Congressional Hearings
OVERSIGHT OF THE EQUIFAX DATA BREACH: ANSWERS FOR CONSUMERS
Congressional Hearings
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Congress: House of Representatives
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| AUTHORITYID | CHAMBER | TYPE | COMMITTEENAME |
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| hsif00 | H | S | Committee on Energy and Commerce |
[House Hearing, 115 Congress]
[From the U.S. Government Publishing Office]
OVERSIGHT OF THE EQUIFAX DATA BREACH: ANSWERS FOR CONSUMERS
=======================================================================
HEARING
BEFORE THE
SUBCOMMITTEE ON DIGITAL COMMERCE AND CONSUMER PROTECTION
OF THE
COMMITTEE ON ENERGY AND COMMERCE
HOUSE OF REPRESENTATIVES
ONE HUNDRED FIFTEENTH CONGRESS
FIRST SESSION
__________
OCTOBER 3, 2017
__________
Serial No. 115-59
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Printed for the use of the Committee on Energy and Commerce
energycommerce.house.gov
______
U.S. GOVERNMENT PUBLISHING OFFICE
27-462 WASHINGTON : 2019
COMMITTEE ON ENERGY AND COMMERCE
GREG WALDEN, Oregon
Chairman
JOE BARTON, Texas FRANK PALLONE, Jr., New Jersey
Vice Chairman Ranking Member
FRED UPTON, Michigan BOBBY L. RUSH, Illinois
JOHN SHIMKUS, Illinois ANNA G. ESHOO, California
TIM MURPHY, Pennsylvania ELIOT L. ENGEL, New York
MICHAEL C. BURGESS, Texas GENE GREEN, Texas
MARSHA BLACKBURN, Tennessee DIANA DeGETTE, Colorado
STEVE SCALISE, Louisiana MICHAEL F. DOYLE, Pennsylvania
ROBERT E. LATTA, Ohio JANICE D. SCHAKOWSKY, Illinois
CATHY McMORRIS RODGERS, Washington G.K. BUTTERFIELD, North Carolina
GREGG HARPER, Mississippi DORIS O. MATSUI, California
LEONARD LANCE, New Jersey KATHY CASTOR, Florida
BRETT GUTHRIE, Kentucky JOHN P. SARBANES, Maryland
PETE OLSON, Texas JERRY McNERNEY, California
DAVID B. McKINLEY, West Virginia PETER WELCH, Vermont
ADAM KINZINGER, Illinois BEN RAY LUJAN, New Mexico
H. MORGAN GRIFFITH, Virginia PAUL TONKO, New York
GUS M. BILIRAKIS, Florida YVETTE D. CLARKE, New York
BILL JOHNSON, Ohio DAVID LOEBSACK, Iowa
BILLY LONG, Missouri KURT SCHRADER, Oregon
LARRY BUCSHON, Indiana JOSEPH P. KENNEDY, III,
BILL FLORES, Texas Massachusetts
SUSAN W. BROOKS, Indiana TONY CARDENAS, California
MARKWAYNE MULLIN, Oklahoma RAUL RUIZ, California
RICHARD HUDSON, North Carolina SCOTT H. PETERS, California
CHRIS COLLINS, New York DEBBIE DINGELL, Michigan
KEVIN CRAMER, North Dakota
TIM WALBERG, Michigan
MIMI WALTERS, California
RYAN A. COSTELLO, Pennsylvania
EARL L. ``BUDDY'' CARTER, Georgia
Subcommittee on Digital Commerce and Consumer Protection
ROBERT E. LATTA, Ohio
Chairman
JANICE D. SCHAKOWSKY, Illinois
Ranking Member
GREGG HARPER, Mississippi BEN RAY LUJAN, New Mexico
Vice Chairman YVETTE D. CLARKE, New York
FRED UPTON, Michigan TONY CARDENAS, California
MICHAEL C. BURGESS, Texas DEBBIE DINGELL, Michigan
LEONARD LANCE, New Jersey DORIS O. MATSUI, California
BRETT GUTHRIE, Kentucky PETER WELCH, Vermont
DAVID B. McKINLEY, West Virgina JOSEPH P. KENNEDY, III,
ADAM KINZINGER, Illinois Massachusetts
GUS M. BILIRAKIS, Florida GENE GREEN, Texas
LARRY BUCSHON, Indiana FRANK PALLONE, Jr., New Jersey (ex
MARKWAYNE MULLIN, Oklahoma officio)
MIMI WALTERS, California
RYAN A. COSTELLO, Pennsylvania
GREG WALDEN, Oregon (ex officio)
C O N T E N T S
----------
Page
Hon. Robert E. Latta, a Representative in Congress from the State
of Ohio, opening statement..................................... 2
Prepared statement........................................... 3
Hon. Janice D. Schakowsky, a Representative in Congress from the
State of Illinois, opening statement........................... 4
Hon. Greg Walden, a Representative in Congress from the State of
Oregon, prepared statement..................................... 5
Prepared statement........................................... 7
Hon. Frank Pallone, Jr., a Representative in Congress from the
State of New Jersey, prepared statement........................ 8
Hon. Michael C. Burgess, a Representative in Congress from the
State of Texas, prepared statement............................. 67
Witnesses
Richard Smith, Former Chairman and CEO of Equifax, Inc........... 10
Prepared statement........................................... 12
Answers to submitted questions \1\........................... 74
Submitted material
Statement of consumer groups..................................... 69
Statement of the Credit Union National Association............... 71
Article entitled, ``Equifax investigating stock sales made by
executives during data breach,'' CNN Wire, October 1, 2017..... 72
----------
\1\ The committee did not receive a response to Mr. Smith's
submitted questions for the record by the time of printing.
OVERSIGHT OF THE EQUIFAX DATA BREACH: ANSWERS FOR CONSUMERS
----------
TUESDAY, OCTOBER 3, 2017
House of Representatives,
Subcommittee on Digital Commerce and Consumer
Protection,
Committee on Energy and Commerce,
Washington, DC.
The subcommittee met, pursuant to call, at 10:00 a.m., in
room 2123 Rayburn House Office Building, Hon. Robert Latta
(chairman of the subcommittee) presiding.
Members present: Representatives Latta, Harper, Burgess,
Upton, Lance, Guthrie, McKinley, Kinzinger, Bilirakis, Bucshon,
Mullin, Walters, Costello, Walden (ex officio), Schakowsky,
Lujan, Clarke, Cardenas, Dingell, Matsui, Welch, Kennedy,
Green, and Pallone (ex officio).
Also present: Representatives Barton, Murphy, Carter,
Degette, Tonko, and McNerney.
Staff present: Jennifer Barblan, Chief Counsel, Oversight &
Investigations; Ray Baum, Staff Director; Karen Christian,
General Counsel; Kelly Collins, Staff Assistant; Zachary
Dareshori, Staff Assistant; Jordan Davis, Director of Policy
and External Affairs; Melissa Froelich, Chief Counsel, Digital
Commerce and Consumer Protection; Adam Fromm, Director of
Outreach and Coalitions; Ali Fulling, Legislative Clerk,
Oversight & Investigations, Digital Commerce and Consumer
Protection; Theresa Gambo, Human Resources/Office
Administrator; Elena Hernandez, Press Secretary; Zach Hunter,
Director of Communications; Bijan Koohmaraie, Counsel, Digital
Commerce and Consumer Protection; Alex Miller, Video Production
Aide and Press Assistant; Mark Ratner, Policy Coordinator; Dan
Schneider, Press Secretary; Sam Spector, Policy Coordinator,
Oversight & Investigations; Madeline Vey, Policy Coordinator,
Digital Commerce and Consumer Protection; Hamlin Wade, Special
Advisor, External Affairs; Jessica Wilkerson, Professional
Staff, Oversight & Investigations; Everett Winnick, Director of
Information Technology; Greg Zerzan, Counsel, Digital Commerce
and Consumer Protection; Michelle Ash, Minority Chief Counsel,
Digital Commerce and Consumer Protection; Priscilla Barbour,
Minority Energy Fellow; Jean Fruci, Minority Energy and
Environment Policy Advisor; Rick Kessler, Minority Senior
Advisor and Staff Director, Energy and Environment; Alexander
Ratner, Minority Policy Analyst; and Tuley Wright, Minority
Energy and Environment Policy Advisor.
OPENING STATEMENT OF HON. ROBERT E. LATTA, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF OHIO
Mr. Latta. Good morning. The subcommittee on Digital
Commerce and Consumer Protection will come to order. The chair
now recognizes himself for 5 minutes for an opening statement.
Good morning. Today we are here to get the facts to learn
what happened at Equifax that led to the personal information
of over 143 million Americans' information being stolen.
Americans need to know what Equifax is doing to fix the problem
and help individuals that are impacted. We must find out what
happened. The public deserves to know what happened and what
steps are being taken to protect their sensitive data going
forward.
Today's hearing needs to shed some much needed information
and light on this breach. We have received assurances from
Equifax that Mr. Smith can speak for the company on concrete
remediation steps that the company took in the aftermath to
secure its computer systems to protect the affected U.S.
customers as well as what happened when he was chief executive.
As chairman of the Digital Commerce and Consumer Protection
subcommittee, I often speak about the fact that we live in a
digitally-connected world. That fact of life can have many
positive implications, far and wide-ranging, for commerce,
trade, communications, and entertainment. The breach is a
massive reminder of the bad actors that are out there and the
security challenges confronting our digitally integrated and
data-powered economy.
In this case, sensitive personal information that is used
to build credit histories and allow individuals to engage in
commerce, open credit cards, buy cell phones and appliances,
and secure mortgages has been compromised. Reasonable security
measures must be implemented, practiced, and continually
improved by companies that collect and store data in order to
guard against unauthorized access to sensitive personal
information. Otherwise, consumers will face substantial
financial harm.
This risk is deeply concerning to me and I know that the
other members of the subcommittee share this view. Priority
number one: We must protect Americans and work to safeguard
their personal information online. The recent Equifax data
breach is unprecedented and is also unique because of the
sensitivity of the information stolen, including full nine-
digit Social Security numbers.
Over 143 million Americans are potentially impacted. This
represents approximately 44 percent of the total U.S.
population. In my home State of Ohio, approximately 5.2 million
customers are likely affected. Based on the information
released by Equifax, we are informed that the massive amounts
of personal and financial information was assessed from mid-May
through July 2017, including names, birthdates, addresses, and
in some cases driver's license information. In addition, over
200,000 people had their credit card information stolen and
over 180,000 people had credit dispute documentation stolen.
This is a staggering amount of sensitive personal
information and impacts an extraordinary number of credit-
visible Americans that is in the hands of criminals that could
result in fraud or identity theft. We need these numbers
confirmed. Today, we must understand the following:
First, how did the hackers get into Equifax's system for so
many weeks and pull so much information out of the system
without being detected?
Second, what processes and procedures were in place in the
event of such a breach and were those processes followed? There
are many questions as to who knew what and when this
information was known. This will have implications in other
ongoing investigations. Further, the chief information officer
and chief security officer made retirement announcements
shortly after the public notice of the breach and have not been
available for questions about their role.
Again, despite months of delay, why was Equifax's
notification and consumer protection process still met with
misinformation, glitches, and overall confusion? For example,
there were numerous reports of difficulties accessing Equifax's
dedicated web site or call centers. And there were dismaying
reports that the official Equifax Twitter account directed
consumers to a fake web site.
I believe the American public deserves to know the facts
about when and how Mr. Smith, company management, and the board
of directors were made aware its systems were vulnerable to
hackers and how over 143 million sensitive personal data
records were stolen. To that end, what were the steps taken and
in what timeframe to notify and help individuals that were
impacted? I look forward to getting these answers today and
many more questions for the American people answered this
morning.
And at this time I will ask the gentlelady from Illinois,
the ranking minority member, for 5 minutes for her opening
statement.
[The prepared statement of Mr. Latta follows:]
Prepared statement of Hon. Robert E. Latta
Good morning, today we are here to get the facts to learn
what happened at Equifax that led to the personal information
of over 143 million Americans being stolen. Americans deserve
to know what Equifax is doing to fix the problems and help
individuals that are impacted. We must find out what happened.
The public deserves to know what happened and what steps
are being taken to protect their sensitive data going forward.
Today's hearing needs to shed some much needed light on
this breach. We have received assurances from Equifax that Mr.
Smith can speak for the company on concrete remediation steps
the company took in the aftermath to secure its computer
systems and to protect affected U.S. consumers, as well as what
happened when he was the Chief Executive.
As Chairman of the Digital Commerce and Consumer Protection
Subcommittee, I often speak about the fact that we live in a
digitally-connected world. That fact of life can have many
positive implications, far and wideranging, for commerce,
trade, communications and entertainment.
This Equifax breach is a massive reminder of the bad actors
that exist and of the security challenges confronting our
digitally-integrated and data-powered economy. In this case,
sensitive personal information that is used to build credit
histories and allow individuals to engage in commerce-open
credit cards, buy cell phones and appliances, and secure
mortgages has been compromised.
Reasonable security measures must be implemented,
practiced, and continually improved by companies that collect
and store data in order to guard against unauthorized access to
sensitive personal information. Otherwise, consumers can face
substantial financial harm. This risk is deeply concerning to
me, and I know the other Members of this Subcommittee share
that view.
Priority number one: We must protect Americans and work to
safeguard their personal information online.
The recent Equifax data breach is unprecedented and it is
also unique because of the sensitivity of information stolen-
including full nine-digit social security numbers. Over 143
million Americans are potentially impacted. This represents
approximately 44% of the total U.S. population. In my home
State of Ohio, approximately 5.2 million consumers are likely
affected.
Based on the information released by Equifax, we are
informed that the massive amounts of personal and financial
information was accessed from mid-May through July 2017,
including names, birthdates, addresses, and in some cases,
driver's license information. In addition, over 200,000 people
had their credit card information stolen, and over 180,000
people had credit dispute documentation stolen.
That is a staggering amount of sensitive personal
information. It impacts an extraordinary number of
creditvisible Americans, that in the hands of bad actors that
could result in fraud or identity theft. We need these numbers
confirmed.
Today, we must understand the following:
First, how did the hackers get into Equifax's system for so
many weeks and pull so much information out of the system
without being detected?
Second, what processes and procedures were in place in the
event of such a breach and were those processes followed? There
are many questions as to who knew what, and when this
information was known? This will have implications in other
ongoing investigations. Further, the Chief Information Officer
and Chief Security Officer made retirement announcements
shortly after the public notice of the breach and have not been
available for questions about their role.
And, despite months of delay, why was Equifax's
notification and consumer protection process still met with
misinformation, glitches, and overall confusion? For example,
there were numerous reports of difficulties accessing Equifax's
dedicated web site or call centers. And there were dismaying
reports that the official Equifax Twitter account directed
consumers to a fake web site.
I think the American public deserves to know the facts
about when and how Mr. Smith, company management, and the board
of directors were made aware its systems were vulnerable to
hackers and over 143 million sensitive personal data records
were stolen. Then, what were the steps taken and in what
timeframe to notify and help individuals that were impacted.
I look forward to getting answers to these and many more
questions for the American public this morning.
OPENING STATEMENT OF HON. JANICE D. SCHAKOWSKY, A
REPRESENTATIVE IN CONGRESS FROM THE STATE OF ILLINOIS
Ms. Schakowsky. Thank you, Mr. Chairman, for holding this
hearing. The Equifax data breach was massive in scale: 145.5
million American victims as of yesterday. I would call it
shocking, but is it really? We have these underregulated,
private, for-profit credit reporting agencies collecting
detailed personal and financial information about American
consumers. It is a treasure trove for hackers.
Consumers don't have a choice over what information Equifax
or, for example, TransUnion, or Experian have collected,
stored, and sold. If you want to participate in today's modern
economy, if you want to get a credit card, rent an apartment,
or even get a job, often then a credit reporting agency may
hold the key.
Because consumers don't have a choice, we can't trust
credit reporting agencies to self-regulate. It is not like when
you get sick at a restaurant and decide not to go there
anymore. Equifax collects your data whether you want to have it
collected or not. If it has incorrect information it is really
an arduous process--I have tried it--to get it corrected. When
it comes to information security you are at the mercy of
whatever Equifax decides is right and once your information is
compromised the damage is ongoing.
Given vast quantities of information and lack of
accountability, a major breach at Equifax I would say would be
predictable if not inevitable. I should really say breaches.
This is the third major breach Equifax has had in the past 2
years. From media reports and the subcommittee's meeting with
Equifax officials after the breach, it is clear to me that the
company lacked appropriate policies and practices around data
security.
This particular breach occurred when hackers exploited a
known vulnerability that was not yet patched. It was months
later before Equifax first discovered the breach, and it was
another several weeks before Equifax shared news with the
consumers, this committee, the Federal Trade Commission, and
the Consumer Financial Protection Bureau.
Senior officials at the company are saying they weren't
immediately aware that the breach occurred, and yet by the way
there were executives who sold over a million dollars in stock
just before, days after the breach was discovered but yet not
reported. And for a lot of Americans that just doesn't pass the
smell test.
The response to the breach was its own debacle. Equifax
offered consumers credit monitoring services that initially
came with a mandatory arbitration clause which fortunately has
been corrected; Equifax tweeted links to the wrong URL
directing victims to a fake web site; the call center was
understaffed; and in the end Equifax has had to apologize for
its supposed breach response almost as much as it has
apologized for the breach itself.
