify. I look forward to 
answering your question.
    [The prepared statement of Mr. Boundy can be found on page 
111 of the appendix.]
    Chairwoman Waters. Thank you very much. I now recognize 
myself for 5 minutes for questions.
    Mr. Begor, I understand you were not at Equifax when the 
mass data breach happened in 2017, but you run the company now, 
so I have a few questions for you. Equifax initially offered 
one-year free credit monitoring for those affected by the data 
breach.
    The company then offered a second year of free credit 
monitoring, but instead of providing the service yourselves, 
you sent these customers to Experian for their services.
    Consumers had to sign up by January 31, 2019, and if they 
didn't, I understand that the initial credit lock they had on 
their data expired. So how many consumers signed up for the 
second year service, and can a consumer, watching this hearing 
who may have been affected by your company's data breach, still 
sign up for the free credit monitoring?
    Mr. Begor. Thank you, Chairwoman Waters. Just to correct, 
we offered that free credit monitoring after the data security 
breach to all Americans, not just those who were impacted by 
the data security breach. And at that time, 4 million Americans 
took advantage of that free credit monitoring service.
    As you pointed out, we extended the credit monitoring 
service in November of 2018 for another year. We decided to use 
Experian to provide that service versus Equifax and I don't 
have the exact number of how many are still using that service, 
but I will get back to you with that data.
    We are not offering today any new credit monitoring to 
impacted Americans, but as there's the ability for consumers, 
if they want, to freeze their account. They can do it for free 
using the Senate Bill 2155 that was put in place last 
September. And we also offer a free lock and alert product. It 
is an Equifax-only product to lock your--
    Chairwoman Waters. Thank you. Thank you very much. I want 
to understand why you referred them to Experian.
    Mr. Begor. Madam Chairwoman, we moved the service over to 
Experian because we believed that was a more appropriate way 
for that service to be provided in our discussions with some of 
the regulators that we were working with.
    Chairwoman Waters. Despite the fact that Equifax is a 
bureau providing these services, you are saying that in the 
case of the breach, you didn't have the expertise, the ability 
to handle your own consumers?
    Mr. Begor. Chairwoman Waters, it really wasn't the 
expertise. We moved very quickly to offer that service right 
after the data security breach.
    Chairwoman Waters. Then why did you refer them to Experian?
    Mr. Begor. As I mentioned earlier in my comments, in our 
discussions with the regulators that we are talking to, the 
discussion was they thought it was more appropriate for a third 
party to provide those services than Equifax.
    Chairwoman Waters. How many consumers signed up for the 
second year of services?
    Mr. Begor. As I mentioned a minute ago, Chairwoman Waters, 
I don't have that number at my fingertips. I believe it is 
somewhere in the neighborhood of 2 million moved over to the 
Experian service.
    Chairwoman Waters. Can a harmed consumer still sign up for 
the free credit monitoring services?
    Mr. Begor. They cannot.
    Chairwoman Waters. Why not?
    Mr. Begor. The consumers who decided to take advantage of 
it, we think we took care of them in September and the fourth 
quarter of 2017, the 4 million who did sign up.
    And as I started to say, we also offer a free lock and 
alert product where they can lock their credit file for free 
with Equifax using a mobile application and that is available 
to all Americans at no cost.
    Chairwoman Waters. So, what you are basically saying is, 
you took care of all harmed consumers and you don't need to 
expand it or do more?
    Mr. Begor. I didn't say that, Chairwoman Waters. What I did 
say is that, we took advantage of all Americans who wanted to 
take care of it, whether they were impacted or not, in the 
fourth quarter of 2017, so we opened it up to every American 
who was available, and as there are other services available to 
consumers who want to lock their credit file, either through 
each of the three bureaus, through Senate Bill 2155, a free 
freeze, and then with Equifax our online and mobile application 
of locking--
    Chairwoman Waters. Okay, I only have a few seconds left and 
I want to know, Mr. Begor, your company sells Equifax Complete 
Premier, which your website describes as, and I quote, ``Our 
most comprehensive credit monitoring and identity theft 
protection product.'' But why should consumers pay $19.95 a 
month when a lot of what is being offered can be done for free?
    Mr. Begor. I am not sure I understand the question, 
Chairwoman Waters, about--you know consumers have a choice 
whether they want to take advantage of that product and that is 
a product available not only from Equifax, but the other credit 
bureaus as well as multiple other sources of credit protection 
is available on the marketplace for consumers who want to avail 
themselves of it.
    Chairwoman Waters. I don't think that is a sufficient 
answer to my question, but my time is up and I am going to give 
Ranking Member McHenry an opportunity to have his 5 minutes of 
questions. Thank you.
    Mr. McHenry. Thank you, Chairwoman Waters. And witnesses, I 
would like to thank you for being here today. I have read your 
testimony, and we have reviewed it. One thing is clear to me: 
not one of you discussed in your testimony increased 
competition in the industry. You don't even reference 
competition with one another.
    In fact, Mr. Begor, you stated that millions of Americans 
have benefited from the efficient structure of FCRA. Yet, what 
I see here is an oligopoly, right? We have three of you not 
really competing and the consumers are the ones who are losing 
out. I think that is a problem.
    That state of limited competition has real ramifications. 
So, how does an oligopoly protect consumers?
    Okay, I will take that as an answer. So each of you 
reference in your testimony that you have an efficient way--a 
very quick, simple way to lock your credit, if somebody is 
concerned about, for whatever reason, their credit file being 
stolen or accessed by other folks. Is that correct? Do you all 
have a very quick, easy process online for that?
    Mr. Begor. That is correct.
    Mr. Peck. Yes.
    Mr. Boundy. Yes.
    Mr. McHenry. Okay. And all of you have referenced the 
changes in Senate Bill 2155. Some of you have referenced the 
fact that we talk about synthetic identity fraud for kids, 
right? And you all enable parents to lock kid's credit scores, 
their children's credit, correct?
    Mr. Begor. That is correct.
    Mr. Peck. Correct.
    Mr. Boundy. Yes.
    Mr. McHenry. And you would encourage parents to do that if 
they have concerns?
    Mr. Begor. That is correct.
    Mr. Peck. Correct.
    Mr. Boundy. Yes.
    Mr. McHenry. So, let us compare those two processes. You 
have this innovative process you talk about in which Americans 
can freeze or lock their credit with a simple click and anyone 
listening can go on the website right now, to any of three 
websites, it is a click and they advertise this. I am a parent 
of 2 children, and one is 4 ears old. She hasn't told me she 
has a credit card yet. The 13-month-old, I am concerned about, 
though.
    [laughter]
    But I looked at your process to freeze my child's credit. 
And while I can very easily and efficiently click through a 
process and do it online to lock my credit, for my child's I am 
required to get a copy of my Social Security card, my driver's 
license, their birth certificate, a copy of both of my 
children's Social Security cards--I'm sorry, my birth 
certificate, not just my child's, my birth certificate as well, 
a copy of my child's birth certificate, as well as their Social 
Security card, documentation either through a birth 
certificate, court order or lawfully executed power of attorney 
or foster care certification that my wife and I are their 
parents.
    And your efficient process, every single one of you, the 
three of you, have a process by which we use the United States 
Postal Service to mail photocopies to you of this sensitive 
information.
    So why is it that when it is protecting my data, it is an 
efficient process and why is it such an inefficient process 
using an antiquated analog paper system to protect kids? Why 
isn't it as simple as a click? And how do I know that those 
documents are secure when I mail them to you?
    You also reference the fact that those documents will not 
be returned to the sender. So with nearly a million kids 
exposed to synthetic identity fraud each year, you have made 
this process needlessly slow because you don't think it is in 
your corporate interest to make the process more efficient nor 
is there competition for you to add in some better way for 
parents to do this.
    So how do I know that your system takes these paper copies 
and ensures that they are delivered to the right and 
appropriate department? The information on these pieces of 
paper is being protected through a secure chain of custody? And 
the paper copies and information are being destroyed at the end 
of the process?
    This is an enormous amount of trust there. So the 
frustration I have here is I don't see that vibrant competition 
which is needed for this industry to actually help consumers in 
the way that the law should instruct. That is why we need to 
update the law. That is why we need more competition and simply 
taking you a three down to one and putting you in government is 
not the solution either.
    So we need to make sure there's competition so that 
consumers actually can win and parents can have a more 
efficient way to protect their kids. I yield back.
    Chairwoman Waters. Thank you very much. The gentlewoman 
from New York, Ms. Velazquez, is recognized for 5 minutes.
    Ms. Velazquez. Thank you, Madam Chairwoman, and let me 
start by thanking you for holding this important hearing. I 
would like to address my first question to the entire panel. 
Concerns about credit reporting errors, stolen credit 
information and identity theft have caused consumers to 
purchase additional credit monitoring services and other like 
products from all three of your companies.
    For example, Experian's CreditWorks Premium program allows 
consumers to check their credit reports everyday from all three 
of your companies and charges consumers $4.99 for the first 
month and then $24.99 for each additional month.
    Do you think developing products like this to help 
consumers guard against your own negligence and then turning 
around and selling them back to the consumer at an 
extraordinary markup allows you to profit in part from your own 
deficient practices? Mr. Begor?
    Mr. Begor. Yes, Congresswoman, we offer a product similar 
to that but I think as the Congresswoman knows, there are also 
many avenues that consumers can use to protect their data.
    You know one is the free freeze that is available through 
Senate Bill 2155 last September and in Equifax's case, many 
Americans have taken advantage of that. And as I mentioned in 
my testimony, we also rolled out a free for life product 
separate from the freeze. It is a phone-enabled tool that a 
consumer can lock their credit file and then open it up at 
their discretion--
    Ms. Velazquez. Thank you.
    Mr. Begor. So it gives--
    Ms. Velazquez. Thank you.
    Mr. Begor. --them full control--
    Ms. Velazquez. Thank you.
    Mr. Begor. --over their--
    Ms. Velazquez. Thank you.
    Mr. Begor. --credit file.
    Ms. Velazquez. Mr. Peck?
    Mr. Peck. Yes, what we are very proud of is I think we have 
created a business model that over 160 million Americans a year 
are getting access to free scores, free monitoring through 
companies like Credit Karma and others and in addition to that, 
they are also getting credit education.
    Ms. Velazquez. Thank you. Mr. Boundy?
    Mr. Boundy. Yes, thank you, Congresswoman. With Experian 
you can come online and you can get access to credit monitoring 
and your credit report for free and I think this is an 
important step as well as being able to freeze your credit 
report--
    Ms. Velazquez. So Mr. Boundy, can you please answer me, 
what makes your product so much better that requires you to 
charge $25 compared to the $5 in the first month?
    Mr. Boundy. The first thing it covers is that there are 
costs involved in providing the product. For example, the cost 
of helping consumers remediate--
    Ms. Velazquez. What is extraordinary about your product the 
second month compared to the first month? Why do you go from $5 
to $25 to fix deficiencies that you created in the first place 
that could cost me my ability to access credit?
    Mr. Boundy. Our products are used by many people in the 
U.S. and they enjoy the service we provide that helps prevent 
them or cope with data breach that occurred to other, companies 
unrelated to any of the credit bureaus.
    Ms. Velazquez. But can you answer me why such a big 
difference, between $5 and $25, do you understand what it means 
for low-income families, consumers, what does it represent, $25 
a month?
    Mr. Boundy. I do and one of the things I want to come back 
to is we do offer a free product that consumers can take 
advantage of as well.
    Ms. Velazquez. Again, this question is for all three of 
you. In March 2017, the CFPB produced a supervisory report 
which found that CRA lacked quality control policies and 
procedures to test reports for accuracy, had inconsistent 
practices for vetting furnishers, and had insufficient 
monitoring and oversight of the furnishers once they were 
approved to provide data. So my question is, how do each of you 
ensure the accuracy of the reports you are producing and test 
the veracity of information furnishers are providing to you. 
Yes, sir?
    Mr. Begor. Yes, Congresswoman, as I mentioned in my 
testimony, we believe one error is one error too many in any 
credit report. We have an extensive team of data quality people 
who are auditing furnisher's inputs. And as I mentioned in my 
testimony, we are investing heavily in our dispute process to 
make it easier for consumers when they identify a dispute to 
help them get it fixed.
    Ms. Velazquez. And what are the oversight procedures that 
you have in place?
    Mr. Begor. As I mentioned, we have a very extensive data 
quality team and when we identify a furnisher that is providing 
inaccurate data to us, we will stop taking that data into 
Equifax.
    Ms. Velazquez. And what are your procedures for taking 
action against any furnisher that fails to comply with your 
established requirements?
    Mr. Begor. We will stop taking their data, Congresswoman.
    Ms. Velazquez. So, what is the maximum number of times a 
furnisher's data can be rejected by your company before you 
stop accepting information from them?
    Mr. Begor. That is something, Congresswoman, I don't have 
at my fingertips, I would be happy to come back to you with 
that data.
    Ms. Velazquez. Would you please submit it in writing?
    Chairwoman Waters. The gentlelady's time has expired. We 
must move on. The gentleman from Florida, Mr. Posey, is 
recognized for 5 minutes.
    Mr. Posey. Thank you, Madam Chairwoman, and thank you, 
gentlemen, for appearing here today. I have a two-part question 
and it is for each of you and we can go left to right.
    Your testimony touches on synthetic identity fraud. And so 
my questions are, what steps can we take to curb this type of 
fraud and what role do Social Security numbers play in 
synthetic identity fraud? And obviously is there a more 
technologically advanced approach that we could or should be 
taking?
    Mr. Begor. Thank you, Congressman. I think as you know that 
is a growing problem and it has been around for a long time. 
Not only for the credit bureaus but for financial institutions 
at large were attacked daily by fraudsters posing as 
individuals like yourself or your constituents trying to access 
the personal information that we have. We have invested heavily 
in multifactor identification to make sure that we know you are 
you when you are trying to access your credit bureau data.
    But even with that, we have a small number of those 
fraudsters that actually are successful in accessing our data. 
With regards to your question about the Social Security number, 
we are a member, along with I believe the other credit bureaus, 
of the Better Identity Coalition that was formed I believe a 
year ago looking at alternatives to the Social Security number.
    But to me, the real approach is just having more rigor 
around identification of the individual when they are trying to 
access sensitive information.
    Mr. Posey. Okay, thank you. Mr. Peck?
    Mr. Peck. Thank you, Congressman. So, the problem of 
synthetic identification isn't just a credit industry problem, 
it is a problem all through the United States and around the 
world and I think we need to do multifactor authentication. I 
think we ought to think about, even a government task force 
that includes our industries, but other technological 
industries and comes up with new ways to check for identities.
    And I think we have to acknowledge that the Social Security 
number, while it is a fine identifier, it is not really 
something that can be used by itself as an identity check. So 
we need to augment that and admit that it has kind of served 
its purpose and now use the new technologies available, maybe 
biometrics, to come up with an even better two-factor 
authentication.
    Mr. Posey. Okay, thank you. Mr. Boundy?
    Mr. Boundy. Congressman, thank you for the question, I 
think it is an important one. Clearly, it's something we are 
all very concerned about and I think we would be very happy to 
work with the committee and suggest some ideas to further 
improve the way that we all address the threat of synthetic 
identity fraud.
    Mr. Posey. What would happen to the availability and the 
cost of credit if we eliminated entire categories of debt from 
credit scores?
    Mr. Begor. Oh, I think that is an excellent question, 
Congressman. We are big believers as are, most importantly, the 
financial institutions that are making those credit decisions 
that more data and accurate data results in the best consumer 
decision. And eliminating types of data from consumers, our 
view and I think the financial institution's view, could raise 
the borrowing cost for all consumers, which is why we believe 
accurate and complete information is most important.
    Mr. Posey. Okay. Mr. Peck?
    Mr. Peck. Congressman, I agree, more and different kinds of 
data, like we have suggested. So, utility data, cable bill 
data, cell phone data, these are the kinds of data that can 
quickly get someone who may have stumbled, to prove again that 
they are back on the right track and they are a good borrower, 
so I would consider that first.
    With regards to taking off data, I think that is something 
that the industry should study and understand the implications 
of, and once they understand it, we can make an informed 
decision of whether we should do that or not.
    Mr. Posey. Thank you. Mr. Boundy?
    Mr. Boundy. Congressman, thank you. I think it is important 
that we are able to have the correct and accurate information 
on a credit report that allows as many people as possible to 
gain access to credit and that is why we have launched the 
Experian Boost product, which allows consumers to directly 
contribute information onto their own credit file for free.
    Mr. Posey. Okay. Thank you, gentlemen. Madam Chairwoman, I 
yield back.
    Chairwoman Waters. Thank you very much. The gentleman from 
New York, Mr. Meeks, is recognized for 5 minutes.
    Mr. Meeks. Thank you, Madam Chairwoman. Let me ask all of 
you this question first. Would you agree with the statement 
that, while consumers may be the clients of your data providers 
and data users, consumers are not, in fact, your primary 
clients, but really just principally the source of data?
    Mr. Begor. Do you want me to start, Congressman?
    Mr. Meeks. Yes, sir.
    Mr. Begor. Thank you, Congressman. As I said in my oral 
testimony that is not how we view it and certainly not how I 
view it since I joined Equifax last April. We believe the 
consumer is central to who Equifax is and I have been very 
clear internally and externally that our goal is to be a 
consumer-friendly credit bureau and we are investing heavily in 
the consumer, including $50 million in new technology to make 
it easier for consumers to access their credit file and also, 
most importantly, to process disputes that they may have on 
their file.
    Mr. Meeks. So, let me ask you this question and then I will 
go to Mr. Peck after that. Who owns the data? Do you own the 
data or do the consumers own the data? Who owns the data?
    Mr. Begor. There's no question, Congressman, it is the 
consumer's data.
    Mr. Meeks. So, if it is the consumer's data, then where and 
how does the consumer control that data? For example, if the 
consumer decides that he or she wants to opt out entirely from 
having their information tracked by your companies, if they do, 
what is your estimate about such a person's ability then to 
access credit or quickly comply with a background check?
    Mr. Begor. I think as the Congressman knows, the credit 
bureau system that we have in the United States is the envy of 
many countries around the world. Consumers today do have the 
ability to freeze their file and that gives them control to 
decide if they want to lock their file from access by any 
financial institution and then they can unlock it at their 
discretion. And as I mentioned, Equifax also rolled out a 
mobile application called Lock and Alert that gives them even 
more control to actually lock and unlock when they are out 
getting a new car.
    Mr. Meeks. Would the consumer have to pay for that?
    Mr. Begor. They do not, Congressman. As I mentioned, it is 
offered for free and it is free for life to all Americans.
    Mr. Meeks. Okay. And the question then is, would the 
consumer, and I will go to Mr. Peck for this question--when you 
are agencies, you control oftentimes, particularly for poor 
people, the determination of whether or not they can get a job.
    Sometimes because they look at their credit rating, et 
cetera, to make the determination whether they can get a job or 
not, and my concern then is, for that poor person who is trying 
to get a job and then they are declined, them having access and 
being able to go through and look through their own data in a 
timely form so they can get the job. What does your company do 
to make sure that happens so that is not an additional expense 
to a person who's already struggling?
    Mr. Peck. Thank you, Congressman. If I understand that 
question, if a credit report is the reason a consumer doesn't 
get a job, the employers are required to tell them what 
information in that credit report caused them not to get the 
job. And then there is also the avenue of free access to your 
credit report through one of many, many avenues today to look 
at that report.
    Mr. Meeks. So, because what I am trying to drive at, when a 
dispute arises, who, other than the consumer, is tasked with 
advocating on the consumer's interest and position? Is there 
anybody?
    Mr. Peck. Congressman, when a consumer has a dispute, they 
submit it to, in this case--if it were to TransUnion, they 
would submit it to TransUnion, one of many avenues.
    We have an obligation within 5 days to acknowledge that and 
get that to the lender who is--or whomever is causing the issue 
and then we have an obligation to get back with them within, I 
think, it is 30 days. It ends up--our statistics show that we 
get back with them within 5 days, 25 percent of the time.
    Mr. Meeks. But there's no other advocate? Because what 
happens oftentimes, especially with someone who is poor and 
they are trying to make their life better, there is a 
statement, and I don't whether any of you have been poor 
before, but there's a statement that James Baldwin made, that 
anyone who was ever struck with poverty knows how extremely 
expensive it is to be poor, and the individual who is poor 
can't get a job, then they have to end up paying for not having 
access that others have then suffers. And they are never going 
to climb out of this poverty that they are fighting to get out 
of.
    And because of the lack of competition that Ranking Member 
McHenry and Chairwoman Waters were talking about, they have no 
place else to go and it seems as though the three of you 
basically can control that, and that person therefore is out of 
a job and cannot climb their way out of poverty. I yield back.
    Chairwoman Waters. The gentleman's time has expired. The 
gentleman from Missouri, Mr. Luetkemeyer, is recognized for 5 
minutes.
    Mr. Luetkemeyer. Madam Chairwoman, I think the gentlelady 
from Missouri is up next. She has an emergency she needs to 
attend to, so I am going to--I will reserve my time for later 
if you will allow her to take her 5 minutes now.
    Chairwoman Waters. The time is granted to the gentlelady 
from Missouri, Mrs. Wagner, for 5 minutes.
    Mrs. Wagner. I thank the Chair for her courtesy, and I 
thank my colleague from Missouri for his kindness also. I thank 
the chairwoman for hosting this hearing today, to examine the 
current state of America's credit reporting system.
    Consumer protection and monitoring the accuracy of credit 
scores is an issue that is critically important to my 
constituents and certainly to everyone across the country.
    Mr. Begor, we know that one of the best things that cyber 
security professionals can do is to band together, sharing 
advice and expertise about what works and what doesn't.
    How has Equifax been helping the broader, I will call, 
chief information security officer community?
    Mr. Begor. Thank you, Congresswoman. As I mentioned in my 
earlier testimony this morning, it is one that we have taken on 
quite strongly since the data security breach in September of 
2017, not only with our competitors; we are sharing what we 
have learned from the cyber security breach internally inside 
of our industry and with our financial partners and others that 
have been impacted.
    We have forms that we set up in many communities and our 
SISO and technology teams are really sharing quite openly what 
we have learned of what happened at Equifax, and more 
importantly, how we are investing the $1.25 billion of 
incremental investment we are making between 2018 and 2020, 
really sharing that with others quite openly, because we 
believe this a war that is not going to end.
    That not only are the credit bureaus, but every financial 
institution, every company in the United States and government 
agency is attacked daily by fraudsters in nation states that 
are trying to attack our data and security.
    Mrs. Wagner. And building on that, Mr. Begor--and we are 
grateful for your leadership, you have been a breath of fresh 
air at Equifax--could you tell me a little bit more about how 
your workforce has changed since the 2017 cyber security 
incident?
    I understand that you have a larger security team, but tell 
me more about what you have done to ensure that you have hired 
employees with the right expertise and how you have drawn in 
new talent.
    Mr. Begor. Yes, as you well know, we have added resources 
in St. Louis and Atlanta, which are our two principal centers 
in the United States. As I mentioned in my earlier testimony 
this morning, we have added 1,000 incremental people in the 
United States, which is almost a 20 percent increase in our 
U.S. workforce and that is part of that $1.25 billion 
incremental spend we are going to do around technology and we 
have attracted the very best.
    We really believe people are going to differentiate how we 
operate in security and technology and that is we have had such 
a high priority in bringing in new and strong talent.
    Mrs. Wagner. Thank you. Mr. Peck, how would eliminating 
accurate predictive information from the risk underwriting in 
your reports impact consumers and lenders?
    Mr. Peck. If we eliminate--thank you for the question, 
Congresswoman, I want to make sure I understand it. If we 
eliminated accurate and correct information. If we eliminated 
the wrong information I think, as we look at the performance of 
bureaus around the world who have attempted this stuff, the 
actual cost of lending has increased substantially, to the 
consumer because they have no way of differentiating between 
the different--
    Mrs. Wagner. Ultimately, the consumer is going to pay.
    Mr. Peck. That is what we have seen. That is why we 
strongly suggest that we look at ways to bring in more 
information, especially things like cell phone payment data and 
other utility-type data that we all deal with. There was a CFPB 
study that just came out that showed people in rural and highly 
urban areas are much more positively affected by bringing that 
data in because it brings them back into good standing, or back 
into the credit community much more quickly than relying on the 
traditional forms of credit reporting.
    Mrs. Wagner. Mr. Peck, briefly, in what ways does a 
consumer have control over their data at TransUnion?
    Mr. Peck. At TransUnion, we believe that we are the 
stewards of the data. The consumer can lock and unlock, freeze 
or unfreeze their data. They can even opt out of the data when 
it is used for firm offers of credit, which is a form of 
marketing. So they have complete control of when it is used.
    Mrs. Wagner. Thank you, Mr. Peck. Briefly, Mr. Boundy, how 
does Experian try to help people from diverse communities 
thrive in your corporate environment?
    Mr. Boundy. Congressman, thank you for the question. As an 
employer, diversity inclusion is a really important part of how 
we run our organization. It is something I am very proud of and 
I know all of our employees are very proud of, whether it is 
from allowing teams to form individual clubs--let them create 
communities or employee resource groups that allow them to 
recognize the community that they represent, or how we recruit 
our staff. It is a very important part of how we run our 
company.
    Mrs. Wagner. Thank you very much. My time has expired. I 
thank everyone for their courtesy. And I yield back.
    Chairwoman Waters. Thank you very much. The gentleman from 
Missouri, Mr. Clay, is recognized for 5 minutes.
    Mr. Clay. Thank you so much, Madam Chairwoman. There are 
quite a few Missourians on this panel. But let me ask the three 
of you, and I want to read a quote from a recent story in--this 
is from Francis Creighton, President and CEO of the Consumer 
Data Industry Association--legislation that are negatively 
impacting them. And we think that is really problematic.
    So my question to the three of you is: is that problematic 
for consumers to be able to challenge something on their 
report, have it removed, or at least bring it to your 
attention? And does it indicate that the industry may need a 
shift in culture because you are putting up quite a bit of 
resistance to changing the culture that you now operate under, 
as far as credit reporting bureaus.
    And understand, the question is about the impediments and 
barriers that you put in front of people who are trying to 
close the family wealth gap, or trying to close the gap in home 
ownership. So that is the impact that your scores have on 
families. So let me start with you, Mr. Begor. Does the 
industry need a shift in culture?
    Mr. Begor. Congressman, as I mentioned in my oral testimony 
this morning, you know, our culture is shifting. We have always 
been strongly focused on the consumer. It is a real priority 
for me to really support consumers. And as you talk about 
errors on credit files, we are really enhancing the processes 
and the focus around helping a consumer because there's a lot 
of angst.
    If they are trying to get a new mortgage, or an auto loan, 
or a school loan and there's an error on their credit file, we 
are obligated to help them fix that. And if the error is an 
error, than get it fixed so they can improve their credit score 
and their credit standing.
    Mr. Clay. How easy is it for a consumer to come to your 
company and say, hey, this is a mistake. And how long does it 
take for them to get that taken off their report, or get it 
corrected?
    Mr. Begor. Congressman, it--as I mentioned in my oral 
testimony, we are investing $50 million in the coming months to 
enhance our capabilities to have mobile online access. As the 
ranking member talked about, having to send documents through 
the mail--actually send them through the web to us in a secure 
way, and we have--there are regulations on how quickly we have 
to respond.
    You know, we respond--I think it is 25 percent, roughly, 
within the first 7 days, resolve that dispute, over 50 percent 
in the first 14 days. And we are obligated to complete that 
process within 30 days.
    Mr. Clay. Okay. Mr. Peck, is there resistance to a cultural 
shift in your industry?
    Mr. Peck. Thank you, Congressman. I think our culture is, 
very much, shifted towards the consumer. No one wins when 
there's an inaccurate report, especially the consumer. And so, 
we have tried, especially over the last 4 or 5 years, to put 
processes in place that are really easy for the consumer to do.
    So for example, right on their credit report, we have a 
button where they can say, if you are disputing this just press 
this button. What are you disputing? Not only our own service, 
but in services like Credit Karma. And we believe that has 
actually driven up the amount of disputes that we have had, or 
people just asking questions about their credit to improve it.
    I would suggest, as it was in my testimony, that--
especially in the area of student loans, the reporting process 
is very confusing. I think it is known that it is confusing, 
and it does not help the--you know, the first time--you know, 
these are the people paying back their loans for the first 
time. And we would love to work with this committee on doing 
something about that.
    We also think that all data is not alike. So if someone is 
paying off their loan and they know they have a mortgage coming 
so maybe they want to pay off their auto loan, having that 
record show much more quickly as paid would reduce disputes, 
but also make that person's life easier.
    Mr. Clay. Okay.
    Mr. Peck. So we would strongly love to work--
    Mr. Clay. Before my time runs out--
    Mr. Peck. --together on that.
    Mr. Clay. Mr. Boundy, has your company made a difference in 
the number of disputes? Have they gone down, or is the culture 
the same?
    Mr. Boundy. Congressman, I think our company has made a 
significant shift towards concentrating even more on the 
consumer, whether that is making it easier for consumers to 
dispute. Our new online dispute portal really does that. Or 
mostly importantly, I think allowing consumers to contribute 
information themselves that improve their credit score.
    Mr. Clay. Okay. My time has expired. I yield back.
    Chairwoman Waters. And now the gentleman from Missouri, Mr. 
Luetkemeyer, is recognized for 5 minutes.
    Mr. Luetkemeyer. Thank you, Madam Chairwoman. Gentlemen, 
thank you for being here today. I just want to make a couple of 
comments here.
    It is very important for a lender to be able to understand 
the risks they are about to take. And lenders want to lend 
money. They don't make any money unless they lend it. But in 
order to make an accurate decision of whether to do it or not, 
you have to really analyze the risk that they are taking when 
they lend that money.
    And so, for your business to be a part of their lending 
decision is very important, and to have the accurate 
information is extremely important. I know that there have been 
some discussions today about some of the things you have done, 
and how you have improved your process and your data.
    But I would like to ask you a couple of questions and go 
down the line to each one of you, can you give me an example--
we will start with Mr. Begor there--of an individual that you 
have helped as a result of some of the new programs that you 
have instituted?
