ID theft translates into revenue for some

Taking care of business
Several companies are paying for the service on behalf of customers or employees whose data they lost. Time Warner, which said last month that it lost a tape containing personal information on 600,000 current and former employees, and Lexis/Nexis, which said data on 310,000 consumers was stolen, are paying for Equifax's monitoring service. Citigroup, whose CitiFinancial division suffered this week's loss, also told customers it would provide free monitoring for 90 days.

The agencies try to cast the services as good corporate citizenship. "We need to make people understand that credit is a right," says Equifax's Chief Executive Thomas Chapman. "The mystique over credit is not necessary."

It also opens the door for Equifax to sell a bunch of other subscription services, including credit-score tracking. That service, ScoreWatch, which it markets along with Fair Isaac, notifies consumers when their scores change. Chapman says this type of product would appeal to home owners who are in the market for a refinancing, for example.

Revenue in Equifax's personal solutions division topped $100 million last year after just six years in existence. For the first quarter, revenue was up 19 percent, to $29.8 million. "Personal solutions will continue to grow, aided by consumers' increased focus on fiscal responsibility and identity theft," Equifax says in its financial reports. "We continue to observe positive trends in customers renewing subscriptions and ordering additional products and services."

Equifax, with 4,600 employees in 13 countries, isn't even the largest of the big three. Experian, based in Costa Mesa, Calif., has 12,000 employees and works in 60 countries, with annual revenue of about $2.5 billion. Last month, GUS Plc, the London conglomerate that also owns Burberry Group, said it would spin off Experian, though it offered few clues as to when that would occur.

TransUnion, a Chicago-based company controlled by the Pritzker family, has 3,600 employees in 24 countries. Its annual revenue is not reported. In January, it was spun off from Marmon Group, the Pritzker's holding company.

There has been speculation of initial stock offerings for TransUnion and Experian, though the companies themselves won't talk about it.

Sales pitch goes on
Of course, getting consumers more interested in the content and nuances of their own credit reports — translating into revenue from subscription products — will offset the enormous costs of the new regulations requiring free annual reports.

Equifax's Chapman and others raised a storm in Congress when the legislation was being debated, arguing that the credit reporting agencies shouldn't be forced to give away their products for free. That is exactly what the 2003 FACT Act will require, though the legislators compromised and allowed the agencies to roll it out in stages. The agencies still get to charge consumers who ask for their credit scores, which are separate from the credit report.

The agencies are charging lenders a "regulatory recovery fee" to offset compliance costs. Equifax notes in its financial reports that while it has incurred significant expenses so far, demand for the free reports has been "within the range of our planning estimates."

And so the sales pitch goes on. Chapman believes consumers must take a more active role in maintaining and monitoring their credit health.

"Checking one's credit report, even several times a year, is akin to using your smoke detector only on weekends. It simply is not enough," he wrote in a recent op-ed. "As millions of consumers are discovering, credit monitoring services are a concept whose time has come."

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