Equifax deserves to be shamed in this hearing, but we
should also ask what Congress has done or failed to do to stop
data breaches from occurring and what Equifax plans to do. The
same day the Equifax breach went public the House Financial
Services Committee held a hearing on FCRA Liability
Harmonization Act, a bill to protect credit reporting agencies
like Equifax from class action suits. Imagine.
In fact, Equifax was lobbying for this bill after the
breach was discovered in July, still not reported, and the 14
Republicans sponsoring this bill should ask themselves whether
this is really the industry they want to be in bed with.
Companies like Equifax need more accountability, not less. I
agree with the CFPB director Richard Cordray that the credit
reporting agencies need embedded regulators to protect
consumers' sensitive information.
And then we need to go further. Last night, I reintroduced
the Secure and Protect Americans' Data Act, along with Ranking
Member Pallone and seven other members of the Energy and
Commerce Committee. And our bill would establish, one, strong
data security standards; two, require prompt breach
notification, which we didn't get; and three, provide
appropriate relief for breached victims.
Chairman Latta, American consumers don't just need answers,
they need action. I hope that our bill can be a starting point
for discussion on strengthening protections for Americans'
data. Consumers deserve a whole lot better than they got from
Equifax. And I yield back.
Mr. Latta. Thank you very much. The gentlelady yields back.
The chair now recognizes the gentleman from Oregon, the
chairman of the full committee, for 5 minutes.
OPENING STATEMENT OF HON. GREG WALDEN, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF OREGON
Mr. Walden. I thank the chairman. We are here to do today
what it appears Equifax failed to do over the last several
months and that is put consumers first. Our job is to get
answers for the more than 145 million Americans who have had
their personal information compromised and now fear they could
be victims of fraud at any time.
How could a major U.S. company like Equifax, which holds
the most sensitive and personal data on Americans so let them
down? It is like the guards at Fort Knox forgot to lock the
doors and failed to notice the thieves were emptying the
vaults. The American people deserve to know what went wrong. We
want a clear timeline of events and to understand what to
expect moving forward.
Mr. Chairman, the Energy and Commerce Committee has always
tried to put our consumers first in everything we do on public
policy. So today we will begin to get the answers for the
public, hold Equifax accountable, and make clear that
businesses holding America's most sensitive data have a
responsibility under existing laws to protect that data. Today
gives whole new meaning to Mr. Smith Goes to Washington. It is
not a run on the bank that is at issue, it is a run on
financial records of 145 million Americans. And the
consequences and the inconveniences for our fellow citizens is
every bit as important to discuss today as the reasons behind
why this breach occurred in the first place.
Mr. Smith, as former chairman and CEO of Equifax at the
helm during and immediately after the breach, we appreciate you
being here and we expect your candor and full cooperation as we
march toward getting the facts in this case. While there is no
such thing as perfect security, companies do have a legal
obligation to protect sensitive consumer data. This diligence
is necessary to both comply with existing laws and maybe more
importantly earn and keep the public's trust in a data-driven
economy.
Given the size of the breach and the sensitivity of the
data, we expect to learn more about how Equifax failed to
secure its systems and what contingency plans were in place.
Further, we need to understand how information flowed through
the organization and when you and other senior executives were
notified about the breach. In other words, how important was
cybersecurity to you as a CEO and to the rest of your executive
team? Did your employees have a way to report to you if they
had concerns about how the security team was functioning?
While there are still many questions that need answers, a
few details have emerged. First, the vulnerability that the
hackers used to get into the Equifax system was discovered in
early March. From the beginning, the vulnerability was
described as critical and easily exploitable. That information
was pushed out through multiple security information sharing
channels including by the U.S. Computer Emergency Readiness
Team to Equifax's chief security officer.
For some period of time between March and August of 2017,
the hackers were able to sit on Equifax's system and siphon out
145 million records without being detected. How did this go
unnoticed? Further, is there a process in place to raise flags
or alarms when massive amounts of data are pulled out of the
Equifax system?
Then there are questions about Equifax's response for
consumers that we need answers to. Why was the consumer-facing
web site created on a separate domain from the main Equifax web
site? Did anyone raise concerns about creating more consumer
confusion with a separate web site? Are consumers able to sign
up for the products offered by Equifax today? How many
consumers have placed a fraud alert on their account or frozen
their credit?
And on top of all the other issues, multiple times Equifax
tweeted the wrong URL directing consumers to the wrong web site
to check if they were part of a breach. Talk about ham-handed
responses, this is simply unacceptable and it makes me wonder
whether there was a breach response plan in place at all and if
anyone was in charge of overseeing and executing that plan. I
have to agree with the interim CEO when he said there is
insufficient support for consumers.
It is important that as Congress does its work on public
policy issues that the Federal Trade Commission and other
agencies, including law enforcement agencies, continue their
work especially in light of recent reports that indicated there
are markers of nation state activity involved with this hack.
But today, Mr. Smith, I and the rest of the committee and
Congress and the country expect the answers. After all, the
buck does stop with you as CEO and I thank you for being here.
And I return the balance of my time.
[The prepared statement of Mr. Walden follows:]
Prepared statement of Hon. Greg Walden
We are here today to do what it appears Equifax failed to
do over the last several months: put consumers first. Our job
is to get answers for the more than 145 million Americans who
have had their personal information compromised and now fear
that they could be victims of fraud at any time.
How could a major U.S. company like Equifax, which holds
the most sensitive and personal data on Amercians, so let them
down? It's like the guards at Fort Knox forgot to lock the
doors and failed to notice thieves emptying the vaults.
The American people deserve to know what went wrong. We
want a clear timeline of events, and to understand what to
expect moving forward.
As Chairman of the Energy and Commerce Committee, I've
tried to put consumers at the forefront of everything we do.
Today we will begin to get answers for the public, hold Equifax
accountable, and make clear that businesses holding Americans'
sensitive information have a responsibility under existing laws
to protect those data.
Today gives whole new meaning to Mr. Smith Goes to
Washington. It's not a run on the bank at issue, it's a run on
the financial records of 145 million Americans. The consequence
and inconveniences for our fellow citizens is every bit as
important to discuss today as the reasons behind why this
breach occurred in the first place.
Richard Smith, the former Chairman and CEO of Equifax at
the helm during and immediately after the breach, is here to
testify. Mr. Smith, we expect your candor and full cooperation
as we follow the facts in this case.
While there is no such thing as perfect security, companies
do have a legal obligation to protect sensitive consumer data.
This diligence is necessary to both comply with existing law
and, maybe more importantly, earn and keep the public's trust
in our data driven economy.
Given the size of the breach and the sensitivity of the
data, we expect to learn more about how Equifax failed to
secure its systems and what contingency plans were in place.
Further, we need to understand how information flowed
through the organization and when you and other senior
executives were notified about the breach. In other words, how
important was cybersecurity to you as CEO and to the rest of
your executive team? Did your employees have a way to report to
you if they had concerns about how the security team was
functioning?
While there are still many questions that need answers, a
few details have emerged. First, the vulnerability that the
hackers used to get into the Equifax system was discovered in
early March. From the beginning, the vulnerability was
described as critical and easily exploitable. That information
was pushed out through multiple security information sharing
channels, including by the U.S. Computer Emergency Readiness
Team, to Equifax's Chief Security Officer.
For some period of time between March and August 2017, the
hackers were able to sit on Equifax's system and siphon out 145
million records without being detected. How did this go
unnoticed? Further, is there a process in place to raise flags
or alarms when massive amounts of data are pulled out of the
Equifax system?
Then there are the questions about Equifax's response for
consumers.
Why was the consumer-facing web site created on a
separate domain from the main Equifax web site?
Did anyone raise concerns about creating more
consumer confusion with a separate web site?
Are consumers able to sign up for the products
offered by Equifax today?
How many consumers have placed a fraud alert on
their account or frozen their credit?
On top of all of the other issues, multiple times Equifax
tweeted the wrong URL directing consumers to the wrong web site
to check if they were a part of the breach. Talk about ham-
handed responses. This is unacceptable. And it makes me wonder
whether there was a breach response plan in place, and if
anyone was in charge of overseeing and executing that plan.
I have to agree with the interim CEO, there is
``insufficient support for consumers.'' It's important that as
Congress does its work on public policy issues, that the
Federal Trade Commission and law enforcement agencies continue
with their work, especially in light of recent reports that
indicated there are markers of nation-state activity.
But today, Mr. Smith, I, the rest of this committee,
Congress, and the country expect answers. After all, the buck
stops with you, as CEO.
Mr. Latta. Thank you very much. The gentleman yields back
and the chair now recognizes the gentleman from New Jersey, the
ranking member of the full committee. Good morning.
OPENING STATEMENT OF HON. FRANK PALLONE, JR., A REPRESENTATIVE
IN CONGRESS FROM THE STATE OF NEW JERSEY
Mr. Pallone. Thank you, Mr. Chairman. While I understand
that law enforcement and internal investigations into this
incident are still ongoing, I expect to get more information
today on what happened and why it took so long to inform the
public. Most importantly, we want answers for consumers because
Equifax's response to this breach has been unacceptable. So too
has been Equifax's ongoing lax attitude when it comes to
protecting consumer data.
It has been 4 weeks since the breach was made public and at
least 10 weeks since it was discovered by Equifax's employees,
yet Equifax's customer service has been confusing and
unhelpful. Equifax even tweeted a link to a fake web site. Many
of the remedies Equifax is now offering to consumers were not
offered upfront or in good faith. They were forced out of the
company only after a public outcry and they are still
inadequate.
It is hard to imagine that anyone at Equifax thought it was
a good idea to offer only 1 year of credit monitoring, with an
arbitration clause at first to boot. Free and comprehensive
credit monitoring and identity theft protection should be
offered for far longer than a year. Most recently, Equifax
added lifetime credit locks to its offering which consumer
advocates suggest are weaker than credit freezes. Regardless, a
lock or a freeze at only one credit bureau is almost useless.
Equifax should work with the other credit bureaus to
immediately create a free, quick, and easy-to-use freeze and
unfreeze one-stop shop.
And because credit freezes or locks may not work for
everyone, going forward Equifax should do more than credit
locks. It should give consumers more control over how their
data is used and stored. In addition, if Equifax wants to stay
in business, its entire corporate culture needs to change to
one that values security and transparence. After all, this is
not Equifax's first data breach in the past year.
Consumers do not have any say in whether or not Equifax
collects and shares their data and that is what makes this
breach so concerning. This is unlike other breaches at stores
such as Target and Michael's where consumers could make a
choice and change their shopping habits if they were upset with
how the companies protected data. That is simply not the case
with Equifax.
While data breaches have unfortunately become commonplace,
it is long past time for Congress, beginning with this
committee, to act. Since at least 2005, this subcommittee has
been considering data breach legislation but it has never
become law and it is time we changed that. Yesterday, Ranking
Member Schakowsky and I reintroduced the Secure and Protect
Americans' Data Act. This bill would require enforceable,
robust data security practices and meaningful notice to
consumers. It would also give additional protections to
consumers after a breach. Of course, breaches will continue to
occur, but they occur more often when there is no
accountability and no preventive measures are in place. And our
bill will not stop mistakes and cyber crimes from happening,
but we need to start somewhere.
So Mr. Smith, I read your op-ed in USA Today last month and
the new CEO's op-ed in the Wall Street Journal last week and I
appreciate that you are both sorry, but my question is what
now? I would like to yield now the remainder of my time to my
colleague from New Mexico.
Mr. Lujan. Thank you to our ranking member, Mr. Pallone,
and I thank the committee's leadership for organizing this
important hearing. 145,500 thousand million Americans, 145.5
million people at risk because of Equifax's failure. Now Mr.
Smith, the American people deserve answers and I hope you are
prepared to provide them. Not just about what caused the
breach, but what Equifax is doing to prevent this from
happening again and to ensure that those who were harmed are
made whole.
I worry that your job today is about damage control, to put
a happy face on your firm's disgraceful actions and then depart
with a golden parachute. Unfortunately, if fraudsters destroy
my constituents' savings and financial futures there is no
golden parachute awaiting them. We have questions and it is our
expectation that you have concrete answers.
And I hope this hearing is just the start of our
committee's work. We need to work together to hammer out real
solutions. I recently took a step in that direction by
introducing the Free Credit Freeze Act to allow consumers to
protect themselves by freezing and unfreezing their credit at
no charge. It is unconscionable that Equifax failed so
spectacularly to protect people's most sensitive personal data.
It is even more reprehensible that the same company profits
from the pain that they have caused.
And I certainly hope that we can get some assurances from
the committee's leadership that we will have a markup and a
hearing on legislation to address this mess, and I hope that
assurance can be given before the holidays of 2017. I yield
back the balance of my time.
Mr. Latta. Thank you very much. The gentleman yields back
and this concludes our member opening statements. The chair
would remind members that pursuant to the committee rules, all
members' opening statements will be made part of the record.
Today we have Mr. Richard Smith, the former chairman and
CEO of Equifax, Inc., who is here to testify before the
subcommittee. Mr. Smith will have the opportunity to give an
opening statement followed by a round of questions from our
members. And Mr. Smith, you are recognized for 5 minutes. Thank
you.
STATEMENT OF RICHARD SMITH, FORMER CHAIRMAN AND CEO OF EQUIFAX,
INC.
Mr. Smith. Thank you. Chairman Walden, Ranking Member
Pallone, Chairman Latta, Ranking Member Schakowsky, and the
honorable members of the subcommittee, it is an honor to be
here before you today.
My name is Rick Smith and for the last 12 years I have had
the honor of being the CEO and chairman of Equifax. Earlier
this week, I submitted a written testimony which at this time I
don't plan on going through any detail on that but rather I am
here today to explain to you and the American people how
criminal hackers were able to steal personal information on
over 145 million Americans from our servers, and as
importantly, to discuss with you today what our company's
response was to that criminal hack.
The criminal hack happened on my watch and as CEO I am
ultimately responsible and I take full responsibility. I am
here today to say to each and every person affected by this
breach I am truly and deeply sorry for what happened. I have
talked to many consumers, I have read your letters, and Equifax
is committed to making it whole for you. Americans have a right
to know how this happened and I am prepared to testify today
about what I have learned and what I did about this incident in
my role as CEO and as chairman of the board, and also what I
know about the incident as a result of being briefed by the
company's investigation which is ongoing.
We know now that this criminal attack was made possible
because of a combination of human error and technological
error. The human error involved the failure to apply a software
patch to our dispute portal in March of 2017. The technological
error involved a scanner which failed to detect that
vulnerability on that particular portal. Both errors have since
been addressed.
On July 29th and July 30th, suspicious activity was
detected and a team followed our security incident protocol.
The team immediately shut down the portal and began our
internal security investigation. On August 2nd, we hired top
cybersecurity forensic and legal experts and at that time we
notified the FBI. At that time, to be clear, we did not know
the nature or the scope of the incident. It was not until late
August that we concluded that we had experienced a major
breach.
Over the weeks leading up to September 7th, our team
continued working around the clock to prepare. We took four
steps to protect consumers. Step number one, determining when
and how to notify the public, relying on the advice of our
experts that we needed to have a plan in place as soon as we
announced. Step two, helping consumers by developing a web
site, staffing up massive call centers, and offering services
free to every American. Three, preparing for increased cyber
attacks which we were advised by the cybersecurity experts that
we should expect. And finally, continue to coordinate with the
FBI and their criminal investigation of the hackers and also to
notify other federal and state agencies.
In the rollout of our remediation program mistakes were
made, for which again I deeply apologize. I regret the
frustration that many Americans felt when our web sites and
call centers were overwhelmed in the early days. It is no
excuse, but it certainly did not help that Hurricane Irma took
down two of our larger call centers in the first few days after
the breach. Since then, however, the company has dramatically
increased its capacity and I can report to you today that we
have handled over 420 million consumer visits to our web site
in just over 3 weeks and the wait times at the call centers
have been substantially reduced.
At my direction, the company offered a broad package of
services to all Americans. In addition, we developed a new
service available on January 31st, 2018 that will give all
consumers the power to control access to their credit data by
allowing them to lock and unlock their credit files when they
want and they can do that for free for life.
Putting the power to control access to credit data in the
hands of the American consumer is a step forward. I look
forward to discussing this new tool with you during my
testimony. As we have all painfully learned, data security is a
national security problem. Putting the consumer in control of
their credit data is a first step towards a long-term solution
to the industry and the problem of identity theft.
But no single company can solve the larger problem on its
own. I believe we need a public-private partnership to evaluate
how to best protect Americans' personal data going forward and
I look forward to being a part of that dialogue.
Chairman Walden, Ranking Member Pallone, Chairman Latta,
Ranking Member Schakowsky, and the honorable members of the
subcommittee, thank you again for inviting me here today to
speak to you. I will close by saying again how sorry I am for
this breach. On a personal note, I want to thank the many
hardworking and dedicated employees who have worked with me so
tirelessly over the past 12 years at Equifax. Equifax is a very
good company with thousands of great people waking up every day
trying to do what is right. I know they will continue to work
tirelessly as we have over the past 2 months to right the
wrong. I am looking forward to answering your questions. Thank
you.
[The prepared statement of Mr. Smith follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Mr. Latta. Thank you very much. This concludes our witness
testimony and we will move into the question and answer portion
of our hearing. I will begin with the questioning and recognize
myself for 5 minutes. And I would remind members because we do
have quite a few members who want to ask questions today, I am
going to try to keep the 5-minute rule on questions in place so
you will hear the tapping. But I will begin with the
questioning.
Mr. Smith, the timeline of events is raising some red flags
I would like to ask you about. According to your statement, the
first time you heard about the breach of security was on July
the 31st of 2017. Is that correct?