    Mr. Begor. Thank you, Congressman, that is a great 
question. In our communities where we have large employment 
centers like Atlanta and St. Louis, we are actively involved 
with local charities that are doing credit consulting, credit 
coaching and one experience has been brought to my attention of 
a woman who was unbanked.
    She was receiving her paychecks via a debit card. As you 
know, there are fees associated with that and through the 
coaching and our partnership with this agency, we were able to 
help her learn about how to open a checking account, how to get 
into the formal financial system and she actually then 
graduated into getting a credit card and it is those elements 
to trying to help that we are really quite supportive of.
    Mr. Luetkemeyer. Mr. Peck?
    Mr. Peck. Congressman, thank you for the question. I will 
talk about something in the broad sense and maybe specifically. 
We introduced a product that included trended data, so over a 
30-month period, you could see not only what a person's account 
was but actually how they are paying it and that ended up 
having a large impact on helping people who are maybe starting 
from a bad spot in their credit to more quickly prove that they 
are acting financially responsible.
    The same effect happens with alternative data and I keep 
quoting the CFPB study that just came out that has a higher 
impact on rural areas and highly urban areas. And our studies 
show that 60 million people have either gone from credit 
invisible to visible or they have improved their credit score.
    A specific thing that just happened, and someone copied me 
on a consumer note that they had sent to--through the dispute 
process and she was asking us, can you help me get my auto loan 
paid off? It is been paid off but it hasn't been reported yet 
and I am applying for a mortgage.
    And so what we are suggesting is that all transactions 
aren't the same. If we could work together to help the 
furnishers understand that perhaps those kinds of transactions 
make them happen more quickly, you can really help consumers in 
a tangible way.
    Mr. Luetkemeyer. Thank you. Mr. Boundy?
    Mr. Boundy. Congressman, thank you for the question. This 
is something that is really important to me and all of our 
employees. I thought it would be useful to maybe tell you about 
Janine. Janine is a married working mother of six from Ohio. We 
helped her at Experian get a fresh start with her credit life 
through our credit educator program. She got into trouble with 
her credit during college and began to associate her debt with 
anxiety, clearly very concerning and she needed to talk to 
somebody about her personal situation.
    We partnered with a community organization and we referred 
her into our credit educator program. Over months of working 
through this, she was able to improve her credit score by 150 
points. That is a very significant improvement for her. It 
allowed her to take out an auto loan and refinance her 
mortgage.
    And if I may, I will just read a brief quote from her. In 
her own words she said, ``I did not think I had any leverage 
but this program gave me confidence to apply what I knew and 
push forward to settling into a better life with better 
credit.''
    Mr. Luetkemeyer. Thank you. You know one of the things that 
I think Mr. Peck you made the point here a minute ago with 
regards to as people's circumstances change their ability to 
pay also improves. So in other words, they maybe change jobs or 
maybe they had a child move out of the household so they now 
have more money to be freed up to be able to do things and 
those things can be reflected on your credit scores as you see 
an improvement in them suddenly for certain reasons.
    How often do you go back and check your data and study it 
to make sure it is accurate? Anybody? Mr. Peck?
    Mr. Peck. So, accuracy is the most important thing we do 
and what we really do is check for accuracy as it comes in and 
we spend a tremendous amount of dollars and time on the 
matching algorithms which we think we have some of the best in 
the business and we also spend a tremendous amount of energy 
and time working with the furnishers to make sure that they are 
submitting--that they are good furnishers, they are submitting 
data in the right format and they are not sending anomalous 
data. So if all of a sudden their data starts looking funny or 
wrong, we get back with them.
    Mr. Luetkemeyer. Thank you. My time has expired. Thank you, 
Madam Chairwoman, I yield back.
    Chairwoman Waters. Thank you very much. I now recognize the 
gentleman from Georgia, Mr. Scott, for 5 minutes.
    Mr. Scott. Thank you very much, Madam Chairwoman. Mr. 
Begor, how are you? Let me ask you this going back for a minute 
with Equifax and the breach. First of all you are a Georgia 
company and I love Georgia.
    Mr. Begor. We do too, Congressman.
    [laughter]
    Mr. Scott. I know we do. And so we want to make sure the 
record is clear in terms of how we have moved to correct the 
breach situation. I think it is very important for the 
committee to know that you were not CEO at the time of the 
breach. You are relatively new at Equifax. You have assumed 
this position, I think, only about 10 months ago. Is that 
correct?
    Mr. Begor. It is, Congressman.
    Mr. Scott. So it is sort of like we have a new sheriff in 
town. And I want to commend you for the leadership that you 
have provided in cleaning up the mess. You have invested $1.2 
billion in getting new technology to correct and make sure the 
breach never happens again. You have hired over 1,000 highly-
qualified tech professionals to make sure of that.
    And you have provided retribution and retention and help 
for all of those customers, 148 million, who need the help and 
the retribution to make sure they are clear. So I want to tell 
you, job well done there, but we have a bigger issue here.
    According to the CFPB's report, of all the complaints that 
have been registered by consumers, they have not been the 
breach, they have been on inaccurate reporting and so I want 
you to comment on that because you have an issue there.
    I want to know, and I think the committee wants to know, 
what are the steps that you are taking to address this issue of 
inaccuracy? As Chairwoman Waters pointed out in her opening 
statement, it is devastating to folks who are trying to get 
jobs, or student loans, so what are you doing to correct that?
    Mr. Begor. Thank you, Congressman, and thank you for your 
comments. As I mentioned in my oral testimony this morning, we 
think it is an important issue and I was very clear that one 
credit report error is one too many and we are really doubling 
down on our focus on the consumer.
    We are investing heavily in our consumer interfaces so we 
can improve the ease for consumers to process a dispute. And as 
you pointed out so correctly, when a consumer has an issue with 
their credit file, and I think it is been talked about a bit 
this morning, there's a lot of angst with that consumer. So we 
have a lot of sympathy to having better trained call center 
representatives, better technology to process the dispute to 
help them because they are generally trying to complete a new 
financial transaction whether it is a car loan or a mortgage.
    Mr. Scott. But here is where I am having difficulty. This 
process, I think it is what you refer to as the dispute 
resolution process, and it goes on and on. Sometimes, these 
consumers have to even go to court. Who is going to pay for 
that when it has been the credit agencies' fault, merging 
files, mistaking information, and in order to get that cleared, 
they have to go to court, which means they have to get a 
lawyer, they have to pay all these costs, what are we doing on 
that point?
    Mr. Begor. Thank you, Congressman, you know it is very rare 
that a consumer would have to go that far as to go to court--
    Mr. Scott. But some are.
    Mr. Begor. And they do, Congressman, and you are correct. 
We don't want any consumer to have to go down that avenue; we 
want to solve it for the consumer quickly and that is our 
focus. And the other thing we want to do is when we are not 
able to solve and those few instances where they do go to court 
we want to learn from that and then fix our process so it 
doesn't happen again.
    Mr. Scott. Do you not think it might be worthwhile to find 
a way to be helpful to--for the cost if they have to go to 
court? You say it is very few, but fair is fair. They didn't 
make the mistake, the credit agency, Equifax--or any of the 
others made that mistake. Wouldn't that be something that would 
be worthy of consideration that if it has to go to court, then 
let us find a way to help that consumer out? He is already 
suffering from the mistake that you and the credit agencies 
made.
    Mr. Begor. Congressman, your point is 100 percent correct. 
You know, our focus is to resolve those with the consumers 
quickly so that the consumer can complete their financial 
transaction as I mentioned in my testimony, my goal is to be a 
consumer-friendly credit bureau and to enhance our customer 
service.
    Chairwoman Waters. Your time has expired. Mr. Huizenga is 
recognized for 5 minutes.
    Mr. Huizenga. Thank you, Madam Chairwoman. So looking at 
the history of why this industry came into existence, it really 
was to try to ease availability for credit, right? Into a 
broader scale, and I do believe that the products that have 
been put forward have significantly helped to ensure that 
credit is more available to millions of consumers.
    And I know, having a small family business background--my 
grandfather started in construction in the 1930's, and I now 
run the family sand and gravel operation--that over the 
decades, credit has been a significant issue.
    What I am concerned about I think as the ranking member had 
talked about is sort of where are we in the industry since FCRA 
hasn't been really touched since the 1970's and I want to know 
what has been done to modernize and adopt the new technologies?
    And I guess specifically I want to go quickly on this 
National Institutes of Standards and Technologies updated its 
cyber framework last spring and the FTC safeguard rules require 
firms have measure to keep in place customer information. So if 
we just quickly go down the line, Mr. Boundy do you comply with 
both NIST framework and the safeguard rules?
    Mr. Boundy. Yes, we do.
    Mr. Huizenga. Yes, Mr. Peck?
    Mr. Peck. Yes, we do.
    Mr. Huizenga. Yes, Mr. Begor?
    Mr. Begor. Same, yes, we do.
    Mr. Huizenga. Okay, and have you conducted an independent 
audit of your cyber security platform?
    Mr. Boundy. We are constantly reviewing both internally and 
externally looking at external accreditations like ISO 27001 
that we hold or PCI accreditations to make sure that our 
information security is up to standard.
    Mr. Huizenga. But not an independent audit at this point?
    Mr. Boundy. External audits are carried out.
    Mr. Huizenga. I'm sorry?
    Mr. Boundy. External audits that are achieved to carry out 
those accredited--
    Mr. Huizenga. Okay. Mr. Peck?
    Mr. Peck. Yes, we do external audits.
    Mr. Huizenga. Mr. Begor?
    Mr. Begor. As you might imagine, Congressman, following the 
cyber incident of 2017 there have been multiple external 
reviews of our cyber security protections both by ourselves as 
well as by government agencies
    Mr. Huizenga. Okay. And should Congress pursue legislation 
to codify Federal data and security and consumer notification 
standards?
    Mr. Boundy. As I said in my opening testimony, Congressman, 
I think it would be something we would support, that there 
would be a national data breach standard and notification 
approach.
    Mr. Huizenga. Okay. Mr. Peck?
    Mr. Peck. Yes, I agree they should.
    Mr. Begor. We also support that at Equifax.
    Mr. Huizenga. Okay, well I do believe that we need some 
updates and reforms, not some, we need some significant 
elements of that as--again as Mr. McHenry had talked about 
earlier, I am a bit concerned that the reforms that the Chair 
has put forward may go a little far afield on that and, 
specifically, the draft suggests eliminating entire categories 
of debt from credit scores.
    And I am curious, what would--knowing that the history of 
how this evolved, how the industry evolved, what would be the 
impact of this and what would happen to the availability and 
cost of credit to consumers? Mr. Boundy?
    Mr. Boundy. Well, I think we would--it is something we 
would need to study in more detail, but just in principle, I 
think they are probably two, one would be it could negatively 
impact a lenders ability to assess risk and second is that it 
has the risk of increasing the cost of consumer's access to 
credit.
    Mr. Huizenga. Mr. Peck, quickly?
    Mr. Peck. Congressman, in my view we should study it and 
make sure it is statistically and empirically sound, we know 
what our conclusions are if we take certain things and maybe 
reduce them from 7 to 4 years. At the same time I think we 
should make the same effort to see if more information will 
actually help improve the scores, so I think that would help 
modernize the system as you discussed.
    Mr. Huizenga. Mr. Begor?
    Mr. Begor. Congressman, just reinforcing what has already 
been said by the other two witnesses is that we believe more 
data and accurate complete data is really in the interest of 
all Americans that are accessing credit.
    Mr. Huizenga. Mr. Boundy, you had talked about this, I 
think in your opening statement, that actually Experian offers 
the opportunity to add information, to opt in by consumers, is 
that correct?
    Mr. Boundy. Thank you, Congressman, yes we do. We have 
recently launched a product called Experian Boost, designed to 
do what it says, which is to give consumers the opportunity to 
boost and increase their score by adding information 
themselves.
    Mr. Huizenga. And so does that maybe buttress what the 
other two gentleman here were talking about sometimes maybe 
more information that is put in by consumer might help that?
    Mr. Boundy. Yes, I think what this does is let us offer to 
consumers the ability for them to add new information that we 
don't currently have that will positively impact their score.
    Mr. Huizenga. My time has expired so I appreciate the 
opportunity.
    Chairwoman Waters. Thank you. The gentleman from Texas, Mr. 
Green, is recognized for 5 minutes.
    Mr. Green. Thank you, Madam Chairwoman. And I thank the 
witnesses for appearing and I appreciate what they have said 
with reference to their efforts to atone, but I do have some 
questions that relate to some other things that may have 
occurred. Is it true that Equifax executives sold $1.8 million 
in company stock, or thereabouts, before the breach was 
announced?
    Mr. Begor. Congressman, I don't have the exact number but 
there were a number of executives who sold stock before that 
breach was announced--
    Mr. Green. If I may, because time is of the essence, would 
you say that it was at or near or around or approximately $1.8 
million?
    Mr. Begor. Again, Congressman, I don't have the number at 
my fingertips but I would be happy to come back to your office 
with that.
    Mr. Green. Well, I will be happy to tell you that I have it 
at my fingertips, and it seems to me that you have been 
naughty. Is it true that at or around the same day the breach 
was announced, there was an attempt to limit damages by way of 
a congressional hearing? And I am talking about the 148 million 
consumers who had their precious priceless information 
breached. Is it true there was a congressional hearing to limit 
or cap damages?
    Mr. Begor. I am not familiar with that, Congressman.
    Mr. Green. Well, I am. Have you opposed capping damages 
such that your liability would be limited to some number, 
perhaps $500,000?
    Mr. Begor. Not since I have been a part of Equifax. No, I 
have not.
    Mr. Green. Okay. Are you aware that there were efforts to 
limit damages?
    Mr. Begor. I was not aware, Congressman.
    Mr. Green. Is it true that the credit bureaus are not 
liable for the information that you purvey, generally speaking?
    Mr. Begor. Is that directed at me, Congressman?
    Mr. Green. Yes, sir.
    Mr. Begor. I am not sure how to define the term 
``liability.''
    Mr. Green. Well, let me help you. If you have information 
that is inaccurate, is it true that you would say to the public 
that the person who gave us the information is the person who 
bears the responsibility for the liability?
    Mr. Begor. I think as I mentioned earlier, it is our view 
at Equifax that we have a central role when there's inaccurate 
information to both auditing it when it comes in from the 
furnishers or the financial institutions--
    Mr. Green. Do you agree, if I may, do you agree that the 
liability or litigation is something that you would contend 
belongs to the person who gave you the information--furnished 
the information?
    Mr. Begor. Congressman, I am not a lawyer so I really can't 
give a perspective on the liability. I can tell you that we 
feel an obligation and it is central to how I am running the 
company to ensure that we are working--
    Mr. Green. Well, if you feel an obligation, permit me to 
ask this: Do you give notice to the users of your information 
that there may be as much as 20 percent of it that is 
inaccurate?
    Mr. Begor. We don't give notice. It is on the CFPB's 
website of what the disputes are that are processed so it is 
available to the public.
    Mr. Green. I understand but do you, as the purveyor of the 
information, do you accord notice indicating that, ``Our 
business model is flawed. We use inaccurate information?'' Do 
you let consumers know that you have a flawed business model?
    Mr. Begor. Congressman, as I mentioned in my testimony 
earlier and this conversation, our focus is on accurate data 
and I said also--
    Mr. Green. Our focus however is on inaccurate data. That is 
my job. I take my job seriously, I am sure you take yours 
seriously.
    Mr. Begor. Yes, I do.
    Mr. Green. Inaccurate information hurts. I have dealt with 
constituents who have not been able to get a mortgage because 
of inaccurate information. Why would I assume, given that you 
have been naughty you haven't been nice.
    Why would I assume that you are now going to repent, that 
you have seen the error of your ways and that you want to atone 
and you want to self-regulate? I see no reason to do it. I 
support the legislation that the chairwoman has presented. It 
is time for change. I yield back the balance of my time.
    Chairwoman Waters. The gentleman from Colorado, Mr. Tipton, 
is recognized for 5 minutes.
    Mr. Tipton. Thank you, Madam Chairwoman, and witnesses, I 
appreciate you taking time to be here today. Mr. Boundy, in 
your testimony you note that placing an emphasis on the 
accuracy and credit reporting benefits both the consumers and 
financial institutions, leading ultimately to better consumer 
protections and lending outcomes. In your testimony you suggest 
that the credit bureaus help stabilize the safety and soundness 
of the nation's consumer lending practices. Can you make a 
statement in regards to statutory change that is being proposed 
by the chairwoman and what kind of customer information is 
being required in those statements to be able to stay on the 
consumer's credit is report? Is that going to be able to 
distort the financial information or would it enhance it?
    Mr. Boundy. Congressman, I think if I understand your 
question, we support the committee's overall goals of 
continuously improving the accuracy of credit reports but the 
information that is currently held in the credit reports does 
allow us to help be part of assuring consumer lending takes 
place appropriately in the United States.
    Mr. Tipton. So would you actually recommend a little bit of 
caution in terms of putting in statutory requirements in terms 
of some of that information? Would it inhibit maybe some of the 
ideas that you are putting forward for the opt in program for 
the utility bills, for the payments that you are making on real 
estate and otherwise coming in?
    Mr. Boundy. Thank you, Congressman. I think what is 
important to understand about the Experian Boost Program is 
that it is a consumer opt in program so that is something that 
any consumer can take part in if they want to but our industry 
does rely on voluntary contribution of information so I am 
always concerned that anything that could impact the accuracy 
of the information that we hold and allow us to support 
consumer lending in the United States.
    Mr. Tipton. Great. Mr. Peck, I noted that you wanted to 
kind of chime in a little bit in terms of what Mr. Boundy was 
talking about on the Experian Boost Program, in terms of some 
of the opt ins. Did you want to speak to that issue?
    Mr. Peck. I did. Thank you, Congressman. I was going to 
bring up a different point. TransUnion came out with trended 
data well before the other two. We came out with certain kinds 
of alternative data well before the other two. Experian has 
come out with this product that we are now working very hard to 
match and build and I just wanted to point out that is an 
example of competition in this industry where we really are 
pushing each other to come up with really interesting 
technology solutions that help the consumer. That was the point 
I was going to make.
    Mr. Tipton. Great. I appreciate that. I represent a lot of 
rural Colorado. Main street businesses, small communities, the 
ability to be able to use some alternative methods to be able 
to actually qualify that you have an ability to be able to 
repay is something that is admirable. Have you had fair buy-in 
in terms of these opt in programs? Are people taking advantage 
of it, Mr. Boundy?
    Mr. Boundy. Yes, they are indeed. We only launched the 
Experian Boost Program recently and already a large number of 
consumers are opting in because they see the benefit to them.
    Mr. Tipton. Great. Mr. Peck?
    Mr. Peck. We don't have that product in place at this time, 
Congressman, but we are working on it. But we have gone about 
it with something we call trended data that has been in the 
market for awhile. That and our alternative data products, as I 
said before, have actually increased the number of credit 
visibles or improved the credit scores of the number--of the 
credit disadvantaged of 60 million people.
    Mr. Tipton. Thanks. Mr. Begor, you talked quite a bit about 
your company's desire to be able to get some of the dispute 
resolutions accelerated. You have cited a number of dollars 
that are being put in. Would you maybe expand a little bit on 
what those dollars are actually translating into, in terms of 
making that dispute resolution a real reality for consumers?
    Mr. Begor. I thank you, Congressman, and as I said earlier 
in a couple of comments this morning, we believe that our 
central goal is to support the consumer and this is consumer 
data that we protect and when there's one dispute, it is one 
dispute too many.
    Our $50 million of investment over the coming months is 
really going to be around to enhance the technology between us 
and the consumer to make it easier for them to file a dispute, 
easier for them to see the dispute in process, when do we have 
it, when it goes back to the furnisher or financial 
institution, when it is back with Equifax, what is the 
resolution? And we really view ourselves as an advocate for the 
consumer.
    Mr. Tipton. Great. Thank you. I will yield back, Madam 
Chairwoman.
    Chairwoman Waters. Thank you. The gentleman from Missouri, 
Mr. Cleaver, is recognized for 5 minutes.
    Mr. Cleaver. Thank you, Madam Chairwoman. And I thank the 
witnesses for being here. Did you bring any of your staff with 
you? Did any of you bring any staff?
    Mr. Begor. Excuse me, I couldn't hear the question, 
Congressman.
    Mr. Cleaver. Did any of you bring any staff with you?
    Mr. Peck. Yes.
    Mr. Begor. Yes.
    Mr. Boundy. Yes.
    Mr. Cleaver. Are they in here?
    Mr. Peck. Yes.
    Mr. Begor. Yes.
    Mr. Boundy. Yes.
    Mr. Cleaver. Are they behind--right behind you?
    Mr. Peck. Yes, some are right behind us.
    Mr. Cleaver. Can you just raise your hands please? Thank 
you.
    I am not as sanguine about the high level of diversity that 
somebody mentioned earlier, but let me go to something else. I 
don't want to suggest that it is easy to do what you are doing, 
when you have approximately 200 million adults, with your--that 
you handle with your credit files, it is difficult and 10,000 
furnishers, the people who provide information.
    But, what I am having some difficulty with is the fact that 
I am not sure that there is the urgency to clean up this whole 
system as it should be, and that leads to one other thing that 
is connected with that. Is the only difference between the 
three of you, the three credit bureaus, the process--the 
difference in the process--in the way you process information? 
Is that the only difference?
    Mr. Begor. Congressman, if you would like, I will start?
    Mr. Cleaver. Yes.
    Mr. Begor. I think there are a lot of differences between 
the three credit bureaus. As you pointed out, central to our 
business is managing the 250 to 260 million American's credit 
files that we have responsibility for.
    But, there are differences you have heard this morning 
about some of the technology we have, some of the tools that we 
are using with consumers and that is what really makes my view 
this very--a very competitive industry, because we are 
investing to provide more tools for consumers and for our 
customers with the financial institutions in order to be an 
integral part of the U.S. economy.
    Mr. Cleaver. Okay, I am glad you said that. So why do we 
need all three? Can somebody, in just a short period of time, 
tell me why we need all three? Okay good, that is what I 
thought.
    [laughter]
    So--I'm sorry.
    Mr. Begor. Well, we are looking at each other, Congressman, 
and deciding who would answer, so I will be happy to take that 
first.
    Mr. Cleaver. Well, no, you answered it.
    Mr. Begor. Okay.
    Mr. Cleaver. I think what you said earlier is one answer, 
but can the other two respond, Mr. Peck and Mr. Boundy?
    Mr. Peck. Yes, Congressman, so there are actually hundreds 
of CRAs. There are specialty CRAs that deal in different kinds 
of data that we don't deal in. We happen to be the three 
national CRAs that have evolved over time. I think having more 
than one creates substantial competition between us.
    Mr. Cleaver. What is the competition?
    Mr. Peck. We are competing for the ability to actually 
provide the best information on a consumer as possible, both to 
the consumer and to the businesses that are trying to lend to 
the consumer.
    Mr. Cleaver. But when you say competitor, does that mean 
somebody has a choice?
    Mr. Peck. Congressman, they do have a choice. The lenders 
have a choice and the consumers do have a choice, if they want 
to use one of our particular services--
    Mr. Cleaver. To the exclusion of the others?
    Mr. Peck. --for certain things to the exclusion of the 
others.
    Mr. Cleaver. But what information would you have for credit 
that the other two would not have?
    Mr. Peck. I don't know if you want to get that one? But, we 
have access to certain utility information that others might 
not have because of relationships we formed. We have certain 
access to rental information that others might not have because 
of the relationships we have formed.
    We have access to trended data because we have been saving 
it over a 30-month period that the others may not have. So, 
that is an example of the kinds of data we might not--
    Mr. Cleaver. So, Mr. Boundy, the three of you are 
competitors? Is that right?
    Mr. Boundy. Congressman, I have six-and-a-half thousand 
employees here in the U.S. who are proud every day to come to 
work, to do a great job for the consumers they serve and the 
customers that we serve and that is what we concentrate on in 
our business.
    Mr. Cleaver. Yes but--okay, nobody answered my question. 
Madam Chairwoman, I apologize. Nobody answered the question. I 
just need you to point out why we need three agencies and you 
say you are competitors and none of you said anything to prove 
you were creditors. Thank you.
    Chairwoman Waters. The gentleman's time has expired. Mr. 
Williams from Texas, you are recognized for 5 minutes.
    Mr. Williams. Thank you, Madam Chairwoman. Thank you all 
for being here, and as a small business owner, and as a 
capitalist, I might add, I know firsthand the value of complete 
and accurate credit reports in making sound business decisions.
    For those of you who are not aware, I am a car dealer. I 
have been a car dealer for 50 years, my family for 79 years. We 
work with lenders to see what terms they can offer prospective 
buyers to finance one of our cars. The lender's ability to 
offer risk-based pricing is essential in any business that 
relies on lending and financing.
    So, Mr. Boundy, can you elaborate on what Experian has done 
to improve the accuracy of credit reports since the CFPB began 
supervising and examining your company? And I have questions, 
so we will go here, okay?
    Mr. Boundy. Congressman, absolutely. We have a large team 
of employees who concentrate on improving the accuracy of data 
and applying a range of rigorous checks, over 400 of those 
checks.
    And, in fact, if the people providing the information don't 
meet our standards, we end up terminating them. We have 
terminated over 100 of those data furnishers over the last 3 
years and now we are moving to make sure the consumers can add 
information onto their own credit file, make sure they can walk 
onto your lot and walk off with a car straightaway.
    Mr. Williams. Okay, as a small business owner and a 
capitalist, as I said, I am going to get as many people into 
new cars as possible, as long as the lender is willing to give 
out loans.
    Now whether a person is buying a car, a private jet or even 
a cow, the lender needs to be paid back in order to continue 
offering lines of credit to other people in the community.
    A deal is a deal in America and people need to pay their 
debts. I am worried that this committee is going to go down a 
path where lenders are receiving credit reports that have been 
scrubbed of all negative credit information. Mr. Peck, can you 
go into some detail, quickly, about the potential risk of 
removing damaging information from a person's credit history?
    Mr. Peck. Thank you, Congressman. So if we would blindly 
remove information, there could be unintended consequences. And 
so, whenever you are going to do something like that, even when 
you add information, you need to prove that it, statistically 
and empirically, will do the job it is intended to do.
    So the danger is, if you remove something without thinking 
through the negative implications, you could increase the cost 
of credit to everybody because, ultimately, when people don't 
pay back their loans, the cost of credit goes up.
    Mr. Williams. I agree totally. Mr. Begor, in your testimony 
you mentioned that Equifax has been investing substantial 
amounts into technology and security. Can you, quickly, 
elaborate on these investments, and how they are making 
consumer data much more secure so we do not have a repeat of 
the data breach?
    Mr. Begor. Yes. Thank you, Congressman. As I mentioned in 
my oral testimony this morning, it is our goal to be an 
industry leader on data security. And that $1.25 billion we are 
investing in 2018, 2019, and 2020, incremental to our normal 
spend is all focused on bringing the very best technology into 
Equifax that is available anywhere in industry.
    And whether it is perimeter security, encryption 
technology, bringing some of our systems into the newest forms 
of technology, that is really the focus of that investment, so 
we can be an industry leader around data security. We know that 
we are entrusted with protecting that data, and we take it very 
seriously.
    Mr. Williams. Thank you. One of the things we have been 
talking about is complaints. And I just made a note here that 
we can't get complaints confused with not paying your bills. 
That is just a statement that I have. Before my time ends, I 
wanted to ask each of you a yes-or-no, simple question. We can 
start on the left. Do you think that the government can 
establish a credit reporting agency that is better than each of 
your representative companies?
    Mr. Begor. No.
    Mr. Peck. No.
    Mr. Boundy. No.
    Mr. Williams. It would cut out competition is what it would 
do. We have talked a lot about that. And then, finally, I want 
to ask each one of you, are you a capitalist or a socialist? We 
will start here on the left.
    Mr. Begor. Congressman, a capitalist with a soft heart.
    Mr. Peck. I would lean more towards being a capitalist.
    Mr. Boundy. Congressman, I am proud to run a business in 
the United States with six and a half thousand employees that 
come to work every day to do a great job.
    Mr. Williams. Well, thank you. Just in closing, I want to 
thank all of you for what you do. Being a person in the lending 
business, your reports are important to us, not only to the 
sellers, but to the consumers. So thank you for that. I yield 
my time back.
    Chairwoman Waters. The gentleman from Colorado, Mr. 
Perlmutter, is recognized for 5 minutes.
    Mr. Perlmutter. Gentlemen, thank you for your testimony, 
and just a couple of questions. Mr. Cleaver was asking, why 
shouldn't there only be one of you? My question is, why aren't 
there more of you?
    Let's talk about the secret sauce, the FICO scores where 
somebody came up with an algorithm, and you guys modify these 
algorithms. I don't understand them. Why aren't there more of 
you? Why are there only three of you? And that is the problem 
that I see. And that is why you are getting some extra scrutiny 
here. Mr. Begor, why aren't there more than three of you?
    Mr. Begor. Congressman, you know, first off, we have tried 
to portray this morning, I think, in some of our comments that 
there's intense competition between the three of us. And the 
$1.25 billion investment that we are making is a very sizable 
amount. As Mr. Peck testified a few minutes ago, there's more 
than the three of us. There are hundreds of data furnishers and 
credit reporting agencies that have different types of data 
that are in the industry.
    Mr. Perlmutter. Mr. Peck, but why, today, are there just 
three of you? Whenever we talk, it is always TransUnion, 
Equifax, and Experian. Full disclosure, I am an Experian 
customer. I am one of the, sort of, three areas. They sell data 
to the masses. They sell data or they provide services to 
creditors. And then they sell back to me so that I can see what 
my credit score is from month to month to month. But why are 
there only three of you?
    Mr. Peck. That is a good question, Congressman. Over time, 
the three have emerged. And it was largely a kind of geographic 
thing. But if you really look at the industry overall, there 
literally are hundreds of CRAs that are looking at different 
ways to collect different kinds of information. They are 
regulated by the FCRA. There are also many, many analytics 
firms. You mentioned FICO.
    Virtually every lender has their own scores as well. So 
there's, I think, very intense competition, which has been 
fueled by, for example, FinTechs, who get access, by the way, 
to all of this information that the big banks--I think the big 
banks, and I can't remember the number, but they hold the 
majority of the data. The CFPB has those numbers.
