Equifax hack could threaten TransUnion, Experian – Finance News

on Sep12

11 September 2017 | 7:00 pm

As credit research company Equifax reels from a monumental data breach, Chicago rival TransUnion may have an opportunity to shine.

Equifax’s profits, stock price and reputation absorbed a major blow from the disclosure last week of a computer hack that may have revealed as many as 143 million consumers’ Social Security numbers and other personal information. Equifax could face up to $325 million in legal, consulting and IT costs as a result, according to one analyst, in addition to lost revenue and reputational damage.

The question now is whether Equifax’s rivals in the credit reporting business will be dragged down by the Atlanta-based company’s woes. Judging by Wall Street’s reaction, the answer so far seems to be no.

Equifax stock plummeted in the wake of the disclosure, with shares of TransUnion and another competitor, British company Experian, dipping last week, too, before beginning to recover today. TransUnion’s business has benefited over the past year from its efforts to diversify.

Still, the rupture at Equifax was a wake-up call.

“If you have customer data, you’re going to be targeted (by hackers), and if you’re targeted, you’re going to have to defend yourself,” said Tom Wells, chairman and CEO of First American Bank, based in Elk Grove Village.

Lenders like First American use the data from credit check companies like TransUnion to gauge consumer creditworthiness for loans and other transactions. Experian is the largest of the three players, based on annual revenue and market capitalization, while Equifax is second-largest, followed by TransUnion, with $1.7 billion in revenue last year.

In a competitive marketplace, Equifax’s loss would normally be TransUnion’s gain, but Wells said he isn’t so sure that’s the case: Most financial institutions need to work with all three companies to meet federal lending requirements. He couldn’t point to any distinctions between the companies and believes all of them are vulnerable to attacks like the one against Equifax, which potentially exposed the sensitive personal financial data of roughly half of American consumers.

“We are aware of the Equifax announcement and have activated our standard protocol to investigate the nature of this attack,” TransUnion said today in a statement. “Our information security and technology teams are actively evaluating this incident to determine what, if any, actions from TransUnion might be appropriate.”

Shannon McNulty, a partner at Chicago class action firm Clifford Law Office who oversees consumer fraud cases, notes that if such a significant intrusion can happen to Equifax, it can happen at Equifax’s rivals. While these services may peddle statements warning that hacks can’t be prevented or predicted, consumers are right to question those remarks and press for more answers and discussion of the threats, she added.

Her firm is representing plaintiffs in a case filed against Equifax in federal court in Chicago yesterday. It alleges that in light of past data breaches at Equifax, the company has shown a “continual failure to ensure the integrity of its file storage system” and that it failed to take reasonable precautions to safeguard consumer reports.

Equifax said in a statement on Sept. 7 that the breach didn’t affect its “core” commercial or consumer credit reporting databases.

Stifel analyst Shlomo Rosenbaum, who covers the industry, estimates that the $325 million expense impact (estimated based on separate similar breaches earlier at retailers Target and Home Depot) could be felt at Equifax for years. “The longer-term reputational impact and to what extent this will affect existing and future customer relationships is still unclear,” Rosenbaum wrote in a Sept. 8 analyst note.

For its part, TransUnion’s stock continued a months-long climb today, making up most of the ground lost late last week. The company’s strategy to diversify with new credit research products in health care, insurance and even residential leasing has been paying off.

The stock rose 47 cents to $47.97 in midday trading, after reaching a 52-week high of $49.39 last week.



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