Mr. Smith. Yes, Congressman. That is correct.
Mr. Latta. And you first asked for a briefing about the
breach on August the 15th. Is that correct?
Mr. Smith. Yes. That is correct.
Mr. Latta. And the first time the board of directors was
notified about the breach was August the 24th. Is that correct,
the full board?
Mr. Smith. Congressman, on the 22nd of August I notified
our lead director, presiding director at the time. The full
board was briefed on the 24th and again on the 25th and
subsequent meetings after that.
Mr. Latta. All right. And you notified the public about the
breach on September the 7th, correct?
Mr. Smith. That is correct.
Mr. Latta. OK. You state in your testimony that you began
developing the remediation for consumers on August the 24th or
the 25th. Why was there a 10-day delay between you finding out
that personal information had likely been stolen and beginning
to develop the remediation plan and do you think that 10-day
window was responsible for having learned about that personal
information being stolen to start talking about how to talk to
the consumers?
Mr. Smith. Congressman, I understand the question, if I may
go back to the timeframe of the 31st. So if you go to the 29th
and 30th, someone in security had detected what they deemed as
suspicious activity. That is something that happens routinely
around our business. On the 30th they bring down this
particular portal and they start their own internal
investigation.
As I had mentioned in my opening comments and in my written
testimony, on the 2nd of August they had engaged leading
forensic experts, cyber experts, and King & Spalding, a leading
law firm, and their cybersecurity team. When you talk to the
forensics experts they will tell you the complications of
trying to understand where these criminals were, the footprints
they had left, the inquiries they had made, is a cumbersome,
cumbersome process. That is why it took weeks before we had an
indication for the breadth and the depth of the issue which
brought us to the August 24th date that you had mentioned.
Mr. Latta. Well, let me just back up to July the 31st when
you learned, again you were talking with the experts at that
time and you learned about the breach and you testified that
you did not know that personal information had been stolen at
that point. But did you ask anyone if personal information had
been stolen when you found out about that breach?
Mr. Smith. Congressman, on the 31st, all I was told at that
time was that security had noticed a suspicious movement of
data out of an environment we call a dispute portal. It wasn't
until later that they understood that was an actual dispute
document. We had no indication on the 31st of July there was
any PII information that was vulnerable.
Mr. Latta. OK, so I guess again, but again not knowing if
that personal information had been stolen at that time, your
company is built on data and at any point did you think it was
important if somebody in the company started looking at if
personal data had been stolen at that point?
Mr. Smith. Congressman, I can tell you we are working with
the best forensic auditors in the business. They do this for a
living. We had a great cyber team from King & Spalding with us.
It took them time. At that time they did not know if data had
been compromised, exfiltrated, or what the data was.
Mr. Latta. If we could go back to when you did find out
about the breach and that conversation with your chief
information officer, Mr. Webb, how did he exactly tell you that
there had been a breach? Was it a phone call, an email, in
person, or how did he notify you of the breach?
Mr. Smith. It was a face-to-face brief meeting on the 31st.
At that time he had just learned as well, so the data was very
fresh to him. The incident was described as an incident not as
a breach.
Mr. Latta. Is that the normal way for that information if
there had been a breach at the company to notify someone is for
the CIO to come and just give a face-to-face, or is that the
standard operating procedure then?
Mr. Smith. Congressman, at that time we had no indication
it was a breach. It was a suspicious activity.
Mr. Latta. Did you tell anyone else in senior management or
any other members of the board of directors about the breach at
that time, or is it just not until on August the 22nd when you
had the one call and then the 24th for the rest of the board of
directors did anyone else know about the breach?
Mr. Smith. Again, it is important to say on July 31st we
did not know it was a breach at that time, suspicious activity
only. The first notification to the board was the lead director
on the 22nd of August, which followed in the chronology of
events a meeting I had with our cybersecurity experts and our
outside counsel had occurred on the 17th of August. That is
when the picture was starting to develop.
Mr. Latta. Thank you. My time is expired and I will
recognize the gentlelady from Illinois, the ranking member, for
5 minutes.
Ms. Schakowsky. Thank you, Mr. Chairman. I am going to get
right to it. I wanted to ask some questions about John Kelley,
the chief legal officer, who I understand is responsible for
security at Equifax or was at least at the time of the breach
and its discovery. Is that right?
Mr. Smith. That is correct, Congresswoman.
Ms. Schakowsky. And Mr. Kelley in turn reports directly to
you the CEO, correct?
Mr. Smith. Correct.
Ms. Schakowsky. OK. So we were told that Mr. Kelley was
informed by the chief security officer the week of July 30th--
we have just been talking about that--that a cybersecurity
incident you mentioned that had occurred. Is that correct?
Mr. Smith. He was notified, it is my understanding, on the
31st of July.
Ms. Schakowsky. Thirty first, OK.
Mr. Smith. That there was suspicious activity in a
particular environment called a web portal that was a dispute
environment.
Ms. Schakowsky. We were told that Mr. Kelley--this is our
staff--was informed at the same time that the incident might
have compromised personally identifiable information. Is that
correct?
Mr. Smith. The only knowledge I have is he was notified on
the 31st that there was suspicious activity in a consumer
dispute portal.
Ms. Schakowsky. Well, we were told that Mr. Kelley then
wrote a short memo to you regarding the incident. Is that
correct?
Mr. Smith. Correct, Congresswoman. And in his email it said
some suspicious activity.
Ms. Schakowsky. OK. Around that same time, three Equifax
executives sold over $1 million of Equifax stock. That is on
August 1st and August 2nd, and it is reported that Mr. Kelley
was ultimately responsible for approving those sales. Is it
true that Mr. Kelley or one of his direct reports would have
been required to sign off on these stock sales?
Mr. Smith. Yes. Mr. Kelley who is our general counsel owns
the clearance process and he would----
Ms. Schakowsky. I have a lot of questions. So the answer is
yes, he was supposed to sign off?
Mr. Smith. Yes.
Ms. Schakowsky. Did any one of these three executives have
knowledge the cybersecurity incident had occurred?
Mr. Smith. To the best of my knowledge, Congresswoman, no.
Ms. Schakowsky. When were they informed that the incident
had occurred?
Mr. Smith. I don't know exactly the date that they were
informed, but to the best of my knowledge they had no knowledge
at the time they cleared their trades with the general counsel.
Ms. Schakowsky. Do you know for sure that they didn't know?
Mr. Smith. To the best of my knowledge they did not know.
Ms. Schakowsky. And Mr. Kelley, who we were told knew of
the breach and that it contained personal information and yet
still approved the stock sale, is he still chief legal officer
for Equifax?
Mr. Smith. Congresswoman, I would come back to it again, he
did not know it was a breach when he approved----
Ms. Schakowsky. That it could have been a breach.
Mr. Smith. All he knew at the time, it is my understanding,
is suspicious activity when he approved the sales.
Ms. Schakowsky. What the heck does suspicious--it could be
a breach, right?
Mr. Smith. It was deemed suspicious activity. We had no
indication that PII was in fact compromised at that time. We
had no idea if data was exfiltrated at that time.
Ms. Schakowsky. So now I understand that you agreed to
forego your 2017 bonus which has been about $3 million for the
past 2 years, correct?
Mr. Smith. That is correct.
Ms. Schakowsky. But it has been reported that you will
still retain $18 million in pension benefits from Equifax; is
that accurate?
Mr. Smith. That is correct.
Ms. Schakowsky. Retiring, which is the category right now
although the company maintains the right to change that
designation, also means you will be free to sell your Equifax
stock which is worth about $24 million. Is that correct?
Mr. Smith. Congresswoman, that calculation, it is hard to
say. It is a complicated calculation. It depends on the total
shareholder return of the company at the time the stocks vest.
There are multiple variables. That may be an estimate, I have
seen different estimates, but it is hard to say what that
number is and we won't know until the end of the year.
Ms. Schakowsky. And that is in addition to Equifax stock
you sold earlier in this year for $19 million. Is that correct?
Mr. Smith. That sounds correct.
Ms. Schakowsky. And according to one report, you could be
eligible for $22 million in performance-based compensation
depending how Equifax stock performs in the next 3 years. Is
that right?
Mr. Smith. Let me be very clear, if I may, Congresswoman.
When I announced my retirement and thought it was best for the
company to move forward with a new leader, I agreed to step
down at that time with no further compensation. I agreed I
should not get a bonus. I agreed there would be no severance. I
asked for nothing beyond what I had already earned.
Ms. Schakowsky. I was just informed by staff that the chief
security officer told the chief legal officer verbally that
there was PII that according to a call with staff yesterday
that actually there was a mention of the breach of personally
identifiable information. The CSO told us in a call yesterday
is what I just heard from staff.
Mr. Smith. Congresswoman, I have no documentation, no
insight, no knowledge that anyone in the company had informed
me or in that case the chief general counsel that there was a
breach on July 31st. Is that what you said?
Ms. Schakowsky. Yes. No, we didn't say a date. I am told
that our staff didn't say a date. OK, let me just say I am glad
the FBI is looking into it and many state attorneys general.
The City of Chicago has sued, so we will probably get more
information that way as well. Thank you.
Mr. Latta. Thank you very much. The gentlelady's time has
expired. The chair now recognizes the chairman of the full
committee, the gentleman from Oregon, for 5 minutes.
Mr. Walden. Thank you, Mr. Chairman.
Mr. Smith, thanks again for being here today. As you know,
this is an example of an Equifax credit report in my hand. It
lists social security numbers, addresses, credit history,
debts, all the sort of personal financial information. It is
the lifeblood of Equifax, right? These data points are really,
really important to what you do as a company?
Mr. Smith. Congressman, that is correct.
Mr. Walden. It is a $3 billion company, data on 820 million
customers worldwide, and yet it appears this breach happened
because the company didn't know it was running certain software
on its system, right, the Apache Struts software that had the
patch requirement?
Mr. Smith. Congressman, as I alluded to in my opening
comments and the written testimony, there was a human error and
a technology error that did not allow us to identify and cover.
Mr. Walden. And I think that is what we are trying to get
to here. If I understand it right, your own information
technology system did not tell the Equifax security division
that the Apache Struts software, which contained the
vulnerability that led to this breach, was running on the
Equifax system. How did that happen?
Mr. Smith. Congressman, the day after the notification came
out from CERT, the security team notified a wide range of
people in the technology team who were responsible for then
finding the vulnerability, applying the patch, and then, days
later as is typical protocol, to deploy a technology scanner to
go then look for the vulnerability, find the vulnerability, and
if it found a vulnerability it knew it was not patched. Both
human deployment of the patch and the scanning deployment did
not work. The protocol was followed.
Mr. Walden. OK, so then people ask us how does that happen?
If as sophisticated of a company as you headed is with so much
at risk, how does this happen? And, we have colleagues that say
we are going to double the fines, triple the fines, put fines
in, do all these things, but how does this happen when so much
is at stake? I don't think we can pass a law that, excuse me
for saying this but I can't fix stupid, as a colleague of mine
used to say. With so much at risk--I have talked to other
software companies and people in this space who say some
companies have an automated system that when a patch comes out
it automatically gets installed. That is not what you had
necessarily, right?
Mr. Smith. I am unaware of an automatic patch. The system
we have in place is security gets notification and it is not
uncommon to get notification from software providers routinely
about vulnerabilities that are discovered.
Mr. Walden. Right.
Mr. Smith. They follow the protocol, which is to notify the
appropriate people within the timeframe that the protocol
called for. Unfortunately, the human error was they did not
find the patch. Did not know----
Mr. Walden. If I could, the human error piece you reference
is that they didn't know that that particular software was
running on your system, Apache Struts was running? Because that
is what needed patching, right?
Mr. Smith. Congressman, great question, if I may clarify.
Mr. Walden. Yes, please.
Mr. Smith. The human error was the individual who is
responsible for communicating in the organization to apply the
patch did not.
Mr. Walden. So does that mean that that individual knew
that the software was there and it needed to be patched and did
not communicate that to the team that does the patching? Is
that the heart of the issue here?
Mr. Smith. That is my understanding, sir.
Mr. Walden. I was on a bank board for a while and we always
had double checks on everybody, right. Do you not have a double
check of some sort, an audit of some sort? It seems like that
was a single point.
Mr. Smith. The double check was the scanning device that
was deployed a few days later.
Mr. Walden. But did the scanning device--I don't know how
that process works. Does it know you have that software or do
you have to tell it that is what you are scanning for?
Mr. Smith. It is the latter. You have got to tell it what
it is looking for. It scans the environment looking for----
Mr. Walden. And so the individual who didn't tell the IT
team, that is where the individual failed. Was that the same
person telling them what to look for?
Mr. Smith. No. The scanner is deployed by the security
team. And I should clarify there that the rationale or the
reason why the scanner or the technology piece did not locate
the vulnerability is still under investigation by outside
counsel.
Mr. Walden. All right, one final question. You have
referenced the suspicious movements of data. You have
referenced incident. The American people think all of that is
breach. How regularly did you have incidents or suspicious
movement of data? Is this a routine thing that people call,
hey, we had another incident, we have another suspicious
movement of data, or was this outside normal operations?
Mr. Smith. Congressman, thank you for that question. As you
alluded to in your comments, we do have a lot of data and our
primary goal is to protect that data. And we have experienced
millions of suspicious activities against our database any
given year.
Mr. Walden. But to the point that the head of your security
team comes to you and says, hey, we have another one?
Mr. Smith. Oh. That is not uncommon. It is not uncommon.
Mr. Walden. How often would that happen in the course of a
week that they would come to the CEO and say heads up?
Mr. Smith. I don't have a number for you, Congressman, but
it is not uncommon. It is not uncommon for us to engage
forensic audit firms. It is not uncommon for us to engage
outside counsel to help us think things through when there is
suspicious activity. It is a part of doing business in a data
business as you alluded to.
Mr. Walden. Thank you for the indulgence of the committee.
I yield the balance of my time.
Mr. Latta. The gentleman yields back and the chair
recognizes the ranking member of the full committee, the
gentleman from New Jersey, for 5 minutes.
Mr. Pallone. Thank you.
Mr. Smith, you testified that on August 11th you were
informed that hackers had stolen, ``a large amount of
consumers' personally identifiable information,'' in this
incident. And on August 17th, I guess a week later, you said in
a speech, ``fraud is a huge opportunity for Equifax. It is a
massive, growing business for us.'' So I am just looking for a
number, Mr. Smith. At the time you gave that speech, roughly
how many consumers did you believe had been compromised by the
breach, if you could?
Mr. Smith. Congressman, if I may clarify, I think you
alluded to an August 11th date?
Mr. Pallone. August 11th, initially, and then August 17th
in the second speech.
Mr. Smith. August 11th I had no indication. I was not
informed at that time. My notification was before the August
17th meeting. And you alluded to a speech?
Mr. Pallone. Well, yes. On the 17th you said in a speech,
fraud is a huge opportunity for Equifax. It is a massive
growing business for us. I am just looking for a number. At the
time, roughly, how many consumers did you believe had been
compromised by the breach?
Mr. Smith. On August 17th, which is I think on or around
the date you had talked about that I gave a speech, we did not
know how much data was compromised, what data was compromised.
That story was still developing. And that speech you are
alluding to is a very common speech we have in communities. I
think this happened to be at a university that we talked to
them, but at that time when I gave that speech I did not know
size, the scope of the breach.
Mr. Pallone. All right. During your tenure at Equifax you
expanded the company's business into packaging and selling
other people's data. And in that August 17th speech you
explained that having free data with a gross margin of profit
of about 90 percent is, ``a pretty unique model.'' And I get
that this unique model is a good deal for Equifax, but can you
explain how it is a good deal for consumers?
Mr. Smith. Thank you, Congressman. I think I understand the
question. Our industry has been around for a number of years as
you know. In fact, Equifax is a 118-year-old company. We are
part of a federally regulated ecosystem that enables consumers
to get access to credit when they want access to credit and
hopefully at the best rates available to them at that time. So
we are very vital to the flow of the economy not just in the
U.S. but around the world.
Mr. Pallone. All right. And I want to turn to what Equifax
is offering consumers in the wake of this breach, specifically
the free credit lock service that is supposed to be introduced
next year. We have been told that this free credit lock service
could require consumers to consent to Equifax sharing or
selling the information it collects from the service to third
parties with whom the individual already has a business
relationship for marketing or other purposes. Is that true?
Mr. Smith. This product will be a web-enabled, mobile-
enabled application that will allow a consumer at the time he
or she, if they decide they want access to credit, can simply
toggle on and toggle off that application to give the bank,
credit card issuer, auto lender, access to their credit file to
approve their own.
Mr. Pallone. Well, by agreeing to use the Equifax's lock
service will consumers also be opting in to any additional
marketing arrangements either via Equifax or any of its
partners?
Mr. Smith. Congressman, we are trying to change the
paradigm, and what I mean by that is this will be in an
environment viewed as a service, a utility not a product. But
we know cross-selling, up-selling, or any products available to
the consumer, when they go to get and sign up for the lock
product it is a service to them and that is the only product
the service will be able to get.
Mr. Pallone. Now will Equifax give consumers an easy and
free method to choose not to share their data in this way, even
if the consumer already has a business relationship with the
third party?
Mr. Smith. Yes, Congressman. I would envision as this
evolves over time the consumer will have the ability to invite
into their world who they want to have access and who they do
not. It will be their choice, their power, not ours, to make
that decision.