    If they weren't sharing that information into a credit 
bureau system like this, community banks, other small banks, 
FinTechs, would not be able to compete. They wouldn't get that 
information. And I think, over the last 3 or 4 years, that has 
driven a substantial increase in the amount of newer and better 
products that have gotten in the hands of all different kinds 
of people.
    Mr. Perlmutter. But let me just stop you. So the fact that 
there are only three--well, three major consumer banks. There 
may be these minors, but when I think of credit bureaus, you 
are the three that I think of. And I think everybody up here, 
Democrats and Republicans, you are it.
    And so, when there's a breach it is big. When there is a 
credit breach--when there's a credit breach, it is big. When--
you know, and--and I said this to Mr. Boundy, he was in to see 
me a week or so ago, you know, here I am. I think I have--
should have really good credit. I screwed up on something. I 
paid the wrong amount. Chase cashes the check. But then, 
unbeknownst to me, you know, reports it as a short check, that 
I haven't paid enough.
    And all of a sudden my wife comes in and says, hey, my 
credit score just dropped like a rock. You know, and I am 
going, I think everything's fine. So then you start calling. 
And you talk to the credit bureau. And then they send you to 
the bank. And you get the low person on the totem pole.
    I guess, the thing that really gets all of us is the fact 
that even if you have good credit, and you screw up once, it 
seems to have a really bad effect on your credit, which could 
hurt you for a long time to come. So I am a little bit happy to 
hear about this other product that you have, Mr. Boundy. So if 
I gave you my utility bills, how's that going to help me fix it 
when I screw up?
    Mr. Boundy. Congressman, thank you for the question. The 
way that the Experian Boost product works is it allows you to 
go online for free, and take information from your bank 
accounts and contribute that directly onto your file, and 
increase your score as a result of proven payment history, for 
example, of your utility bill.
    Mr. Perlmutter. Okay. I understand where the chairwoman is 
going here, though, with wanting to look into this situation 
because we really only have three. There may be smaller 
varieties out there. But the fact is you have a ton of 
information on all of us. When something goes awry even it is 
because of what I did. It was my mistake. But something small 
that I fixed right away. I have not been able really to repair 
in two years now and I hear about it from my wife on a pretty 
regular basis, because she had impeccable credit until I 
screwed up.
    So the effects that you guys have is long-lasting and 
across the board and there is a real desire on our part to make 
sure that there is good communication between you and the banks 
and all of us to help us do a better job. I yield back.
    Chairwoman Waters. Thank you. The gentleman from Georgia, 
Mr. Loudermilk, is recognized for 5 minutes.
    Mr. Loudermilk. Thank you, Madam Chairwoman. Thank you all 
for being here. Being a former business owner, mistakes and 
errors happen. None of us are perfect. We do not live in a 
perfect world, but the mistakes that happen in your business do 
have a profound effect because it affects the livelihood of 
individuals.
    Mr. Peck, I will start with you and ask, when there's an 
error on a credit report, that is information that is provided 
to you by a creditor of some type, right?
    Mr. Peck. Most often a creditor, yes.
    Mr. Loudermilk. Okay. When somebody--a consumer notices 
through something like Credit Karma or something like that and 
they contact you, do you have any way of assisting--or do you 
attempt to assist the consumer in cleaning it up and how to 
clean it up?
    Mr. Peck. Yes. If they dial into us we answer the call in 
30 seconds. If they dispute online, which is becoming more 
prevalent, we take in their data. They have an automatic way to 
upload the documentation that supports their dispute. We get in 
contact with the furnisher or the lender and we try to help 
them resolve that dispute.
    Mr. Loudermilk. So if the lender--do they have a timeframe 
that they are supposed to respond by?
    Mr. Peck. Yes, if they don't respond within 28 days, then 
we close the dispute in favor of the consumer.
    Mr. Loudermilk. Okay. Does Equifax do the same?
    Mr. Begor. We do, Congressman. And as I mentioned in my 
testimony, we are investing more dollars to make that even 
easier for the consumer to process that dispute, quicker call 
response time because we know it is an anxious time for the 
consumer when they see an error on their credit report.
    Mr. Loudermilk. How long, let us say when they claim their 
report up, how long does it take to reflect in their credit 
rating? Is it immediate? Is there usually a time after the 28 
days or whatever?
    Mr. Begor. I'm sorry?
    Mr. Loudermilk. Let me ask--do you have a timeframe as 
well?
    Mr. Begor. It happens almost automatically.
    Mr. Loudermilk. Okay.
    Mr. Begor. In a kind of overnight fashion. When that 
dispute is repaired, it will update their credit scores and go 
all the way through the system.
    Mr. Loudermilk. Okay, Mr. Boundy?
    Mr. Boundy. Yes, Congressman, it would very be similar 
practices from Experian.
    Mr. Loudermilk. Okay. How long has this been in place--this 
type of, Mr. Peck, of customer assistance and the timeframes?
    Mr. Peck. So the process of consumer dispute has been in 
place since the FCRA legislation came out. In my view, over the 
last 5 years, 7 years, the dispute process has improved 
substantially because of the use of online tools. I think the 
credit bureaus frankly have gotten much more focused on doing a 
better job at it.
    Mr. Loudermilk. Okay, thank you. I appreciate that. Mr. 
Boundy, I did a little research on complaints before this 
hearing and from what we found out Experian had about 95,000 
complaints to the CFBB since 2012. Does that sound about right?
    Mr. Boundy. I don't know the exact number, Congressman, but 
I think that sounds about right.
    Mr. Loudermilk. When we ran the numbers--that sounds kind 
of high but when we ran the number that is about 0.5 of 1 
percent of your customers which actually sounds pretty good 
when it comes to customer satisfaction. Mr. Begor, do you guys 
track customer satisfaction ratings at all?
    Mr. Begor. We do. In our call center we do call recordings 
to coach our call center associates on how to be strong in 
customer service and we are focused on improving that service.
    Mr. Loudermilk. Okay. Well, I don't envy the position you 
are in. I think as my colleague, Mr. Williams, said, it is 
important to actually helping keep our interest rates down but 
it is a frustrating process when you do have something wrong. 
My grave concern over where we are going with all this is the 
government getting more engaged in it because quite frankly the 
agency that has the lowest customer satisfaction rating in the 
entire United States of America is the United States 
Government, by far.
    At the bottom is the Veteran's Administration and Treasury. 
Now if they would adopt the same procedures that you have for 
resolving disputes, I think that would go up because we 
regularly deal with constituents who, with the VA, who has data 
that is wrong about a veteran that we have sent the right data. 
We have some who are now on their 13th year trying to correct 
that information.
    I have constituents who are on their fifth and sixth year 
trying to correct data with the IRS in the Department of the 
Treasury. We have the same thing with the housing agency, with 
HUD. Those are the three of the lowest of the lowest and so my 
concerns is as Congress goes forward is while there are issues 
definitely with these agencies that need to be corrected, are 
we just going to make them worse by getting the government 
involved. With that, Madam Chairwoman, I yield back.
    Chairwoman Waters. The gentleman from Florida, Mr. Lawson, 
is recognized for 5 minutes.
    Mr. Lawson. I thank you very much and welcome to the 
committee. The question that I have is a certain segment of the 
population does not have access to credit and I might say not a 
certain section but a large section. This means that they do 
not have a credit score. As all of you know, no credit score is 
just as bad as low credit score.
    How can we utilize alternative proofs of someone's ability 
to pay--approve a payment included utility bill, cell phone 
bills, and maybe even cable bills to determine what kind of 
credit score, and all of you all can respond to that because in 
certain segments of society, people do anything sometimes to 
pay their utility bill, cable bill and so forth but they still 
might have a really bad credit score. How do you handle that 
situation?
    Mr. Begor. Congressman, I will go ahead and start. We 
believe that one of the roles we play is really helping those 
disadvantaged Americans who don't have access to the 
traditional credit file. There are upwards of 26 million 
Americans who are not in the credit system. There are another 
close to 19 million who have what they call a thin file, 
meaning they are in the credit bureau but they have no trade 
lines, meaning they don't have any financial records.
    So like our competitors, we are constantly looking for 
alternative data like cell phone, like utility payments, like 
rental payments that we can bring into our financial partners 
and really help in that credit decisioning for that consumer 
who is not in the traditional financial system.
    Mr. Peck. Congressman, my answer would be very similar to 
Mr. Begor's. It is--we are trying to find information--
information or payment data on things that people are using in 
their regular everyday life, wireless phones, cable, rental, 
that shows a sustained ability to discipline themselves to pay 
for those things and then that does find its way into the 
credit score and increases their access to credit.
    Mr. Boundy. Congressman, thank you for the question. I 
think you are absolutely right, in fact if you want to do that 
at Experian you can do that straightway today. You can come to 
Experian.com, you can select to boost your score, you can add 
that information immediately onto your credit file, your score 
will immediately reflect and increase as a result of that if it 
is appropriate. In fact I heard about one consumer increasing 
their score by over 70 points.
    Mr. Lawson. Thank you very much. My other question is, you 
know, when I was in college, I was very popular my senior year; 
everybody wanted to give me a credit card. As a result of 
getting all those credit cards, 2 or 3 years later when I was 
trying to get a home, it was a situation where they said I had 
missed a couple of payments.
    It was causing a problem. I have probably over 100,000 
students throughout my district in 4-year institutions and 
community colleges and so forth and they have a lot of things 
going on in terms of using credit cards to make payments. Do 
you all take that into consideration 2 or 3 years later when 
you have a score that you are trying to apply for different 
things and the credit starts to reflect some of those options 
that they made? Anyone can respond to that.
    Mr. Begor. I will go ahead and start. Congressman, as you 
may know, credit scoring systems that we use and the financial 
institutions use really the predictive nature of a missed 
payment that is 2 years ago, 3 years ago, 4 years ago, 5 years 
ago, is less relevant and becomes less a part of that credit 
decision. Something that is missed last week, last month, you 
know in a recent period, is much more weighed into that credit 
decision.
    Mr. Lawson. Right, quickly, because of all the hurricanes 
that we had, this Hurricane Michael you know in Florida and a 
lot of things happened, and are still going to happen with 
people's credit, and so forth, how do you weigh in on that?
    Mr. Begor. Congressman, as you may know, in the situation 
of a hurricane we will work with the financial institutions to 
make sure they understand the impacted consumers or another 
natural disaster we have actually are doing the same thing with 
regards to furloughed government workers from the recent 
government shutdown and we also offered free credit reports to 
the furloughed government workers so they could really 
understand where they may have missed a payment and helping 
them communicate that to the financial institution.
    Mr. Lawson. Does anyone else care that I have about 10 
seconds left?
    Mr. Peck. I was more or less, Congressman, going to answer 
the same way. The example is with the recent government 
shutdown it is advertising that there is help available, we had 
professional counselors counseling the people who might have 
been affected on how to talk to their furnishers or their 
lenders. We talked to the lenders and said here's what you can 
do to indicate that this person wasn't really late on a 
payment.
    Mr. Lawson. Okay, I yield back.
    Chairwoman Waters. The gentleman from Ohio, Mr. Davidson, 
is recognized for 5 minutes.
    Mr. Davidson. Thank you, Madam Chairwoman, and I thank our 
witnesses and thank you for the work you do to make sure that 
our consumers have access to credit. Mr. Peck, would you agree 
that it is accurate that the purpose of credit rating agencies 
is to help those who would extend credit to consumers to 
accurately assess risk of default or timely repayment?
    Mr. Peck. Yes I would, I would also say it is to help 
consumers have kind of an independent view of who they are 
without regard to race, religion, or gender.
    Mr. Davidson. Thank you. Mr. Boundy, a topic that is very 
near and dear to me and to millions of Americans and a big part 
of why all three of you are here today is data privacy. The 
E.U. has moved forward with their own data privacy legislation 
called the General Data Protection Regulation or GDPR for 
short. Are you familiar with GDPR?
    Mr. Boundy. I am familiar with it in principle.
    Mr. Davidson. Thank you, in response, your U.K. branch said 
preparing for GDPR has had a significant impact on U.K. 
organizations in terms of cost and effort. Do you still agree 
with that statement?
    Mr. Boundy. I agree with the statement that we made.
    Mr. Davidson. So, clearly it is a dynamic change to privacy 
laws for Europe, and I am particularly curious about how the 
GDPR's consent regime which requires that processing can only 
occur if the data subject gives informed and unambiguous--I 
understand--a clear and affirmative act establishing a freely 
given specific informed and unambiguous indication of the data 
subjects agreement to the processing of personal data related 
to him or her such as by written statement including by 
electronic means or oral statement.
    To me, that is potentially legally confusing, and I am sure 
it caused a lot of changes for your company as it has for many 
others. But it is very different than the opt out regime that 
we have in the United States under Gramm-Leach-Bliley. How do 
credit reporting agencies then lawfully process personal data 
under GDPR and should that be a model for the United States 
legislation?
    Mr. Boundy. Well, Congressman, it is a complex topic, but 
in fact there are a great many similarities between the way 
that the GDPR legislation is applied to the credit bureaus and 
the financial system in, for example, the United Kingdom, as 
well for the FCRA here in the United States.
    Mr. Davidson. Okay, so at the end of the day it is 
inconsequential then if we just go with the GDPR for the U.S., 
you guys would be for that?
    Mr. Begor. Congressman, I am not sure I necessarily agree 
with that. There are a lot of protections already in place 
today, and for example the Senate Bill 2155, it was passed last 
September, it allows a consumer to freeze their file for free--
you know gives a consumer a lot of control--
    Mr. Davidson. But that is not the same as consent to all 
the data that is in it. So it is a very different legal 
framework for the U.S. and I am sure that all of you are aware 
that the U.S. is contemplating future privacy legislation, and 
I am very passionate that we get it right. And I am just 
curious how it would impact.
    I trust that it would impact you quite appreciatively, I 
don't think it is accurate to downplay the seismic shift that 
GDPR had in privacy framework by saying well it is essentially 
what we have in America; it is not. The underlying premise is 
very different. I think, you know, the other big thing is who 
ultimately at each of your organizations is responsible for 
security? Mr. Begor?
    Mr. Begor. It would really be me. The chief security 
officer reports to me, and also reports to the board. We have a 
special technology committee and the individual has a dual 
report.
    Mr. Davidson. Thank you. Mr. Peck?
    Mr. Peck. It would be me.
    Mr. Davidson. Absolutely. Mr. Boundy?
    Mr. Boundy. It would be me.
    Mr. Davidson. I am so encouraged to hear you say that, and 
that is just so nice to hear that the buck stops here, that 
everything happens or fails to happen ultimately comes up to 
the chief executive. Since those have been incredibly valuable 
and increasingly prominent role the org charts of organization, 
Mr. Begor could you highlight how your organization has changed 
the role and responsibility for your system?
    Mr. Begor. Prior to the data security breach, our chief 
security officer worked for our general counsel and that was 
changed right after the data security breach and I continued 
with the--
    Mr. Davidson. Thanks. Any big changes for either of your 
organizations?
    Mr. Peck. From the technology officer and to me. It is a 
highly technical job. It has no place reporting into the legal 
department. It also is a culture and so you need this person to 
have direct access to your head of audit and also to your 
chairman of the board.
    Mr. Davidson. Thank you. Mr. Boundy?
    Mr. Boundy. No major changes other than it is an incredibly 
important job to have in an organization. In fact, the 
accountability sits with every employee in our company to 
ensure the security.
    Mr. Davidson. Thank you. My time has expired and I yield 
back.
    Chairwoman Waters. The gentlewoman from Virginia, Ms. 
Wexton, is recognized for 5 minutes.
    Ms. Wexton. Thank you, Madam Chairwoman, and thank you to 
the witnesses for joining us here today. I represent Virginia's 
10th District, which is just across the Potomac in Northern 
Virginia, and it has a very high concentration of Federal 
employees and contractors who were negatively impacted by the 
shutdown.
    Now that the shutdown's over, most of my constituents are 
back at work, but the challenges they are facing still remain. 
I am sure you all are aware of that. Prudential Financial 
recently conducted a survey of Federal employees to see how 
they were affected financially by the shutdown.
    The survey found that more than a quarter of them missed a 
mortgage or rent payment because of the shutdown, 13 percent 
missed a student loan payment, and nearly half fell behind on 
their bills in general.
    So, I would inquire of you gentlemen, if you observed any 
increase or spike in negative credit reporting among folks whom 
you either have identified as Federal employees or contractors, 
or that you know are in the region where there are a lot of 
such employees. I inquire of the panel.
    Mr. Begor. Congresswoman, thank you for that question. As I 
mentioned in my oral testimony and my comments earlier, we have 
great sensitivity to any American who is impacted by any issue, 
whether it is a hurricane, a wildfire or, in this case, the 
government shutdown.
    We announced on February 1st that we were offering free 
credit reports for all impacted government workers. We also 
increased the staffing of our call centers and really made sure 
they were ready and available to take those inbound calls to 
help coach the impacted government workers about how to work 
with their financial institution.
    And, as the Congresswoman probably knows, there's an 
ability to put a note on your credit file to really highlight 
that you were impacted in that way and that credit file goes to 
the financial institution as part of the underwriting process 
for a new loan, a new auto loan or a credit card.
    Ms. Wexton. Just following up on your response, Mr. Begor, 
as a part of the process, if they did, for example, pay a 
mortgage payment late or miss a rent payment, that is something 
that would show up as an adverse event in their credit score, 
is that correct?
    Mr. Begor. That is correct.
    Ms. Wexton. Okay, they would have an option to attach an 
explanatory statement, but it would not, ultimately, help the 
score that they get.
    Mr. Begor. That is correct. And they also have the 
opportunity, which we coach them on, is to talk to their 
financial institution to really make sure they understand why 
they missed it and really go through that avenue.
    Ms. Wexton. I think we know why they missed it, because 
they weren't getting paid. Now, Mr. Boundy, you testified 
earlier in your prepared remarks that you vet the data provided 
by the furnishers, is that correct?
    Mr. Boundy. Yes, Congresswoman, that is correct.
    Ms. Wexton. Is that data--does that vetting process involve 
the consumers themselves?
    Mr. Boundy. That vetting process that I was talking about 
in my testimony involves our employees and our data quality 
team, putting it through about 400 checks for accuracy. Of 
course, every consumer is able to access their report for free 
and check their own information as well.
    Ms. Wexton. But, before that data is entered into your 
system, is there any vetting that involves the consumer? Or 
does it just involve the furnishers and double-checking Social 
Security number, date of birth, geographic location?
    Mr. Boundy. The information that I was talking about in my 
testimony is reviewed by our own staff for its accuracy and put 
through a range of rules and checks to make sure that it is as 
accurate as possible.
    Ms. Wexton. But, does it involve the consumers themselves?
    Mr. Boundy. That process does not involve the consumer.
    Ms. Wexton. Now as far as consumer directed or inquiries to 
a person's credit report, whether they be by a furnisher or a 
creditor or the consumer themselves, does the number of 
inquires cause it--does an increased number of inquires cause a 
decrease in the overall creditworthiness score?
    Mr. Peck. I can answer that. So, there are hard inquires 
and soft inquires. When the consumer themself is making an 
inquiry to take out credit, and they make a repeated series of 
many all at once, that can decrease the score when it is a soft 
inquiry, meaning they have checked their own credit score, 
meaning they have maybe been part of a predetermined offer of 
credit, that is a soft inquiry, it would not count against--it 
shows up in their credit report, but does not count against 
their credit score.
    Ms. Wexton. So, for example, Mrs. Perlmutter, the spouse of 
the gentleman from Colorado, she apparently likes to go on the 
credit reporting bureaus and check her score with regularity, 
is that an adverse event that would impact--
    Mr. Peck. No, that would be a soft inquiry and the reason 
we keep track of it is we are federally--our regulation says we 
have to be able to tell her every time somebody, including 
herself, checked her score, and it is called a soft inquiry.
    Ms. Wexton. Thank you very much. The dispute process--those 
generally arise when the consumer is denied credit, is that 
correct? Would you say that is an accurate time that it would 
be?
    Mr. Peck. I think that is--
    Chairwoman Waters. The gentlelady's time has expired.
    Ms. Wexton. Thank you.
    Chairwoman Waters. The gentleman from Tennessee, Mr. 
Kustoff, is recognized for 5 minutes.
    Mr. Kustoff. Thank you, Madam Chairwoman, and I do want to 
thank all the witnesses for being here today for this important 
hearing. Mr. Peck, if I can go to you, in your statement you 
talked about at TransUnion alternate data helping 60 billion or 
some odd credit invisible or you--I think you may have termed 
it credit disadvantaged customers gaining access to credit by 
supplementing traditional credit with new insights that reflect 
broader payment behaviors. My question is, have you seen any 
type of, for lack of a better way of putting it, negative 
impact from doing this or from these new insights?
    Mr. Peck. Our studies have shown that these impacts are 
very, very positive. I would have to go back to look at the 
report to see if there was any kind of negative impact, but 
that is something we would be willing to share with you, 
Congressman.
    Mr. Kustoff. Thank you. Do you see any potential risks by 
doing this?
    Mr. Peck. Congressman, I think the risk would be that the 
furnishers are doing this on a voluntary basis, and so because 
they are doing it on a voluntary basis, if there is a negative 
impact, then they would have to be able to respond to us.
    And, I think, that is part of the conversation this 
committee needs to have as we look for more and more sources of 
alternative data. We have to encourage the suppliers of this 
kind of alternative data that they are going to have to comply 
with the FCRA in order to supply the data.
    Mr. Kustoff. And when you talk about encouraging those 
suppliers, are you saying reluctance, or are you saying 
openness, or how would you characterize it?
    Mr. Peck. Congressman, that is a good question. I would 
characterize it as that we likely receive more negative data on 
these types of things than positive data. And the positive data 
is what really makes a difference to people. Of course, the 
negative data makes a negative difference to people.
    And so, to really get a full profile, let us say, of the 
modern American who has a cell phone, who's paying their cable 
bill, making rent payments, perhaps, because they can't afford 
a home right now. You want all of that positive data to be part 
of a credit report.
    Mr. Kustoff. Thank you, Mr. Peck. If I can, I would like to 
open this up. And I think there is a difference of opinion, in 
terms of how we approach credit reporting modernization. The 
legislation drafted by the chairwoman approaches reform by 
making it easier for consumers to address issues with credit 
scores by creating processes to remedy mistakes and remove 
adverse findings. My question, I guess, Mr. Boundy, is to you. 
Do you have any concern, whatsoever, that this might raise 
costs? And would it protect consumers seeking credit?
    Mr. Boundy. Congressman, thank you for the question. I 
agree with the aims of the committee, which are to improve 
people's access to credit, and the accuracy of credit reports. 
This is really important.
    One of the reasons that I have talked about that we have 
launched the Experian Boost product is to find ways to access 
that different information, and allow consumers to increase 
their credit score. So I am always concerned about anything 
that could impact the consumer's ability to access credit, and 
the cost-effectiveness with which a financial institution can 
provide the credit.
    Mr. Kustoff. Do you think it could adversely affect the 
cost to the consumer?
    Mr. Boundy. I think removing some information, if it is 
proven to be very predictive, could impact the cost.
    Mr. Kustoff. And do you have any idea, the extent that it 
could affect the cost?
    Mr. Boundy. I don't have any idea of exactly what that 
would be, but I would be very happy to work with the committee 
and get back to Congress with more details on that.
    Mr. Kustoff. If you could look and try to analyze what you 
think the cost would be to the consumer and get back to me, I 
would appreciate it. Mr. Begor, if I could, to you as well, the 
same question and the same premise. Do you have an opinion, 
from your standpoint, whether that could affect cost, 
ultimately, to the consumer?
    Mr. Begor. Similar to Mr. Boundy's testimony, that, you 
know, we believe that more data is going to be more valuable 
for all Americans, and including alternative data is important. 
But first and foremost, having accurate data is quite critical. 
And that is the focus that we have in our internal processes, 
and also making it easier for consumers to process disputes. 
And I think, as the Congressman knows, in the last 5-plus 
years, the CFPB has been very active, both, with us, and 
furnishers around the accuracy of data.
    Mr. Kustoff. But would that, ultimately, affect the cost to 
the consumer?
    Mr. Begor. It could. And it could impact the cost to all 
consumers if the wrong data was removed from a--the data files.
    Mr. Kustoff. Thank you very much. I yield back the balance 
of my time.
    Chairwoman Waters. The gentlewoman from Michigan, Ms. 
Tlaib, is recognized for 5 minutes.
    Ms. Tlaib. Thank you, Madam Chairwoman. Hi, how are you 
guys? I always feel like--I don't know if it is because I am 
new, or--but I feel like it goes so long, and the monotone is 
the same, and I know the chairwoman wouldn't like me to ask all 
of us to stand up and stretch, but I do appreciate this. This 
is a really critical issue in my district. I represent part of 
Detroit, but also these Wayne County communities. And we 
actually have the largest car insurance rates in the nation.
    In one of my ZIP codes, I think the average is over $5,000. 
And my question is, do you, as agencies--and I am pretty sure 
it is a yes--transmit credit scores to car insurance agents--
industry?
    Mr. Begor. Yes, we do.
    Mr. Peck. Yes.
    Mr. Boundy. Yes.
    Ms. Tlaib. What does a credit score say about the person's 
driving history, or their potential for accidents? Anybody, 
Mark, James, Craig, you can call me Rashida.
    Mr. Begor. Congresswoman, I can't really respond to how an 
insurance company uses the data. Maybe one of the other CEOs 
could.
    Mr. Peck. I can't really respond either, Congresswoman, 
other than that it is just one of many, many factors that goes 
into deciding how much the cost of insurance is for an 
individual.
    Mr. Boundy. Yes. I don't have a different answer, 
Congresswoman.
    Ms. Tlaib. Yes. So one of the things that I have talked to 
the chairwoman about, and some of my colleagues, is--you know, 
I have a resident. She worked at Beaumont Hospital in Michigan 
for over 25 years, steady income, great credit score--decent.
    As soon as she retired, obviously her fixed income--her 
income got lower. It impacted her credit score. She had no idea 
until she got her increase in her car insurance rate. And it 
went up over $400 or $500. And it is still going up almost 
every single year.
    And she called them, and she asked what was the problem--
what was the issue? I haven't gotten in a car accident in 55 
years. Not one ticket. You know, she went to work, came back, 
and now she just goes grocery shopping, or she sees her family. 
She is an incredibly responsible driver. And their answer was 
her credit score dropped.
    And she said, I don't understand how that impacts my 
driving record. And I asked this--all of you is, you know, I 
want to introduce a bill that basically says that you can't 
provide credit scoring--a credit score to the car insurance or 
the automotive--the auto insurance industry because there is no 
connection with somebody's driving record and what their credit 
score is. And I would like to hear from you all. And I know 
this is a risky answer, but would you support something like 
that?
    Mr. Begor. Congresswoman, I really can't give an opinion on 
that because I don't know enough about how the insurance 
industry uses this data. And I think, as Mr. Peck pointed out, 
I am sure it is one of multiple data sources they use, 
including, you know, the driving record of the individual. But 
again, I am not skilled enough to provide an answer.
    Mr. Peck. Congresswoman, I would encourage you to dig into 
it, and ask--
    Ms. Tlaib. I intend to.
    Mr. Peck. Exactly--and I imagine you do, but exactly how 
are you calculating the difference in scores that would impact 
a driver's rating, which is, as you know, what drives their 
insurance rate.
    Mr. Boundy. Congresswoman, it is a complex issue that 
sounds like it is definitely worthy of further study.
    Ms. Tlaib. So I read somewhere that some in the car 
insurance industry feel that if their credit score is lower, 
the likelihood of them committing a crime is higher--a crime of 
fraud. And if you read and dig deep, many experts say, well, 
wait a minute, you are punishing somebody for being low income 
because most people's credit score is not because they haven't 
paid a bill.
    Some it is because they haven't got access to credit. And 
like you talked about some of the services. And so, for my 
folks, I have the third poorest congressional district in the 
country, it is not because somebody forgot to pay a bill, or, 
like one of my colleagues, paid a little bit less than he was 
supposed to.
    It is because they have no access to really bringing up 
their credit score, or to--to any equity. And so, it is 
something that is very disturbing because in Michigan there is 
no real transit system. The only way to get around, to get into 
a job--70 percent of folks in the City of Detroit actually work 
outside--like 60 percent work outside of the City of Detroit.
    So they have to drive somewhere. And more and more of our 
residents are driving without car insurance because of this 
issue around credit score--with the use of credit score. And 
so, I want to bring that to your attention. And I hope that you 
all will work with me and many of my colleagues who will be in 
full support of saying we have to restrict the use of credit 
scoring as a basis or a circumstance for auto insurance 
companies as a driving record standard. Thank you so much for 
your time. And thank you, Madam Chairwoman. I yield back.
    Chairwoman Waters. Thank you very much. The gentleman from 
Tennessee, Mr. Rose, is recognized for 5 minutes.
    Mr. Rose. Thank you, Chairwoman Waters, and thank you to 
the three witnesses on the panel today. The proposed 
Comprehensive Consumer Credit Reporting Reform Act, I assume 
all three of you are familiar with the terms of that proposed 
legislation?
    Mr. Begor. Yes.
    Mr. Rose. As I understand it, credit bureaus the three 
organizations that the three of you represent, have pushed for 
alternative credit information from entities such as 
telecommunications and utility companies, yet many of those 
companies, as I understand it, are reluctant to provide 
consumer payment data because it might subject them to the Fair 
Credit Reporting Act. Is that a similar concern that you would 
have?
    Mr. Peck. I would say generally in discussions that would 
be true, Congressman.
    Mr. Rose. The legislation institutes new requirements on 
furnishers including the establishment of a new regime for 
reinvestigations upon request by consumers at an appeals 
process following such reinvestigations. I am not convinced 
these changes would incentivize more companies to furnish data 
to credit bureaus. Does this have the potential and this is a 
question for all three of you, does this have the potential to 
undermine the mission of growing the number of qualified 
borrowers in the United States? Mr. Begor?
