Security Risks Loom as Credit Reports Go on Net

By Fickenscher, Lisa | American Banker, October 5, 1998 | Go to article overview

Security Risks Loom as Credit Reports Go on Net


Fickenscher, Lisa, American Banker


Federal regulators and other privacy watchdogs are increasingly worried about privacy and security risks as consumers are gaining on-line access to their credit information files.

Even the credit bureaus, the repositories of that information, are treading cautiously, fearful of the potential for fiasco.

Experian Inc. is selling personal credit reports over the Internet, and its two major competitors, Trans Union Corp. and Equifax Inc., are about to follow suit. But the sensitivity of the data and the history of security breaches on the Internet are causing much hand-wringing.

On the Internet, "10,000 credit reports could go out in a nanosecond before Equifax discovers that the wrong people are getting a report," said Jeffrey L. Dodge, senior vice president in charge of the Atlanta company's Internet activities.

The credit bureaus say they are responding to consumer desires for electronic access to credit reports. The Internet is less expensive for the bureaus than using the postal system.

But any on-line foul-up could prove disastrous to the bureaus, which even under normal circumstances face knocks from privacy advocates.

When Experian began selling credit reports on the Internet last year, it was forced to stop after four hours when 14 people received the wrong credit reports.

Experian, a subsidiary of Great Universal Stores of the United Kingdom, is trying a different approach this time. Instead of selling the reports directly, it is doing so through two on-line companies that specialize in consumer financial services: QSpace Inc. of Oakland, Calif., and Consumerinfo.com of Orange, Calif.

In the year they have been offering this service, there has been no problem, but the Federal Trade Commission is among those keeping watch.

The agency, which oversees the credit bureau industry, has said it believes consumers could benefit from the ability to do a quick credit check before applying for a loan. Such access could streamline the time- consuming resolution of errors.

David Medine, the FTC's associate director of financial practices, said Internet access to credit information is a "powerful tool" but any further snafu would be extremely troublesome.

"We are supporting the idea of easy access, but we are concerned about protecting privacy," Mr. Medine said.

QSpace markets the credit reports at a Web site called icreditreport.com and uses them to induce people to sign up for other loan-related services. It also sells the reports to a handful of other companies.

Todd Meagher, president of Credit.com of San Francisco, a QSpace customer until recently, would like to sell reports from Equifax and Trans Union as well. He said the credit bureaus are "paranoid about the Internet."

Janis Lamar, a spokeswoman for Experian, said the Orange, Calif., company plans to resume offering its data directly to consumers and its agreements with QSpace and Consumerinfo.com do not preclude this.

Combined, Experian's distribution partners sell 8,000 to 12,000 credit reports a month, Ms. Lamar said. By contrast, Experian each month sells 30,000 credit reports and gives away 320,000 to consumers who, for example, are denied credit or are unemployed.

Ms. Lamar said the Internet companies are not selling more Experian reports because they are not as well known. …

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