Equifax Gets Slammed, Removes Forced Arbitration Clause from Credit Monitoring Offer

Equifax Monday announced changes to its free credit-monitoring offer for victims of the massive data breach it disclosed last week, after getting slammed for originally attempting to force people to sign over their rights to legal recourse in order to enroll.

In a breach update, Equifax said it has removed certain language from the Terms of Use on the third-party website victims have to use to sign up for the credit monitoring service. It has also added a FAQ to its own website to confirm that enrolling in the complimentary credit monitoring offer does not waive any rights to take legal action against the company.

Earlier, consumer advocacy groups such as Public Citizen, New York Attorney General Eric Schneiderman, the Consumer Financial Protection Bureau, and Sen. Sherrod Brown (D-Ohio) were among many who had demanded that Equifax remove the forced arbitration clause in its original credit monitoring offer. The clause basically prohibited people who signed up for the offer from later suing the company in court.

"The wounds were totally self-inflicted," says Bob Ackerman, a managing director at cybersecurity venture firm Allegis Capital. "The debacle of perceived release of liability, if you opted in to their credit-watch services was just pure stupidity."

In addition to acquiescing to the demand to remove the clause, Equifax said it would also not require a consumers' credit card information when they sign up for the offer. Neither will consumers be automatically enrolled or charged at the end of the free period, the company said. There had been some concern over both requirements when Equifax originally announced the complimentary credit-monitoring offer — particularly over the prospect that the company could actually end up making money over the breach.

"We are listening to issues consumers have experienced and their suggestions. These are helping to further inform our actions," the company noted in Monday's update.

Equifax's moves to soothe frayed tempers, while some might see as a positive development, is unlikely to do much to mitigate the fallout from the breach.

In the four days since Equifax announced the breach, the company's shares have fallen by over 20%, erasing billions of dollars in market value in the process. From around $142.70 last Thursday, Equifax's share price had tumbled to around $111.30 about 90 minutes before market close Monday. Some financial experts expect prices will fall even further to around $100 by mid-October.

Schneiderman, and attorneys general from Connecticut, Illinois, Pennsylvania, Massachusetts, and other states already have launched investigations or have announced their intention to do so soon.

It is almost a sure bet that Equifax will need to respond to similar investigations from every single state AG. Among the issues they will probe is the 40-day delay between when Equifax first discovered the breach and when it first publicly disclosed the incident and whether the post-breach measures it is taking to protect consumers are adequate.

News that three senior Equifax executives sold nearly $2 million worth of their shares in the company in the days immediately following breach discovery has added to concerns about the company's commitment to addressing what went wrong.

Multiple lawsuits already have been filed over the breach, including one in Portland, Oregon, which seeks a mind-boggling $70 billion in damages nationwide.

On Monday two high-ranking lawmakers—Senators Orrin Hatch (R-Utah) and Ron Wyden (D-Oregon)—announced the first of what is sure to be multiple inquiries into the impact of the incident on U.S. agency records. The two Senators also wanted to know when exactly the three Equifax executives who sold their stock were first informed of the breach.

"Equifax has made a number of critical missteps, which have caused the public to question whether or not they truly have the best interests of their customers at heart," says Michael Sutton, CISO of ZScaler. "Whether it's the Equifax executives selling shares days after the discovery of the breach…or profiting from the breach by pushing a credit monitoring service that they own, the optics have been horrible."

Equifax had plenty of time to prepare a better response, Sutton says. The company should have known there would be a tsunami of concern following the breach disclosure and put in place measures for handling questions from concerned consumers.

"Equifax badly bungled the release of the website meant to provide answers. There were initially connectivity problems, and once it came online, it provided limited and sometimes contradictory information, even responding to nonsense requests," Sutton notes. The website was a critical component of the communication strategy and should have been thoroughly vetted before it went live.

Chris Pogue, global head of security at Nuix, predicts that the data compromise will likely result in the biggest class-action lawsuit in data breach history. "They'll probably debate the defensible position of reasonableness, which asks, 'Did Equifax do what was reasonable to protect this data?'" Pogue says. "In my opinion, they would be hard-pressed to find a security expert who says they took those steps." 

All of the public statements that Equifax has made about the breach so far are likely carefully vetted by lawyers because the company knows it is going to court over this. So, when the full details emerge, things are going to get far worse for Equifax, Pogue predicts.

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