    Mr. Begor. I think, as the Congressman knows, the furnisher 
system in the United States today is a voluntary system and it 
is one where a financial institution makes the decision to 
contribute their data to the three credit bureaus and our view 
is that there is a very rigorous process today to really to 
manage the disputes.
    I think you heard in my testimony that we want to take that 
even to another level and really improve the customer focus 
that we have in supporting consumers when they have an error or 
dispute on their credit file.
    Mr. Peck. Yes, I really cannot add much more to that view; 
it is the same view.
    Mr. Boundy. You know Congressman, I would be concerned 
about anything that meant we didn't have an accurate 
representation of a consumer and therefore helped them get 
access to credit.
    Mr. Rose. Would lowering the amount of time that adverse 
credit information stays on a report tend to result in a higher 
cost to consumers, to borrowers?
    Mr. Peck. Congressman, thanks for the question. I will 
reiterate my view. I think when we start talking about taking 
things on and off credit reports, we should actually do the 
statistical analysis because we can, as an industry, to 
determine what would happen and that would include the lenders 
and if it were to result in, you know, more defaults that cost 
would ultimately be passed on to the consumers through higher 
interest rates.
    Mr. Rose. Is it safe to say that financial institutions buy 
credit reports in order to accurately price the credit risk of 
an individual?
    Mr. Begor. That is correct, Congressman.
    Mr. Rose. So surely there is room for debate on specifics 
of how to deal with disputed information on a credit report, 
but it seems clear to me that mispricing credit risk is the 
root cause of many defaults. Would you agree with that?
    Mr. Begor. Congressman, I would. That is really what 
financial institutions to charge to do is really assess the 
credit risk of an individual consumer when they are renting, a 
mortgage, a loan or any other financial transaction.
    Mr. Rose. My experience personally is that government is 
rarely good at doing anything, and so my general approach to 
whether government should be telling us how to evaluate credit 
risk or whether the private market should be helping us figure 
out how to evaluate credit risk is that I want to always place 
my bet on the private market.
    So I commend your companies for the service that you do to 
the American public by helping our financial institutions 
adequately assess the risk of we as consumers, and we come 
forward to them and I hope that this body does not get carried 
away with trying to substitute whatever agenda it might be 
pursuing for making sure that you are able to act to adequately 
access the information and provide it to your consumers that 
would allow them to fairly and accurately price credit so that 
all of us in turn can continue to work in a credit industry and 
existing in one, which is frankly the envy of the world in 
terms of properly assessing risk.
    Thank you for being here today. I yield back the balance of 
my time.
    Chairwoman Waters. The gentleman from California, Mr. 
Sherman, is recognized for 5 minutes.
    Mr. Sherman. We have an amazing consumer credit system in 
this country. It would have been unheard of 100 or 200 years 
ago. Ordinary working people borrowing hundreds of thousands of 
dollars when they buy a home; tens of thousands when they buy a 
car; borrowing from people they have never met.
    That can happen because you do your job and we want to make 
the credit reporting system better but we should respect that 
having a credit reporting system is what allows people to get 
loans and while we will curse a situation where we are denied a 
loan unfairly, where through inaccuracy it is amazing to have a 
system where ordinary people can get loans from folks they have 
not met.
    I want to focus on the gentleman from Equifax. You had 145 
million records stolen. As far as I know, we still don't know 
who hacked your system or what they used the information for. 
They obviously put tremendous effort into hacking you. And then 
they don't seem to have used that information unless they are 
perhaps a foreign spy agency that only was interested in the 
records of a few dozen or hundreds of American intel personnel 
looking for the one who is in desperate need of cash.
    Do you have any insight at all as to why somebody would 
spend such tremendous effort and it would be the effort of a 
whole team of individuals to hack you and then not use the 
proceeds of what they got? Mr. Begor?
    Mr. Begor. Thank you, Congressman, for the question. You 
are correct in that our forensic efforts internally watch the 
dark web quite closely since the cyber security incident and we 
have seen no instances as you pointed out where the data has 
been used in any fashion. Typically when data like this is 
stolen, it will be used and sold on the dark web for identity 
theft purposes and we haven't seen any instances of that. It is 
difficult for me to give--
    Mr. Sherman. Well, there are 145 million Americans whose 
data was stolen, and a somewhat smaller number whose data 
wasn't stolen. Everybody is subject to some identity theft. Are 
the people whose identity was stolen from you subject to more 
identity theft, so far, than the people who weren't?
    Mr. Begor. We haven't seen any instances, Congressman, of 
increased identity theft related to our data. We are able to 
watch that on the dark web and to date we haven't seen that.
    Mr. Sherman. Okay. For a while you were providing some free 
credit monitoring, you have stopped?
    Mr. Begor. That is not correct, Congressman. We offered 
free credit monitoring right after the data security breach in 
2017, not only for those who were impacted, but every American, 
regardless if they were impacted or not. And in November of 
2018, when that one year was up, we voluntarily extended it for 
another year.
    Mr. Sherman. For only those people who had signed up or 
what about people who didn't sign up yet?
    Mr. Begor. Just for those who had already signed up, 
Congressman.
    Mr. Sherman. So, only 2 million out of 145 million signed 
up? What about the other 141 million, can they get anything?
    Mr. Begor. There were actually 4 million who signed up 
right after the data security breach--
    Mr. Sherman. Four million, okay. So, that still leaves 139 
million, can they get anything?
    Mr. Begor. Correct. And we have other services, like the 
free freeze, where a consumer can freeze their credit bureau, 
which protects that.
    Mr. Sherman. Now, I might want to freeze because my data 
was stolen from your network, but I would want to freeze with 
you and your two colleagues up there. Do I have to pay money to 
them to get that freeze?
    Mr. Begor. You do not. As the Congressman may recall, 
Senate Bill 2155 that was passed last September provides a free 
freeze for all Americans and then Equifax also has a free for 
life product that we rolled out, right after the data security 
breach, that is a mobile application to lock and unlock your 
credit file.
    Mr. Sherman. Okay, a number of us including the chairwoman, 
Mr. Meeks, et cetera, have legislation to focus on those 
employees of the Federal Government and contractors who weren't 
getting paid during this shutdown or, god forbid, the next 
shutdown.
    It is my understanding that some of you are footnoting the 
disclosure and saying, hey, this person didn't pay their 
electric bill, but by the way, they are a Federal employee and 
the Federal Government wasn't paying them. But that is a 
footnoted disclosure is better--isn't as good as no disclosure 
at all. It is my understanding that you would need legislation 
to simply make it like it never ever happened.
    Do you support legislation that would instruct the credit 
rating agencies to expunge from the record the non-payment of 
bills by Federal employees who weren't being paid during the 
period of time they weren't being paid and for a month or two 
after? I will go down--which of you support the legislation? 
Which of you oppose?
    Mr. Begor. Congressman, I will start. We don't think the 
legislation is necessary, because there are other tools in 
place to support those impacted government employees.
    Chairwoman Waters. The gentleman's time has expired.
    Mr. Sherman. I will ask to just get a yes-or-no answer from 
the other two.
    Mr. Peck. We would support the legislation.
    Mr. Boundy. We don't think the legislation is necessary, 
because there are other tools.
    Mr. Sherman. I yield back.
    Chairwoman Waters. The gentleman from Wisconsin is 
recognized for 5 minutes.
    Mr. Steil. Thank you. We all want to ensure that consumers 
have access to credit and transparency and accuracy of those 
reports is critical. And so, where there are errors, you are 
called upon to make those corrections. And all three of your 
companies operate around the globe, is that correct?
    Mr. Peck. Yes.
    Mr. Begor. Yes.
    Mr. Boundy. Yes, that is correct.
    Mr. Steil. And so, in each of those jurisdictions there are 
different rules of the road that are implying and determining 
what records are accessible, what records are available and 
have a significant impact on a borrower's ability to access 
credit, correct?
    Mr. Peck. Correct.
    Mr. Begor. Yes.
    Mr. Steil. And those systems are obviously different across 
the globe, and I would love to tap into your experience and see 
a number of those countries have experimented recently in 
different areas of how those credit reportings are available. 
Could you comment, maybe Mr. Peck, on what has been done in the 
foreign markets that has harmed consumers' access to credit 
that we have seen globally?
    Mr. Peck. Thank you for the question, Congressman. Without 
saying which country--but I would willing to come and talk to 
you specifically.
    Mr. Steil. That is fine.
    Mr. Peck. There have been some that have over a several 
year period just not forgiven the debt, but forgiven any record 
of the debt on anyone's credit report. And I won't say chaos 
ensued, but it was very hard then to determine who to lend to, 
and so the cost of debt went up substantially in those areas.
    In other countries where they have tried to replicate a lot 
of the regulation that this body has passed here, the FCRA and 
others, they are building a middle class and it is really 
probably one of the most satisfying things about my job at 
TransUnion is watching groups of people, whether it is 
microlending or otherwise, be able to get access to loans to 
clothe their children, to ultimately be able to send their kids 
to schools and it is built on the fact that we are able to 
report information when consumers take out the loan to get them 
to opt into the system, just like the FCRA.
    Mr. Steil. So, this example where the country came in with 
a law that said they are going to wipe out historical records, 
actually when you socialize that and you remove that, you are 
actually damaging people who have good credit history.
    Mr. Peck. It did damage the economy for some period of 
time.
    Mr. Steil. Mr. Boundy, Mr. Begor, have you seen other 
examples of countries that have put in place laws that more or 
less are socializing that credit risk?
    Mr. Begor. I think Mr. Peck outlined it well, the same 
thing that we have seen in some countries. From my perspective, 
the U.S. credit bureau system is the envy of the world. The 
system that we have and the way that it operates, so the depth 
of the data, the furnishers that provide the data and how it is 
used is really the envy of every country that I meet with.
    Mr. Boundy. I don't have any other good examples that 
spring to mind, Congressman.
    Mr. Steil. Okay, so I think the walk-away there is that the 
more we have records that are accurate, the more reliable data 
we have, the better we are to be able to properly access risks 
and give people those opportunities to obtain the loans that 
they need to go about their life. Thank you very much. I yield 
back my time.
    Chairwoman Waters. The gentleman from Illinois, Mr. Garcia, 
is recognized for 5 minutes.
    Mr. Garcia of Illinois. Thank you, Madam Chairwoman, and 
thank you all for your testimony. My question is for Mr. Begor. 
In your testimony you stressed that Equifax understands the 
financial stress suffered by Federal employees, contractors, 
and their families during the shutdown. And you mentioned that 
your firm has announced a free credit report service for those 
affected by the shutdown.
    One week before this free credit report service was 
announced, a coalition of consumer and civil rights groups 
wrote to you and to other CEOs testifying today to urge that 
credit bureaus, ``institute a special program of credit report 
relief for employees of Federal contractors and employees of 
small businesses affected by the shutdown.'' I would ask 
unanimous consent that that letter be entered into the record, 
Madam Chairwoman.
    The measures that consumer groups recommended went beyond 
just a free credit score, however, and included the opportunity 
to have negative information removed from their credit reports 
if consumers could prove that they had lost income due to the 
shutdown.
    So, question, Mr. Begor, did Equifax take the 
recommendation of these consumers and civil rights advocates 
into consideration when it implemented the free credit report 
service, and if so, why hasn't their full recommendation been 
followed?
    Mr. Begor. Congressman, thank you for the question. We did 
receive those inquires as well as a letter from Chairwoman 
Waters asking us to do the same thing. We responded quickly 
through the free credit report and we offered more than the 
free credit report. As Mr. Peck talked about earlier, like in 
TransUnion, we trained our call centers associates to be ready 
for those inbound calls from the impacted consumers.
    And I would also highlight that this is one instance of 
where we are trying to give the right humanitarian effort when 
there's a hurricane, or a wildfire that impacts consumers and 
impacts their ability to pay, we do the same thing.
    With regards to taking data off of the credit file, we 
don't have the ability to do that. That is done by the 
furnisher or the financial institution, they own that data, 
they are the ones who are responsible for it and as I mentioned 
earlier in my testimony, we really work with the consumer, the 
individual who is impacted and really give them the coaching to 
talk to their financial institution about what was impacted as 
well as if they would like to put a note on their credit file 
about their situation which will be shared with the financial 
institution for future transactions.
    Mr. Garcia of Illinois. Thank you. Mr. Peck and Mr. Boundy, 
why haven't your firms offered any credit relief measures to 
those affected by the shutdown or am I missing something?
    Mr. Peck. Congressman, I believe we did offer this similar 
relief as we offered to the regular employees. Specific to 
taking negative information off their credit report, we 
discussed with the furnishers and the affected parties that 
they called that there could be something called a forbearance 
code put on the credit report, that was--that is the only 
avenue we had to educate and to do something about that.
    Mr. Garcia of Illinois. Mr. Boundy?
    Mr. Boundy. Congressman, we do and have been offering free 
credit reports and free credit monitoring to anybody impacted, 
either employee or contractor, and have also worked with the 
lenders to provide the opportunity to miss a payment, what Mr. 
Peck referred to, a forbearance code. And we put clear 
education on our website on how people can do that as well.
    Mr. Garcia of Illinois. Thank you. I think the fact that 
none of your firms voluntarily implemented the credit relief 
measures for those affected by the shutdown beyond the free 
credit reports offered by Equifax underscores the need to do 
more and that is why I am proud to be co-sponsoring with 
Chairwoman Waters, a bill creating a mechanism to identify 
those adversely affected by shutdowns and to restrict credit 
rating agencies from including adverse credit profiles for the 
duration of a shutdown plus 90 days. I yield back the rest of 
my time, Madam Chairwoman.
    Chairwoman Waters. Thank you. The gentleman from Texas, Mr. 
Gooden, is recognized for 5 minutes.
    Mr. Gooden. Thank you, Madam Chairwoman. Thank you 
gentlemen for being here, I know you are busy, and we 
appreciate your time. The Office of Personnel Management, as 
you may or may not know, was responsible for a data breach and 
lost 21.5--I believe is the number give or take--identities 
were basically stolen, which leads me to question if the U.S. 
Government can't protect classified employee's data, then how 
could the private industry possibly do a better job?
    Especially if we create a single entity that is collecting 
all this credit data. So I would ask you Mr. Begor, what all 
have you learned from the data breach that you have recovered 
from at Equifax and can you guarantee that this won't happen 
again?
    Mr. Begor. Congressman, you raise an excellent question, 
and I assured in my testimony earlier this morning that from 
our perspective this is a war that every company, all three of 
the credit bureaus, every financial institution, every 
government agency faces and whether it is a fraudster or a 
nation state that we are attacked. I get alerts now as a part 
of our new security protocols every time someone tries to 
penetrate our perimeter. And I get them virtually every day.
    So this is a war that is not going to end. What we have 
learned from it is that we just have to continue investing in 
it. And we are putting record amounts into our technology and 
security, as I mentioned in my testimony, a 50 percent increase 
in our spending. It is an area that we have to all be diligent 
on.
    Another important point that I look at from this 
perspective is we don't have any trade secrets around security, 
meaning we want to share everything we are learning with our 
competitors, which we do. But also with government agencies, we 
have had our CSO meet with government agencies here in 
Washington, with our customers and we think sharing is quite 
important.
    The last part of your question is, can I guarantee it will 
never happen again? I don't think anyone could ever guarantee 
that. What I can guarantee you is that we are taking every step 
possible to make sure it doesn't happen again.
    Mr. Gooden. Thank you, and I want to move along to 
diversity. Some of my colleagues across the aisle mentioned 
diversity earlier today, one of them was even so brazen as to 
ask the members of your staff to raise their hands and then he 
rendered a judgment on his perception of your diversity or lack 
thereof, based on what I perceive to be his analysis based on 
their appearance, which I think is appalling. I certainly 
couldn't have gotten away with that, so I will ask you Mr. 
Begor, could you make a comment and discuss diversity in your 
organization and the progress you all have made?
    Mr. Begor. Congressman, was that to me first?
    Mr. Gooden. Yes, sir.
    Mr. Begor. Yes, diversity is a real priority for me. As you 
know, I have only been at Equifax since April but we have taken 
strong steps.
    We have a strong ethnic diversity, 35 percent of our 
workforce--36 percent actually is ethnic diverse and 44 percent 
of our organization are women. On my leadership team, I have 
four female direct reports and five either ethnic or gender 
diversity and on our board, 30 percent of our board is women.
    And just one last point, I talked about the thousand people 
we have added in the last 12 months or so, as we have grown out 
our organization, that thousand people is actually more diverse 
than the average because we are bringing more diverse talent. 
We are big believers that we should have an organization that 
looks like the communities that we work in and the customers 
that we represent.
    Mr. Gooden. I appreciate your testimony, and also I would 
like to apologize to any staff for my colleague's comments 
earlier. I appreciate you all being here. I yield back.
    Chairwoman Waters. Thank you. The Member is not here to 
respond to what you just accused them of, and so I would like 
to just have everyone remember that everyone is elected here 
and they have a right to their opinions and their right to use 
their time as they see fit, and so in the future, it would be 
good if you could direct your comments to the Member so the 
Member can respond to you.
    Mr. Duffy. And if I could, Madam Chairwoman, Mr. Gooden 
asked his questions to the panel--it would help to ask--
    Chairwoman Waters. Excuse me, Mr. Duffy, I have not 
recognized you for any time. The gentlewoman from California, 
Ms. Porter, is recognized for 5 minutes.
    Ms. Porter. Hello, thank you all for being here, I would 
like to start with Mr. Begor, and my question for you is 
whether you would be willing to share today your Social 
Security number, your birth date, and your address at this 
public hearing?
    Mr. Begor. I would be a bit uncomfortable doing that, 
Congresswoman, if you would so oblige me, I would prefer not 
to.
    Ms. Porter. Okay, could I ask you why you are unwilling?
    Mr. Begor. Well, it is sensitive information, I think it is 
sensitive information that I like to protect and I think 
consumers should protect theirs.
    Ms. Porter. If that sensitive information were provided at 
this public hearing, what are you concerned could happen?
    Mr. Begor. I think like every American, Congresswoman, I 
would be concerned about identity theft. I am actually a victim 
of identity theft. It happened 3 times in the last 10 years to 
me, twice now with my tax returns and once, you know, as a 
consumer of someone opening up fraudulent credit accounts in my 
name. Somehow they got my Social Security number, my date of 
birth, and my address and then changed the address and opened 
up the account. So I think like all Americans, we are concerned 
about that.
    Ms. Porter. So my question then is, if you agree that 
exposing this kind of information, information like that, that 
you have your credit reports creates harm, therefore you are 
willing to share it, why are your lawyers arguing in Federal 
court that there was no injury and no harm created by your data 
breach?
    Mr. Begor. Congresswoman, it is really hard for me to 
comment on what our lawyers are doing--
    Ms. Porter. Also respectfully, excuse me, but you do employ 
those lawyers, and they do operate at your direction or your 
counsel and they are making these arguments in court arguing on 
the record--I have the minutes here from the court case--that 
there was no--that this case should be dismissed because there 
is no injury and no harm created by the disclosure of people's 
personal credit information.
    I understand you as I would, to believe that that 
information--that the exposure of that information--I asked if 
you would give it to the committee and you understandably said 
no, would in fact, create a harm. So I guess I would ask you to 
please look carefully at what your lawyers are doing and the 
arguments that they are making because I feel they are 
inconsistent with some of the helpful testimony that you have 
provided today.
    And my second question is, the breach occurred in September 
2017, is my understanding, and is it correct that in April of 
2017, a cyber risk analysis firm and science rated your breach 
risk likelihood at 50 percent over the upcoming year? So there 
was a firm that rates the likelihood of breaches and yours was 
rated at 50 percent. Are you aware of that fact?
    Mr. Begor. I am not familiar with the fact you cited, 
Congresswoman.
    Ms. Porter. Do you know what your current breach risk 
rating is?
    Mr. Begor. I don't have it in front of me, no.
    Ms. Porter. Could you find someone to follow up and provide 
that information?
    Mr. Begor. I would be happy to, Congresswoman.
    Ms. Porter. Okay. My next question is you--I know that you 
have spent considerable resources on improving your cyber 
security. I wanted to move to Mr. Boundy and Mr. Peck and ask 
if they could share what kind of investment--dollars and cents 
please, if you could--you are making or as a percentage of your 
revenue. Whatever's easiest for you--within the last year? How 
much of your resources are you devoting to the issue of 
cybersecurity?
    Mr. Peck. We spend about a half-a-billion dollars a year on 
our cyber security and IT systems.
    Mr. Boundy. We spend just over a billion dollars a year on 
information security and technology in our organization.
    Ms. Porter. Wonderful. And then my last of the remainder my 
time, I just wanted to say, Mr. Begor, I wanted to compliment 
you, because when you began to release your Lock and Alert 
system, one of the things that you did is you removed the 
mandatory arbitration provision that you have in your general 
terms of service that applies when you deal with businesses, 
you removed that lock and alert terms of service, and I 
appreciate you recognizing the mandatory arbitration in that 
kind of product would be inappropriate. So thank you for doing 
that.
    My last question to the panel is--this may end being a 
comment given the lack of time. But we see Visa policing 
merchants if merchants have a lot of fraud and a lot of 
chargebacks, they keep track of that ratio. And if you are a 
merchant who is routinely having fraud occur, then what they do 
is they don't let you take Visa cards, you are not allowed to 
process Visa cards.
    Could you think about applying a similar framework to hold 
your furnishers accountable? Thank you, and I yield back the 
remainder of my time.
    Chairwoman Waters. The gentleman from Virginia, Mr. 
Riggleman, is recognized for 5 minutes.
    Mr. Riggleman. Thank you, Madam Chairwoman, and thank you 
gentlemen for being here today and thank you for your staff for 
being here today too. Some of my questions might be a little 
different, I have a different background. I think that a lot of 
people here based on the fact that in my 26 years of combined 
DOD service and being a CEO, I have been able to weatherize 
data and protect data, so bear with me on some of these 
questions and I promise I am going somewhere with this.
    I am going to start with Mr. Begor. So as you know, as was 
well documented in 2017, Equifax was a victim of the largest 
cyber attack in history. You inherited the situation and have 
already acknowledged today that as CEO, you are ultimately 
responsible for the organization. Can I get your commitment 
today that you and Equifax will continue working with consumers 
to ensure damage from that breach is mitigated to the fullest 
extent?
    Mr. Begor. We are doing that as we speak, Congressman.
    Mr. Riggleman. Right, and there have been some questions 
from my colleagues that I found interesting, because I do 
promise everybody here, if I got your Social Security number, 
date of birth, place of birth and your address, I got you and I 
think that is one of the things as we go forward here, these 
questions actually are going to have a point, and a reason as 
to why some of the other people aren't here, that I would love 
to talk to in the future.
    So right now on the panel today, we have witnesses from 
Equifax, TransUnion, and Experian, and I have a question for 
you and it is sort of broad. But if we had a panel of every CEO 
in the country today, if we asked each of the CEOs what is 
their biggest fear, what is their biggest concern for the 
organization, what do you think the answer would be? Any one of 
you can go first.
    Mr. Peck. Cyber breach.
    Mr. Riggleman. You know that, right. It really is. Even 
having a DOD company on the side that I had, our biggest issue 
was actually cyber breach based on technologies that we have, 
but also based on the people with the type of information we 
have for HR resources and things of that nature. So we are 
definitely in agreement on that. And I would say, given your 
response as an increase in frequency and scale of data 
breaches, I believe this Congress and the committee should work 
through and to address. The reason that I am so interested in 
this is because this is not to be the last cyber attack on any 
critical infrastructure, and I don't know what the definitions 
are, but I almost think that credit reporting agencies are 
critical infrastructure based on the data that you hold.
    So as I listen to colleagues on both sides of this aisle 
about FCRA, the proposals before us today could be considered 
more than a comprehensive reform to the system. So as I am 
going back and forth, even though I am so--I would say directed 
on protecting data, what I also did on weaponizing data was 
looking at cascading effects with the law of unintended 
consequences.
    Let me give you an example as we go forward. We had 
somebody here talking about Social Security numbers and I 
believe the Chair was talking about Social Security numbers and 
credit, or credit scores as they relate to clearances, 
specifically military clearances. I just have this to say about 
that: they are exactly; right credit scores do affect 
clearances. Mine was checked in a background check every year 
and I was polygraphed on it.
    But I would say there is an opposite thing here, and I 
would humbly submit that the more data that you have actually 
protects those in the military by ensuring that you don't have 
people to credit risk because of the people that scare me half 
to death when I am actually serving beside them.
    So on that note, based on more data, I would think the more 
data that you have, the more that you can involve, and I would 
love to talk to guys about graph databases in the future 
between relational and graph; I think that is why we need you 
to protect this data, because it is so much more than just 
having the data and credit scores, it is everybody's personal 
information that I can attack at will and I can. So you know as 
we go forward, I have something here that I just want to point 
out then I have a question then I want to go in a little bit 
more.
    All this stuff here is technical and I am not going to go 
into that because I get a little excited and I nerd out on this 
so I do apologize to everybody here, because this is what I 
have done for so long, but Richard Cordray, I think he was the 
former CFPB Director under President Obama said that without 
credit reporting and credit scoring it would be harder for 
financial service providers to assess and manage credit risk 
and the supply of credit would be more expensive, more erratic, 
and more constrained.
    In about, well I am just going to say for me, when I am 
looking at this right now, we do have the most robust system 
and since I took way too much of my time getting excited about 
this, I have one more question of why I was asking you those 
questions and I would actually ask the committee and everybody 
here is why don't we have the actual data providers here, 
because the questions I want to ask are how that data is 
actually transmitted, and how you all coordinate with those 
data providers. Is it encrypted in rest? Is it encrypted in 
transit?
    Do you guys have a standardized methodology for actually 
protecting that data and identifying breaches because some of 
the questions we got here I wonder if it is proprietary 
because, sir, Mr. Begor, you said that you guys were sharing or 
there's an ability to share data and I would love to know in 
the last 15 seconds if you have a rolled up infrastructure that 
is proprietary or are you guys sharing actually off-the-shelf 
software for fast-time breach identification?
    Mr. Begor. Congressman, as you might imagine it is a 
combination of both. There are some fantastic technologies, 
cutting edge technology out there that we are using. We are 
also augmenting it ourselves and we are sharing everything we 
are doing with our customers, our competitors, and government 
agencies so they can learn from it. We think this is a war that 
we all face and it is not going to end.
    Mr. Riggleman. Next time, I would love to talk to the data 
providers with you all specifically to know what kind of 
security--
    Chairwoman Waters. The gentleman's time has--
    Mr. Riggleman. Thank you, Madam Chairwoman.
    Chairwoman Waters. The gentleman from New Jersey, Mr. 
Gottheimer, is recognized for 5 minutes.
    Mr. Gottheimer. Thank you, Madam Chairwoman. Thank you all 
for coming before the committee today and while I appreciate 
the steps you all have taken to prevent future data breaches at 
your companies, I am concerned that there's still room for 
error and a need for consumer reporting agency reform. The 
consumer reporting agencies, as you all know, hold an immense 
amount of personal data as we have talked about today, and it 
is clear that there must be enhanced oversight with regard to 
cyber security at consumer reporting agencies and overall.
    Beyond cybersecurity, I have heard from many of my 
constituents--I live in Northern New Jersey--that dealing with 
your websites can be clunky and confusing and as some have 
mentioned today and having to create three separate accounts 
and log into three separate websites to freeze their credit and 
handle disputes is slow and cumbersome.
    People deserve a faster, more streamlined process. It is 
why I am working on legislation that will give people the power 
to easily freeze their credit if they find suspicious activity 
across the agencies and find and fix mistakes and would give 
consumers more control of their credit information and also 
increase cybersecurity at the credit reporting agencies.
    My question, if--and I still, as we have talked about, find 
the manner in which Equifax disclosed the breach absolutely 
appalling like many have and I am sure everyone in the room, 
including the three of you agree with me that there are fixes 
that need to take place. This is not a Democrat or a Republican 
issue at all, this is 147 million Americans from New Jersey to 
South Carolina to Southern California were affected. And while 
there's a lot to be angry about, the amount of time that passed 
between the discovery of the breach and the public finding out 
of that breach is the most disgraceful and disserving I think 
to many of us.
    So I would love to hear from each of you and I know you 
have touched on this a bit, but can you explain to me more the 
internal guidelines you have put in place, all of you because I 
know I am sure you have each studied these breaches to properly 
notify consumers if this happens again and how long will it 
take next time to notify those consumers and what do we do 
about this? And I will start with Mr. Begor, if that is okay 
with you?
    Mr. Begor. Thank you, Congressman.
    Mr. Gottheimer. Thank you, sir.
    Mr. Begor. It is an excellent question and you know our 
goal at the time and I can talk more about what our goal is 
going forward is to notify consumers, government agencies, 
regulatory agencies, you know when there's an event like this 
as quickly as we can, but as completely as we can. And as you 
know, a situation of the magnitude of what happened at Equifax 
in 2017 is incredibly complex.
    It took time to really detail through who was actually 
impacted, what data was actually accessed so we could--I say 
we, so the team could have the proper notification. But going 
forward, our goal is to do it as quickly and as completely as 
we can.
    Mr. Gottheimer. And do you--just a quick question about 
that--feel that there is a--the lag--I know that you don't 
always immediately notify. Is it because you are concerned that 
you get to the bottom of it first and how much time--when 
should the notification really occur? How do you make that 
decision?
    Mr. Begor. It is a great question, Congressman, and it 
really is situational. You know it is--what we want to do is 
notify those consumers who are impacted so they know if they 
were a victim of a breach and it does take time to work through 
the forensics on what was actually exfiltrated and how did it 
happen. Our goal is to notify those consumers first and 
foremost as quickly as possible.
    Mr. Gottheimer. Mr. Peck?
    Mr. Peck. Thank you for the question. When the Equifax 
breach happened, we kind of found out about it when everyone 
else found out about it. Our goal is to get with the right 
government entity as quickly as possible and we ended up having 
conversations of--well, I could relate to you not--not here but 
maybe later--with some high level folks who were wondering, did 
you have one too? What is going on? And you must not, because 
you haven't told us, right? And we said, of course not or we 
would have told you, because they can help us with 
understanding what might have happened.
    Our goal in notifying consumers is as soon as possible. We 
have--you have the same issues. You have to find out who was 
affected, how to notify them, et cetera. So it is as soon as 
possible.