Mr. Pallone. Now last week, the interim CEO announced that
by January 31st of 2018 Equifax would make locking and
unlocking of a person's Equifax credit report free forever. A
credit report lock is already included in TrustedID Premier and
other services like credit monitoring and identity theft
insurance. Will that still end after 1 year?
Mr. Smith. Congressman, a couple of differences. Number
one, the product we offer today for consumers protects the
consumer at the same level of protection they would get January
31st. The difference is today it is a browser-enabled product
or service. The 31st of January it will be an application, much
simpler and easier for the consumer to use. The protection is
largely the same.
So they get this free service when they sign through for 1
year. At the end of the 1 year, effective January 31st of 2018,
it goes into the new lock product.
Mr. Pallone. I guess, the difference other than not
expiring between the credit report lock that is part of
TrustedID Premier and the credit locking tool that will be
available in January, why not just extend the freeze program?
Mr. Smith. There is a difference between the freeze product
which came to pass with FACTA back in 2003, passed into law in
2004. That is now governed by state laws in all states and it
is a cumbersome process for a consumer. In many cases, some
states require you to mail in your request for a freeze and
then we must mail you a PIN, so your ability to get access to
get credit when you want credit is encumbered.
A consumer could go to a car dealer or to a bank to get a
credit card, forget his or her PIN on a freeze product. Have to
go back home, look for the PIN, mail the PIN in. So it is a
cumbersome process. The lock product we are offering today is a
big step forward. The lock product for the 31st of January is
an even further step forward.
Mr. Pallone. My time has run out, Mr. Chairman.
Mr. Latta. Thank you very much. The gentleman's time has
expired. The chair now recognizes the chairman emeritus of the
full committee, the gentleman from Texas, for 5 minutes.
Mr. Barton. Thank you, Mr. Chairman, and since I am not a
member of this subcommittee, thank you for your courtesy in
allowing me to ask questions.
Mr. Smith, what is the market value of Equifax? What is
your company worth, or your former company?
Mr. Smith. Congressman, last time I checked it is somewhere
close to $13 billion.
Mr. Barton. Thirteen billion. I am told by my staff that
this latest data breach was about 143 million people; is that
right?
Mr. Smith. We were informed yesterday from the company that
it is typical in a forensic audit there was some slight
movement and the numbers-adjusted press release came out from
the company last night it is 145.5.
Mr. Barton. Well, OK. I appreciate your accuracy there. But
under current law you are basically required to alert each of
those that their account has been hacked, but there is really
no penalty unless there is some sort of a lawsuit filed and the
Federal Trade Commission or a state attorney general files a
class action lawsuit against your company. So you are just
required to notify everybody and say so sorry, so sad. I
understand that your company has to stay in business, has to
make money, but it would seem to me that you might pay a little
bit more attention to security if you had to pay everybody
whose account got hacked a couple of thousand bucks or
something. What would the industry reaction be to that if we
passed a law that did that?
Mr. Smith. Congressman, I understand your question. I think
the path that we were on when I was there and the company has
continued is the right path, and that is the path of allowing
the consumers to control the power of who and when accesses
their credit file going forward, taking the----
Mr. Barton. Well, the consumer can't control the security
of your system.
Mr. Smith. That is true, sir. But they can control----
Mr. Barton. And your security people knew there was a
problem and according to staff briefings that I have been a
part of they didn't act in a very expeditious fashion until the
system had already been hacked. You are to be commended for
being here. I don't think we subpoenaed you. I think you
appeared voluntarily, which shows a commendable amount of
integrity on your part.
But I am tired of almost every month there is another
security breach and it is OK, we have to alert you. I checked
my file to see if I was one of the ones that got breached, and
apparently I wasn't. I don't know how I escaped, but I didn't
get breached. But my staff person did, and we looked at her
reports last night and the amount of information that is
collected is way beyond what you need to determine if she is
creditworthy for a consumer loan. Basically, her entire adult
history going back 10 years everywhere she has lived, her name,
her date of birth, her social security number, her phone
numbers, her addresses, her credit card, student loans,
security clearance applications for federal employment, car
insurance, even employment history of jobs that she worked when
she was in high school. That is not needed to determine whether
she is worthy of getting a $5,000 credit card loan or something
and now it is all out in the netherworld of whoever hacked it.
I can't speak for anybody but myself, but I think it is
time at the federal level to put some teeth into this and some
sort of a per-account payment. And again I don't want to drive
credit bureaus out of business and all of that, but we could
have this hearing every year from now on if we don't do
something to change the current system.
So I would hope that you would go back to your peers and
work with the committee, the chairman and the subcommittee
chairman and ranking member and let's figure out something to
do that actually gives an incentive to the industry to protect
ourselves. And the only way I know to do it is some fine per
account hacked that is large enough that even a company that is
worth $13 billion would rather protect their data and probably
not collect as much data than just come up here and have to
appear and say we are sorry.
With that, Mr. Chairman, thank you for your courtesy and I
yield back.
Mr. Latta. The gentleman yields back and the chair now
recognizes the gentleman from New Mexico for 5 minutes.
Mr. Lujan. Thank you, Mr. Chairman.
Mr. Smith, there is a difference between a lock product and
a freeze, correct; those are two different things?
Mr. Smith. Congressman, there is a process. It is a little
different, but as far as the consumer and the protection that
he or she would get from doing one versus the other is
virtually if not exactly the same.
Mr. Lujan. Well, virtually almost exactly is not the same.
Are they different?
Mr. Smith. It is the same.
Mr. Lujan. So your lock product is the same as a freeze?
Mr. Smith. As far as the protection----
Mr. Lujan. Well, we will get into that later. I appreciate
that clarification. Will Equifax be willing to pay for this
freeze at Experian and TransUnion for consumers whose
information was stolen?
Mr. Smith. You are referring to the freeze or the lock?
Mr. Lujan. You said they are the same so.
Mr. Smith. Yes. Right now we offer a free lock product as
you know for 1 year and then a free lifetime lock product for
life starting January 31st, 2018.
Mr. Lujan. And that also extends to Experian and
TransUnion?
Mr. Smith. No, sir. It does not.
Mr. Lujan. Let me repeat the question. Will Equifax be
willing to pay for that freeze for that lock at Experian and
TransUnion for consumers whose information was stolen through
Equifax?
Mr. Smith. Congressman, the company has come out with what
they feel is a comprehensive five different services today and
a lifetime lock. I would encourage TransUnion and Experian to
do the same. It is time we changed the paradigm, give the power
back to the consumer to control who accesses his or her credit
data. It is the right thing to do.
Mr. Lujan. OK. I am down to limited time, Mr. Smith. I
apologize. I will take that as a no that Equifax will not pay
for Experian and TransUnion consumers. Do you think consumers
should have to pay a penalty for your mistake including
potential identity theft, false credit accounts, fraudulent tax
returns, or medical identity theft, or do you commit to
compensating any consumers who suffer harm as a consequence of
your breach?
Mr. Smith. We take this seriously. I have apologized. I
will apologize again to the American consumer. We have offered
a comprehensive set of products for free.
Mr. Lujan. Mr. Smith, will those comprehensive sets of
products make consumers whole?
Mr. Smith. It will protect them going forward.
Mr. Lujan. Will it make them whole, yes or no?
Mr. Smith. It is hard for me to tell if someone has been
harmed so I can't answer the question.
Mr. Lujan. If someone's credit has been stolen and someone
went and opened up a bunch of their accounts, bought furniture,
bought cell phones, bought a bunch of fuel, and now this
consumer can't fix their history they have been harmed. In that
case will Equifax make that person whole?
Mr. Smith. Congressman, as I have said I apologize. We have
offered them a----
Mr. Lujan. Thank you very much, sir.
So I want to go back to the line of questioning earlier
from Mr. Pallone. On August 11th, in your prepared testimony it
says that you were aware of a large amount of consumer PII. On
August 15th, it says in your prepared testimony a PII had been
stolen, it appeared likely, and that you requested a detailed
briefing to determine how much the company should proceed. On
August 17th, it says, you, I held a senior leadership meeting
to receive the detailed briefing on the investigation. You gave
a speech also on the 17th about profiting off of fraud with
these new markets. You shared with Mr. Pallone that you were
not aware of PII being stolen. What is it?
Mr. Smith. Congressman, on the 17th I had the full debrief
from Mandiant, our forensic auditors, from outside counsel, and
my team. I was aware on the 15th that there had been some PII
compromise. How much the scope----
Mr. Lujan. I appreciate that clarification. You were aware
it was stolen and you just were not aware how much?
Mr. Smith. I was not aware it was stolen. I was aware there
was----
Mr. Lujan. It says in your prepared testimony that you were
aware, that you asked for a detailed briefing to determine how
the company should proceed. So you were aware that PII was
stolen on the 15th; is that true or not true?
Mr. Smith. At that time, the 17th was the detailed review
of when I learned about PII. And even at that time which PII,
was it stolen, was it not stolen, those details came to life,
Congressman, over the course of August.
Mr. Lujan. Mr. Smith, on August 15th, were you aware that
there was PII that was stolen or not?
Mr. Smith. On August 15th----
Mr. Lujan. Regardless of the amount were you aware of that?
Mr. Smith. On August 15th, I was made aware that hackers,
criminal hackers, had gotten into our system and had some PII
information.
Mr. Lujan. OK. Well, we can revert to your prepared
testimony. The other question that I have that Ms. Schakowsky
was asking on, is Chief Legal Officer John Kelley still
employed by you, or by Equifax?
Mr. Smith. Yes, he is.
Mr. Lujan. And you were the CEO at the time that approved
the terms of the retirement for David Webb and Susan Mauldin.
Is their classification as retired permanent or could it
potentially change to fired for cause like yours?
Mr. Smith. There is an investigation going on by the board
at this time.
Mr. Lujan. And Mr. Chairman, I know that my time has
collapsed here, if you will, but there is an article in WGN-TV
that talks about Equifax doing their own investigation into the
three executives that sold their stock and profited. And I
guess they must have a pretty good investigative team there
because between the press release that happened on Friday or
whenever it came out, and then a story on Sunday, and today we
have a revelation that those folks didn't know that this breach
took place, I just hope we get to the bottom of this.
And again, Mr. Chairman, I hope that we can be given
assurance to the committee and to the American people that this
committee will have a markup and a hearing with bills that we
can take to the floor before the holidays to give the American
people consumers confidence again because this is a mess. Thank
you, Mr. Chairman.
Mr. Latta. Thank you very much. The gentleman's time has
expired. And the chair now recognizes the gentleman from
Mississippi, the vice chairman of the subcommittee, for 5
minutes.
Mr. Harper. Thank you, Mr. Chairman.
Mr. Smith, thank you for being here to testify today. In
your written testimony and in response to some of the
chairman's questions, you stated that you were informed of
suspicious activity on July the 31st by your chief information
officer and went on to discuss that. And you said, I certainly
did not know that personal identifying information, PII, had
been stolen or have any indication of the scope of the attack.
Did you ask him if there had been any personal identifying
information that had been obtained?
Mr. Smith. Congressman, at that time I was informed it was
a dispute portal document. A dispute portal document is
something that typically houses if the company is disputing
with us they paid off a utility bill he or she may take a
picture of the utility bill. So at that time that was the
conversation.
Mr. Harper. Mr. Smith, not to interrupt, but my question
was did you ask if any PII had been accessed?
Mr. Smith. No, I did not.
Mr. Harper. Were you made aware at that point of the Apache
Struts patch?
Mr. Smith. No, sir. I was not.
Mr. Harper. Had you had any meetings with your chief
information officer or your security department about any of
this issue prior to July 31st?
Mr. Smith. No, Congressman. I did not.
Mr. Harper. Had you had any meetings with them about any
other security information during that time from March until
July 31st?
Mr. Smith. Oh yes. We would have routine meetings, security
reviews, IT reviews.
Mr. Harper. How often do you have those?
Mr. Smith. Common due process would be at least quarterly.
Mr. Harper. And why did you not have this discussion come
up and did you have, obviously that is more than a quarter, so
how many meetings did you have between that time of March the
8th until July the 31st with your security team?
Mr. Smith. Make sure I understand your question. Why
didn't----
Mr. Harper. No. How many meetings did you have during that
time from March the 8th until July the 31st?
Mr. Smith. I don't have that information with me. If that
is important we can get that.
Mr. Harper. Well, how many do you remember? Do you remember
any of those?
Mr. Smith. So normally we would have IT reviews at least
quarterly and security reviews at least quarterly. And then you
would augment that on an as-needed basis.
Mr. Harper. Well, with those meetings and those timelines
of March the 8th until July 31st we are covering into three
quarters. Not a total of 9 months, but you touch into three
quarters of that year. And at any point in any of that did you
have any information about this going on?
Mr. Smith. No, sir. I did not.
Mr. Harper. All right. In your testimony you indicate that
the security department ran scans in March for the
vulnerability but failed to identify it. Can you explain how
this is possible and why was there never any confirmation of
anybody coming back and checking to see, OK, we have this
identified information, there was a failure of someone on the
team to identify this that it was being used, that the software
was even being used? Was there no one coming in to verify that?
Do you have any outside person prior to the ones that you hired
to look at this?
Mr. Smith. Congressman, we get notifications routinely, the
IT team and security team do, to apply applications. This
individual as I mentioned earlier did not communicate to the
right level to apply the patch. The follow-up was as you
mentioned----
Mr. Harper. You said this individual?
Mr. Smith. Yes.
Mr. Harper. So you had one person responsible for this?
Mr. Smith. There is an owner of the patch process. There is
a communication that comes out from security. It is a broad-
based communication. Once they receive notification from a
software company, or in this case DHS, they notify appropriate
people. Then an individual who owns the patch process cascades
that communication.
Mr. Harper. For everyone who is on your Equifax team is
there anything more important than protecting the PII of the
consumers?
Mr. Smith. No, sir.
Mr. Harper. Would you identify that as the number one
responsibility of the company and everybody in your company?
Mr. Smith. We have for years, sir, yes.
Mr. Harper. OK. So it just appears, obviously, the job
wasn't done and so we know that and we are trying to look at
this. And I know too there was an Equifax spokeswoman who said,
we have taken short-term mediation steps and continue to
implement and accelerate long-term security improvements as
part of ongoing actions to help prevent this type of incident
from happening again.
So we have 145.5 million people whose PII has been
compromised. How many files do you have in the system?
Mr. Smith. Worldwide?
Mr. Harper. Yes, sir.
Mr. Smith. I think someone mentioned earlier there is a
public number out there of over 800 and some odd million
consumers and 100 million companies, roughly.
Mr. Harper. And we know this breach includes some from
Canada, some from the U.K. Would that be fair to say even at
this point?
Mr. Smith. Congressman, a point of clarification there,
there was some data that we had on, I think it is 7,000
Canadians in the U.S. So the data was in the U.S., same
environment. We had some data on U.K. citizens also in the U.S.
That piece is still under investigation.
Mr. Harper. My home State of Mississippi has three million
people. Almost 1.4 million files have been breached in my
state. If you take away people that are minors who don't have a
file yet, almost my entire state is going to be impacted. So
this is a travesty, something that was preventable, we know,
and so saying that we want to protect what goes forward doesn't
bring us a lot of comfort today. Thank you and I yield back.
Mr. Latta. The gentleman yields back. The chair now
recognizes the gentleman from California for 5 minutes.
Mr. Cardenas. Thank you very much. I thought I prepared for
this committee, but I have more chicken scratch notes. I don't
even know where to start.
Mr. Smith, welcome to Washington. Are you currently
employed by Equifax?
Mr. Smith. No, sir.
Mr. Cardenas. You are not. When you decided to come before
this committee were you specifically requested by name to come
to this committee by this committee or were you offered up by
Equifax as the representative of Equifax to come represent
Equifax before this committee?
Mr. Smith. I believe I was asked specifically to come
before the committee.
Mr. Cardenas. By Equifax or the committee?
Mr. Smith. My understanding is by the committee.
Mr. Cardenas. OK. OK. Apparently the committee asked for
the CEO at the time and at that time you were still the CEO,
but you are no longer the CEO. Did you inquire as to why the
current CEO or interim CEO didn't come before this committee?
Mr. Smith. I did not, but I felt personally it was my
obligation. The breach occurred under my watch. And as I said
in my written testimony and my oral testimony I ultimately take
that responsibility, so I thought it was important that I be
here.
Mr. Cardenas. Thank you. I get the picture. On August 31st
or, excuse me, on July 31st you were notified of the suspicious
activity that eventually as we now know was a 145 million
person breach? Was it July 31st, was it?
Mr. Smith. Yes, Congressman. It was a brief interaction----
Mr. Cardenas. A verbal interaction?
Mr. Smith. Yes.
Mr. Cardenas. And then you just referenced as an answer to
another one of my colleagues' questions on that on August 31st
you received some kind of email referring to the possible
breach?
Mr. Smith. A point of clarification, I was notified on the
31st of July by the chief information officer, Dave Webb, in a
very brief interaction that this portal seemed to have a
suspicious incident. There was a communication trail internally
between others that also referenced that I was aware of this
incident through my interaction with Dave Webb.
Mr. Cardenas. So that written trail was not directed to
you, you were just mentioned in that trail that you had been
verbally notified?
Mr. Smith. That is my recollection.
Mr. Cardenas. OK. Mr. Chairman, is it appropriate for this
committee to ask for that trail of documents?
Mr. Latta. For our counsel, but I would say----
Mr. Cardenas. OK. Well, if it is appropriate, Mr. Chairman,
what I would like is for my office and this committee to
receive copies of that trail. That it has been referenced more
than once to some of our questions here on this committee, on
this congressional committee.
