The Equifax hack is worrying U.S. lenders, who fear their consumer loan and credit card businesses could be hurt if scores of people lock or freeze their credit reports.
According to a news report in Reuters, Equifax’s comments last week that it will enable consumers to lock and unlock their access to Equifax credit files by the end of January is prompting financial firms to worry that more consumers will freeze their credit reports, preventing them from taking out new loans and credit cards. “Banks hate credit freezes. The banks want people to buy things on credit without a second thought,” Chris Jay Hoofnagle, a law professor at the University of California, Berkeley told Reuters.
Equifax has been reeling ever the personal information of 143 million people and 209,000 credit card numbers may have been exposed in its data breach. The breach prompted a slew of investigations, calls by lawmakers for the company to do more to help consumers and the retirement of Chief Executive Richard Smith.
In its apology to U.S. consumers, Equifax vowed to provide an easy ability to freeze and unfreeze credit reports. Those restrictions mean it will take longer for lenders and banks to check the credit of consumers in order to issue consumer loans. If the borrowers don’t take the extra step to get the restrictions removed, there will be less business for the lender.
That’s particularly true for store credit cards, where instant credit and purchase discounts often drive the opening of these accounts. If the borrower still has to contact Equifax, that impulse buy could go out the window, noted the report. Avivah Litan, a security analyst at research firm Gartner Inc., thinks the number of consumers who opt to freeze their credit reports will double but will stay at around 5 percent, which shouldn’t impact lenders. Still another unnamed banker said it is worrying lenders, reported Reuters.