    Mr. Gottheimer. Mr. Boundy?
    Mr. Boundy. Thank you, Congressman. Yes, I will go the 
course to notify consumers as soon as it is possible and with a 
full amount of information.
    Mr. Gottheimer. And the soon as possible question is--but 
obviously that is if you are a consumer you feel like you 
should know right away because every day that goes by is 
possibly a breach and someone is misusing your credit, right, 
for nefarious purposes. So I think that is always the challenge 
we all have is what should that time be, how long, and what do 
we do about it?
    Mr. Boundy. I think that is right and I think it is 
absolutely right that a consumer should be expected to be 
notified as soon as it is practical and possible.
    Mr. Gottheimer. Okay, thank you all. I yield. Thank you.
    Mr. Sherman. [presiding]. I now recognize the gentleman 
from Ohio, Mr. Gonzalez, for 5 minutes.
    Mr. Gonzalez of Ohio. Thank you, Mr. Chairman. I really 
appreciate everybody being here today. I don't envy the 
situation that unfolded at Equifax. It was terrible for the 
American people to have that level of a breach but obviously 
the credit reporting agencies are critically important to our 
society. I think we talk a lot about income and equality. I 
think one thing we don't talk enough about is wealth and 
equality and the effects that having--or not even having any 
access to credit have on an individual's ability to build 
wealth for their families.
    I want to go through a quick line of questioning. So if I 
could summarize sort of the testimony today and the answers 
from the three gentlemen, the argument that I am hearing a lot 
of is there are actually more than three of us. I think a lot 
of us are saying, hey this is an oligopoly, and there are 
actually more than three of us and we do, in fact, compete 
aggressively. Would that be a fair characterization?
    Mr. Begor. I would say it is more than fair, yes.
    Mr. Peck. Yes.
    Mr. Gonzalez of Ohio. Okay, so quickly, in the last fiscal 
year, could you each say, and you are all public companies; 
this isn't proprietary, how much revenue you made as a company? 
Last Fiscal Year?
    Mr. Begor. In global revenue?
    Mr. Gonzalez of Ohio. United States.
    Mr. Begor. United States is $2.3 billion.
    Mr. Peck. Our global number is $2.3 billion. Let me get 
back to you on just--we have a combination of businesses in the 
U.S. that I would have to add up.
    Mr. Boundy. Congressman, our global revenue is about $4.8 
billion.
    Mr. Gonzalez of Ohio. Okay. So in the--there are more than 
three of us line of questioning--are there any other domestic 
competitors that compete anywhere near that scale from a 
revenue standpoint? Near let us say 50 percent, that come even 
half as close as you do?
    Mr. Peck. Congressman, I would say there are people in the 
information business that approach this size of the business, 
certainly FICO has a very large business and they are playing 
right in the middle of everything we do.
    Mr. Gonzalez of Ohio. Okay, so maybe FICO. So I will 
basically take that as it is you guys and FICO are in there. So 
I will kind of check that as an oligopoly by most definitions. 
And then--we do compete aggressively. Mr. Begor, in your 
testimony when you talked about the breach, you said that you 
were funneling customers to Experian as a result of that 
breach, is that roughly what you were saying?
    Mr. Begor. Congressman, I don't recall using the term, 
``funneling.'' For the first year after the data security 
breach we provided a credit monitoring service for free, for 
all Americans including those who were impacted. After the 
conclusion of that year we made a decision to voluntarily 
extend it for another year, and we contracted with Experian to 
provide that second year of service.
    Mr. Gonzalez of Ohio. So Experian provided the service--
your competitor provided the service?
    Mr. Begor. Correct--at our expense.
    Mr. Gonzalez of Ohio. Okay. I come from a variety of 
backgrounds--professional football is one of them. I know a 
little bit about competition, and I would suggest that that is 
not competition in the way that we typically describe it.
    And so to me I think it is fairly obvious that what this 
industry needs is a lot of reform, and reform that would 
inspire more competition--real competition and not the kind 
where you are scratching each other's back. And, that way I 
think we can extend credit to more people.
    So back to the original thing I said on wealth inequality 
and the ability to extend credit to different communities, in 
your written testimony, Mr. Begor, you talk about NeuroDecision 
technology as a machine learning technology that you are using 
to expand credit. Can you talk a little bit--and you can take 
the remainder of my time--about the success of that program, 
and how you see machine learning playing in to the idea of 
expanding credit to more families?
    Mr. Begor. Thank you, Congressman. You know, we are big 
believers in two things--one is that more data is going to be 
good for every American, so that is point number one.
    Point number two is that technology using technology to 
access that data to decision it, to create algorithms is also 
going to be better for Americans and for the financial services 
industry and we have invested heavily in our NeuroDecisioning 
technology--it is a patented technology that we got a patent on 
earlier this year.
    And it is one that allows a financial services company to 
really use that to go through various databases--ours, theirs 
and third-party databases in order to make decisioning, to 
really help extend credit to more people.
    Mr. Gonzalez of Ohio. Thank you, and I yield back.
    Chairwoman Waters. The gentleman from Minnesota, Mr. 
Phillips, is recognized for 5 minutes.
    Mr. Phillips. Thank you, Madam Chairwoman, and thank you to 
each of our witnesses. You have each spoken about commitments 
to becoming more consumer-friendly which is of course, why we 
are all here. So to that end, I took the time to download apps. 
I looked for first, Equifax's, and strangely enough, Experian's 
app came up first for me.
    So I downloaded it, and it was very easy. I must commend 
you and I appreciate that. Simple information, it was done in a 
minute. I identified my credit score, accounts that have been 
opened, accounts that have been closed--my debt capacity. But 
then I found that dreaded red arrow that we all know, and it 
says number of your--you have at least one account with a 
missed payment or derogatory indicator.
    But I couldn't find a way to identify what that was, and my 
first question to each of you is upon notification that you 
have something that has degraded your credit score, how does a 
consumer like me actually identify what that is? What is the 
easiest, fastest, most expedient way to do so? Starting with 
you, Mr. Boundy?
    Mr. Boundy. Thank you for the question. I think I am not 
familiar exactly with you would do it in the detail on our app 
in terms of going past the red arrow, but--
    Mr. Phillips. There is nowhere--yes, there is nowhere to go 
past the red arrow. Lots of information--specific account 
information, but when you see a red arrow that indicates you 
have something that degraded your score, there's nowhere else 
to go.
    Mr. Boundy. I normally would advise consumers at that stage 
to look at their individual report and on there you can see the 
specifics of any of the negatives impacting your score.
    Mr. Phillips. Okay, just not on--so if you order the actual 
paper report you see it, but not on the app? Because that is 
what I did, I looked at my credit rating--comprehensive credit 
rating.
    Mr. Boundy. I would need to double check, Congressman, on 
that.
    Mr. Phillips. Mr. Peck, for your organization, how does one 
identify specifics that degrade your credit score?
    Mr. Peck. Sir, there's an application we have built called 
Credit View, which once you get in to it, will give you 
suggestions on what you can do differently to change your 
credit score, and--
    Mr. Phillips. Is there a cost associated with that?
    Mr. Peck. If you go to Credit Karma you can get that for 
free, and many other banks are also offering that for free.
    Mr. Phillips. For your product, does one have to pay to 
identify it?
    Mr. Peck. You know what, I don't believe it is in our True 
Identity product.
    Mr. Phillips. Okay.
    Mr. Peck. I don't believe it is there.
    Mr. Phillips. So I have to go to a third party to identify 
what that arrow or degradation is?
    Mr. Peck. Yes, you do.
    Mr. Phillips. Okay. Mr. Begor?
    Mr. Begor. Congressman, as you probably know, most 
consumers in the process of applying for new financial 
transactions, if they are denied credit they will get a credit 
report for free and that is generally when they will engage 
with us around something on their credit report that is 
impacting their credit score.
    And they will call us in the call center, or they will 
process if there's an error that they think is incorrect on a 
payment that was applied by a financial institution they will 
process that dispute either online to us, or through our call 
centers. And that is generally how a consumer will engage with 
us around a error on their credit report.
    Mr. Phillips. Okay so, going back to you, Mr. Boundy--I see 
my red arrow which indicates there's something there. Is there 
anything that would preclude this app, or website from simply 
linking to what that red arrow is? Considering all the wealth 
of information that you do so quickly and thoughtfully present 
to me?
    You understand what I am trying to get to--what troubles 
me, and I have tried this in the past, and I hear from 
constituents all the time what troubles them so is they don't 
have a perfect credit score they cannot identify why. And in my 
estimation neither of your organizations are making it terribly 
easy to identify that. Is there a better way to do so?
    Mr. Boundy. Congressman, thank you for highlighting this. I 
think it is something we will have to look into in more detail 
because I think what you are saying is correct; it should be 
easy for them to access and be able to see that.
    Mr. Phillips. Okay. And if the answer is that you have to 
purchase that information, the notion of buying is something 
that troubles me, and of course a lot of consumers. I yield 
back.
    Chairwoman Waters. The gentleman from Wisconsin, Mr. Duffy 
is recognized for 5 minutes.
    Mr. Duffy. Thank you, Madam Chairwoman. Welcome everybody, 
good afternoon. Do the three of you all know each other from 
before today's hearing? You guys have met before?
    Mr. Peck. By phone with--
    Mr. Duffy. First time in person then, you are all meeting?
    Mr. Peck. This is the first time. Yes.
    Mr. Begor. Not for me, Mr. Chairman. We met by phone and 
Mr. Boundy and I met face to face.
    Mr. Duffy. Okay. Great. So this--since you are here 
together because it is wonderful that we can lock our credit, 
it is a great service that you provide. But it would be even a 
better service if the three of you could collaborate together 
and just give us one app that I can lock all three of you on.
    And if you guys could talk about that amongst yourselves at 
a coffee break that would be great because I think that would 
really help the American people very quickly lock and unlock 
and I know you guys have the technology and the friendship.
    You have enjoyed the hearing today, I know. So I would love 
it if you would work on that. Will you work on that? I will try 
to get an answer?
    Mr. Begor. Yes, Congressman.
    Mr. Peck. Yes, we will work on that.
    Mr. Boundy. Yes.
    Mr. Duffy. Great. Okay. Let's talk about the lawsuit, Mr. 
Begor. You are being sued because of the breach, is that right?
    Mr. Begor. That is correct. Yes, Congressman.
    Mr. Duffy. And is it fair to say that to your knowledge 
monitoring the dark web and you haven't seen any of this 
information that was--that was breached being used against 
American citizens. Is that fair to say?
    Mr. Begor. To date, Congressman, since the breach, all of 
our forensic analysis is done internally. We see no evidence of 
that.
    Mr. Duffy. And so thus far no American has been damaged 
from the breach, is that correct?
    Mr. Begor. Is that a question, Congressman?
    Mr. Duffy. Yes.
    Mr. Begor. You know I think there's no question that 
consumers have been concerned with a data breach of the size of 
Equifax, which is why we are so sensitive about providing the--
    Mr. Duffy. No, I know you are but--
    Mr. Begor. Data protection.
    Mr. Duffy. But no one is having their identity stolen 
because of your breach as of yet?
    Mr. Begor. Not that we have been able to identify, 
Congressman.
    Mr. Duffy. But you are being sued?
    Mr. Begor. Correct.
    Mr. Duffy. And the allegation is that you are defending 
your company and saying there hasn't been damage as of yet and 
we have a class action lawsuit where trial lawyers will 
probably take 35 or 40 percent of the cut and no one has been 
damaged?
    I just want to make that point. I think it is a fair 
argument to make. And if there was damage you will probably be 
held accountable. But at this point there has been none. Was it 
a nation state that hacked you?
    Mr. Begor. We don't know who the criminal or nation state 
was that did this attack on a U.S. company on U.S. consumers. 
We don't know who it is, Congressman.
    Mr. Duffy. But you think it is a nation state?
    Mr. Begor. I don't have a real opinion on it. We are 
working closely with the authorities. That started right after 
the data security breach and we know they are working hard to 
figure out who these criminals were, who the nation state was.
    Mr. Duffy. I would note that there are several reports in 
the media that it was China that did this to you and I am sure 
you probably don't want to comment on that. But again, I think 
it reiterates and underscores the point that China has not been 
an ally, has not been a friend, and we don't know how they are 
going to use this information on us. You provided free credit 
monitoring, is that right?
    Mr. Begor. That is correct, Congressman, not only to those 
who were impacted but to all Americans.
    Mr. Duffy. To the whole country. Right? To everybody. And 
you are required to provide one year by law, is that correct?
    Mr. Begor. Each law varies by State. As you may know--
    Mr. Duffy. S.2155, did that require you to provide 
monitoring?
    Mr. Begor. I don't believe, Congressman, S.2155 included--
    Mr. Duffy. What did S.2155 require you to do?
    Mr. Begor. That is the free freeze bill. It allows 
consumers to do a free freeze at no charge with the credit 
bureaus.
    Mr. Duffy. I will just note that most of my friends across 
the aisle voted against that, by the way. Just to note for the 
group. I only have 1 minute, 20 seconds left. The three of you 
collect data and try to provide useful information to companies 
that want to extend credit to Americans, right? And your 
business model is having the best and most accurate data 
possible, right? Is that fair?
    Mr. Begor. Correct.
    Mr. Duffy. Are you trying to screw the American people? Are 
you trying put bad information inside credit reports so people 
can't get credit?
    Mr. Begor. No, of course not.
    Mr. Duffy. Are you trying to use data to make poor people 
poorer, to keep them from getting homes, or are you trying to 
say I am going to get the best data so the best credit 
decisions can be made by our customers?
    Mr. Begor. That is correct. Yes.
    Mr. Duffy. And if you don't have good data, frankly, you 
are not very good companies are you? And you might lose 
clients, you might lose revenue. Fair enough?
    Mr. Begor. That is correct.
    Mr. Duffy. And if someone gives you bad data, you are just 
the collector of the data; why would you be liable if someone 
provides you bad information. Wouldn't it be fair to say that 
if a bank gave me bad information, that would be the bank's 
fault, not necessarily mine? You are just the collector or the 
aggregator of the data. Is that fair to say?
    Mr. Begor. I think, Congressman, as I testified earlier, we 
also have an obligation to audit the data that comes in to 
ensure that it is accurate, that is coming with furnishers, and 
obviously provide the consumers real access when they have an 
error that they identify.
    Chairwoman Waters. The gentleman's time has expired. The 
gentlewoman from Iowa, Ms. Axne, is recognized for 5 minutes.
    Mrs. Axne. Thank you, Madam Chairwoman, and thank you to 
the panel for being here today. I appreciate your time to 
discuss this important issue. My question is to you, Mr. Peck. 
Earlier today you said that no security breach had happened 
within your organization because you are consistently updating 
your system.
    Yet, just this past November in Hong Kong, which was just a 
few months ago, you were forced by the Hong Kong banking 
authority to suspend online services over a personal data 
security flaws.
    This was identified after a local newspaper easily accessed 
personal data of the city's leader and finance minister. You 
said you haven't had a security breach because you are 
consistently upgrading the system. My question is how can you 
say that this wasn't a security breach?
    Mr. Peck. Yes. Thank you for the question, Congresswoman. 
This was, in our view, an attempt of fraud where the 
credentials of these three people were stolen and they were 
able to access the system and get the data only for them and 
the choice to shut down the system was ours because we are 
going to upgrade the authentication more in line with what we 
are doing in the United States.
    Mrs. Axne. I appreciate that. So if I am hearing you 
correctly, they were able to access the data of not just the 
city leader and finance minister but others as well?
    Mr. Peck. No.
    Mrs. Axne. But the reporter actually got in and saw their 
personal data.
    Mr. Peck. He stole their identities and after many, many 
repeated attempts was able to see the individual data of just 
one person each.
    Mrs. Axne. So you wouldn't consider that a security breach, 
entering your system and being able to access information about 
an individual's personal information and financial information. 
You don't consider that a security breach?
    Mr. Peck. I would not consider that a material security 
breach.
    Mrs. Axne. Okay, I would consider that a security breach. 
As an owner of a digital design firm as well, my question would 
also be, why weren't you using two factor authentication in 
Hong Kong?
    Mr. Peck. We weren't able to put two factor authentication 
in Hong Kong. We are doing that right now, Congresswoman.
    Mrs. Axne. Well, I am glad to see that you are doing that. 
You know as somebody who used two factor authentication just to 
run for my office here and you know were able to implement that 
very readily, I would assume that with the size of your 
organization and that your security within your IT would be up 
to date to make sure that those things happen. I appreciate 
that you are trying to move forward with it, but I would, 
absolutely, consider that you had a security breach and that 
you weren't well prepared for that.
    My question, then, would be to all of you here, do you 
think it is realistic to think that there won't be any future 
data breaches? I know you are investing heavily, Mr. Begor. Mr. 
Peck, you said you haven't had any material damages. Mr. 
Boundy, it sounds like you said you are also making some 
investments in things like your Boost program. Let's talk about 
what you think is going to happen in the future. Are there 
going to be more data security breaches?
    Mr. Begor. Congresswoman, as I testified a couple of times 
this morning, this is a war. It is a war every company faces. 
It is a war every government agency faces, whether you are a 
credit bureau, a financial institution, or an industrial 
company. There are criminals and nation states that are 
attacking us.
    And as I also said, I get alerts, virtually, multiple times 
per week, of our perimeter being attacked, and us preventing 
those attacks. We believe we have to continue to invest, number 
one, in this technology to protect ourselves.
    And second, is the sharing of the ideas around how to 
protect yourself we think is quite important. And I have 
brought--I came into the company with the approach that there 
are no trade secrets around data security. So we are sharing 
with our customers, with our competitors, and everyone.
    Mrs. Axne. So would you say we could look forward to more 
security breaches, or no?
    Mr. Begor. Congresswoman, I was asked a question earlier 
about whether--I don't know what the exact wording was, but 
could I guarantee it won't happen again. Of course not.
    Mrs. Axne. Okay. Mr. Peck?
    Mr. Peck. I think we can expect that there's going to be a 
constant attack on all of our systems.
    Mrs. Axne. Mr. Boundy?
    Mr. Boundy. Congresswoman, I think there are constant 
attacks on all of our systems.
    Mrs. Axne. So with cybersecurity and attacks on our 
systems, what percentage of your revenue, and what percentage 
of your profitability are you putting into cybersecurity and 
making sure that you protect these systems? Any one of you can 
answer that.
    Mr. Peck. As we have discussed before, for TransUnion we 
put about $500 million into our overall IT systems.
    Mrs. Axne. And can you tell me what percent of your 
operating expenses that is? What percent of your revenue that 
is, profitability?
    Mr. Peck. It would be, roughly, 30 percent--well, not 30 
percent, 20-some percent of our revenue.
    Mrs. Axne. Twenty-some percent of your revenue, and what 
percent of your profitability?
    Mr. Peck. We make about $297 million a year in profit.
    Chairwoman Waters. The gentlelady's time has expired.
    Mrs. Axne. Thank you.
    Chairwoman Waters. The gentleman from Kentucky, Mr. Barr, 
is recognized for 5 minutes.
    Mr. Barr. Thank you, Madam Chairwoman. And thank you for 
holding this hearing. Gentlemen, thank you for your testimony 
today. Let me start with Mr. Boundy and work our way down the 
panel. Briefly, each of you, describe a world in which credit 
reporting agencies do not exist.
    Mr. Boundy. Thank you, Congressman. I think if I was to 
describe that, I would describe a world in which credit was 
very expensive and difficult for consumers to access.
    Mr. Barr. Mr. Peck?
    Mr. Peck. Thank you, Congressman. I would describe a world 
where there wouldn't be any competition among the banks, and 
the biggest banks would maintain all of the information on the 
consumers that they were able to take in. And they would be 
able to market to them exclusively. And so, there wouldn't be 
as many competitive products.
    Mr. Barr. Mr. Begor, as you answer the question, could you 
also, kind of, add a little bit to what it would mean for the 
consumer?
    Mr. Begor. Yes. From my perspective, Congressman, I think 
it is a great question because I think we play a critical role 
in the U.S. financial ecosystem, and as I travel the world, our 
credit reporting system and infrastructure is the envy of most 
markets around the world. The lack of a system like we have 
today would increase costs for everyone, and constrain, in my 
view, credit for everyone.
    Mr. Barr. Well, I appreciate the answers because, 
obviously, this industry serves a vital role, in terms of 
providing the infrastructure that is the predicate for the 
provision of affordable, accessible financing for consumers 
throughout this economy. Having said that, we have identified 
some issues and some problems, and I appreciate some of the 
measures that your industry is taking to correct some of those 
issues.
    Let me ask you about the--kind of, follow-up with Mr. 
Kustoff's line of questioning, particularly with regard to 
credit invisibles and alternative data as a potential solution 
for credit invisibles.
    What are the impediments, if any, to always taking into 
account cell phone bills, utility bills, rental payments, what 
are the existing impediments that would inhibit you all from 
expanding on your programs that are taking alternative data on 
a voluntary basis, and making that data kind of a standard part 
of your assessment because as you all have testified, the more 
data the better, in terms of accuracy. And any one of you can 
answer that question.
    Mr. Boundy. Congressman, I think with our Experian Boost 
program that I have talked about today, we are able to work 
with consumers to allow them to contribute that information 
directly onto their credit file, whether it be cell phone or 
utility payments, and see an immediate benefit to their credit 
score. And I think that is really important.
    Mr. Barr. But that is voluntary, correct?
    Mr. Boundy. That is right. So I think the impediment, as 
you would describe them, would be our ability to get the 
completeness of the data across a large number of consumers.
    Mr. Barr. Right. Why wouldn't your firms do that as a 
matter of course--try to obtain the information more 
frequently?
    Mr. Boundy. We are constantly working in industry to find 
appropriate sources of data to add and make sure the consumers 
are able to get the best access to credit. But it is voluntary 
for organizations to provide that information to us.
    Mr. Barr. Any other feedback on that?
    Mr. Begor. No. I would agree with Mr. Boundy that, you 
know, our focus--and I am sure it is for TransUnion also, is to 
continue to look for more data sources because we believe more 
data is going to help more consumers, particularly those who 
are less advantaged.
    Mr. Barr. Some of the concerns, what we have heard is--on 
medical bills, especially unforeseen medical bills, as not 
particularly predictive, or of future creditworthiness. Has 
your industry taken a look at that, in terms of, maybe, a 
catastrophic healthcare situation that results in non-payment 
that blemishes a credit history, but that wouldn't normally be 
a solid indicator of future creditworthiness? Has the industry 
taken a look at that issue?
    Mr. Peck. Yes, Congressman, good question. I don't have the 
exact data. But one of the previous agreements we have made is 
to take off credit that is under a certain age. Take off--not 
credit, but missed payments on medical, and/or if the insurance 
company was supposed to pay for it and just hadn't paid for it, 
it doesn't go on a credit report. And we would certainly be 
willing to look into other avenues to reduce those kinds of 
negative information.
    Mr. Barr. Now, final question. In the world of modern 
technology and diverse consumers coming from different 
financial backgrounds, it is our understanding that the credit 
bureaus only recognize five basic dispute types. Can you verify 
this? And would it be better if the industry would, with more 
particularity, categorize disputes with greater detail than 
just five large categories? Would that assist you in your 
assessments, any one of you, Mr. Begor?
    Mr. Begor. Congressman, I would have to look into that and 
get back to you. I am not sure--
    Mr. Barr. Anyone? Mr. Begor?
    Mr. Begor. Congressman, I would have to look into that and 
get back to you. I am not sure about the right answer on that.
    Chairwoman Waters. The gentleman's time has expired.
    Mr. Barr. Thank you.
    Chairwoman Waters. At the request of our witnesses, the 
committee will stand in recess for 10 minutes.
    [recess]
    Chairwoman Waters. The committee will come to order. The 
gentlewoman from North Carolina, Ms. Adams, is recognized for 5 
minutes.
    Ms. Adams. Thank you, Madam Chairwoman, and thank you for 
holding this important hearing today. I am just going to go 
straight to my questions. I have been back and forth between 
committees. Mr. Begor, is Equifax still running the ACI Assist? 
Does it also use any legacy systems or any custom built systems 
over 10 years old?
    Mr. Begor. I don't know the answer to the question on 10 
years old, Congresswoman. I know we have some technology that 
is in that range that is quite old and that is part of our 
$1.25 billion investment that we are making in 2018, 2019, and 
2020 to replace that legacy infrastructure with a state of the 
art technology. Some of that was completed last year. It is 
completing as we speak, as we go through 2019 and 2020.
    Ms. Adams. Thank you. Have you taken any steps to 
strengthen your internal protocols and overall cyber security?
    Mr. Begor. Congresswoman, we have taken many steps to 
increase our overall protocols. We have a totally new security 
organization. As I mentioned earlier in my testimony, the Chief 
Security Officer (CSO), reports directly to me and to the board 
which is quite different. We also installed an element of our 
bonus system. The top 3,000 employees in Equifax receive a 
bonus and 25 percent of that bonus is tied to our security 
improvements. It is quite unique in corporate America and it is 
only punitive, meaning it can only go down in your bonus if you 
don't meet our goals in improving our security.
    Ms. Adams. Thank you. What can CRAs do better to facilitate 
reduction of disputes and improve handling of disputes caused 
by debt collectors, and how often do you conduct an independent 
review of the evidence?
    Mr. Peck. So I want to make sure I got the question, 
Congresswoman, what could we do better to reduce disputes--
    Ms. Adams. What can you do better to facilitate reduction 
of disputes and improve handling of disputes that are caused by 
debt creditors and how often do you conduct an independent 
review of the evidence?
    Mr. Peck. If there was one thing we could do to help 
reduce--or maybe two--but one area where we are having a 
disproportionate amount of disputes is in student loans. The 
way student loans are reported to us are just--it is incorrect 
and we can't do anything about it and I think it has kind of a 
disproportionately bad impact on the student borrowers. So that 
would be the one thing I--and we are focusing on it and we are 
working on it. But we would welcome the help of this committee 
to do that.
    Ms. Adams. All right. The other gentlemen?
    Mr. Boundy. Yes, thank you, Congresswoman. We work all the 
time to review every individual furnishing and the information 
they are providing and try and find ways to make sure that the 
information we are receiving from them is accurate and try and 
minimize the disputes that way. Also working with consumers to 
allow them to contribute their own information that they feel 
is appropriate onto their consumer reports is another important 
step we are taking.
    Ms. Adams. One last question: What steps are you taking to 
mitigate against discrimination and abuse in the reporting of 
consumer data to your systems? Mr. Begor? Mr. Peck?
    Mr. Peck. Could you repeat the question?
    Ms. Adams. What steps are you taking to mitigate against 
discrimination and abuse in the reporting of consumer data to 
your systems?
    Mr. Peck. And when you say, ``discrimination,'' you mean?
    Ms. Adams. Well, some people have been victimized by 
predatory or discriminatory loans and those kinds of things.
    Mr. Peck. Sure, okay, thank you for the question. We do 
keep track of the way our furnishers are reporting data and if 
we see a consistent abuse then they are no longer furnishers of 
our data.
    Ms. Adams. Mr. Begor?
    Mr. Begor. The same, Congresswoman. We have an active audit 
process set with our furnishers.
    Ms. Adams. Yes, sir?
    Mr. Boundy. Yes, we are the same for Experian.
    Ms. Adams. Okay. Does your policy tend to favor consumers 
who have been victimized or the entity engaged in the harmful 
practice? Mr. Begor?
    Mr. Begor. Congresswoman, I would say we are focused on 
both. We want to be an advocate for the consumer if they have 
been impacted in some way and then we are very aggressive about 
auditing the furnishers to make sure their data is accurate.
    Ms. Adams. Okay, Mr. Peck, quickly?
    Mr. Peck. That is correct. We monitor the furnishers and if 
we see repeated bad behavior, we take action and we just don't 
take their data any more.
    Ms. Adams. Thank you, gentlemen. Madam Chairwoman, I yield 
back.
    Chairwoman Waters. The gentleman from Indiana, Mr. 
Hollingsworth, is recognized for 5 minutes.
    Mr. Hollingsworth. Good afternoon. I appreciate everybody 
being here. I wanted to take a step back. There have been a lot 
of specific examples, a lot of specific questions asked but I 
am a big believer, coming from the private sector, in just the 
alignment of incentives, so let's talk about the incentives 
that have been structured here.
    I took a little bit of a break and got the opportunity and 
looked at the market cap for Experian at $24 billion, Equifax 
at $13 billion, and TransUnion at about $12 billion and then I 
thought, gosh, how much of that is really faith in your ability 
to deliver a great product with accurate data that provides 
good predictive power to those lenders, right? So I wondered, 
and got out my old dusty accounting text book and looked up 
what a book value was, and then calculated the book value for 
each of that: for Experian, it is about $2.2 billion; for 
Equifax, it is about $3 billion; and for TransUnion, it is 
about $1.8 billion.
    So you own some stuff, right, but at the end of the day 
much of the value in each of your companies is the ability for 
this product to provide good predictive power for lenders and 
have accurate data. So I wondered if you might just speak for 
minute or two, each of you, and say what impact it would have 
on the $4 billion or $5 billion in revenue, on the $20 billion 
or $11 billion or $13 billion in market cap if this data was 
found to be inaccurate or was found to not have good predictive 
power. Because we in Congress think that we are breaking new 
ground here, like we are the first people to ever come up with 
the idea that this data may be inaccurate or it may not provide 
predictive power.
    But people who have tens of billions of dollars at stake in 
these transactions, whether they are the ones making the loans, 
whether they are investors providing you capital, they have a 
lot more at stake in running the analysis to test those things 
and to see whether there's a great amount of inaccurate data or 
whether there's a lack of predictive power. So I wondered if we 
might just talk about what might happen if, gosh, your 
customers found out that much of this data is inaccurate.
    Mr. Begor. Do you want me to start, Congressman?
    Mr. Hollingsworth. Yes.
    Mr. Begor. Yes, I think you are right on the mark. There's 
no question that the financial institutions look at all three 
credit bureaus--and I will speak about Equifax--wanting to have 
a broad array of data and accuracy is fundamental, right? To 
them. And without that accuracy, if they thought we were 
inaccurate, they would move their business from Equifax to 
either Experian or TransUnion or one of the other credit 
reporting agencies that are a different scale.