It has come to my attention that several people are no
longer with the corporation. You are not officially with the
corporation anymore. The CIO at that time is no longer the CIO
of the corporation, of Equifax?
Mr. Smith. That is correct.
Mr. Cardenas. And then there is another higher-up that is
no longer----
Mr. Smith. The chief security officer.
Mr. Cardenas. OK, chief security officer. However, John
Kelley was the chief legal officer at that time but still is
currently the chief legal officer, correct?
Mr. Smith. That is correct.
Mr. Cardenas. OK. Apparently, the chief legal officer on or
about, between July 29th and August 1st went to outside counsel
and hired outside counsel. Correct?
Mr. Smith. No, Congressman. What occurred on August 2nd is
that the chief security officer reached out to a forensic
expert, cyber expert, and outside counsel King & Spalding, and
she engaged them at that time.
Mr. Cardenas. OK, thank you. When executives at Equifax
want to sell stock they need to get the chief legal officer to
sign off?
Mr. Smith. Yes, correct, Congressman. There is a protocol
that requires the general counsel of Equifax to approve that
sale.
Mr. Cardenas. OK. And John Gamble, Joseph Loughran, Rodolfo
Ploder, they are all high-ups with Equifax. They apparently
sold stock on or about August 1st or 2nd in the amount of
approximately 1.8 million, give or take. So they had to get an
OK from John Kelley before they did that, correct?
Mr. Smith. That is correct, sir.
Mr. Cardenas. OK. And apparently they did get the OK?
Mr. Smith. Yes. That is my understanding.
Mr. Cardenas. And you were the CEO at the time that they
sold that stock?
Mr. Smith. And I have no step in that----
Mr. Cardenas. I get it.
Mr. Smith. Yes. I was----
Mr. Cardenas. I am referring to John, but you were the CEO
at the time.
Thank you, Mr. Chairman. Just a little bit of latitude on
my time. Just a little bit, please. What I would like to
request of you, Mr. Chairman, and also the Ranking Member
Schakowsky, that we ask for a specific hearing of this
committee where we get John Kelley, chief legal officer, who
was then the chief legal officer of Equifax and who is
currently still the chief legal officer, hopefully when and if
we get him here he will still have that title.
I am a bit disturbed that we are Congress holding a hearing
and that Equifax has before us someone who no longer works for
them. Thank you very much, Mr. Chairman. I hope that we can ask
for that hearing where we have John Kelley, the chief legal
officer, before us.
Mr. Latta. Thank you very much. The gentleman's time has
expired and the chair now recognizes the former chair of the
full committee, the gentleman from Michigan, for 5 minutes.
Mr. Upton. Thank you, Mr. Chairman.
Mr. Smith, every family watches over their financial data
with great concern. It impacts their daily life whether it is
going to get a mortgage, a loan, a car, they have to have that
credit score that gets them often even a job. So they view that
data as it relates to them as very, very private and they want
it to be secure.
Here is an Equifax credit report for somebody that I know.
It is 131 pages long, unbelievable in terms of the data that
has been collected on this particular individual. I would guess
that most individuals have no clue that there is that much data
that has been assembled on their own personal family account.
Now you said earlier that the data was compromised. So a
question that I have to ask is does that word ``compromise''
include the word or the term ``manipulated''? Are those folks
who broke into that account, are they able to actually change
the accurate data that might be reflective of their own
personal story? Can that be changed?
Mr. Smith. Congressman, I understand your question. The
database was attacked by criminals, that we know. The forensic
experts that we engaged in this case, Mandiant, has led us to
believe that there is no indication the data that is left
behind has been manipulated.
Mr. Upton. Now one of the things that is in this report,
any credit report, is you verify the income of that individual
to make sure that it is accurate. And as I understand it, and I
go again in personal experience, when one goes to get a loan
whether it is a mortgage or a car, often one of those little
boxes that you check is that you are allowing permission to
look at that tax return of the individual. Is that not correct?
Regardless of self-employed income, regardless of automated
underwriting findings, when self-employed income is used to
qualify, the following documentation is required: most recent 2
years of their individual tax returns with all schedules and W-
2s and K-1s; most recent 2 years' business returns; IRS forms
1120 and 1120S; 1065s in which the borrower has ownership
interest at 25 percent or more; and a complete and signed IRS
form 4506-T is required for every borrower on the loan
application. Tax transcripts validated from the IRS are
required for each year documented in the loan file.
So the question is if that is collected, is someone who is
a bad actor actually able to use the personal information
stolen from this report to then perhaps file a false tax return
come the first of the year?
Mr. Smith. Congressman, I think I understand your question.
A couple points of clarification. A credit report does not
contain employment and income information. There are many
lenders who will ask you as a consumer when going to get a loan
to validate your income and there are many means as you alluded
to in your readings there as to how you might do that. But the
credit report does not contain employment income data.
Number two, the unfortunate criminal hack that we referred
to this morning in written testimony and press release over the
past month or so was clear to say it did not include the credit
report information that you just picked up there. It was
limited to nonetheless a large number, but limited to an
environment we call a consumer dispute portal, not the credit
file itself.
Mr. Upton. The last question I have is how did you know? We
have had a lot of hearings, a number of them classified.
Breaches made into Department of Energy, utilities, a whole
number of different major players where hackers are coming in
trying to break and penetrate daily. What tripped these guys
up? How did you identify in fact a breach had been made? What
was their mistake?
Mr. Smith. Congressman, there is a piece of technology
called a decryptor, and it was a decryptor that allowed us to
see some of the data. And once we saw the data that is what the
start of the conversation earlier in the testimony here, that
is when we saw the suspicious data and were able to shut off
the portal at the end of July.
Mr. Upton. Yield back, my time is expired.
Mr. Latta. Thank you very much. The gentleman yields back
and the chair now recognizes the gentlelady from Michigan for 5
minutes.
Mrs. Dingell. Thank you, Mr. Chairman.
Mr. Smith, I first want to say we appreciate your coming
and testifying today. We have spent a lot of time talking today
about the what, the when, the where, and the whys of this
breach and I agree with all of my colleagues that we need to be
expressing extreme displeasure.
But I want to ask a few questions about where we go from
here, because I hope this has awoken the American consciousness
about privacy and credit that they need to be paying far more
attention to. This breach is different than most. Not only the
scale of those affected but the type of information taken. In
the past, folks usually just changed your passwords, maybe you
got a new credit card and that was it. It was an annoyance but
it had no real impact on your life.
That is not so simple when it is your social security
number or other personal information. You can't change your
social security number and I can't change my mother's maiden
name. This data is out there forever. Clearly something needs
to be done. We can all sit here and talk about what went wrong,
but we are doing the public a disservice to not at least begin
the discussion on how to improve data security. That is why I
am a proud co-sponsor of Representative Schakowsky and Ranking
Member Pallone's bill. It is a good first step that needs to be
given serious consideration. And I am also introducing the Data
Protection of 2017. Whatever path we choose going forward, it
is important that we take action on the topic and that all
American consumers pay attention.
Now I would like to ask a few questions. Nobody has asked
this question yet, so just a quick yes or no. Have you or
anyone on your team seen signs that the attackers were backed
by a nation state?
Mr. Smith. Congresswoman, we have engaged the FBI. At this
point that is all I will say.
Mrs. Dingell. I don't think it is all the same, but thank
you. After your security department blocked the suspicious
traffic you mentioned in your testimony, did anyone from your
team or outside companies venture beyond the parameter of your
network to attempt to locate where they came from?
Mr. Smith. Congresswoman, yes. We have the ability to track
the IP address of the criminals, but as you know finding the
location where the IP address does not necessarily tell you
where they are from. It is easy to set up IP addresses anywhere
in the world.
Mrs. Dingell. I think we all care about this, but I want to
move to this other topic. I share your belief that placing
control of access to consumers' credit data should be placed in
the hands of the consumer, but most people have no idea that
Equifax was even holding their data. I unfortunately learned a
long time ago because this isn't the first data theft and Doris
and I were part of something else where they got our social
security numbers and mother's maiden names.
It is one thing to take steps to mitigate damages after a
breach has occurred, but going forward we must give consumers
the chance to protect themselves before a breach happens. Do
you believe that consumers can take reasonable steps to secure
their identity and information if they don't even know who has
it?
Mr. Smith. Congresswoman, I think we can help. I think we
can help by the announcement of this offering to all Americans
the ability to lock and unlock your credit file for life for
free. There needs to be a greater awareness, I understand your
point clearly. And I think making this available to all
Americans is one step in doing that.
Mrs. Dingell. So I was just actually even educating my
colleagues up here about Credit Karma and they were stunned by
how easy it was with two little factoids to suddenly unleash
the amount of money they had in every one of the credit card
companies, what any data inquiries have been, and all of the
different factors. I think most people don't understand that it
is not just you, but Experian and TransUnion who are also
collecting this data.
Why do consumers have to pay you to access their credit
report? Why should that data not be free?
Mr. Smith. Congresswoman, the consumer has the ability to
access the credit report for free from each of the three credit
reporting agencies once a year, and you combine that with the
ability to lock your credit file for life for free again is a
step forward.
Mrs. Dingell. Well, I am running out time. But like my
colleague over here, when you find mistakes, which a number of
us have and we are luckier than 99 and 9/10ths, it is very
difficult to fix and when you do fix it you still have to pay.
I think we need a longer debate about who owns this data and
how we educate the American people. Thank you, Mr. Chairman.
Mr. Latta. Thank you very much. The gentlelady's time has
expired and the chair now recognizes the gentleman from New
Jersey for 5 minutes.
Mr. Lance. Thank you, Mr. Chairman.
Good morning to you, Mr. Smith. Criminals perpetrated this
fraud. Is it possible that these criminals are from another
country?
Mr. Smith. Congressman, it is possible but at this time----
Mr. Lance. It is possible. Number two, is it possible it is
the government of another country?
Mr. Smith. As I mentioned to the congresswoman a few
minutes ago, we have engaged the FBI they will make that
conclusion.
Mr. Lance. Do you have any suspicions in that regard either
persons from other countries or the government of another
country?
Mr. Smith. Congressman, I will defer that. We have the FBI
involved.
Mr. Lance. Yes, I know we have the FBI involved. Do you
have an opinion to the two questions I have just asked?
Mr. Smith. I have no opinion.
Mr. Lance. You have no opinion. The stock that was sold by
your colleagues, Mr. Gamble and Mr. Loughran--I hope I am
pronouncing that right--Mr. Ploder, as I understand it that
stock was sold on August 2nd. Is it usual that executives of a
mature company, not a company that has just come onto an
Exchange, is it usual that the significant amounts of stock are
sold?
Mr. Smith. Congressman, a few points here of clarification.
The stock was sold on the 1st and the 2nd. So----
Mr. Lance. Yes, I said the 2nd. Yes.
Mr. Smith. The 1st was, I think, the first day it was sold.
Mr. Lance. Yes.
Mr. Smith. It is not unusual for stock to be sold at the
end of a quarter. After we have our earnings call the window
opens up. We encourage those who are going to sell, sells early
in the window. The window is open for about 30 days. They sell
as early in the window as possible and that is what occurred
here.
Mr. Lance. You believe that this stock was sold merely as a
matter of course as would be true in any other quarter?
Mr. Smith. Yes.
Mr. Lance. You do not believe it was based upon knowledge
known by these gentleman related to the breach?
Mr. Smith. Congressman, I have known these individuals,
some of them up to 12 years. They are honorable men. They are
men of integrity. They followed due process. They went through
the clearance process through the general counsel. I have no
indication that they had any knowledge of the breach at the
time they made the sale.
Mr. Lance. Did you have knowledge of the breach at that
time?
Mr. Smith. I did not, sir.
Mr. Lance. Weren't you warned well in advance of this that
there was suspicious activity?
Mr. Smith. I was notified on July 31st in a conversation
with the chief information officer that there was suspicious
activity detected in an environment called the web portal for
consumer dispute. No indication of a breach.
Mr. Lance. That was prior to the sale of the stock; is that
accurate?
Mr. Smith. The 31st of July, but there is no indication of
a breach at that time.
Mr. Lance. From my perspective as a layman the difference
between a breach and suspicious activity is not one that I
believe is particularly relevant. A breach might have technical
connotations to it, but certainly you were aware of untoward
activity prior to that date; is that accurate?
Mr. Smith. No, Congressman, it is not. On the 31st we had
no indication that documents were taken out of the system, what
information was included. It was very early days. It took the
forensic experts as I mentioned earlier from then until the
24th to start to develop a clear picture and that picture still
changed the 24th because we heard just last night the
additional announcement.
Mr. Lance. Many calls have been received by Equifax at your
call center since September 7th. Do you know how many calls
have been dropped or missed due to staffing shortages or other
issues?
Mr. Smith. Congressman, I don't have the exact number, but
as I said in my opening testimony I apologize for that startup.
It was overwhelming in volume, overwhelming. I think I
mentioned over 400 million U.S. consumers coming to a web site
in 3 weeks. We went live in a very short period of time with
call centers. Our two larger call centers were taken down in
the first few days by Hurricane Irma. The team is committed and
was committed to make the experience better for the consumer
and I am told that each and every day the process is getting
better.
Mr. Lance. On August 22nd, you notified a lead director,
Mr. Fiedler--I hope I am pronouncing that right--of the data
breach, and the full board was informed later, I believe 2 days
later. Why was there nearly a week between August 17th and
August 22nd before members of the board were alerted?
Mr. Smith. Congressman, the picture was very fluid.
Mr. Lance. Fluid, fluid. What does that mean?
Mr. Smith. We were learning new pieces of information each
and every day. As soon as we thought we had information that
was of value to the board I reached out to the lead director as
you said, Mark Fiedler, on the 22nd, convened a board meeting
on the 24th. Convened a second board meeting on the 25th and
had subsequent board meetings routinely, if not daily in many
cases, through as recently as last week.
Mr. Lance. Thank you. And my time has expired, Mr.
Chairman.
Mr. Latta. Thank you very much. The gentleman's time has
expired and the chair now recognizes the gentlelady from
California for 5 minutes.
Ms. Matsui. Thank you, Mr. Chairman, and thank you, Mr.
Smith, for appearing here today.
As many of my colleagues have highlighted, the events that
led to this data breach and the actions that Equifax management
took after the fact are very upsetting. It seems that many
Americans are in a place of breach fatigue. But this latest
event that potentially impacts nearly half of all Americans
should light a fire under every member here and I think you
have noticed that it has lit a fire.
We cannot follow the same script after the next inevitable
data breach. That is one of the reasons why I am also
supporting Congresswoman Schakowsky's Secure and Protect
Americans' Data Act. And it is not as if this type of
legislation is unprecedented. Forty-eight states have
implemented laws that require consumers to be notified of
security breaches.
And I am pleased that my home state of California was the
first state to pass this kind of notification law in 2002.
Today, if California residents' personal data is hacked, state
law requires that they are notified in the most expedient time
possible and without unreasonable delay. We must act to ensure
that all Americans are subject to protections like this at the
federal level.
Mr. Smith, because Equifax without doubt has the
information of many California residents, the company is
subject to the California data breach notification law. Can you
please describe to me how Equifax complied with the state law?
Were California residents notified of the breach as required?
Mr. Smith. Congresswoman, I don't have the specific
knowledge of the California law. I can tell you though that we
worked as a team including with our counsel to help us ensure
we were doing what was right for the consumer in the most
expedient manner as possible. So we are aware of the
requirements of the specific state laws, I just don't have the
specific knowledge as it relates to the State of California.
Ms. Matsui. So you also don't know, because the law also
requires Equifax to submit a copy of the breach notification to
the California attorney general, you don't know whether this
was done?
Mr. Smith. Congresswoman, I do not. But we can have our
team follow up through staff if that would be helpful.
Ms. Matsui. OK. In the context of this breach, if data that
you hold is about me do I own it? Do I own my data?
Mr. Smith. Could you please repeat the question?
Ms. Matsui. In the context of this breach, if the data that
you hold is about me do I own it?
Mr. Smith. Congresswoman, we are part of a federally
regulated ecosystem that has been around for a long time and it
is there to help consumers get access with their consent to
credit when they want access to credit.
Ms. Matsui. Well, can you explain what makes data about me
mine compared to what would make it someone else's?
Mr. Smith. The intent, if you will, of the solution we have
recommended, we implement, and are going live with in January
of 2018, is in fact to give you as the consumer through this
lock product for life, for free, the ability to control who
accesses your personal information and who does not.
Ms. Matsui. So at that point in time you believe that I
own, I can say I own my data; is that right?
Mr. Smith. You will have the ability to control who
accesses and when they access your data.
Ms. Matsui. OK. Could I ask you some further questions
following along to what others have asked about, credit locks
and credit freezes? Now limiting access to credit even for a
short amount of time can have real financial consequences
especially for low-income populations. How quickly will a file
be able to be locked and unlocked and how will you ensure that
speed?
Mr. Smith. Congresswoman, thank you for that question. That
is a great advantage of the product we are offering for free
versus the freeze, which again came about in 2004 out of
regulation, and there states dictate how quickly you can access
to freezing and unfreezing your file and oftentimes that can
take days if not weeks because we are mailing data back and
forth to the consumer.
In this case, the intent is in January of 2018, on your
iPhone, you can freeze and unfreeze your file instantly at the
point you want it locked and unlocked.
