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Here’s why Equifax and other credit agencies will survive the data breach

Author: Adam Shell / Source: USA TODAY

Nearly half of all Americans are affected by a cyber security breach at Equifax, one of the nation’s three major credit-reporting agencies. Here’s how to avoid being a victim.



Despite a data breach that put as many as 143 million Americans at risk of identity theft, the chances of the credit-reporting agency Equifax — or the broader industry — being forced out of business are extremely slim, according to Wall Street analysts.

A huge black eye? Certainly. Costly legal fees? Yes. Outrage from lawmakers and a likely regulatory crackdown? Yup. Fewer sales of credit-monitoring services to consumers and the potential for clients to defect to rivals? Check.

There’s no disputing Equifax faces challenges. But a demise of the business? Unlikely. It’s central to modern economic life. Both Equifax’s and rivals’ business of collecting financial and personal data from consumers and selling it to lenders is what keeps the credit spigot open.

“The (core credit-reporting) system as it stands in terms of facilitating lending works,” says Brett Horn, a Morningstar analyst. “At the end of the day that will be the deciding factor.”

That’s not to say regulators and lawmakers won’t make credit bureaus take additional steps to better safeguard Americans’ personal data, or limit the ways credit-reporting companies can use and profit from the valuable information they keep in their databases.

“The biggest X-factor is: Does this prompt any regulatory changes that will increase costs of doing business,” says Horn.

Investors have pounded Equifax shares. The stock is down more than 30% since the company divulged the data breach on Sept. 7.

“The core function of credit reporting will still continue,” says James Thomas, a director at S&P Global Ratings, which this week kept Equifax’s BBB+ credit rating intact but downgraded its outlook to “negative” from “stable.”

The reasons cited for the weaker outlook included revenue losses from Equifax offering consumers free credit monitoring services for a year, “meaningful costs” related to lawsuits and potential government investigations, as well as an expected drop in sales of credit-protection services to consumers.

There’s also a risk that current clients might not…

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