    Mr. Hollingsworth. Yes. And I think that is--and you have, 
to your knowledge, these lenders probably check that. Right? 
They are spending billions of dollars with you and the other 
firms every single year to get access to this, and to make sure 
that they have the opportunity to understand that individual, 
the best that they can before they make the loan, they are 
probably checking that after the fact to make sure that it is a 
wise spending of their money, right?
    Mr. Begor. That is correct, Congressman, and they check it 
intensely.
    Mr. Hollingsworth. Yes. More intensely probably than we can 
in a six-hour hearing of asking questions.
    Mr. Begor. They have hundreds of people at each institution 
who are making sure they have the most accurate data so they 
can make the best decision for that American consumer.
    Mr. Hollingsworth. So your business model demands accuracy. 
Your business model demands predictive power and you have tens 
of billions at stake in making sure that you get to those 
outcomes for your consumer, for your customers, but also for 
those individual borrowers?
    Mr. Begor. Correct.
    Mr. Hollingsworth. Anything you guys want to add as well?
    Mr. Peck. I would echo those things, Congressman. I think 
they value that and our ability to protect the data.
    Mr. Hollingsworth. Right.
    Mr. Boundy. Congressman, I think it is a great analysis and 
I absolutely agree.
    Mr. Hollingsworth. Well, great. What I wanted to come back 
to, and just summarize, and then I will yield back my time is 
we ask a lot of great questions here, right? And a lot of 
specific examples are thrown out. They have 100 examples about 
how there are inaccuracies, you have 100 examples of 
inaccuracies that were corrected and those individuals went on 
to get the credit that they deserve.
    But I think the points that are being made here is one, you 
have every incentive to do that on your own. You think about 
that every day. I am sure you wake up every day saying how can 
we make this product better for our customers, better for 
lenders, and so you are trying to root out those inaccuracies 
as well. You don't need a government regulator to tell you we 
want this to be the most accurate data because your customers 
and the lenders demand it and you have tens of billions of 
dollars at stake.
    And I think the second point that you guys have very 
articulately made over and over again is without this, in the 
absence of a credit bureau, in the absence of this research 
that you guys are providing, individual lenders have to do this 
about individual consumers every single time. The cost of doing 
that would make the cost of borrowing prohibitive for many 
borrowers.
    This is about enhancing credit availability to more and 
more Americans, and a correct, robust, and full data set gives 
you the opportunity to do that. And if we begin to tamper with 
that data and say we are going to remove the bad things but we 
are going to keep the good things, then lenders are going to 
quickly realize that we have skewed the data and they are no 
longer going to be able to rely on that data in order to get 
the lowest cost of capital for those individual borrowers.
    Instead, everyone's cost of capital goes up. So I 
appreciate the fact that you are here talking about the 
business that you do and that you don't just do this out of 
benevolence but you are doing it because you're incentivized in 
your very business model to deliver accurate, predictive, 
powerful results. Thank you for being here today.
    Chairwoman Waters. The gentlewoman from Massachusetts, Ms. 
Pressley, is recognized for 5 minutes.
    Ms. Pressley. Thank you, Madam Chairwoman, and thank you to 
my fellow committee members for their robust line of 
questioning. Many of my questions have been asked and answered. 
I want to thank all of you for being here. And as someone who 
has a name that is often mispronounced, I did just want to get 
clarity. Is it ``Begor'' or ``Begor?''
    Mr. Begor. Sorry. I will answer to just about everything 
but my mom goes by ``Begor.''
    Ms. Pressley. Okay, ``Begor.'' I want to get it right. All 
right. So we have spoken a great deal about what we consider to 
be, based on the security breach, the collateral damage, the 
lack of trust and sense of security by your customers, by 
consumers and what we haven't spoken about, when we are 
thinking about collateral damage and sort of accountability, we 
know that everyday Americans are punished and suffering in 
terms of their opportunity for social and economic mobility and 
bare necessities, often for things outside of their control.
    So here we have spoken about the impacts of the shutdown 
and natural disasters, we have spoken about medical debt. You 
were talking about data furnishings from those who may have 
predatory practices such as our for-profit colleges and 
universities, which I want to pick up on that in a moment. But 
what is unclear to me is considering the impact of this data 
breach on 143 million people throughout the country, what was 
the accountability to your company? Was anyone fired from the 
board?
    Mr. Begor. Congresswoman, there was a lot of 
accountability. The CEO left. As you know, I am new starting in 
April. We have a new chief security officer, a new technology 
leader, we have changed out two of our board members since the 
data security breach, including a woman who was elected on a 
Friday who's a data scientist, which will be a terrific 
addition to our board.
    And then we are investing incredible amounts inside the 
company to bring ourselves to industry-leading capabilities 
around data and security. My testimony this morning talked 
about the $1.25 billion, which is a 50 percent increase in our 
technology and security spend that we will be doing in 2018, 
2019, and 2020.
    Ms. Pressley. Again, I just wanted to make sure that I have 
that data point correct. It was my understanding from my quick 
read that there were folks who retired or perhaps were forced 
to retire but not who were actually let go. And I just want to 
know if anyone was fired and held accountable for this breach 
as a way to restore the faith in your consumers and customers.
    Mr. Begor. Congresswoman, there was a lot of 
accountability. The entire senior leadership team in 2017 did 
not receive a bonus. Zero. So that was accountability to that 
leadership team. As you know, I was not there at the time. I 
joined in April, 10 months ago. And then the individuals you 
could describe, you know, retirement or left the company, but 
they are no longer employed by Equifax.
    Ms. Pressley. All right. Well, you know, I do just think 
ultimately if the goal here is to treat people and customers as 
consumers and not as products, then we can't in any way be 
complicit to executives who are turning a profit there 
unscathed when there are customers who are still struggling to 
recover from the damage that your company caused. I will move 
on. I just wanted to pick up on--you said that if you received 
data, if it is furnished from those that have participated 
repeatedly in predatory practices that you no longer accept 
data from them.
    Are there any companies that you could use as an example 
and evidence of that?
    Mr. Peck. Congresswoman, I can't name them right now. But I 
would be happy to come back to you with my staff and let you 
know the names.
    Ms. Pressley. Okay. Specifically, I worry about those who 
have been victims of the deceptive business practices and 
predatory marketing of some for-profit colleges and 
universities really ensnared in a downward spiral of--of 
defaulted loan, and poor credit, that they are digging out from 
for decades through no fault of their own because they have 
been victimized. So at this time, you can't speak to any for-
profit college or university that you are no longer accepting 
data from?
    Mr. Peck. No, but I can have my staff reach out to your 
staff and we will provide that to you.
    Ms. Pressley. Okay. And then, what about for those who are 
the victims of domestic abusers, which impacts their credit? Is 
there any recourse or anything you do specifically for them, 
again, outside of their own control, any avenue or recourse for 
those, no? Okay. Thank you, I yield back.
    Chairwoman Waters. The gentlewoman from New York, Ms. 
Ocasio-Cortez, is recognized for 5 minutes.
    Ms. Ocasio-Cortez. Thank you, Madam Chairwoman. And thank 
you to our three witnesses here today. I know it has been a 
long day, so I appreciate you all coming. For clarification, 
there are no other credit bureaus at a similar scale, aside 
from the three major credit bureaus you three represent, is 
that correct, Mr. Peck?
    Mr. Peck. Yes. That is correct.
    Ms. Ocasio-Cortez. And all three of your bureaus--Equifax, 
Experian, and TransUnion--are for-profit corporations, is that 
correct? Yes. So, virtually, every credit score in America is 
managed by the three of you in some way--touched or managed by 
the three of you in some way, shape, or form, Mr. Begor?
    Mr. Begor. Congresswoman, you used the term, ``credit 
score.'' There are lots of different organizations that create 
credit scores, financial institutions do it on their own. We do 
some. There's a company called FICO that does some. But we are 
central to that in the data that we house and in creating those 
scores.
    Ms. Ocasio-Cortez. So what would you say or how would you 
characterize the package of data that U.S. bureaus, and the 
three of you, essentially, have--have the most amount of market 
share over? How would you characterize that--like, how would 
you characterize what you have the most market share over?
    Mr. Begor. I am not sure I understand the question, 
Congresswoman.
    Ms. Ocasio-Cortez. So the differentiation--if you could 
explain to folks, the differentiation between the score and, 
for example, the reporting that you all provide.
    Mr. Begor. As the Congresswoman knows, we house the data 
from furnishers. Financial institutions provide it to us. We 
all have similar data, but all three bureaus are different in 
the data that they possess. And then, the data is provided to 
financial institutions and other organizations for decisioning, 
generally, around financial products like a mortgage, a loan--
    Ms. Ocasio-Cortez. Great.
    Mr. Begor. And, you know, our view is to have accurate and 
complete data.
    Ms. Ocasio-Cortez. Great. So as the three of you 
representing these three bureaus, you are responsible for an 
enormous amount of consumer data for virtually anyone who has a 
credit score in the United States?
    Mr. Begor. Is that for me, Congresswoman?
    Ms. Ocasio-Cortez. Yes.
    Mr. Begor. Yes, sorry.
    Ms. Ocasio-Cortez. Okay.
    Mr. Begor. Yes, that is correct. You know, we have a real 
responsibility there. And there are about 250 to 260 million 
Americans who are in our credit file.
    Ms. Ocasio-Cortez. Thank you.
    Mr. Begor. There are about 60 million who are not.
    Ms. Ocasio-Cortez. Thank you. Okay, so I do have a question 
here regarding these incentives. You stated earlier that you 
believe that consumers own their own data. And I agree with 
that. I thank you for taking that position because I believe 
that as well. Do consumers or everyday people ever explicitly 
consent to giving their data to you?
    Mr. Begor. Is that for me again, Congresswoman?
    Ms. Ocasio-Cortez. Yes.
    Mr. Begor. Sorry. There is not a consent by the consumer to 
give us the data.
    Ms. Ocasio-Cortez. So consumers own their data, but credit 
bureaus collect their information without their consent?
    Mr. Begor. That is correct, Congresswoman. But as we talked 
about earlier in the testimony, there are a number of tools 
available to consumers to--
    Ms. Ocasio-Cortez. To correct it.
    Mr. Begor. ----really control their data, and freeze it--
    Ms. Ocasio-Cortez. Right.
    Mr. Begor. --or lock it.
    Ms. Ocasio-Cortez. But there is no way that they can 
prevent you from collecting it. And so, I see here, you know, 
credit scores are life-altering pieces of information. And 
monitoring credit is incredibly important. And yes, we have 
seen here, by reports issued by this committee, that one in 
five consumers have had an error on their credit report.
    There are about 60 members on this committee. That means 12 
members here, either currently or in the past, have had an 
error on their credit report. You know, if parachutes had a one 
in five error rating, I don't think a lot of people would go 
skydiving. And now we are talking about people's homes. We are 
talking about their ability to get a job.
    We are talking about people assessing whether they would be 
a good janitor based on their credit score. Mr. Peck, your 
largest customers for the bureau are creditors and lenders, is 
that accurate?
    Mr. Peck. Yes, banks.
    Ms. Ocasio-Cortez. Banks and lenders. So those banks and 
lenders stand to, generally, profit more from higher interest 
rates, and those with the marginally lower tax score than 
someone else. Would that be correct?
    Mr. Peck. Congresswoman, I wouldn't necessarily think so. I 
think they profit most when they are able to put the right 
products into the people's hands in the right way, and not 
ignore a whole population.
    Ms. Ocasio-Cortez. I got you. So when we talk about putting 
consumers first--and again, I applaud the priority of putting 
consumers first in this, especially in the amount of breaches. 
My one question is how are bureaus--in what ways are bureaus--
or are bureaus financially incentivized to put the needs of 
consumers ahead of the needs of creditors, Mr. Begor?
    Mr. Begor. Congresswoman, as I testified, you know, we 
believe central to what we do is really protecting consumer 
data, and allowing consumers access so it is accurate. And we 
are investing heavily to allow consumers to have easier access 
to that when they have an issue with their credit file so we 
can be an advocate for them, and help them get it fixed with 
the furnisher or financial institution.
    Ms. Ocasio-Cortez. Thank you.
    Chairwoman Waters. The gentlewoman's time has expired. The 
gentleman from Guam, Mr. San Nicolas, is recognized for 5 
minutes.
    Mr. San Nicolas. Thank you, Madam Chairwoman. I would like 
to thank the panel for joining us today. I am having a lot of 
nostalgia up here because I used to be in the banking industry. 
And I remember around 10 years ago, printing out my Equifax 
reports, and sitting down with my consumer loan applications, 
and doing my underwriting to figure out whether or not we were 
going to be giving out the credit.
    And, you know, going on this trip down memory lane, I 
remember that when I looked at credit reports there were a lot 
of consistencies when it came to what you see there, and what 
ultimately becomes the creditworthiness of the individual 
applying. And it is not just what you see, with respect to the 
consumer. But it is what you see with respect to who is 
pursuing that consumer.
    And I noticed that some of the applicants who are less 
favorable candidates for credit oftentimes had some of the same 
companies that were pursuing them for so many years. And as I 
sat back and I reflected on this, I realized that while we do 
these credit reports and these credit scores, we are always 
rating the consumers--we are rating their behavior or rating 
their choices. And that is fair, I think that is fair. But I 
think that what we also should be doing since we are 
aggregating all this data is rating the lenders.
    If we are getting all this data together, we can easily 
aggregate a score on all the lenders and all the banks. And we 
can aggregate whether or not a particular bank has an egregious 
number of 30 day, 60 day, or 90 day violators versus one that 
doesn't.
    We can do an aggregation of whether or not a bank has a 
longer or shorter banking relationship history with the 
customers that it has, or is the kind that just picks up 
customers and dumps them very quickly.
    We can aggregate the errors, and create a score on lenders 
and whether or not they are violating a lot of the credit 
reporting standards with respect to accuracy. And I think that 
this is something that I am hoping the panel can consider as a 
public service, even--aggregating our data not just on the 
consumers themselves, from the lenders also and coming up with 
a lender score.
    So when I am evaluating a credit card, it is not just 
whether or not it is cash back, or points, but whether or not 
this lender actually has a good scoring with respect to--I 
don't know, the aging of their accounts? Or a good scoring with 
respect to how they go about handling 30, 60, 90 day 
violations.
    So I was wondering--because my colleagues' line of 
questioning kind of made it very clear that consumers are not 
consenting to the aggregation of their data and the algorithms 
that result in their scoring, would there be anything that 
would restrict the aggregation of the data, with respect to the 
lenders and your companies coming up with a lender score that 
consumers can look to be able to determine whether or not they 
want to do business with those lenders?
    Mr. Begor. Do you want me to respond to that one, 
Congressman?
    Mr. San Nicolas. Yes, please.
    Mr. Begor. Yes, my apologies. I think that is an 
interesting idea, particularly around the data accuracy--I 
think as all three of us have testified we have rigorous 
programs in place to audit the data that is coming in to us, 
when a furnisher has a history of inaccurate data we take 
actions, and no longer accept that data. So I think it is an 
interesting idea to look in to how else we might use that 
information around the accuracy of data.
    Mr. Peck. I would agree with that, in that the CFPB has 
some jurisdiction, Congressman, over predatory lenders, and we 
would encourage them to take their role as well.
    Mr. Boundy. Thank you, Congressman, it is an interesting 
idea--one we will certainly look in to.
    Mr. San Nicolas. Thank you, I think that it could really 
create some interesting dynamics. Because once the lenders 
realize that their behavior is going to get scored, that might 
result in a change of the behavior.
    It might result in them being less aggressive in dinging a 
credit score for a 30-day delinquency, instead making an extra 
effort to try and work with the customer to get back on track. 
And those kinds of things would be a win-win for everybody.
    We would have less consumers having their credit getting 
hit, and we would have better customer service for individuals. 
And we would have a scoring system that works both ways in the 
industry, not just with respect to finding the customers for 
the lenders, but also with respect to finding the lenders for 
the customers. I yield back, Madam Chairwoman. Thank you very 
much.
    Chairwoman Waters. The gentlewoman from Pennsylvania, Ms. 
Dean, is recognized for 5 minutes.
    Ms. Dean. Thank you, Madam Chairwoman. I am Madeleine Dean 
from Pennsylvania and I know there has been a lot of 
conversation today--in particular about the Equifax data breach 
of 2017. And while it affected more than 148 million Americans, 
included among those were 5.4 million Pennsylvanians.
    It is an extraordinarily high percentage of Pennsylvanians. 
It is regarded as one of the largest data breaches in our 
nation's history, exposing millions of people's personal 
information. And so you might understand that I have a feeling 
that my consumers back home in Montgomery and Berks counties 
might be surprised by the answers about accountability that my 
esteemed colleague brought forth.
    The people moved on based on retirements that people 
suffered because they didn't get one year's bonus. When we are 
talking about massive data breaches, such as the 2017 breach 
which can have life-long consequences for the consumers.
    So I will say to you that just--I throw this out to you to 
say, and I know you were not there at that time. And your 
stewardship has been touted as important in bringing to the 
fore. But I would ask you to rethink that, and rethink 
accountability. Passing on a year's bonus, I don't think will 
impress people whose personal data was taken--and could have 
life-long consequences.
    So in a follow-up to what the chairwoman asked a long time 
ago, which was, according to Consumer Reports, Equifax's free 
service--monitoring service, trusted ID premiere expired as of 
just January 31st of this year. I believe your answer was, you 
don't plan to renew that, is that correct?
    Mr. Begor. I'm sorry, Congresswoman, we did extend it 
voluntarily for another year to the impacted consumers.
    Ms. Dean. Okay. And that will be free to the consumers?
    Mr. Begor. Yes, Congresswoman.
    Ms. Dean. Okay, and beyond that, what is the plan for 
February of 2020?
    Mr. Begor. We haven't made a decision on 2020, we will take 
that into consideration when we get closer to that date.
    Ms. Dean. I appreciate that, and I would urge you to 
continue that. If the consequences remain for the consumer, 
then they shouldn't have to pay for protecting their 
information. Something else I wanted to look at, because it is 
unclear to me is the notion of credit locking--so if all three 
of you could help me with this?
    I think that each of you offer credit locking services, if 
you could describe the difference between credit freezing and 
credit locking? Is it in-house, or is it a third-party? What 
does it cost the consumers? And is any of that information 
whether it is credit locked in-house, or in a third-party 
situation, is it in any way sold, transferred, shared in any 
way? So that is a layer of questions, I apologize but--
    Mr. Peck. Sure, I will start. So at TransUnion we have a 
credit lock and a credit freeze. And the reason we have both is 
we were offering a free credit lock before we were required to 
offer something called a free credit freeze. We already had it 
built and offered. It is part of our free, True Identity 
product which also offers credit monitoring, insurance if you 
lose your identity.
    When the freeze requirement happened we just took the 
same--essentially the same technology and built a free freeze 
product, and it is--you can get it in the form of an app, or 
online, or by phone. So they are exactly the same 
functionality--it is all inside, we don't sell it--do anything 
with it.
    Ms. Dean. All in-house? No sharing? I don't--beyond 
selling, is there any sharing of it?
    Mr. Peck. No, we don't share it. We don't--like, other 
people can't get at it and say, oh, I know this person's thing, 
they just know they can't pull that individual's credit report
    Ms. Dean. And yours is free. Is that true also, Mr. Boundy?
    Mr. Boundy. Credit Freeze's products are free.
    Ms. Dean. Okay.
    Mr. Boundy. And once a file is frozen, then the information 
doesn't leave our organization.
    Ms. Dean. But how about the credit lock?
    Mr. Boundy. Credit Lock is a product that is basically--it 
is similar in functionality, but it is included in a 
subscription product that we have.
    Ms. Dean. And what is the cost?
    Mr. Boundy. There are a range of different price points, 
depending on exactly the nature of the bundle that you choose. 
But the Credit Freeze product that is available to everybody is 
free.
    Ms. Dean. But Credit Lock is something you also promote and 
is probably, maybe you believe, more effective, otherwise, why 
would we have it? What is the cost to an ordinary consumer?
    Mr. Boundy. It would depend on the particular product. You 
can get a family plan that would allow a number of people in a 
family to be included, or you can take an individual 
subscription for that product.
    Ms. Dean. Is it a monthly fee?
    Mr. Boundy. It is a monthly subscription. But the Credit 
Freeze product is free to everybody.
    Ms. Dean. And just give me a range. What is the monthly 
subscription fee?
    Mr. Boundy. It might be say $19.99, might be a typical 
range. But that would include other features as well. It just 
includes it within that capability.
    Ms. Dean. And it is to protect me, the consumer, against 
what?
    Mr. Boundy. Well, included in the product will be things 
like scanning the dark web to see whether your information is 
out there and it is for sale. It would be an example of 
something else that would be included.
    Chairwoman Waters. The gentlewoman's time has expired.
    Ms. Dean. Thank you very much. Thank you, Madam Chairwoman.
    Chairwoman Waters. The gentleman from Illinois, Mr. Casten, 
is recognized for 5 minutes.
    Mr. Casten. Thank you, Madam Chairwoman. And thank you all 
for your patience and time today. My first question is on data 
breaches and really on national security. We have, as a 
nation--when I say ``we,'' I am talking about the United States 
Government--an exceptional intelligence community and security 
forces that are monitoring a tremendous amount of incoming 
information from state actors, non-state actors, more often 
than not, one masquerading as the other.
    And we have the ability to monitor. And when those attacks 
come in on government resources subject to jurisdiction in the 
situation, we have the ability to pursue either defensive or, 
in some cases, offensive strategies. As you all know all too 
well, we increasingly live in a world where the value of data 
held on private servers is sometimes more valuable than the 
information on public servers.
    My question for all, and recognizing this is a public 
hearing, I am not expecting you to be fulsome in this is, you 
have all talked at length about the defensive measures that you 
have taken, in response to hacking. Are you taking any active 
offensive measures? And to the extent you are, are you 
coordinating with our various national security agencies in the 
course of doing that?
    Mr. Begor. Do you want me to start, Congressman?
    Mr. Casten. Yes. And again, with recognition to be brief, I 
just would like to understand if--
    Mr. Begor. Sure. You know, we cooperate with the 
authorities. And after our data security breach in 2017, we 
quickly engaged with all the appropriate authorities at the 
Federal and State level. And we are confident they are working 
hard to really find out who were the criminals or nation states 
that committed this crime against Equifax and American 
consumers.
    When you talk about offensive actions, one of the things we 
do very aggressively is hire third parties to try to penetrate 
our exterior. I view that as offensive. Another one that--
    Mr. Casten. I mean, reaching out to the people who are 
coming in. So in other words, we as a government can take 
active measures to try to disrupt those foreign networks. 
There's a concern I have personally of, as people are coming--
you--if I were in your shoes--I was a CEO for 16 years--I would 
be inclined to punch back. But this is--becomes a national 
issue. So are you reaching out to those networks?
    Mr. Begor. We are trying to share them with the authorities 
when we see instances of whomever the criminal is. As I 
mentioned in my testimony a couple of times this morning, we 
are also trying to share with each other. We really believe 
this is something that can't be solved as one company, one 
government agency.
    So we are trying to be very transparent with everything we 
have learned. This is a war that we all participate in. Every 
company, all three of us here, government agencies, other 
companies in the United States, really have to work together to 
defend ourselves. And that is why we are trying to very 
transparent about everything we are learning and doing.
    Mr. Casten. Okay. I wanted--I have one more question, so I 
want to stay on the time. But just to--in general, I am taking 
that as not specifically on the active side. And just yes or no 
from the other two of you.
    Mr. Peck. No, we are not taking an offensive position.
    Mr. Casten. Okay.
    Mr. Boundy. No.
    Mr. Casten. Okay. Second question, I mentioned that I am 
new to this job, as you can tell by how late I am in the 
questioning. I was a CEO of a couple of energy companies for a 
long time, and I now find myself in middle management. I have a 
deep respect for the profit incentive and how it drives you to 
do good things.
    I also have a deep respect, having worked in an industry 
that is a public utility, that there is always a challenge with 
aligning the profit incentive with the social incentive.
    You all provide a public utility, and I thank you for that. 
Our credit markets depend on you all doing what you do. You 
also primarily earn your revenue from lenders rather than 
consumers.
    And I am sure you have thought about this, but to the 
extent hat your profit incentive is at odds with the social 
purpose that you need to serve, that creates tension that, at 
some level, we all have to step in.
    So my question for you is, can you discuss where you see 
that tension and what measures, if any, you can take, 
independent of regulation, to better align your profit 
incentive with the incentive facilitate access to credit?
    Mr. Begor. Congressman, I think I have testified a couple 
of times this morning that we have a real priority about 
putting consumers first, giving consumers control over their 
credit file, either with the freeze in S.2155 or, in our case, 
a lock and alert product that is free for life to consumers.
    And those kinds of investments are investments that we are 
making because it is the right thing to do. It is something 
that is right for the consumer, but it is also something our 
customers want us to do, meaning the financial institutions.
    Mr. Peck. And Congressman, I would just add, accuracy is 
the most important thing that we can do, along with protecting 
consumers' data. And so, we are completely aligned in that 
case, and it is the best thing for the consumer. And finally, 
the idea of financial--
    Mr. Casten. If I could just clarify, though. Your 
consumer--there is the consumer--the consumer who deems credit, 
your customer's primarily the lenders.
    Mr. Peck. Well, Congressman, when the consumer has the data 
accurate about them, it is also best for them because they get 
into the right products. You couple that with the idea of 
financial inclusion where we are looking more for--for more 
different kinds of data that especially serve the underserved 
communities, which I talked about, rural areas, or high urban 
areas, I think we are actually all aligned in our objectives.
    Mr. Boundy. Congressman, I think--
    Chairwoman Waters. The gentleman's time is up.
    [laughter]
    Mr. Casten. Thank you.
    Chairwoman Waters. And you may respond to him in writing. I 
would suggest that you do that. Thank you very much. We are 
going to have a second panel, but before I do that, I would 
like to thank our first panel of witnesses for their testimony 
today.
    After hearing the testimony from the CEOs before us today, 
I am more concerned than ever about the state of our consumer 
credit reporting system. I am troubled to the point where I do 
think that we need to start thinking about how we reimagine it 
and rebuild it from the ground.
    And so, I thank you for being here, I have appreciated the 
time that you put in today, and we will be introducing 
legislation, and we will interact with you as we formulate that 
legislation to see what we can do to protect our consumers more 
and strengthen the entire system. Thank you very much.
    [recess]
    Chairwoman Waters. I would like the second panel to please 
come forward and take their seats: Ms. Lisa Rice, president and 
CEO, National Fair Housing Alliance; Ms. Chi Chi Wu, staff 
attorney, National Consumer Law Center; Ms. Jennifer Brown, 
associate director for economic policy, UnidosUS; Mr. Edmund 
Mierzwinski, consumer program director, U.S. Public Interest 
Research Group; and Mr. Thomas Brown, a partner of the law 
firm, Paul Hastings.
    Each of you have 5 minutes to summarize your testimony. 
With 1 minute remaining, a yellow light will appear. At that 
time, I would ask you to wrap up your testimony so we can be 
respectful of both the witnesses' and the committee members' 
time. And without objection, your written statements will be 
made a part of the record.
    Ms. Rice, you are now recognized for 5 minutes to present 
your oral testimony.

   STATEMENT OF LISA RICE, PRESIDENT AND CEO, NATIONAL FAIR 
                    HOUSING ALLIANCE (NFHA)

    Ms. Rice. Thank you. Chairwoman Waters, and members of the 
committee. Thank you so much for inviting me to speak about the 
need to overhaul our credit reporting and scoring systems. The 
National Fair Housing Alliance has worked to address how the 
U.S. credit system restricts access to consumers of color since 
our inception 30 years ago.
    Our work with industry partners and our network of over 200 
community and State-based organizations gives us unique 
insights into how credit markets function and impact our 
underserved consumers.
    How our society collects and uses consumer data, as it 
relates to the provision of financial services, has always been 
slanted against people of color. Our credit scoring and 
automated underwriting and pricing systems are fueled by 
algorithms that rely on data that is infused with, and reflects 
a discrimination that is replete throughout our financial and 
housing markets.
    While credit repositories capture all types of data from 
myriad sources, they do not capture information that explains 
the impact of discrimination and racial inequities. Moreover, 
repositories adopt policies that favor the provider of the 
credit data over the consumer, even when the entity has engaged 
in discrimination or fraud.
    Finally, repositories do not collect rental housing payment 
information that can result in expanded access to quality, 
sustainable credit for underserved groups. Our country has a 
dual credit market that stems from historical and current 
discrimination which taints the data housed in the credit 
repository systems.
    Housing policies established from the inception of this 
nation were expressly designed to assist whites in gaining land 
and homeownership rights while simultaneously denying people of 
color the same opportunities. Federal agencies like: the Home 
Owners Loan Corporation, which by collecting millions of pieces 
of data developed an infrastructure for systemizing red lining 
in our financial markets; and the Federal Housing 
Administration, which used race-based policies and weaponized 
data against communities of color, denying them from obtaining 
credit and homeownership opportunities while simultaneously 
generating trillions of dollars in wealth for white Americans.
    Federal agencies along with private actors demanded the 
segregation of residential communities and actively worked to 
disinvest those areas with higher concentrations of people of 
color. In my written testimony, there is an illustration of 
America's separate and unequal credit system. The tan side 
reflects the non-traditional or sub-prime market where entities 
like check cashers and pay day lenders operate, when consumers 
access credit in this space it does not in year to their 
benefit. Many operators in this space do not report positive 
payment behavior to the credit repositories, however they do 
report negative information to the system.
    Non-traditional credit providers are less regulated than 
mainstream credit providers and are more apt to develop 
products that are not safe or sustainable or are designed to 
push borrowers into delinquency. Non-traditional creditors are 
also highly concentrated in communities of colors while there 
are banks and credit unions located in African-American, Native 
Indian, and Latinx communities. We continue to see differences 
in credit scores high to residential segregation. People living 
in communities of color are more likely to be credit invisible 
and have lower credit scores.
    This is because data is not innocuous. Although 
discrimination is a common occurrence in the housing sector, 
there are over 4 million instances of discrimination each year. 