Ms. Matsui. So, and I recall that one of my colleagues
asked whether a credit lock is the same thing as a credit
freeze and you said it was; is that correct?
Mr. Smith. As far as protection to the consumer,
Congresswoman, it is. As far as ability to lock or unlock and
freeze or unfreeze, a lock is far more user-friendly.
Ms. Matsui. OK. So you currently offer a credit lock
product now and you plan to offer this other one for free
starting the end of January. Would a lock be more economical
for you or would a freeze be? I am trying to get the sense of
the difference, because I think there is a difference here.
Mr. Smith. Yes, if I may one more time try to clarify. As
far as protection they are the same. The lock you are getting
that we offered to the consumers on September 7th gives you the
same level of security you would get from a freeze or from the
product that is going out in January. The difference is today's
lock is browser-enabled; January's lock will be an app on an
iPhone. And secondly, it will be instant on and instant off
versus the freeze or today's lock.
Ms. Matsui. OK. I have more questions but I know I have run
out of time. Thank you.
Mr. Latta. Thank you very much. The gentleman from Illinois
is recognized for 5 minutes.
Mr. Kinzinger. Thank you, Mr. Chairman, and sir, thank you
for being here today.
This is obviously a huge issue, 145 1A\1/2\ million people
affected by this data breach. It is nearly half of all
Americans. That is a failure on multiple levels. It is a
failure to keep consumer personal information secure. It is a
failure to appropriately respond to a breach and a failure to
notify the public and much more. My constituents and the
American people need not just answers but they want assurances
that they are not going to be financially ruined by this.
I do want to make a quick point. Mr. Lujan asked you if the
people that would be harmed by this would be made whole and you
made a statement. And I understand that there is probably some
legal and technical reasons for this, but you said I don't know
if consumers were harmed. I just want to make the point that I
think that idea that people are not harmed in this is
ludicrous. Of course they are going to be harmed. Even if there
is no financial harm that comes to them just even having this
information exposed is a massive deal, but I feel that we are
going to see bigger repercussions from that.
But let me say now, Mr. Smith, I was surprised to find out
that Equifax initially included a requirement that consumers
consent to a mandatory arbitration clause. Why did that happen?
Why was that at the beginning part of the rollout?
Mr. Smith. Congressman, thank you for that question and I
want to clarify. The product offering that went live or the
service offering on the 7th, it was never intended to have that
arbitration clause apply to this breach. It was a standard
boilerplate clause as a part of a product. As soon as we
learned that that boilerplate term was applied to this free
service, I think it was within 24 hours we removed that and
tried to clarify that. That was a mistake and one of the
mistakes I alluded to in my oral testimony about the
remediation product on September 7th.
Mr. Kinzinger. So does Equifax require consumers to consent
to arbitration with respect to any of its other products and if
not is that information prominently disclosed to the consumer?
Mr. Smith. Not as it relates to the breach, Congressman.
Mr. Kinzinger. Well, the question is what about any other
products do you require consent to arbitration?
Mr. Smith. Some of the consumer products we have there is
an arbitration clause in there. It is a standard clause.
Mr. Kinzinger. What is the reason for that?
Mr. Smith. I don't have that answer other than it is a
standard clause.
Mr. Kinzinger. If you could get that to me that would be
good. Your press release indicates that the company has found
no evidence of unauthorized activity on Equifax's core consumer
or commercial credit reporting databases. What are Equifax's
core consumer and commercial credit reporting databases and how
are they distinct from the databases containing personal
information that was subject to the unauthorized theft?
Mr. Smith. Congressman, the area that was impacted here was
a consumer dispute portal where the consumers would come in and
they would dispute activity with us. As separate then a
congressman had talked about, had the credit file in their
hand. That is separate from the core credit data that consumers
have in our database.
Mr. Kinzinger. So in essence, were there 145.5 million
people that at one point had disputed credit issues then, if
that was the----
Mr. Smith. It is a portal they used and they could have
been in that portal for multiple reasons. And we also by
regulation have got to keep data for extended periods of time,
in some cases 7-plus years. So it is a lot of data for a lot
years, but it is outside the core credit file itself.
Mr. Kinzinger. Which company, and I guess you kind of went
into this, which company databases were accessed, but why
wouldn't you consider that then--maybe this is a change now
after this--why wouldn't you consider that to be part of the
core consumer and commercial credit reporting databases?
Mr. Smith. It is just the way we define it. The credit file
itself is housed and managed in a completely separate
environment from a database that consumers can come into
directly. The core credit file itself is largely accessed by
corporations, companies that we deal with versus consumers.
Mr. Kinzinger. OK. So I just want to make sure and you will
have to forgive me, I am not an IT expert. So to get 145
million people's records in only the dispute database, I guess
I am trying to figure out if--you didn't really answer the
question in terms of were there 145 million people that have
disputed at some point in time, half of Americans, or was there
another entry somehow through that that went into other
information? Maybe I just don't understand the IT part of this.
Mr. Smith. The only entry was through the consumer dispute
portal and that is a completely separate environment from the
credit file itself. We also, as you might recall, house a lot
of data for small businesses in America and that environment
which is part of the definition that you were alluding to was
not compromised either.
Mr. Kinzinger. OK. And lastly, are your core consumer or
commercial credit reporting databases encrypted?
Mr. Smith. We use many techniques to protect data:
encryption, tokenization, masking, encryption in motion,
encrypting at rest. To be very specific this data was not
encrypted at rest.
Mr. Kinzinger. OK, so this wasn't but your core is?
Mr. Smith. Some, not all. Some data is encrypted, some is
tokenized. Some it is in motion, some is masked. There is
varying levels of security techniques that the team deploys in
different environments around the business.
Mr. Kinzinger. OK, thank you, sir. I yield back.
Mr. Latta. Thank you very much. The gentleman yields back.
The chair now recognizes the gentleman from California for 5
minutes.
Mr. McNerney. I thank the chair for holding this hearing.
Mr. Smith, it is my understanding that the compromised
information was due to an unpatched vulnerability in the web
application framework Apache Struts? Besides the company's
online consumer dispute resolution portal, does Equifax have
any other portals that use Apache Struts?
Mr. Smith. No, sir. This was the environment that had
deployed Struts.
Mr. McNerney. All right. That was a simple answer. You
might need to restart my time. In addition to Equifax's credit
monitoring and reporting services, the company has Equifax for
business offerings and in this capacity operates as a data
broker. As a part of these services the company collects large
amounts of data about consumers without consumers having any
knowledge of this happening. Was this information compromised
in the breach?
Mr. Smith. I think I understand your question, but could
you repeat that one more time, please, so I get it right?
Mr. McNerney. OK. Well, you are familiar with the Equifax
for business offerings?
Mr. Smith. Yes. We do have product offerings and solutions
for small businesses, medium sized businesses and large
business across the country, correct.
Mr. McNerney. Right. Was information from Equifax for
business also compromised in the breach?
Mr. Smith. No, Congressman, it was not. It goes back to the
question earlier on as part of our, what we call our core
credit data. It was not compromised.
Mr. McNerney. Well, in your testimony you noted that
``throughout my tenure as CEO of Equifax we took data security
and privacy extremely seriously and devoted substantial
resources to it.'' Could you tell us about what investments
Equifax made in cybersecurity during your tenure?
Mr. Smith. Yes, Congressman, I can. When I came to the
company 12 years ago we had virtually no focus on
cybersecurity. At that time cybersecurity was not as
sophisticated as it today. We have gone from the environment to
a team now of over 225 professionals focusing each and every
day on security around the world.
Mr. McNerney. So what timeframe is that?
Mr. Smith. That was from the time I started 12 years ago.
Mr. McNerney. So you say that you hired up to 250 personnel
to fix the issue?
Mr. Smith. I did not, the team did. I didn't hire them,
sir, but we now have a staff of 225 cyber or security experts
around the world. We made substantial investments over that
timeframe. In the last 3 years alone we have invested
approaching a quarter billion dollars in security. There is an
IBM benchmark. It says financial service companies who tend to
be best in class spend somewhere between 10 and 14 percent of
their IT budget in security.
Mr. McNerney. Well, the company was notified of the
vulnerability in the Apache Struts system days before the
attack occurred.
Mr. Smith. Yes. We were notified by Department of Homeland
Security in March of 2017.
Mr. McNerney. And the attack occurred after the
notification?
Mr. Smith. Yes.
Mr. McNerney. So was there a human failure? How could 250
professionals that are designed and hired for that purpose let
a breach like that happen after they were notified?
Mr. Smith. Yes, Congressman. What happened and it was in my
oral testimony was the notification comes out. We had a
communication process in place. I described it as a human error
where an individual did not ensure communication got to the
right person to manually patch the application. That was
subsequently followed by a technological error where a piece of
equipment we use which scans the environment looking for that
vulnerability did not find it.
Mr. McNerney. You mentioned that in your opening testimony.
That seems like a lack of competence or a professional error of
some kind. What did you call it?
Mr. Smith. I described it as a human error and a technology
error, and I apologize for that but that is what happened.
Mr. McNerney. OK, moving on. Do you believe that the FTC
has an important role in protecting consumers from future data
breaches? How much of a role should the FTC be playing at this
point given what has happened?
Mr. Smith. I think there is a role for the business to do
more, industry to do more. We talked about earlier this concept
of offering the consumer the ability to control their data and
lock and unlock when he or she so choose. And if there is
particular legislation that arises out of this horrific breach,
I am sure you would find the management at Equifax and the
industry willing to work and cooperate with the regulators.
Mr. McNerney. Well, the reason I am asking is the Federal
Trade Commission is an enforcement body, but it doesn't have
any rulemaking authority. And do you think the FTC should have
rulemaking authority? Do you think it would have made a
difference or do you think it will make a difference in the
future or do you have an opinion?
Mr. Smith. I have no opinion.
Mr. McNerney. Well, my final question then is how long will
individuals be vulnerable to identity theft problems due to
this breach?
Mr. Smith. We, Congressman, offered five different
individual services, as you may or may not be aware, effective
September. One is the ability to monitor your credit files from
all three of us for free, another is to lock your file, another
is a dark web scanning product.
Mr. McNerney. That doesn't answer my question. How long are
we going to be vulnerable? How long are we going to--our social
security numbers are out there. This is forever, right?
Mr. Smith. Unfortunately, the number of breaches around a
social security number has been on the rise as you know, and
many even this year. So there is another thought and that is,
do we think about how secure, really, is an SSN and is that the
best identifier for consumers going forward?
Mr. McNerney. Thank you, Mr. Chairman.
Mr. Latta. Thank you very much. The gentleman's time has
expired and the chair now recognizes the gentleman from
Kentucky for 5 minutes.
Mr. Guthrie. Thank you, Mr. Chairman.
Thank you for being here, Mr. Smith. We appreciate you
being here to testify. And there is a medical hearing going on
upstairs, so I have been back and forth so I will try not to
double a question. But when I was here earlier and a lot of
people have asked, a lot of us wondered, you know, July 31st
was the suspicious activity and then it seemed the activity or
the notice in the board was about 3 weeks later, August 24th
and 25th.
And so not to repeat before, I heard you say that it was
suspicious activity and therefore you didn't realize it was a
breach and then the action took place 3 weeks later when you
did. Looking back now, knowing how colossal this is and how big
it is, would you have done different? So from July 31st to
August the 24th, what would you have done different that didn't
happen or Equifax didn't do?
Mr. Smith. Congressman, that is an appropriate question. To
be honest, time for reflection will come. There has been no
time for reflection. This has been a team of people including
myself working around the clock for the last 6, 8 weeks trying
to understand the forensics, trying as best we could to stand
up an environment to offer consumers services to protect
themselves. There will be an opportunity where I will have the
time to catch my breath and reflect. I have not had a chance to
do so now.
Mr. Guthrie. Thank you and I appreciate that. Well, 1.9
million Kentuckians were exposed in this hack. And one of the
questions we have about the process that Equifax underwent to
help people determine that and one was setting up a new web
site, not just a portal within your web site, for consumers to
visit. And was that an appropriate response? I know there were
some issues with getting on to the web site. And the question
is were you part of the deliberation and why did you choose to
set up a new web site that seemed to cause issues as opposed to
just doing a portal on your current web site?
Mr. Smith. Congressman, good question. It was strictly due
to the sheer volume of incoming visitors that we had expected.
The traditional web site that we would use to interact with
consumers services a total of maybe 7- to 800,000 consumers at
any one given point in time over a period of time. I mentioned
in my opening comments earlier, this new microsite as we call
it that we set up had a capacity to surge to much higher
levels. We had some 400-, and I think it was, 20 million
consumers come to visit us in the first 3 weeks on that web
site. Our traditional Equifax web site could not have handled
that volume on day 1.
Mr. Guthrie. OK. According to reports, many consumers
weren't able to determine with certainty if their information
was breached. So why was Equifax unable to provide clarity or
certainty on whether individuals' information was breached?
Mr. Smith. When you went to the web site, Congressman, and
you typed in six of your nine digits of your social security
number, if it was likely that you were breached it would say
something along the lines of it looks like you may have been
compromised or breached as opposed to it is definite that you
have been breached, and that is because it was six digits
versus nine. The point is we offer these five different
services to every American. It didn't matter if you were
compromised or not, every American was offered the same
services.
Mr. Guthrie. So, and just going forward, because we have to
also do an analysis and so what we are going to do as a
legislative body going forward to protect the American people.
And what your business does and what people in your business do
are important is when you can sit down at a car dealer, and I
think you kind of mentioned earlier, walk away with a car that
afternoon because somebody can check that you are creditworthy,
and so having those types of services are available.
So what steps is Equifax doing to rebuild the confidence?
People aren't confident that their information is flowing out
there. But the ability to be able to access credit almost
immediately if you have the proper credit is something that
your services provide, but the risk is having all that
information in one place plus the convenience of what your type
of business offers. So what you doing to rebuild or how can
people be confident that this can go forward?
Mr. Smith. Congressman, that is a really good question. And
we are a 118 year old company and we have done a lot of great
things for consumers over those 118 years. We take being a
trusted steward seriously. So step one is to make sure we think
more holistically, broadly, about steps we can and have taken
to make sure we are more secure today than we were at the time
of the breach.
Second thing we could do is offer these services to
consumers we offered on September 7th to make sure they are
protected. And third is to launch this whole paradigm shift
effective January of next year which is to put the power of the
control of the consumer credit in the consumers' hands, not our
hands.
Mr. Guthrie. Thank you, and that would be helpful. So I
appreciate that and now my time is expired. I yield back.
Mr. Smith. Thank you.
Mr. Latta. Thank you very much. The gentleman's time has
expired. And pursuant to committee rules we will go with the
members on the subcommittee by order of appearance and then
after that the non-subcommittee members. So the chair would
recognize the gentleman from Florida for 5 minutes.
Mr. Bilirakis. Thank you, Mr. Chairman. I appreciate it.
Mr. Smith, one of my constituents accessed Equifax's web
site, equifaxsecurity2017.com., to determine if they were
affected. They informed me that whether you submit your own
identifying information or whether you submit a random name and
social security number you get the same message that you may be
affected. What course of action should consumers who haven't
received correspondence yet as to whether they are affected or
not, what is the course of action? And if they were affected
what are the next steps?
Mr. Smith. Congressman, it is my understanding that those
who have gone online to register and that were not notified
immediately that that backlog is completely now drained, if you
will. So if you are trying to sign up for the service, if I
understand your question correctly, you have now been notified.
Mr. Bilirakis. OK. I understand that Equifax currently is
waiving fees to freeze and unfreeze your credit. How long is
that exemption going to stay in place because it is so very
important?
Mr. Smith. It is important. Congressman, we have announced
on September 7th the ability to lock and unlock your file at
Equifax for free for 1 year from the time you sign up. We have
also announced on a product we have been working on for quite
some time, effective in January of 2018, the ability to lock
and unlock your file with Equifax for life for free. That will
be the next generation of the lock that we offered in
September.
Mr. Bilirakis. OK. As CEO, what level of involvement did
you have with regard to the data security and data protection?
Mr. Smith. Yes. The----
Mr. Bilirakis. Obviously, the buck stops with you. I
understand that. But what level of involvement did you have?
Mr. Smith. So data security reported to a direct report of
mine, my general counsel, and I would have active involvement
with my general counsel, with the head of security, routinely
throughout the year.
Mr. Bilirakis. OK. What responsibilities did Ms. Mauldin,
again the chief security officer at Equifax at the time of the
breach, have with respect to data security, data protection,
and data breach notification? What were her responsibilities?
Mr. Smith. Those were core to her responsibilities. She was
the head of cybersecurity and physical security in all 24
countries that we operate.
Mr. Bilirakis. How many briefings did you have with Ms.
Mauldin between March 8th and July 29th of 2017? How many
briefings?
Mr. Smith. I don't recall. We had, as a congressman asked
earlier, there are routine meetings which we go through
security strategy, security quarterly reviews, investment
decisions required for security, but the actual number of times
in that timeframe I don't recall.
Mr. Bilirakis. OK, so say a half dozen, a dozen?
Mr. Smith. That would be a guess, I don't know.
Mr. Bilirakis. It would be a guess. More than three?
Mr. Smith. If it is important to you, Congressman, we can
find that information.
Mr. Bilirakis. Give me that information, I appreciate that.
What responsibilities did Mr. Webb, the chief information
officer at Equifax at the time of the breach, have with respect
to data security, data protection, and data breach
notification?
Mr. Smith. Directly, none, sir. He was expected obviously
as the head of technology to work closely with the head of
security, but the security function was a separate function.
