Posted about 9 years ago

The Equifax Hack And The New Investment Landscape

Credit bureau Equifax has just been hit with what could be the biggest data breach in history. How will it change the investment landscape? And what does that mean to us as investors?

The Equifax hack may not only prove to be far more widespread than first announced by the credit bureau, but is likely to force many to seek out new investment strategies.

Equifax finally revealed that around 50% of Americans had their personal information stolen through their firm’s database weeks after the fact. More recently, analysts and security experts estimate that the real figure could be closer to 300M individuals, or virtually everyone in the country. Equipped with this level of information criminals and unethical companies cannot only take out credit in your name, but hack bank accounts, and steal identities.

Leading law firms have already prepared a $70B lawsuit against Equifax for damage caused to two of their clients. While this could become the biggest and most expensive class action lawsuit ever, legal experts warn that Equifax’s TrustID service which it has promoted as help for victims actually requires users to give up legal rights to compensation. This follows on from the discovery that three top executives sold off personal shares in the company after the breach, and before the disclosure was made.

The impact over the next couple of years could be absolutely game changing for the financial system, and the lives of at least tens of millions of Americans. From a business and investment perspective it certainly calls for better cybersecurity, being prepared for stronger regulations and controls, more thoroughly verifying IDs, and watching the evolving impact on financing and credit quality. It may eventually prove necessary for credit qualifications to be recalibrated in response to widespread ID and credit fraud, as well as renewing commitment to doing good business, and ensuring your team is on board with the bigger long-term vision, not just monthly goals.

From the standpoint of an individual investor, it is critical to be careful who you do business with. What are their values? What are they doing to protect your data?

For those taking hits to their credit, it may prove essential to find new investments. Especially those which can be invested in with current equity or retirement accounts, and through partnerships and using non-recourse leverage which does not rely on personal credit.

Have you been impacted? How did you find out? How will it change the way you do business or invest?