The bias in our markets is not accounted for in the way credit 
data is collected or utilized. This means that data is tainted 
and often manifests harmful outcomes for consumers. When credit 
repositories gather data, they do not simultaneously ascertain 
if a consumer has obtained credit from a predatory, 
discriminatory or abusive debtor for the purposes of 
ameliorating negative fallout.
    I have four suggestions for potential solutions. The first 
is that credit reporting systems must be revamped to merit 
consumers and creditors alike, in an equal fashion. The second 
is that adverse information related to discrimination, fraud, 
and abuse must be removed from our credit repository system. 
The third is that rental housing payments should be reflected 
in the credit repository system. The fourth is that if a 
provider of data--a lender--does not report positive data into 
the system, any negative data emanating from that provider must 
not be captured.
    [The prepared statement of Ms. Rice can be found on page 
168 of the appendix.]
    Chairwoman Waters. Thank you. Ms. Wu, you are now 
recognized for 5 minutes to present your oral testimony.

STATEMENT OF CHI CHI WU, STAFF ATTORNEY, NATIONAL CONSUMER LAW 
                         CENTER (NCLC)

    Ms. Wu. Chairwoman Waters, Ranking Member McHenry, and 
members of the committee, thank you for inviting me to testify 
today. I am testifying on behalf of the low income clients of 
the National Consumer Law Center. So by my estimate, this is 
the sixth time I have been before Congress talking about abuses 
by the credit bureaus. Of course, it is an honor each time to 
be invited, but it is really terrible that I, my predecessors 
at NCLC, and other consumer advocates such as the fine folks on 
this panel have had to come back so many times to talk about 
the same issues.
    We have complained many times about mixed files, where the 
credit bureaus mix up information of two different people. Such 
as Tammy Brown of North Carolina who was wrongfully tagged with 
the bankruptcy of another Tammy Brown from Indiana. Mixed files 
are something that Senator William Proxmire considered the 
father of the Fair Credit Reporting Act, complained about in 
1968. It often occurs because credit bureaus don't match the 
information using the full Social Security number of consumers 
but rely only on seven out of the nine digits resulting in 
mismatches.
    Another problem we've complained about before is what 
affected Peggy B. of Missouri, whom the credit bureau tagged as 
deceased. Imagine being denied credit and sent condolence 
letters about your own death when you are very much alive. 
These errors affect millions of consumers. According to the 
Federal Trade Commission, one in five consumers has a verified 
error in their credit report and 5 percent have errors serious 
enough to be denied or pay more for credit. Five percent is 
unacceptable. It means 10 million Americans have seriously 
damaging errors in their credit reports and what is worse is 
what happens when consumers try to fix these errors.
    They run into the Kafkaesque nightmare of the credit 
bureaus dispute system. In 2009, our report, ``Automated 
Injustice'' described how the dispute system was a travesty. 
That all the credit bureaus did was send the disputes to third-
party vendors, sometimes off-shore, who simply turned them into 
two or three digit codes maybe with a line of text and sent the 
codes to the creditor or debt collector who supplied the 
information. And then the credit bureau always accepted what 
the creditor or debt collector responded even if it is clearly 
contradicted by the evidence like a court judgment or a police 
report.
    Now in the last 10 years there has been some improvement 
due to examination and supervision of the credit bureaus by the 
Consumer Financial Protection Bureau--although with the new 
leadership, we're always concerned about backsliding, as well 
as settlement in 2015 with the credit bureaus obtained by 30 
attorneys general. But as documented in our new report released 
just yesterday called, ``Automated Injustice Redux,'' problems 
with accuracy and getting errors fixed still very much 
frustrate consumers like Tammy Brown and Peggy B. And they also 
frustrate the over one quarter million consumers who filed 
complaints with the Consumer Bureau against Equifax, Experian, 
and TransUnion, where credit report issues were the top 
category of complaints in 2017 and 2018.
    We need a better system and wholesale reform, which is why 
we supported Chairwoman Waters' Comprehensive Consumer Credit 
Reporting Reform Act in 2017, and we support her new draft 
currently being discussed.
    The other perplexing thing about the credit reporting 
system is how it doesn't distinguish between consumers with 
poor financial management and those who missed bills because 
they were unlucky.
    They got sick. They lost their job. They were impacted by a 
natural disaster or they missed a month's pay due to being a 
Federal contractor affected by the government shutdown. In his 
written testimony, Mr. Peck said that credit reports reflect 
good choices and hard work.
    So does that mean the Federal workers made bad choices and 
were lazy? No, I don't believe so, and that is why we support 
Chairwoman Waters' Protecting Innocent Consumers Affected by a 
Shutdown Act being discussed.
    I know others will talk about the Equifax data breach but I 
wanted to note one fact revealed by a report from the last 
Congress by the House Oversight Committee, that the computer 
systems used by Equifax to process credit reporting disputes 
was the very system hacked in the data breach and part of the 
problem was that this was an antique legacy system built in the 
1970s. Now we know why we have been having the same complaints 
over and over again for the past 40 years because the credit 
bureaus have been using the same systems for the past 40 years.
    One last point about credit invisibility, it is certainly 
an issue. But the Credit Access and Inclusion Act has an 
inclusion act passed in the last Congress is the wrong way to 
go about it because all it does is preempt State consumer 
protections for the privacy of utility customers.
    And it will impede States trying to regulate the 
problematic practices of tenant screening agencies. By the way, 
the CEO's of the credit bureaus keep asking for more data. 
These are the same companies that had their data stolen and 
have high error rates. I don't know if we want to give them 
even more of our data. I thank you for the opportunity to 
testify and look forward to your questions.
    [The prepared statement of Ms. Wu can be found on page 179 
of the appendix.]
    Chairwoman Waters. Thank you very much. Ms. Brown, you are 
now recognized for 5 minutes to present your oral testimony.

   STATEMENT OF JENNIFER BROWN, ASSOCIATE DIRECTOR, ECONOMIC 
                        POLICY, UNIDOSUS

    Ms. Brown. Thank you. Good afternoon, and thank you, 
Chairwoman Waters, Ranking Member McHenry, and distinguished 
members of this committee for inviting me to testify today. My 
name is Jennifer Brown. I am the associate director of economic 
policy at UnidosUS. UnidosUS is the largest national Hispanic 
civil rights and advocacy organization in the United States. 
For over 50 years, we have worked to advance opportunities for 
Latino families so that they can achieve economic stability 
through our network of nearly 300 affiliates in 35 States, the 
District of Columbia, and Puerto Rico. For more than 2 decades, 
UnidosUS has published reports, testimony, and has engaged in 
advocacy on issues that support strong, fair housing and 
lending laws and increased access to financial services.
    This statement through information and stories from our 
affiliates focuses on how credit scores are still largely 
associated with income and wealth and how it perpetuates the 
racial wealth gap. Credit invisibility occurs most frequently 
in communities of color, low-income neighborhoods, in younger 
populations, and among immigrants. Credit scores are used for 
many non-lending purposes including applications for 
employment, housing, utility services and even health 
insurance. First, I would like to take some time to discuss 
credit scores. Delores from Pennsylvania told us that a high 
credit score opens the door. A low credit score, they take away 
the keys.
    Credit scores are supposed to be an objective measure of an 
individual's creditworthiness, free from the bias that has 
historically determined who can and cannot access credit and on 
what terms. Yet credit scores are still largely associated with 
income and assets exacerbating long-standing wealth disparities 
between different races and ethnicities. Communities of color 
have had lower incomes and therefore they have lower credit 
scores. This is confirmed by a report from the Federal Reserve 
that found that the average credit score of black Americans was 
approximately half that of whites and the average credit score 
of Latinos was more than 1/3 less than whites.
    Second, I would like to discuss credit invisibility. Miguel 
from California told us, if I have income and the ability to 
pay shouldn't that determine if I can pay off a loan? According 
to the Consumer Financial Protection Bureau, 45 million 
Americans or 19.3 percent of all consumers are credit 
invisible, have thin credit files or lack a recent credit 
history. Credit invisibility, according to the Consumer 
Financial Protection Bureau (CFPB) occurs most frequently in 
communities of color, in low-income neighborhoods, in younger 
populations, and among immigrants. Among the factors that 
contribute to credit invisibility is that the credit scoring 
models rely on formulas and algorithms that fail to consider 
cultural norms such as reluctance to debt, reliance on cash, 
failure to account for other--other ways to pay for making on 
time payments.
    Third, I would like to take a moment to discuss the 
consequences of being credit invisible. Henry from California 
told us, since I don't have a credit history my only option to 
turn on my gas and electric was to give a down payment of $500. 
That is a lot of money. Credit scores were originally intended 
to be used by lenders to access whether to approve a customer 
for credit. Today however, credit scores or credit histories 
are used for many non-lending purposes including getting a job 
serving frozen yogurt, to obtaining federally subsidized 
housing, establishing an account with a utility provider, and 
even signing up for health insurance.
    If we continue to rely on credit bureaus as gatekeepers who 
can determine whether a person can obtain a job, put a roof 
over their heads, stay warm in the winter or cool in the 
summer, or secure healthcare for themselves and their families, 
the credit rating system will need to reflect a more accurate 
and transparent depiction of the creditworthiness of all 
Americans. Without this accuracy and transparency, the credit 
ratings agencies will remain, as Carla in Pennsylvania told us, 
the ``original gangsters'' because they have their own system.
    In conclusion, I hope this testimony provides the committee 
with information on why we should fix the credit scoring system 
so it is not largely associated with income and wealth. Make 
the system more inclusive to communities of color, low income, 
neighborhoods and younger populations. Limit credit scores for 
credit purposes and prevent credit scores from being used as 
screeners for employment, housing, utility services and health 
insurance. Thank you.
    [The prepared statement of Ms. Brown can be found on page 
113 of the appendix.]
    Chairwoman Waters. Thank you very much. Now, Mr. 
Mierzwinski, you are recognized for 5 minutes to present your 
oral testimony.

   STATEMENT OF EDMUND MIERZWINSKI, SENIOR DIRECTOR, FEDERAL 
     CONSUMER PROGRAMS, U.S. PUBLIC INTEREST RESEARCH GROUP

    Mr. Mierzwinski. I was going to commend you, Madam 
Chairwoman. That is just exactly how you say it. Chairwoman 
Waters, Mr. McHenry, members of the committee, I am Ed 
Mierzwinski and I am with the U.S. Public Interest Research 
Group a non-profit, non-partisan consumer advocacy group. I 
want to point out a few highlights from my testimony today.
    First of all, every action by Congress to reform the credit 
reporting system was proceeded either by a scandal, a State 
action, or both. So in 1970, the original hearings were held to 
create the Fair Credit Reporting Act because Equifax, then 
going by Retail Credit Company, was running a--so many 
complaints were coming in about its investigations of people 
applying for insurance.
    There were so many lawsuits against the company that 
Congress took notice, and passed the original FCRA. Then during 
the first big wave of consolidation, States and the FTC began 
investigating the credit bureaus in the late 1980s. Congress 
held a hearing.
    I testified for the first time in 1989 before the committee 
and in 1992 a bill was ready to go to the Floor and in fact 
went to the Floor to reform the credit bureaus. But in 
committee, the industry had won an amendment reversing the way 
that the original consumer credit laws, Truth In Lending fair 
credit reporting and all the rest had said that any State law 
that is stronger is not in conflict. The industry won an 
amendment. We could not get rid of it on the Floor. Former 
Representative and Chairman Henry B. Gonzalez and his members 
then took the bill off the Floor and it did not pass until 1996 
with limited preemption only, not the total preemption that the 
banks and credit bureaus sought.
    But in the meantime, in Vermont, where TRW, the predecessor 
to Experian, had said that 3,000 people, almost everybody in 
the town of Norwich, Vermont, had not paid their credit bills 
and not paid their taxes when they had. Vermont and California 
passed new laws and seven States passed free credit report 
laws. The Federal 1996 amendments came about the time that 
identity theft became a problem, a big problem.
    So in 2003, Congress didn't fix identity theft but it 
extended free credit report rights nationwide and did give the 
banks extended preemption but also allowed States to pass 
identity theft laws and so between 2003 and 2018 every State 
passed a data breach notice law and a credit freeze law.
    Before the passage of the vaunted S2155, several States in 
2018 had passed new amendments to their credit freeze laws 
making them free. So the industry came to the committee on the 
Senate side and said, let us get the free freeze into S.2155 
but let us make it preempt the States. So every single time we 
have had a scandal where the States act first, then Congress 
finally acts and not necessarily as well as the States did.
    The mistakes in credit reports from PIRG's first study in 
1990 credit reports were public enemy number one at the Federal 
Trade Commission. That was based on a FOIA report. Throughout 
1990 to today, our studies have shown that credit reports are 
the number one complaint. You have seen it on the big jumbotron 
here in the committee that the Big 3 credit bureaus are still 
number one, two, and three in complaints at the Consumer 
Financial Protection Bureau.
    By the way, at the bureau we have a public database. We 
don't have to file FOIA's. I strongly urge you to ask the 
Director of the CFPB when she comes in next month to keep the 
public database public. One other point from our complaints, in 
1990 I remember a consumer said, ``item remains confirmed by 
source, what is this source?''
    I concur completely with my colleague, Chi Chi Wu, and her 
explanation of why the dispute system doesn't work and how your 
bill would fix the dispute system that doesn't work. Because 
the bureaus and the furniture creditors are running a con where 
they say their computers match so it must be okay. It isn't and 
we quote several ``item remains'' stories from the CFPB 
database in my comments.
    We could talk about Equifax for my entire 5 minutes but my 
written testimony goes into great detail about how the cover--
I'm sorry, the clean up, and that was a Freudian slip there, 
but the clean up was almost worse than the problem because of 
the way they botched it. Finally, I want to point out that 
going forward, we would like to work with the committee on 
other issues related to privacy. The credit bureaus are data 
brokers. They are the only regulated data brokers because all 
the rest of the thousands of data brokers don't meet the 
definition of a credit bureau or credit report. We need to fix 
that. Thank you.
    [The prepared statement of Mr. Mierzwinski can be found on 
page 138 of the appendix.]
    Chairwoman Waters. I am going to take a moment here to 
advise Members that votes have been called on the Floor. We 
will complete our witness opening statements now and then 
recess for votes. The hearing will resume immediately following 
the Floor votes. So Mr. Brown, we are going to hear your 
testimony, but I want the Members to know that the votes have 
been called and then we will be back. Please proceed.

 STATEMENT OF THOMAS P. BROWN, PARTNER, PAUL HASTINGS LAW FIRM

    Mr. Brown. Thank you, Chairwoman Waters, Ranking Member 
McHenry, and members of this august committee for holding this 
hearing and inviting me to testify. I want to make clear at the 
outsetthat I am here speaking in my individual capacity. I am 
not here representing the firm of which I am the co-chair, its 
Fintech practice, nor any of its clients, and I am not being 
paid to be here. I am speaking on this topic because it is a 
subject in which, as I explained to a cousin this weekend, I 
have a passionate interest and that interest arises from two 
things.
    One, I taught a class on and off at UC-Berkley Law School 
for 10 years where I met a member of this committee, 
Congresswoman Porter, who is as much an expert in the FCRA as 
any of the people you have heard testifying here today, and 
two, from work that I have done on a pro bono basis for CFSI 
and others around the problem of financial health for all 
Americans. I am happy to answer questions about my testimony at 
length.
    I do want to use the time in my opening to discuss three 
issues that I have heard come up over the course of the many 
hours that we have all been sitting here: data ownership; 
competition; and innovation. So let us start with data 
ownership. I don't believe that data ownership is a useful 
framework for thinking about the problems that arise with 
respect to consumer privacy generally or the Fair Credit 
Reporting Act.
    Data is an intangible asset and like any intangible asset 
it is difficult for a single person to possess. In the sense 
that you can possess an instance of data but that--use of that 
instance of data does not deprive other people of use of that 
data. And rather than focusing on ownership, I think the 
Congress in connection with this area should focus instead on 
eliminating harm to consumers from misuse of their information.
    This committee actually has jurisdiction over two excellent 
examples of how we protect consumers against harm from 
information that relates to them. These are Reg. E and Reg. Z, 
both of which protect consumers from the misuse of information 
that is important to them, namely information related to their 
accounts. I think focusing on the issue of data ownership is 
misplaced.
    So then let us talk about competition. Competition is a 
subject that is near and dear to my heart. The last time that I 
sat in this room, I was staffing a former Member, a former 
Chair of the Federal Trade Commission. I am an anti-trust in 
consumer protection litigator by background. I believe that 
these things relate deeply to one another. And there are two 
aspects to competition that I think have surfaced in today's 
hearing that are worth discussing. The first, and this really 
responds to a question that Congressman Duffy asked earlier is, 
why can't all the bureaus get together and create a mechanism 
that allows people to freeze their reports? Well, because 
Section one of the Sherman Act makes it very difficult for 
companies that are in competition with one another to 
collaborate.
    The operative language of--well the Sherman Act is 
contracts, combinations and restraint of trade are prohibited. 
And although it is not impossible, it is difficult for those 
entities to collaborate, to offer products to consumers.
    Now, there may be ways that the entities can collaborate 
with respect to, for example, identifying furnishers that 
provide inaccurate information on a systemic basis. There are 
examples, as Congresswoman Porter observed earlier, from the 
card industry where the card networks share information about 
terminated merchants. That is a mechanism that has worked 
reasonably well in policing bad activity on the part of 
merchants in the payment industry and it is an idea that I 
think is worth exploring here.
    So what is the other dimension in which I think competition 
is interesting. Well, it relates to the oligopoly structure 
that has been a topic of discussion. As a product of the 
University of Chicago where we see an industry that is not 
organized in a way that we would expect. We should look among 
other places at the underlying regulatory framework.
    The FCRA, as I detail in my testimony, is extremely 
technical and it serves as a barrier to entry into the space. 
That takes me to the final issue, inclusion. I have 30 seconds. 
I do believe quite passionately that to address the problem of 
inclusion we do need to provide consumers with the ability to 
provide information about themselves to people who are willing 
to provide loans.
    Congress has spoken on this issue through Section 1033 of 
Dodd-Frank. The CFPB and the prudential regulators have not 
taken the issue up. I believe that the committee should ask the 
new Director of the CFPB about the Bureau's position on that 
issue when she appears in a week.
    [The prepared statement of Mr. Brown can be found on page 
123 of the appendix.]
    Chairwoman Waters. The committee will stand in recess.
    [recess]
    Chairwoman Waters. The committee will come to order. I now 
recognize myself for 5 minutes for questions. I want to talk 
about comprehensive reform. It is clear that Congress should 
consider a number of actions to address concerns exposed by the 
Equifax data breach, including accurate reporting, a dispute 
resolution process that is unfriendly for our consumers, and 
other systemic problems. Ms. Wu, if my comprehensive consumer 
credit reporting reform bill were enacted into law, would you 
briefly discuss how some of the provisions would be better for 
consumers than current law?
    Ms. Wu. Absolutely, and thank you very much for introducing 
the comprehensive consumer credit reporting reform bill so many 
times. First of all, the bill would provide for an appeals 
right for consumers who have been frustrated trying to fix 
errors in their credit reports. That would address the issue I 
talked about how right now they deal with a Kafkaesque system. 
It would reduce the impact of negative information from 7 years 
to 4 years and that would help consumers with their credit 
reports. It would allow them to remove the negative information 
from predatory loans and for-profit school fraud. It would 
provide for injunctive relief. They can ask a court to fix 
their credit reports.
    It would help deal with medical debt by preventing 
information from going on for a full year, so that consumers 
have the ability to fix all these errors that happened because 
of insurance coverage and insurance denials. You know, 
questions about what is this bill and also remove paid or 
settled medical debt. And it would severely restrict the use of 
credit reports in employment, which we think is entirely unfair 
and has a racially discriminatory impact. It is such a great 
bill and there is so much that I am probably missing a lot of 
important points.
    Chairwoman Waters. Go ahead.
    Ms. Wu. It would do so much to help consumers. It would 
require the CFPB to engage in a rulemaking on issues about 
matching. As I mentioned before, one of the worst problems is 
mixed files when you mix up two consumers. And it is because 
credit bureaus have this incentive to be overly inclusive of 
negative information. And so, they need to crack down on how 
they match information, use all 9 digits of the Social Security 
number or at least 8 digits, and maybe a full name and address.
    By the way, the CFPB did get them at least to take off all 
this public record and lawsuit and tax lien information because 
they were having trouble making sure it was the right consumer. 
That this Richard Smith, he was the actual Richard Smith who 
was being sued because Social Security numbers don't show up on 
court records. And so getting the CFPB to do a rulemaking to 
make sure data is more accurate would be really helpful.
    Chairwoman Waters. Thank you very much. Mr. Mierzwinski, 
Ms. Brown or Ms. Rice, would you like to add to anything? For 
example, should Congress consider giving the credit bureau 
regulators similar powers that other regulators have with 
respect to banks, such as the ability to remove senior 
executives, limit the company's asset size, or even wind down 
their operations if they repeatedly violate the law and harm 
consumers? Now, you may not have thought about these particular 
remedies but what comes to mind?
    Mr. Mierzwinski. Well, Congresswoman, I think those are 
great ideas. The banking regulators have the power to shut down 
a bank, throw out a CEO or do a lot of things that the CFPB 
cannot do, although the CFPB has more powers than the old FTC 
did. And the old FTC did fight with one hand tied behind its 
back for 40 years against the credit bureaus and their 
mistakes.
    But I would support looking at any of those improvements 
because again, as many people have pointed out including the 
ranking member here today, we have an oligopoly of three 
powerful gatekeepers. We don't have any competition so we 
should have more power over the credit bureaus. Thank you.
    Ms. Rice. Congresswoman, if I could just add one of the 
most important parts of the provisions of your law I think 
relates to removing information from predatory lending and 
abusive practices. As I mentioned previously, predatory lenders 
are hyper concentrated in communities of color. This has grave 
ratio disparities and the products that those lenders 
perpetuated were unsustainable. They were designed to push 
borrowers into delinquency and as we have mentioned before the 
repository system does not rate the type of credit that the 
person is getting. It infers that abuse onto the consumer.
    Chairwoman Waters. Thank you very much. The Chair now 
recognizes the distinguished ranking member, Mr. McHenry, for 5 
minutes of questions.
    Mr. McHenry. Thank you, Chairwoman Waters. I want to thank 
the panel for staying. It is been quite a day, but I do 
appreciate it and I appreciate your testimony as well. What I 
would say is, I think what was interesting about the first 
panel is no one seemed concerned in the panel that the Fair 
Credit Reporting Act was outdated or in need of updating. 
Right? Let's just go across the panel. Does FCRA need updating?
    Ms. Rice. Yes.
    Mr. Brown. Yes.
    Mr. Mierzwinski. Yes.
    Ms. Brown. Yes.
    Ms. Wu. Yes.
    Mr. McHenry. For the record, everyone says ``yes'' on the 
second panel. We have four Democratic witnesses and one 
Republican witness--not that that matters of your affiliation 
but that is who requested your attendance. So getting into 
that, why haven't we had more innovation? Why have we not had 
more companies enter the picture? Why is it just the big three? 
Mr. Brown?
    Mr. Brown. I know that not everybody on the panel is going 
to agree with my view on this but the prospect of taking on the 
bureaus, even independent of the underlying regulatory regime, 
is daunting. The businesses were described today and we have 
been sort of seeing the slides. They have relationships with 
thousands of furnishers who give them data. They process, 
synthesize, and assemble that data and then sell it to a large 
number of financial institutions.
    Those incumbent customer relationships and information 
sourcing relationships just on their own would be difficult to 
challenge and then the underlying regulatory framework is from 
the standpoint of thinking about launching a new full fledged 
bureau is daunting. I think all of us here probably reasonably 
well understand what the requirements are for a large-scale 
bureau. We are all trained or at least many of us are trained 
to par statutes but most of the people who are thinking about 
launching a new FinTech business are not lawyers by nature. 
They are engineers, and of all of the statutes that you are 
going to tackle as an engineer, the FCRA would be at the bottom 
of the list.
    As I have mentioned in my written testimony, I do think 
that there is evidence of innovation. It is just coming from 
adjacent areas and I think that for--in thinking about--
    Mr. McHenry. So where is their innovation?
    Mr. Brown. I talk about a little bit about this in my 
testimony but one area is in allowing consumers to furnish 
information to people who will provide them financial services. 
We see a range of companies that are offering such services, 
many of which are trying to tackle and compete with some of the 
predatory products that have been available for a long time. I 
can rattle them off quickly. Companies like Earnin, Evein, Pay 
Active and others that are introducing alternatives to payday 
loans. We have seen it in the incorporation of cash flow data 
in products offered by folks like Peddle and Opportune. All of 
which are trying to find ways to provide consumers with the 
ability to directly provision information that would not be 
accessible through a credit report.
    Mr. McHenry. Okay. So if you look at the consumer data that 
these three groups have, the Social Security number as we have 
heard in previous testimony and written testimony. Use of the 
Social Security number and--and data surrounding that makes the 
theft of that data even more detrimental to consumers. Right?
    When a Democrat colleague of mine raised this question in 
the first panel, two factor authentifications for basic 
standards of tech, these companies have not complied with that. 
What is your thought, just in this final minute we have, on the 
utilization of the Social Security number as an identifier? 
Would it be proper to step in and restrict that capacity for 
these bureaus to use our Social Security numbers as a 
identifier?
    Ms. Wu. So the problem with the use of the Social Security 
number, if I may, is not as an identifier but as a verifier or 
authenticator. And it is really important to separate them out 
because, take the example of Richard Smith. There are many 
Richard Smith's, the former CEO of Equifax, in the United 
States. There's only one Richard Smith with the Social Security 
number ``123456789.''
    Mr. McHenry. Sure.
    Ms. Wu. In order to match data correctly, you need that 
unique identifier. So it is not the use as an identifier. It is 
used as a verifier because what it says is this person online 
or over the phone can say, my Social Security number is 
``123456789'' and that proves who I am. And that is the 
problem. It is the use of an authenticator. We need different 
and better authenticators--
    Mr. McHenry. Does everybody agree?
    Ms. Wu. Yes.
    Ms. Brown. Yes.
    Mr. Brown. Yes.
    Ms. Rice. Yes.
    Mr. Mierzwinski. Yes.
    Mr. McHenry. All right. So that distinction between the two 
should be an element of discussions we have as policy makers. 
Ms. Wu?
    Ms. Wu. Yes, absolutely.
    Mr. McHenry. Okay.
    All right. Thank you all for your testimony. Thank you for 
your engagement, and thank you for caring about our 
constituents and trying to protect them.
    Thank you.
    Chairwoman Waters. Thank you.
    The gentleman from Missouri, Mr. Clay, is recognized for 5 
minutes.
    Mr. Clay. Thank you, Madam Chairwoman.
    Let me start with Ms. Rice.
    And thank you all for being here.
    Ms. Rice, a large part of what the Congressional Black 
Caucus seeks to do is eradicate the racial wealth gap. And 
indeed, as my father, former Congressman Bill Clay, said, we 
have no permanent friends nor enemies, just permanent 
interests. And we must address this debilitating economic 
disparity everywhere it exists, including in the credit 
industry.
    I hear conservative commentators and other people of that 
ilk talk about how race is overblown, irrelevant, or doesn't 
even exist. Your testimony presents demonstrable facts to the 
contrary. Not only does race matter, but the question of race 
to this day still impacts the ability of a black person to walk 
into a retail outlet or try to buy a home.
    Could you discuss the history of the Home Owners Loan 
Corporation and how this and the FHA discriminated against 
African-Americans and the dual credit market, which you 
referenced in your testimony?
    Ms. Rice. Thank you, Congressman Clay. I would be happy to 
respond to your question, and thank you for it.
    Throughout the entire history of the United States of 
America, so even if you go back to the colonialization period 
of our nation, our housing and finance policies have been 
racialized. In other words, those who had access to the 
benefits were, by and large--actually, sexualized and 
racialized--white men, right?
    So we start out with the colonialization period: White men 
received 50 acres to 100 acres of land for every person in 
their household, including slaves and indentured servants. And 
that land was taken from indigenous peoples by militia and 
given to those white households.
    So fast-forward to the Great Depression, when the Federal 
Government implemented two major housing entities, the Home 
Owners Loan Corporation--the Home Owners Loan Corporation did 
not invent redlining. Redlining already preexisted. But what it 
did do was it said that we had to have policies that promoted 
residential segregation. Remember, we are more residentially 
segregated today than we were 100 years ago, largely because of 
the policies that were perpetuated by the Federal Government.
    So the Home Owners--
    Mr. Clay. Which created the middle class in America, 
correct, with government backstops of mortgages?
    Ms. Rice. Yes. Those products that were developed by the 
government through the HOLC program and the Federal Housing 
Administration program provided opportunities for white 
Americans to obtain quality, sustainable credit, and they 
disclosed opportunities to people of color. And that is how the 
middle class was basically built, through the development of 
those two programs.
    Now the problem and the challenge is because those programs 
developed and implemented systemized ways of providing credit 
to people, it fueled and exacerbated what we call the dual 
credit market. And I have a graphic of that in my written 
testimony.
    The problem is we are still being impacted by this system 
today. We still have this system.
    So if you access credit on the tan side those credit 
providers do not report positive payment to the credit 
repositories. But if you access credit on the blue side your 
positive payment is reported to the credit repositories.
    In a perverse arrangement, your negative information if you 
are accessing credit on the tan side--that negative information 
is reflected in the credit repository system. And so you see, 
you have a good chance if you are accessing credit here to get 
a deflated--a poor credit score, but you also have a higher 
chance of being credit invisible because the positive payments 
are not reported to the credit repository system.
    Mr. Clay. And, Ms. Wu or Mr. Mierzwinski, can you tell me 
how do we break the culture of this? How do we help families 
build wealth?
    Ms. Wu?
    Ms. Wu. Well, one issue is the fact that credit scores 
reflect this racial wealth gap, and we use credit scores and 
credit reports in ways that they shouldn't be used, like for 
employment, or for insurance, or for tenancy. So one way to 
stop the cycle is to stop using the data that actually reflect 
discrimination.
    Another way is to look at different kinds of data that has 
less disparate impact.