But you can't do security without IT, you can't do IT without
security.
Mr. Bilirakis. How many briefings did you have with Mr.
Webb, again between March the 8th and July 27th of 2016?
Mr. Smith. If I may just clarify again, on March 8th is
when the CERT came out saying there was a vulnerability in
Apache Struts. I was not even notified to put it in perspective
that there was an incident and didn't know what the incident
was until July 31st. So the number of meetings I would have
with Dave Webb would not have been related to this incident.
Mr. Bilirakis. All right, Mr. Chairman. Thank you, I yield
back.
Mr. Latta. Thank you very much. The gentleman yields back
and the chair recognizes the gentleman from Indiana for 5
minutes.
Mr. Bucshon. Thank you, Mr. Chairman. Thank you for being
here. And again I was at the Health Subcommittee hearing too,
so I am back and forth. Sorry about that.
But is it possible for people who never signed up or used
Equifax directly could have been impacted by the breach?
Mr. Smith. Yes, Congressman.
Mr. Bucshon. OK. So how does Equifax get the information on
people who have never directly associated with Equifax at all?
I mean I am not familiar with that.
Mr. Smith. Yes. We get it from banks, telecommunications
companies, credit card issuers, so on and so forth.
Mr. Bucshon. So just like, when we go to apply for a loan
they send you the information because they want to get a data,
they want to get the information on my credit rating, for
example?
Mr. Smith. Correct. As I define it we are part of the
federally regulated ecosystem that enables banks to loan money
to consumers.
Mr. Bucshon. Right. So it is up to the banks at that point
to notify the individual which credit agencies they are
utilizing to assess their credit risk, or is it up to the
credit agencies?
Mr. Smith. Traditionally, the contributors of the data in
that case, Congressman, the banks, would give their data to all
three. That is the benefit of the system is you get a holistic
view of an individual's credit risk.
Mr. Bucshon. Yes, and my point is I guess because a lot of
people I talk to back in Indiana, southern Indiana, have no
idea who Equifax is, right. And many of those people have
applied for home loans and other things and matter of fact
probably at some point you have their information, but they
just, they may or may not have been notified who had sent the
information to them, probably the bank or other agency.
And that is just something I think that is also maybe an
issue that people don't understand or have not been told who is
being used to assess their credit risk, and hence something
like this happens they have no idea whether or not their
information has been compromised.
Mr. Smith. I understand your point.
Mr. Bucshon. Yes. I also have a lot of constituents in
rural and lower income areas that may or may not have access to
the internet and WiFi. The penetrance of that it is interesting
depending on where you are of people who actually have WiFi and
the internet is not as high as you might think in rural
America, but some of those people still have probably applied
for loans and other things where their information could have
been acquired by your company.
How are you notifying all of those people other than saying
that you have a web site? And you may have already answered
that and I apologize if you have. But that is important because
again the penetrance of people having access to the internet
may be not as high as you think when you come out to like rural
Indiana and other areas.
Mr. Smith. Yes. Coming from Indiana I understand rural
Indiana.
Mr. Bucshon. There you go.
Mr. Smith. Congressman, we have set up the web site that
you mentioned at a press release across the country. We have
also set up for those that don't have access to the web, to the
internet, call centers. We have staffed up. We have gone from
some 500 call center agents to over 2,700. So----
Mr. Bucshon. I guess that is, again, I understand the call
centers and all that. I knew you had done that. But I guess
that is again making the assumption that people have watched
the news and know that there has been a breach and that they
are proactive in trying to find out whether they have been
involved or not.
Is there any, other than a passive way for them to find
out, is there anything proactive from Equifax's point of view
that might notify them that their data may have been
compromised?
Mr. Smith. Well, in many states there is local
requirements, state requirements to take out advertisements in
newspapers and so forth. We follow those. One indication I did
mention earlier, it may or may not help those in rural Indiana,
but the visibility this has gotten is extremely high. I
mentioned 400 and some odd million consumers had come to our
web site, so it has gotten the press.
Mr. Bucshon. And probably after today it will be, maybe
more people will know. So thank you for answering those
questions. Like I said, my main concern is that my constituents
understand whether or not their data has been compromised and
then what are their options going forward. You have outlined
most of those things today. I am not going to ask you that
again.
But I do think it is important to recognize that you know,
although they are important, passive ways to have people become
aware of their data may be compromised is one approach, but
also actively informing people proactively might very well be
important in certain areas of the country. Thank you, I yield
back.
Mr. Latta. The chair now recognizes the gentleman from
Texas for 5 minutes.
Mr. Green. Thank you, Mr. Chairman, and I apologize. We
have a Health Subcommittee upstairs and I appreciate it. That
is not to take away the importance of this hearing. I want to
thank you and our ranking member for setting it.
We are here to discuss one of the worst and most impactful
hacks that we have seen. It is a breach that was entirely
preventable due to a level of negligence that in some
industries may be considered criminal. The credit reporting
industry is infamously unforgiving and it is an industry that
helps perpetuate the cycle of poverty. Agencies like Equifax
force those with lower credit scores to pay more money for
loans and mortgages, less than perfect credit scores can even
result in higher rates for products that they don't require
credit like our auto insurance premiums. These people who have
a harder time paying back higher interest rates make it more
likely they won't be able to pay their debt back on time and
will hurt their credit further. Yet Equifax and the rest of the
credit reporting industry expect forgiveness for breach after
breach, lobbying Congress for even less liability.
When restaurants fail regular health inspections they are
routinely shut down for violations. They are shut down even if
problems haven't yet occurred as a consequence of their
violations. It isn't clear to me why Equifax, who is beyond
that point, should be allowed to continue operating when they
have failed spectacularly at their core business and endangered
the public. In the next couple months, Senate Republicans may
repeal the Consumer Financial Protection Bureau's arbitration
rule thus allowing companies like Equifax to put clauses in
their fine print forcing individuals into arbitration
agreements instead of class action agreements where they stand
a chance of being able to cover some of their loss.
But it should be clear to us by all that is now not the
time to roll back consumer safeguards in the financial industry
and I support my colleague and our ranking member Congresswoman
Schakowsky's Secure and Protect Americans' Data Act. I look
forward to hearing what our witness has to say.
Mr. Smith, ID theft protection companies have seen a big
jump in business and share price since the breach of your
company including LifeLock who has reported a tenfold increase
in enrollment for their credit monitoring and other services.
LifeLock has a contract to purchase credit monitoring services
from Equifax, meaning that every time someone signs up for
LifeLock protection from the impact of Equifax' data breach
they again involuntarily sign up for Equifax to provide those
services and Equifax makes money on that breach. What is the
value of that contract that LifeLock has with Equifax?
Mr. Smith. Congressman, I don't recall what that is. But at
the same time, those same consumers have the ability to come to
us directly and get free product.
Mr. Green. OK. If it is available I would hope you would
send it and share it with the committee. Mr. Smith, an Equifax
report marketed to its business customers says that leading
lifestyle databases available commercially offer hundreds of
response segments covering almost every conceivable aspect of
how consumers live and what they spend their money on and what
interest they have.
Can you tell us on as granular level as possible what the
sources are for that data for every conceivable aspect of a
consumer's life?
Mr. Smith. Congressman, I am not quite sure what you are
referring to. We are not a data provider in the area of
behavioral analytics, behavioral data, social media data, so I
am not quite sure what you are referring to.
Mr. Green. Well, I have a lot of constituents who are
concerned about, for example, they say oh, I don't need to
worry about this breach, I haven't applied for credit for 10
years. But that is not always the case because these hundreds
of millions who are released, maybe they bought a car 20 years
ago and that data still goes forward, I assume.
Mr. Smith, Equifax customers are businesses who purchase
data and credit reports on consumers. The American public is
essentially Equifax's product. How many times per year on
average does Equifax sell access to a given individual's credit
file to a potential creditor and how much do they make every
time they sell it?
Mr. Smith. If I understand the question, Congressman, we
take the data that is given to us by the credit ecosystem of
the U.S., add analytics to it, and then when a consumer wants
credit again through credit card, home loan, a car, the bank
then comes to us for that data and for the analytics and we
charge them for that.
Mr. Green. OK. Well, the question was how many times does
Equifax receive payment for that individual credit file? If my
local car dealer contacts Equifax and so they pay a fee to
Equifax for that information?
Mr. Smith. Yes, Congressman. If you as an individual want
to go to that car dealership and get a loan for a car they come
to us or our two competitors, and when they take your data,
access your data we do get paid for it.
Mr. Latta. Pardon me. The clock wasn't started right. You
have about 15 seconds.
Mr. Green. I am sorry?
Mr. Latta. You have about 15 seconds. The clock didn't
start up on you, so you have 15 seconds.
Mr. Green. Oh, OK. Oh, I thought I just had a perpetual
time.
Mr. Latta. No.
Mr. Green. Mr. Chairman, I just have one more question. The
products that Equifax are so far providing victims of the
breach do not include anything they won't need if it weren't
for Equifax's laxes on their data. You, however, made more than
$69 million in 2016. And so, but that is the concern that this
committee has and I know we have for all our constituents.
And I thank you, Mr. Chairman, for your time.
Mr. Latta. Well, thank you very much. I appreciate the
gentleman's questions. And the chair now recognizes the
gentleman from Oklahoma for 5 minutes.
Mr. Mullin. Thank you, Mr. Chairman.
Mr. Smith, what is your current job?
Mr. Smith. I am retired.
Mr. Mullin. You are retiring. Are you still getting paid by
the company?
Mr. Smith. No, sir.
Mr. Mullin. So you are fully retired and so you have no
affiliation at all with the company? You are not on as a
contractor or as----
Mr. Smith. No, Congressman. What I agreed to do because I
love this company, I spent 12 years with 10,000 people trying
to do the right thing, is I told the board it was right for me
to step down and have new leadership, take this company in a
new direction. So when I retired I agreed to work for as long
as the board required, for free, to help make it right for the
consumers. So the affiliation is to do free work with the board
of directors and the interim CEO.
Mr. Mullin. So you are not getting paid in any manner, not
through any type of shares, stocks, anything?
Mr. Smith. Nothing. The day I announced my retirement that
ended.
Mr. Mullin. Do you still own stock in the company?
Mr. Smith. I am sorry?
Mr. Mullin. Do you still have stock in the company?
Mr. Smith. Oh, yes.
Mr. Mullin. Have you sold any of it?
Mr. Smith. I have been there for 12 years. Yes, sir.
Mr. Mullin. In recent, since this has become aware to the
public?
Mr. Smith. During this breach?
Mr. Mullin. Yes.
Mr. Smith. Oh. No, sir.
Mr. Mullin. Are you aware of the individuals that have?
Mr. Smith. Yes. There are three individuals who reported
directly to me while I was their CEO.
Mr. Mullin. That sold stock?
Mr. Smith. Yes. One, yes, and all three of them are men I
have known, I mentioned earlier, for a number of years. Two for
almost 12 years and one for 3 or 4 years and they are men of
high integrity.
Mr. Mullin. Did they sell it before this went public?
Mr. Smith. Yes. As I said before, we went public with this
knowledge on September 7th.
Mr. Mullin. And when did they sell their stock?
Mr. Smith. August 1st and 2nd.
Mr. Mullin. So after the breach?
Mr. Smith. No, sir. The timeline of the end of July, 29th
and 30th and notification on the 31st of suspicious activity,
at that time 1 or 2 days prior to their selling there was no
indication of a breach.
Mr. Mullin. So what would cause them to sell it?
Mr. Smith. As a what we call a Section 16 Officer, there is
a limited window in which they can sell. It tends to be right
after the earnings call for no more than 30 days, so this is a
natural process. The window opened after the second quarter
window, second quarter call.
Mr. Mullin. In your opening statement you had mentioned
that there was an error in the portal and it was 3 weeks before
you were notified of a breach?
Mr. Smith. If I can clarify?
Mr. Mullin. Yes.
Mr. Smith. There was a software, it is called an open
source software that was deployed in this environment, this
consumer dispute portal.
Mr. Mullin. Right.
Mr. Smith. We never found a vulnerability, didn't patch
that vulnerability. That was the issue.
Mr. Mullin. So who was in charge overseeing that? Who was
supposed to be watching those portals for you?
Mr. Smith. Ultimately me.
Mr. Mullin. I know. Ultimately you, I get that. But who did
you have hired that was supposed to watch that?
Mr. Smith. There was on the vulnerability side, there was
the----
Mr. Mullin. Do you have a department that is dedicated to
this?
Mr. Smith. Yes. There is a chief information officer who
was ultimately responsible. He was----
Mr. Mullin. Is that person still over that department?
Mr. Smith. No, sir. He is gone.
Mr. Mullin. He is gone. You said you put in, once you were
made aware of the breach you put in four plans of action,
right. The first one was, do you remember?
Mr. Smith. Notification.
Mr. Mullin. Notification. The second one was a call center.
The third one was increased cyber attacks, preparing for that.
The fourth one was coordinating with law enforcement. I am also
or was CEO, not on a company the size that you have but from
the companies that my wife and I have had and we have protocols
put in place of what could happen. We know cyber attacks
happen, you hear it every day on the news.
These four things that you named were common sense, things
that should have been put in place to begin with. It should
have been the fire alarm. You are in that world. This should be
on the side of the wall where you pull the handle and it
immediately goes into place. How was it that it was just now
thought of that you needed to have four common sense principles
put in place on how to react to something in a world where we
knew you were vulnerable at?
Mr. Smith. We have protocol, team followed protocol. This
is well known what to do. From hiring a cyber forensic expert
we knew what to do, we have done it before. Engaging a world-
leading cyber arm of a law firm, we knew what to do. These are
all protocols that they knew what to do.
The one thing, Congressman, it is not a switch on a wall.
It is the ability to stand up the environment we had to stand
up----
Mr. Mullin. It took a long time to stand up and that is the
issue we have here is you are on the leading front of this. And
the four things that you identified to me, I don't mean to
simplify it by saying a switch on a wall, but these protocols
should have already been put in place and you should have been
on a react much, much sooner than what took place. And with
that I am sorry. I don't mean to cut you off, but the chairman
has indulged me longer than what he should have and I
appreciate your time. Thank you, Mr. Chairman.
Mr. Latta. Thank you very much. The gentleman's time has
expired and the chair now recognizes the gentlelady from
California, Mrs. Walters, for 5 minutes.
Mrs. Walters. Thank you, Mr. Chairman.
Mr. Smith, before I get to my question I just want to say
that on behalf of the 15 million Californians whose information
was exposed, we expect better. Your business model was based on
collecting and maintaining the most sensitive information on
folks and you let us all down and that happened on your watch.
And from my briefings it appears that this could have been and
frankly should have been prevented.
Now Equifax's business model depends on gathering consumer
information, repackaging it, and selling it. Equifax has set up
a web site in which consumers can enter information to
determine if they are at risk and sign up for credit monitoring
and credit lock. To participate, a person has to give Equifax
the same type of personal information, including social
security number, which Equifax put at risk in this breach. I
want to know what Equifax is planning to do with this
information besides offering credit monitoring and credit
locks. Can you ensure me that Equifax will not plug this
information back into its core business operation and sell it
to its lenders?
Equifax should not benefit from the situation and I want to
know that Equifax is going to wall off this information and
guarantee that the company will not profit from this situation.
Mr. Smith. Congresswoman, thank you for your comments. And
as I mentioned in my written testimony and my oral testimony, I
have said throughout the morning and I will say again today, as
the CEO it was under my watch. I am responsible. I am
accountable and I apologize to all of your consumers in
California.
The intent of this offering that we are giving to your
constituents in California and to consumers across the country
is in an environment where we are not going to sell other
products. It is to come there and be service protection of the
five offerings that you had mentioned, not to sell and take
your data and monetize that. It is to take and protect you with
these five services.
Mrs. Walters. Equifax's breach notification web site uses a
stock installation of WordPress. This causes me a lot of
concern because it seems to have insufficient security for a
site asking people to provide part of their social security
number. Can you assure me that this web site is secure and will
not further endanger the personal information of my
constituents?
Mr. Smith. Congresswoman, we took what we believe was the
right amount of time working hastily from late August to going
live on the 7th. One of the four work streams the Congressman
from Oklahoma mentioned was ensuring we were prepared for what
was going to be increased cyber attacks as told to us by our
forensic examiners. And one of the first things we did was
ensure that the web site we were bringing consumers to, to get
these free services, was as secure as possible. So that was one
of our top priorities.
Mrs. Walters. OK. And finally, my last question is how many
U.S. consumers have enrolled in the credit monitoring service
TrustedID? I will just finish here, because I know multiple
people who have enrolled including my immediate family and they
were told that they would receive an email to complete the
process. After days of waiting they have not received an email
and wanted to know what the delay is in processing this
protection and when will they be able to complete the process
to help protect their information?
Mr. Smith. I understand the question and I mentioned
earlier that over 400 million consumers have come to the web
site. I would assume we don't have 400 million consumers in the
country so a number of them came back multiple times. But it is
a lot of volume. Number two, I was told in the last few days
that the backlog waiting for those emails has now been
fulfilled, had been drained. As you come into the system it is
a more immediate response, so the team seems to have made great
progress in the last couple weeks.
Mrs. Walters. OK, thank you. And I yield back the balance
of my time.
Mr. Latta. Thank you very much. The gentlelady yields back
and the chair now recognizes the gentleman from Pennsylvania
for 5 minutes.
Mr. Costello. Thank you, Mr. Chairman. I have heard from
hundreds of constituents in my congressional district. There
are approximately 5 1A\1/2\ million in Pennsylvania. I have
reviewed each and every one of the constituent stories that I
have received.