    Mr. Clay. My time is up. I have to yield back.
    Chairwoman Waters. Thank you very much.
    Mr. Clay. Thank you.
    Chairwoman Waters. I now recognize Mr. Scott, the gentleman 
from Georgia, for 5 minutes.
    Mr. Scott. That would be going to the other side, but 
there's no other side.
    Let me just ask you, this morning when we had the chief 
executives here and I was very much awakened to something I was 
only dimly aware of, and that was this--what do we call it, the 
dispute resolution process. And I want to talk about that for a 
moment.
    We were able to discover this morning that even if it is 
proven that it was the agency, the credit agency, who was at 
fault, who made the mistakes within the reporting--wrong 
birthdate, whatever--we pointed out where that costs jobs, it 
costs education loans, it costs lending, it just causes a 
whole--we are a credit-based economy. And it just surprised me 
and concerned me that even when the credit agency itself is at 
fault in these, do you all think it is right if they have to 
take this dispute resolution all the way up to the courts? They 
have to hire a lawyer? They have to go through that? And it is 
not their fault.
    It just seems to me that we ought to address that. And 
Chairwoman Waters has a bill, the Comprehensive Consumer Credit 
Reporting Reform bill, and I think it is something we ought to 
address here because I don't think that is right. And I think 
that we ought to do it in a way that will bring the credit 
agencies to the table, and put the right kind of language in 
there.
    It doesn't have to be the final language, but it could be 
language that would get their attention, because too many of 
these errors are taking place. It is the number one issue that 
the Consumer Financial Protection Bureau--it is at 60 percent 
is on inaccuracies.
    So I would like to get your comments on that. Do you think 
I am right? Is it something for which we ought to be able to 
draw up some kind of language?
    If nothing else, it would get their attention to make sure 
that these errors will stop, if it has to come out of their 
pockets to help defray this court cost for a problem that they 
caused.
    Ms. Brown? Any of you? Do you think that is feasible or am 
I being too tough on them?
    Mr. Mierzwinski. Mr. Scott, I would say that the 
Comprehensive Consumer Credit Reporting Reform Act includes a 
very important solution to this, and that is to give people the 
right to appeal disputes. Right now, disputes are a mess. We 
tried to fix them in 1996; we tried to fix them in 2003; and 
this bill includes a number of factors to fix them better.
    But up until now, as Ms. Wu has testified in great detail, 
you have a system that is gamed against the consumer. So that 
would be my first advice.
    Ms. Wu. And I agree absolutely that the credit bureaus need 
to be brought to account on disputes. The Comprehensive 
Consumer Credit Reporting Reform Act would do that.
    It is even worse. Do you know that 40 percent of disputes 
involve debt collectors, but they only provide 13 percent of 
the account information in the system? So it is 
disproportionately debt collectors.
    And you have to figure, is a debt collector going to be 
fair about removing mistakes or do they just simply want to 
keep it on so they can get paid from whomever?
    Mr. Scott. Well, one of the things I want to do is I think 
this dispute resolution needs to be improved. And I would look, 
and hopefully you all will take a more jaundiced eye at looking 
at it and advising us on what steps we can take to strengthen 
this aspect of Ms. Waters' bill. I know she is going to be 
dealing with that, but--
    Mr. Clay. [presiding].The gentleman's time has expired.
    Mr. Scott. All right. No problem. Thank you.
    Mr. Clay. I now recognize the gentleman from Illinois, Mr. 
Foster.
    Mr. Foster. Thank you, Mr. Chairman.
    Well, I was interested that it has repeatedly come up in 
this testimony that data errors are--a dominant source of them 
are misidentification of individuals, and that the use of the 
Social Security number as an identifier as opposed to an 
authenticator is just something that we get wrong in this--in 
this country, that--that we should be using it only as an 
identifier.
    And there is a group called the Better Identity Coalition--
are you familiar with this group? They are actually looking at, 
you know, Mr. Mierzwinski--and I would be wondering--I guess I 
can--if you could answer this with some time to think about it, 
look over the recommendations of the Better Identity Coalition 
and see if there are problems that you see from the consumer 
point of view of taking their recommendations, which is 
basically the suggestion that our country transition on how we 
use the Social Security number and then use it more generally, 
everything from IRS tax refunds going to the correct person and 
just--there's a long list of things that--that could be 
improved, and--to reduce identity errors.
    And so I will be submitting a question for the record on 
that.
    And the second thing, Ms. Rice, you know, I represent 
Joliet and Aurora, Illinois, and I looked over the redlining 
maps that I think, what was it, Richmond University put online, 
and accompanied by the just incredibly bigoted comments that 
the people who designed the red lines put with each 
neighborhood. And then I look over those neighborhoods and I 
feel that I can see the fingerprints of that redlining in how 
those are today. And it made me furious.
    But my question, then, is one that relates to the business 
of using neural networks and advanced algorithms to do credit 
selection. And there's a problem here that isn't entirely the 
fault of the companies that are doing this, which is that 
because of this unjustified discrimination you have different 
groups, different demographics have different amounts of 
wealth, for example, and if you are in danger of missing a 
payment it is very common that it is--if you have a wealthy 
relative then you can go hit them up for some money so you can 
actually make this month's payment.
    And so as a result it is actually statistically true that 
people with wealthier relatives, certain protected classes, in 
fact, have better or worse statistical odds of defaulting on a 
debt, and so that if the algorithms left to themselves will 
then identify these protected classes and adjust their credit 
ratings or--or the amount that they actually get charged for 
statistically correct reasons.
    And we have decided as a country that, okay, it might be 
that a woman is a worse credit risk because she might get 
pregnant and a man won't, and so as a result statistically 
there's a difference, but we have decided as a country we are 
not going to discriminate that way.
    Then if you turn things loose to algorithms--and I was 
looking over the--I guess it was the Equifax NeuroDecision 
product that they are marketing. They use a wide variety of 
information, and I would not--I am actually an artificial 
intelligence programmer, so I actually understand how this 
stuff can work. It will be very easy for the algorithms to 
simply come up with a proxy for race, or gender, or all these 
protected classes and effectively use that.
    How do you solve this problem?
    Ms. Rice. Well, there are a number of ways to solve the 
problem. And one thing that I do want to point out to you, 
which I have mentioned in my testimony, is just the point that 
you are making, that data is not blind; it is not innocuous.
    Researchers at Berkeley very recently did an analysis of 
FinTech firms who only rely on algorithms for the decisioning 
and the pricing, and what they found was that these FinTech 
firms who only use algorithmic lending are discriminating 
against African Americans and Latinos because they haven't 
removed the discrimination from the system but really just 
shifted the mode and the mechanism for discriminating.
    It is estimated that these FinTech firms are charging 
borrowers of color between $250 million to $500 million extra 
per year because of the discriminatory pricing, and so--
    Mr. Foster. Right. But, this is not a deliberate action by 
the FinTech firms. It is a reflection of the reality--
    Ms. Rice. Right. It is a reflection.
    Mr. Foster. --that groups that have suffered 
discrimination, they themselves and their relatives and 
everyone else may have less money, and it is statistically 
correct. These algorithms are not dumb. They identify the fact 
that certain protected groups are better or worse credit risks.
    But still as a society we cannot let that happen, and so we 
have to tell the algorithms no.
    Ms. Rice. It is more than that. It is more than just the 
wealth factor, but you are absolutely right, the wealth factor 
is a huge part of it.
    Mr. Clay. The gentleman's time has expired.
    I now recognize the gentleman from West Virginia, Mr. 
Mooney, for 5 minutes.
    Mr. Mooney. Thank you, Mr. Chairman.
    My question is for Tom Brown, and I have a comment before 
the question.
    Mr. Brown, looked like you were wanting to jump in there, 
so I am going to yield you a minute or whatever you need to 
comment on that last discussion.
    Mr. Brown. I wanted to provide a note of optimism, 
Congressman Foster. I represented Upstart when they applied for 
a no-action letter from the CFPB related to the inclusion of 
new data in connection with underwriting models, and the 
outcome of that process under Director Cordray was to grant 
that no-action letter around the design of a compliance 
management process that would identify and control for the 
problem that you have identified. And I would be happy to talk 
about that with you more, but I don't think it is as 
pessimistic a picture as the one that has been portrayed.
    Mr. Mooney. Thank you, Mr. Brown.
    I know the intention of this legislation and numerous other 
pieces of legislation that we have seen over the years is to 
create more equity and help people. My concern is it has the 
opposite effect: Adding these regulations, these restrictions, 
these second-guessings, these requirements actually prevent 
loans and credit from going to people who need it the most--
people with low-income scale, people who need the loans the 
most.
    So, Mr. Brown, what would happen--my question to you is 
what would happen to the availability and cost of credit if we 
eliminated entire categories of debt from credit scores?
    Mr. Brown. It is highly likely that the reports themselves 
would be less predictive and that that would increase the price 
of credit or decrease its availability.
    Mr. Mooney. And what would the effect on people be to that?
    Mr. Brown. It would leave people will less access to 
credit, and exacerbate some of the wealth disparities that have 
been observed and discussed for several hours.
    Mr. Mooney. Yes, so the goal of the bill would have the 
opposite effect, like I said in my comments. Do you think that 
is a fair portrayal of what--
    Mr. Brown. I think that is fair, yes.
    Mr. Mooney. Well, thank you.
    Mr. Mierzwinski. Congressman, could I make a brief--
    Mr. Mooney. I would like to yield my time--no. I would like 
to yield my time to the Republican leader.
    Mr. McHenry. Well, I thank my colleague for yielding.
    I just want to ask this question to the whole panel, which 
is, I said initially these three represent an oligopoly. And so 
the basic definition of an oligopoly is that you have thin 
providers, meaning--thin providers, and thus narrow competition 
or no competition. So do you see competition between the big 
three--do you, or not? So let me just restate my question: Do 
you think the big three represent an oligopoly?
    Ms. Wu. Absolutely. I think--
    Mr. McHenry. Ms. Rice?
    Sorry, I was--
    Ms. Wu. Absolutely. They are an oligopoly. They are an 
oligopoly whose customers are the creditors, not the consumers.
    Mr. McHenry. Ms. Rice?
    Ms. Rice. Yes.
    Ms. Brown. Yes.
    Mr. Mierzwinski. I totally agree, and I would add that 
oligopolists are like monopolists. They extract monopoly rents, 
meaning they make extra money without making innovations. And 
the classic example would be this Equifax 1979 computer, or 
whatever year it was, that they were using, the legacy systems. 
Like AT&T with a--you could have any phone you want as long as 
it is black.
    And one more thing: They are following the Amazon, 
Facebook, and Google playbook of buying up their competitors or 
erstwhile potential competitors. So they are seeing who might 
be a competitor and they are buying them up.
    There was a big wave that ended up with three companies in 
1992, and today those three companies exercise their power 
first by extracting extra money, and second by buying up 
anybody that might compete.
    Mr. McHenry. Mr. Brown?
    Mr. Brown. I think the market structure certainly is 
consistent with the idea of an oligopoly. I hesitate as an 
antitrust lawyer to label it as such without more 
investigation, but on its surface there is evidence of 
concentration and it is a relatively narrow market category.
    Mr. McHenry. There was testimony in the first panel that 
there are a great deal of folks who are in the same industry, 
and therefore that represents competition. Do you all agree 
with that assertion?
    Mr. Brown. I think you are getting a technical answer to a 
very technical question, which is that the scope of the FCRA, 
in the sense of the number of discrete companies it covers, is 
broad, so individuals who are providing background checks, for 
example, can be covered by the FCRA.
    When I look at this industry and I look for evidence of 
innovation I see it as I indicated in my testimony, that it 
comes from adjacent areas, not--not necessarily from within the 
scope of--of what the FCRA regulates.
    Mr. McHenry. Mr--
    Mr. Mierzwinski. No, I would agree with Mr. Brown.
    Ms. Wu. Yes, I would agree with Mr. Brown. Those are 
specialty agencies; they are not in the same market as the 
credit bureaus.
    Mr. Clay. The gentleman's time has expired.
    And I now recognize the gentlewoman from Michigan, Ms. 
Tlaib, for 5 minutes.
    Ms. Tlaib. Thank you, Mr. Chairman.
    Thank you all so much for being here and for being such 
strong advocates on this issue.
    This is very, very close to many of the residents at home, 
and I want you to know, Ms. Wu, when you mentioned disparate 
impact it kind of hit something for me as a social justice 
lawyer, but also when we all taut and praise the fact that we 
passed the Civil Rights Act in 1964, we don't really fully 
understand over the last 50 years how the courts got more 
conservative and watered it down to where we can't even show 
disparate impact as an element of getting--basically being able 
to show discriminatory practices like the use of credit scoring 
by the car insurance industry.
    And many of the data I have been reading and information is 
the auto industry uses this as saying, look, if they have a low 
credit score the likelihood of them committing so-called fraud 
is higher, basically saying if you are low-income or poor then 
you must be some sort of criminal. And not only by $10, $20; we 
are talking about hundreds of dollars, sometimes thousands more 
dollars because of credit scoring.
    What have your agencies--and I will start with you, Ms. 
Wu--what has your agency done to try to combat the use of that? 
Because it worries me. It is the auto insurance today, right, 
and we talked about access to rent--to be able to be a renter 
with your family, access to so many other things is so much 
based on credit scoring.
    Ms. Wu. Absolutely, Congresswoman, we totally agree. There 
are huge racial disparities in credit scores. There are 20 
years' worth of studies. Study after study after study shows 
this.
    And so number one, we think credit scores should not be 
used for any non-credit purposes such as employment, insurance, 
auto, home, or rental. This is what they call mission creep. 
Credit scores were designed to evaluate credit, not whether you 
are a good worker.
    Because there is this myth out there that if you have bad 
credit, you are a bad person, you are amoral. That is wrong.
    If you have bad credit it is more likely you fell on hard 
times, you lost your job, you got sick, you were affected by 
the shutdown, a natural disaster happened. And we have to stop 
beating up on these folks who just lack money and have had 
financial troubles.
    And so I think we need better ways, in terms of credit, of 
evaluating people. And it is going to be hard because 
everything financially related is going to show disparate 
impact because it is all about structural racism. Racism is 
baked into the cake of financial stuff in the United States, 
right? And it is exactly as Ms. Rice described.
    For someone from a white family, $100,000 in assets means 
if you lose your job you can still cover your bill. But $6,000 
or $8,000 in assets means you can't, and that shows up on your 
credit score, and that means you can't get a job or your 
insurance goes up and it is that much harder. And it is a 
vicious cycle, and we have to break that vicious cycle.
    Ms. Rice. And if I can answer your question specifically on 
the insurance issue, so the National Fair Housing Alliance, 
along with a number of our member organizations, when I ran the 
Toledo Fair Housing Center, sued a number of insurance 
companies for insurance redlining and for the application, the 
discriminatory application of the insurance scoring mechanisms.
    In one such case we actually tore apart the insurance 
score, the algorithm that the insurance company was using--it 
was their own proprietary system--and found that there were 
ways that we could adjust the algorithm, taking out certain 
variables and changing the weighting in other variables, that 
actually increased the predictive power of the algorithm but 
reduced the discriminatory impact.
    We also work very closely with several insurance 
organizations that we have had partnerships with for a number 
of years, and we work with them on their proprietary scoring 
systems to do the same thing. So we do a lot of disparate 
impact testing to make sure that we are lessening the 
discriminatory effect.
    Ms. Tlaib. We are just running out of time to--I want you 
to know, my first bill, the Justice For All Civil Rights Act, 
is going to basically be able to say we have to--you can show 
disparate impact to be able to get some sort of legal 
resolution to this, because I feel like even with Chairwoman 
Waters' bill, as well as other fixes that we try to have, I 
find that the corporations and the industry will always find a 
way to target people of color and low-income families, and I 
feel like the only way is to always have this overwhelming 
oversight no matter who's in control here and who's in the 
body, but some sort of access for organizations like yours to 
say and to show the disparate impact, to show the racial 
structure that is there in the process.
    But I want to thank all of you so much again for your 
advocacy, and I yield my time back.
    Chairwoman Waters. Thank you.
    The gentlewoman from New York, Ms. Ocasio-Cortez, is 
recognized for 5 minutes.
    Ms. Ocasio-Cortez. Thank you, Madam Chairwoman.
    Earlier today we had the CEOs of the three major credit 
reporting bureaus here and these folks are responsible for the 
credit reports and the credit reporting of virtually every 
American. And I asked a question that was not answered--that 
was not directly answered at all, which is given the fact that 
these credit bureaus, the only in existence that are at--at the 
level or of the size that they are at, they--given the fact 
that they are--there are only for-profit corporations, that it 
is only for-profit corporations that are managing and--and 
responsible for these credit bureaus, their primary customers 
are creditors; they are lenders; they are banks. All of--the 
majority, the lion's share of their revenue comes from people 
who are lending to everyday people.
    Do you think, Ms. Wu, that given their current structure 
and the just basic business model of credit--credit--credit 
agencies, credit bureau agencies, do you think that they are 
incentivized, structurally incentivized to protect consumers 
more than creditors?
    Ms. Wu. Absolutely not. Thank you for the question, 
Congresswoman.
    The credit bureaus are incentivized to favor the interests 
of creditors over consumers, not the other way around. And the 
perfect example of it is the broken dispute process.
    The reason it was so Kafkaesque--that they just turn things 
into codes and accept whatever the creditors say is it--number 
one, it saves them money. At one point they were only paying 53 
cents a dispute, so the disputes were a cost center and they 
were trying to cut the price.
    And also they always take the side of the creditors in a 
dispute. It is like a judge who always rules for the defendant, 
and they still do that.
    If you saw the testimony of Mr. Peck, they don't make an 
independent call. If the creditor says, I am right, even if the 
consumer has a judgment or a police report, the creditor wins 
all the time. And that is why an appeal right in Congresswoman 
Waters' bill is so important.
    Ms. Ocasio-Cortez. And so you would say that a credit 
score--well, let's go back to the basics. What is a credit 
score supposed to measure?
    Ms. Wu. So a credit score technically was designed to do 
one thing, which was to predict the likelihood someone would be 
90 days late in a 2-year period. That is it. The fact that it 
is used for anything else is a travesty because it wasn't 
designed for that.
    Ms. Ocasio-Cortez. So a credit score is supposed to measure 
the likelihood of being 90 days late over a 2-year payment 
period. Do you think that the current scoring algorithms and 
structures are being designed with that specific metric in 
mind?
    Ms. Brown?
    Ms. Brown. Absolutely not. Ms. Wu and I both wrote in our 
testimony--in our written testimony--about how there is this 
mission creep. It is literally pervading all of society today.
    You can see it especially in the housing rental market, of 
how you have the big three that were here today selling all of 
your rental information packaged with your credit history in 
order to determine whether or not you are a good renter.
    Ms. Ocasio-Cortez. Ms. Brown, you bring up a really 
important point, you are talking about mission creep--and folks 
here on the panel feel free to weigh in as you see fit. My 
question is, if they aren't developing scores with the original 
mission in mind, what do you think the incentive or the credit 
bureaus' mission actually is?
    Mr. Brown. Well, so for what it is worth I--and this is a 
point that I describe in my testimony, it is important to 
distinguish between scores and reports.
    Ms. Ocasio-Cortez. Right.
    Mr. Brown. So the entities that were up here this morning 
are collecting information that is then reported to people who 
are underwriting. Those underwriters are going to either 
develop scores or use their parties to develop scores--
    Ms. Ocasio-Cortez. Thank you. Thank you for the 
clarification.
    So when it comes to reporting--my mistake. Thank you. When 
it comes to the reporting, if they--if these reports are not 
being generated with that incentive in mind, what is their 
incentive? What do you think, whether it is consciously or 
subconsciously, what do you think that these incentives--what 
mission do they serve? What end point are they actually 
resulting--
    Ms. Wu. The mission creep and the incentive is to sell more 
data. Sell more reports. Every report they sell is money.
    Ms. Ocasio-Cortez. So they aren't as incentivized to 
actually come up with the most accurate 90-day predictor 
possible. They are incentivized to sell data.
    Ms. Wu. That is right.
    Ms. Ocasio-Cortez. And to collect as much data about each 
and every single American.
    Ms. Wu. That is right. You heard them. They want more data. 
And more data. They want more. Give me more.
    Ms. Ocasio-Cortez. And especially when they are--when 
consumers don't even get to opt in, or choose, or offer consent 
as to what data is being collected, we have an oligopoly of 
three major corporations that are trying to collect as much 
data as possible without consumer consent.
    Chairwoman Waters. The gentlelady's time has expired.
    Ms. Ocasio-Cortez. Thank you.
    Chairwoman Waters. I now recognize the gentlewoman from 
Massachusetts, Ms. Pressley, for 5 minutes.
    Ms. Pressley. Thank you, Madam Chairwoman.
    And again, I am in the unenviable position of being last or 
close to, so I thank my committee members, again, for their 
robust and thoughtful line of questioning, and I thank each and 
every one of you for your commitment here today and every day. 
Your testimony has been incredibly informative and also 
impassioned.
    I wanted to ask, since we talk a lot about the wealth gap, 
and there are many ways that we talk about how to get at that, 
and certainly there are stark disparities along racial lines. 
And so I would be curious as to how much do you think this 
current system is contributing to the wealth gap? And if you 
were to give a three-point recommendation of how to address 
these inequities, which I believe are either created by this 
system or exacerbated by them, what would it include?
    Ms. Rice. I would say the system perpetuates the wealth gap 
for a number of reasons. Just one example, the dual credit 
market that I showed you guys the illustration of recognized 
that the subprime or nontraditional lenders are hyper-
concentrated in communities of color where there are a dearth 
of mainstream--so you don't have banks and financial--and 
credit unions in communities of color, but you have a plethora 
of credit check-cashers, and payday lenders, and buy-here-pay-
here lenders who are all peddling abusive products, right, and 
they are not reporting positive information to the credit 
repository systems, and there's a reason for that.
    So you have this system that is perpetuating racial 
disparities and inequalities.
    So, three things that we should do? One is adverse 
information related to discrimination, fraud, and abuse should 
be removed from the credit repository system.
    Several years ago the DOJ dinged Bank of America for 
discriminating to over 200,000 African Americans and Latinos, 
pushing them into predatory loans when they really qualified 
for prime loans. So that is 200,000 consumers who are having 
negative information about them reflected in our credit 
repository systems.
    It is not accurate. It is discriminatory and it is 
negatively impacting them. That information needs to be removed 
from the credit repository systems.
    Ms. Pressley. Absolutely. I know even in the district I 
represent in Massachusetts, there have been something like 
3,000 of those complaints based on erroneous data just in the 
last 2 years alone. That is what we can quantify. So thank you 
for that.
    And to your point about access, now you would like to think 
that when you have more you do better, but there's something to 
be said for education and access. In full disclosure, when I 
was an aide on the House side in my early 20s I still went 
every week to cash my check at a check-cashing facility.
    I did not have a checking account until I was much later 
into my 20s because no one in my family or in close proximity 
to me had a checking account, and for all the reasons that you 
spoke to earlier, a reluctance to go into debt. We took great 
pride in the number of things that we did pay for in cash. We 
thought that was an honorable thing. And so I know what it is 
to be underbanked and to be credit invisible, and what that 
impact is generationally.
    So could you speak a little bit as to how we might better 
combat credit invisibility?
    Ms. Brown. I can do that.
    First off, you have to actually have access to institutions 
and banking institutions. And you are not alone. We actually 
published this Latino banking report in December of last year 
that actually talks about how many people in this country are 
banked, unbanked, or underbanked.
    And so first you have to increase access to those 
traditional banking institutions. And you have to lend credit 
through those institutions in order to not fall into, second, 
this alternative financial system that Ms. Rice discussed on 
the left-hand side of her image. And then last, you have to 
actually help people build their credit through secured cards, 
through programs like our small-dollar loan program. You have 
to actually help people get into the system and build their 
credit in a positive manner.
    Ms. Pressley. How do we guard against, then, predatory 
behaviors in that? Because then we create another market and 
not everyone is well-meaning in that, but--
    Ms. Wu. Well, I just wanted to say that we need to be 
careful in terms of alternative data. There's good data; 
there's bad data. Bank account data has been promising. Some 
other types of data like gas and electric bills can be 
dangerous.
    And also certain types of data make inequality worse--like 
use of education, for example. You don't want to do that. And 
unfortunately, I think Upstart uses education in its 
underwriting. So that can be problematic, too.
    Ms. Pressley. Thank you.
    Chairwoman Waters. Thank you very much.
    The gentlewoman from Texas is recognized for 5 minutes.
    Ms. Garcia of Texas. Thank you, Madam Chairwoman.
    Representative Pressley, you were not the last. I think I 
am. We saved the best for last, I assure you.
    Ms. Rice, I want to go back to you on your--thank you for 
that history on people of color. And I just wondered, while the 
history may not be the same, going forward is and currently is 
the same.
    So what impact do some of these predatory practices and the 
lack of visibility in the have on Latinos, new Americans, 
immigrants? My concern is moving forward. We can't fix what 
happened in the past, but moving forward what impact--can you 
talk about that in terms of the credit issues that we have?
    Ms. Rice. I would be be happy to.
    And I think the point of going through the history is to 
explain how it is still impacting us today.
    Ms. Garcia of Texas. Sure.
    Ms. Rice. But going forward, so we know that Latinos and 
African Americans and certain segments of the Asian populations 
disproportionately access credit in this tan space because, 
to--to Congresswoman Pressley's point, those are the only 
credit providers in their communities.
    Ms. Garcia of Texas. So all--the same chart applies to all 
of them?
    Ms. Rice. This is today.
    Now, you access credit from a credit provider in this tan 
space who does report information to the credit repositories. 
You pay your bill on time. You never, ever, ever, ever miss a 
beat, right? You are dinged in the credit scoring mechanism 
because the credit scoring algorithm assumes that because you 
are accessing credit in the tan space there's something wrong 
with you, right?
    The credit scoring algorithm doesn't understand that you 
are accessing credit in the tan space because there are no 
blue-space folks in your neighborhood. So it is dinging you, 
the consumer, for the failure of the system. You can be dinged 
in the FICO score up to 20 points for each time you are 
accessing credit in the tan space.
    Again, you are paying on time, never miss a beat, but your 
credit score goes down just because of where you live.
    Ms. Garcia of Texas. Got it.
    To Ms. Brown, I do want to ask you the same question. And I 
was curious about the study that you held up.
    So are you all seeing or hearing any stories any 
differently?
    Ms. Brown. No, actually, and I was going to tell you the 
rates in which Latinos are actually accessing alternative 
financial services through our fact sheet here.
    So in 2017--and by the way, this data is from the FDIC and 
these are rosy statistics. In 2017, 32.4 percent of Latino 
households used alternative financial services in the previous 
12 months, so one in three.
    Ms. Garcia of Texas. Did it describe which alternatives? 
Just tell me it is not payday lenders.
    Ms. Brown. We can get that information for you. The FDIC 
does actually break down which one of the AFS that people use.
    It is not just Latinos. This data is not Latino-specific. 
It is actually any and all communities of color and also 
whites.
    Ms. Garcia of Texas. So when you say Latinos does that 
include immigrants who may or may not have authorization to be 
in this country?
    Ms. Brown. It is not that one--the FDIC data does not 
actually ask a foreign-born or citizenship question.
    Ms. Garcia of Texas. Do the credit agencies do that?
    Ms. Brown. I am not quite sure of the answer to that 
question.
    Ms. Garcia of Texas. I am sorry I wasn't here to ask that 
question of the big three.
    But I want to ask all of you, so I guess I was just really 
thinking of the model of credit unions. We got tired of the 
fees; we got tired of the banks. So we allowed credit unions to 
form through employees, through nonprofits, through other 
means.
    So has anyone ever tried to do that in this arena?
    Mr. Brown. Yes.
    Ms. Garcia of Texas. In starting your own credit agency so 
that we can kind of check on our own folks and take care of our 
own folks and give them a break?
    Mr. Brown. The history of the bureaus is that they started 
as nonprofit associations.
    Ms. Garcia of Texas. So they did?
    Mr. Brown. Yes.
    Ms. Garcia of Texas. So when did things get changed?
    Mr. Brown. The evolution of the bureaus is sort of 
fascinating and tied to the history of credit in the United 
States. There's a great book, ``Financing the American Dream,'' 
by a professor at the University of Georgia, Lendol Calder, 
that walks through it.
    But the short story is that it shifted from retailers to 
chartered financial institutions really over the middle part of 
the last century, and the bureaus as we know them today really 
developed in the late 1960s through the mid 1980s.
    Ms. Garcia of Texas. Interesting.
    Well, could I finish--so do you think we could just do that 
again and just start with a white piece of paper and--
    Ms. Wu. The problem is that lenders would have to accept 
that data, and right now, we can't even get them to accept FICO 
9, which reduces the impact of medical debt.
    Ms. Garcia of Texas. But our credit unions would, and how 
many millions of Americans go to credit unions and not banks 
anymore?
    Chairwoman Waters. The gentlelady's time has expired.
    Ms. Garcia of Texas. Yes, ma'am. Thank you.
    Chairwoman Waters. Thank you so very much.
    Without objection, the statements and letters from the 
following organizations are entered into the record: Americans 
for Financial Reform and the 82 other consumer civil rights, 
labor, and community organizations that joined their letter; 
Consumer Reports; Public Citizen; and the National Association 
of Consumer Advocates.
    I would like to thank our witnesses from this, our second 
panel, for their testimony today. And I am especially honored 
and pleased to have and hear the comments of support for our 
Comprehensive Consumer Credit Reporting Reform Act of 2019 and 
our Protecting Innocent Consumers Affected by a Shutdown Act.
    The Chair notes that some Members may have additional 
questions for these witnesses, which they may wish to submit in 
writing. Without objection, the hearing record will remain open 
for 5 legislative days for Members to submit written questions 
to these witnesses and to place their responses in the record. 
Also, without objection, Members will have 5 legislative days 
to submit extraneous materials to the Chair for inclusion in 
the record.
    I ask our witnesses to please respond as promptly as you 
are able.
    And with that, this hearing is adjourned.
    [Whereupon, at 4:33 p.m., the hearing was adjourned.]

                            A P P E N D I X

                           February 26, 2019 

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