And among my growing concerns, your baseline security
practices leading up to the breach, the company's awareness of
the breach developments and relevant timing, how consumers can
get assistance in securing their accounts, how reliable the
recovery efforts are in the wake of the breach, and the path
forward long term for consumers' personal information and
making sure they are safe despite the breach.
And it is this last one that is so particularly angering
because it is going to potentially be so destructive to
hundreds of millions of Americans what might happen to them in
the years to come. And as the head of the company and
throughout the company, the culture of that company has to know
how predictable the damage can potentially be.
And so I ask you, is it not predictable how bad it might
get for the individuals who have been compromised in terms of
how much damage could be wrought upon them individually in the
years to come?
Mr. Smith. Congressman, let me start by saying that like
you I have talked to constituents, consumers across this
country who have been impacted. I have personally read letters
from consumers complaining and voicing their anger and
frustration, so I know what you were seeing back home in
Pennsylvania.
Mr. Costello. See, I think the anger is going to be
multiplied thousands of times when something actually happens.
So when you talk about how predictable some of this is, the
rollout of the call centers and the second rollout and the
third rollout, it has to be predictable how massive this is and
what would need to be put in place from a protocol perspective
in order to address what is coming.
And the slow rollout and how poor it was done to me is just
inexcusable. I mean you have to have departments dedicated to
dealing with this potential and it doesn't appear to me as
though that was planned. Or if it was planned it was planned
extremely poorly.
Mr. Smith. I understand your point, but it requires a
little more color. We went from 500 call center agents to a
need of almost 3,000. Properly handled call center agents to
handle consumer calls took time. We did the best we could in a
short period of time to ramp those up. I mentioned in my
opening comments two of our larger call centers in the first
weekend----
Mr. Costello. I understand, the hurricane.
Mr. Smith [continuing]. Taken out by Hurricane Irma. We
were not prepared for that kind of call volume.
Mr. Costello. How couldn't you be? How couldn't you be?
Mr. Smith. It is not our traditional business model. Our
traditional business model is dealing with companies, not 400
million consumers coming to the web site.
Mr. Costello. But your business model has a couple hundred
million customers, so on a breach of this scale obviously you
are going to have at least that number and probably twice that
amount calling, inquiring as to whether or not they are subject
to the breach and that wasn't done.
Mr. Smith. Congressman, the difference is again the primary
business model we have is dealing with companies, not with
hundreds of millions of consumers. We did the best we could to
react as quickly as we could. I had mentioned that the service
is getting better each and every day. We have listened to
consumers' feedback and tried to make changes to the web site,
we have made changes to the call center.
Mr. Costello. You are familiar with the Safeguards Rule
that is essentially what you operate under?
Mr. Smith. Yes.
Mr. Costello. How often does a forensic consultant issue a
letter or a certification or a law firm issue a certification
that they feel your protocol is in compliance with the
Safeguards Rule?
Mr. Smith. We are in compliance. I am not sure how often
that is actually communicated, is you are saying communicates
with us?
Mr. Costello. How would you know that you are in compliance
then? Because if you said you followed protocol and protocol
led to this, then it is very difficult for me--that calls into
question whether the Safeguards Rule is sufficient enough.
Because if you are saying you are in compliance with it and you
followed protocol and this still happened that unearths a whole
other set of questions.
Mr. Smith. Again the speed of reaction and the scale of the
reaction was unprecedented for. I am not making any excuses.
Mr. Costello. Yes. But there is a corporate governance
issue here as I see it and that is your board of directors gets
together, you are CEO. You have a chief information officer,
you have a chief security officer and at least once a year and
probably quarterly you have, I presume, outside forensic
consultants doing this stuff every single day from you on
retainer. And the speed at which you have to do this just to
run your company operationally you don't ever stop. It is
obviously ongoing and persistent.
And it just seems to me that through insurance policies,
through reporting to your board, through your board wanting to
make sure that they are doing their job that you are going to
be looking for certifications from your outside forensic
consultants doing audits to say yes, you are doing good. You
are doing good. Here are the new threats. Here is how we are
updating. That is the kind of information I think would be
extremely helpful that we have not received any information
from today.
But I would ask you since I am well over my time that I
would like to know how often your board asks you to certify
whether or not you are in compliance and what is that protocol
and when was the last time you updated that protocol? You said
you have complied with protocol. When was the last time that
was updated?
Mr. Smith. I understand your question. We will get you that
information.
Mr. Costello. Do you yield back after you are already well
over? I yield back.
Mr. Latta. Your time is expired, how is that? The chair now
recognizes the gentleman from Georgia--I am sorry. The
gentleman from New York, 5 minutes.
Mr. Tonko. Thank you, Mr. Chair. Americans should know
their sensitive personal information is safe. Their security is
exposed when private companies including Equifax can collect
their private information without their direct knowledge or
consent, and it is why I am co-sponsoring Representative
Schakowsky's measure, H.R. 3896, the Secure and Protect
Americans' Data Act.
Mr. Smith, we are here today because months after the
breach actually took place your company, Equifax, revealed that
its for-profit business practices have exposed the highly
sensitive personal information of some 145 1A\1/2\ million
Americans and counting. Your data breach exposed a critical
vulnerability in the American economy and the information
security of the American people. Victims of this breach span
every age group, every race, class, and other demographic. They
now face a lifetime at risk of fraud, identity theft, and other
crimes as a result of the private data that you exposed.
I have many, many questions and allow me to be the conduit
through which my constituents ask you, Mr. Smith, their
questions. I will go first to Garance (ph.), a constituent,
pointed out to me it would be wrong to call the victims of this
breach Equifax customers. Most of them never asked to be
tracked and judged by a private company with little public
oversight or accountability. This is unacceptable. And he asks
why he has been impacted in this manner. Any comment to
Garance's question?
Mr. Smith. Again, Congressman, I have read many similar
letters and talked to people back home in Atlanta who voice
that same concern. I can tell you this. Where a company has
been around for 118 years, have 10,000 employees trying to what
is right each and every day, I apologize to the individual who
wrote you that letter. I apologize to America for what happened
and we are going to try to make it right.
Mr. Tonko. My constituent Jason from Albany asked, Mr.
Smith, did you to the best of your knowledge employ the best
and most effective defense available to you to prevent this
breach?
Mr. Smith. A crisis never occurs if everything has gone
right. In this case as I mentioned earlier we had a human error
and a technology error. It wasn't because we were unwilling or
unable to make the financial investments in people, process, or
technology though.
Mr. Tonko. My constituent Tanya asks, how do I get Equifax
to fix this without signing over my rights and what related
costs will I, Tanya, be expected to pay over my lifetime?
Mr. Smith. The five products we launched or the services we
offered in September are all free. They are all spelled out in
the press release that gives that individual significant
protection. The most comprehensive change is coming in January
of next year which is the ability for consumers to lock and
unlock their data when they want and only when they want.
Mr. Tonko. And any related costs that she should expect to
pay over her----
Mr. Smith. Those services are all free.
Mr. Tonko. A number of my constituents would like to know,
given that the sole purpose of credit agencies is to secure
handling of consumers' confidential information which they
spectacularly failed to do that why is this company allowed to
continue to exist?
Mr. Smith. We have a rich history of helping those who want
to get access to credit to get access to credit. The company
has done many great things to help those in the unbanked world
who would never otherwise have access to credit because of what
we do, bring them into the credit world.
Mr. Tonko. Constituent Lee from Albany asks, why are you
using this gross misconduct to turn your victims into customers
for a paid monitoring service that you will profit from?
Mr. Smith. That is not the intent. Our intent is to offer
those five services for free, followed by the sixth service,
which is a lifetime lock for free.
Mr. Tonko. My constituent Karen asks why have you not
notified each person whose data you compromised? Most never
asked you to collect it and securely store their private
information, so we are the representatives and why should they
be responsible for your malpractice?
Mr. Smith. Following the recommendation of those who
advised us we did notify through the press release notifying
the entire population, not just those who were victim of the
criminal act but all Americans, to get access to these products
and services for free.
Mr. Tonko. And my constituent James from Defreestville, New
York asks why did it take you so long to announce the data
breach and why shouldn't you be held responsible for every day
of failing to report?
Mr. Smith. I think hopefully my written testimony and my
oral testimony and the dialogue we have had today has talked
about the timeline in enough granularity to help that person
understand what occurred from March through September 7th.
Mr. Tonko. And a constituent Stephanie from East Greenbush
asks, do they know if the people were targeted or randomly
picked? Why some but not others?
Mr. Smith. At this point all indications are it was at
random. It was not targeting of individuals specifically.
Mr. Tonko. I have exhausted my time, but let me assure you,
Mr. Smith, I have many, many, many constituent questions that
continue to pour forth and we are going to provide those after
the hearing here and would expect that they would all be
answered. And again thank you for your response. I yield back,
Mr. Chair.
Mr. Latta. Thank you very much. The gentleman yields back
and the chair now recognizes the gentleman from Pennsylvania
for 5 minutes.
Mr. Murphy. Thank you, Mr. Chairman, for allowing me to sit
in on this hearing. My fellow members have already asked a lot
of questions, very important high level questions, but I want
to take a few moments to dig a little more deeply into a few
specific issues.
We now know that Equifax information security department
ran scans that should have detected systems that were
exploitable by the Struts' vulnerability but that the scans
didn't detect any. Obviously at least one system was
vulnerable. So if the scan wasn't properly configured to catch
this vulnerability, in other words you missed a major breach,
is it possible that it has also been improperly configured to
detect similar vulnerabilities?
Mr. Smith. I have no knowledge of that. I have no knowledge
of that being the case.
Mr. Murphy. But now you have to feed the information in
these scans and it has to be complete and accurate information
and this information apparently was fed in an inomplete way;
isn't that true?
Mr. Smith. Could you repeat the question, please?
Mr. Murphy. In order to scan something a human has to feed
it information, right?
Mr. Smith. I am not a scanning expert, Congressman. My
understanding is you have got to configure the scanner in
certain ways to look for certain vulnerabilities.
Mr. Murphy. Yes, but a lot of what is going on here is you
are blaming, they say no humans are involved here, but
configuring is done by a human being, isn't it right? And some
inaccurate information got in there too. So if it was
improperly configured to catch the vulnerability, is it
possible it has also been improperly configured to detect
similar vulnerabilities?
Mr. Smith. I have no indication to believe that is the
case.
Mr. Murphy. We have also heard a lot about the web site
Equifax set up to handle the consumer protection response at
equifaxsecurity2017.com. As it has been pointed out, this looks
like a web site that scanners would use for phishing. In fact,
it was widely reported in the press someone switched two words
and made it into phishing web site that looked almost
identical. Luckily, this person was just trying to make a
point, but I think that point is well taken.
You said earlier today that you set up this external web
site because Equifax's own domain wouldn't be able to handle
the sheer amount of traffic. Now why wouldn't your web site be
able to handle this traffic? I mean it just doesn't make sense
a company of your size and knowledge doesn't understand how to
handle traffic for over a 100 million people. Don't you use an
elastic cloud computing service that would have accounted for
this traffic?
Mr. Smith. Congressman, a point of clarification, if I may.
This phishing site that you referred to was mentioned a few
times today, was a error by an individual in the call center.
My understanding is----
Mr. Murphy. Well, let me get this other question though.
OK, we have that established, but I want to ask this question
though. Your own domain wouldn't be able to handle the sheer
amount of traffic, but don't you use something like an elastic
cloud that would allow for greater traffic?
Mr. Smith. The environment the microsite is in is a cloud
environment that is very, very scalable. The traditional
environment that we operate in could not handle 400 million
consumer visits in 3 weeks.
Mr. Murphy. Well, I am going to come back to some of this
stuff too. I want to come back to the issue of patching the
March vulnerability. Now I know this has come up a few times,
but I want to make sure to highlight this point since it is
critical in understanding how this breach occurred here.
Our understanding is that fixing this vulnerability
required more effort than simply installing a patch. But we
also understand that when Equifax did patch the vulnerability
it took less than 3 days to do so. So if the patch only took a
few days to apply, why did Equifax fail to install it
immediately after it was announced as critical?
Mr. Smith. Patching takes a variety of time. I am not sure
where you got the note that it is 3 days. Patching can take
from days to up to a week or more to apply a proper patch.
Mr. Murphy. Did you notify everybody it was going to take
some time? Did you notify all your customers it was going to
take some time? Did you notify people there was the risk of
your trying to apply the patch?
Mr. Smith. I know of no standard protocol that we would
notify----
Mr. Murphy. I didn't ask about standard protocol. I asked
did you notify people.
Mr. Smith. I have no knowledge that we would notify
customers or consumers of a patching process.
Mr. Murphy. So you didn't notify anybody that the patch was
going to take place and in the meantime there was a risk that
existed?
Mr. Smith. I have no knowledge of need----
Mr. Murphy. Did you notify other people--did other people
and the executives of your company, were you aware of it?
Mr. Smith. As I have said before I was not.
Mr. Murphy. You were not aware that there was this problem
with the vulnerability? You just told me it takes a few days or
a few weeks, but you weren't aware that it existed?
Mr. Smith. That is correct.
Mr. Murphy. Well, let me wrap up with one final thought
here. In your testimony you state that the breach occurred
because of both human error and technological failures, or
technology failures. So looking at the three features I just
highlighted--the improperly configured scans, the poorly chosen
web site, the lack of patching--these are not failures of
technology. A human misconfigured the scan. A human selected
the web site name. A human failed to apply the patch.
While I understand that cybersecurity is an immensely
complicated field, we have dealt with this many times in this
committee and sometimes flaws in technology we rely on are
really to blame, but I also think it is important to be upfront
about the causes of breaches like this. And if we continue to
blame technology for human failures to provide inadequate
cybersecurity, I think we are going to have a very difficult
time improving our capabilities and preventing future cyber
threats.
Mr. Chairman, I recognize I am out of time. We will see you
again in my subcommittee.
Mr. Latta. Thank you very much. The gentleman's time has
expired and the chair now recognizes the gentleman from
Maryland for 5 minutes.
Mr. Sarbanes. Thank you, Mr. Chairman.
Mr. Smith, thank you for being here. You have been the
president of the company for, CEO for 12 years; is that right?
Mr. Smith. That is correct.
Mr. Sarbanes. There is three things I think that the public
is angry about. Certainly, as my colleague was indicating, we
are getting a lot of messages and contacts, inquiries from our
constituents across the country.
First of all, they want to understand. And you have tried
to explain it today, but I am not sure it is going to be
satisfactory why there weren't sufficient protections in place
on the front end so that this kind of breach wouldn't happen in
the first place given the sensitivity of the information that
you are keeping in the company. The second thing is how quickly
once a breach was discovered you came clean to the public and
provided information on what was happening. There seems to have
been a delay there that concerns people.
The third is whether the services that you are now
providing to people, you have enumerated to five or six free
services that you are providing to people, whether that is
going to be a sufficient assurance to folks going forward that
their identity can be protected, that their information is safe
and so forth. So you are trying to fix things now, but there is
going to continue to be, I think, serious questions about all
three of those things that I just mentioned.
I wanted to ask you about the kind of remedies that you
have out there because there is some confusion. I got a
question from a constituent who had purchased a monitoring
service that would cover his family including a child under the
age of 18. So first of all, can you tell me, it is possible for
someone under the age of 18 to have their identity stolen. Is
that correct as far as you understand?
Mr. Smith. Is it possible?
Mr. Sarbanes. Yes.
Mr. Smith. As it relates to this breach?
Mr. Sarbanes. Just generally. Identity, if certain
information about a minor is divulged to some unscrupulous
actor that can be used to steal the identity of that person.
Mr. Smith. If someone has a social security number, at any
age, can that be compromised? Yes. It could not be compromised
in this case because this database they got into it is my
understanding only was for those who had credit, credit active
or inactive, and they have been in a credit environment.
Mr. Sarbanes. OK. But my understanding is that when you
provide a family service you are collecting information and
holding information that includes the social security number of
people who may be under the age of 18.
Mr. Smith. I have no knowledge that under 18, not credit
active, was compromised here. I can look into that.
Mr. Sarbanes. OK.
Mr. Smith. But I have no knowledge.
Mr. Sarbanes. If that is the case, is this free service
that you are providing going to cover any exposure or
information that is related to a minor, as opposed to somebody
who is over the age of 18, if you had information on that
minor?
Mr. Smith. I can look into that, Congressman. The intent of
the coverage was to cover anyone in America who is in the
credit system. So if you are under 18 and not in the credit
system, I will check your one point which is on this concept
called family plan that you are alluding to where you lock down
consumers, you monitor consumers. I don't believe their social
security numbers were in this system, but we can verify that.
Mr. Sarbanes. Well, that is important because----
Mr. Latta. If I could just interrupt. I think again we had
a little clock issue. You have about 30 seconds left. Thank
you.
Mr. Sarbanes. OK. I think it is important because it may be
that with respect to credit reporting the implications of this
breach only attach to people that are 18 or older. But if you
are holding information about minors like a social security
number that is part of the portfolio of information you are
getting from a family, for example, particularly when the
family has paid for this service, you are holding their social
security number, so any breach that makes that information
available outside of the arena in which it is supposed to be
kept close creates vulnerability for that person.
It is not like we get a new social security number when we
turn 18. So that is going to follow them all the way through
and create some real risk for them. So I think that is a piece
of this that we need to understand much better, and I want to
thank my constituents for bringing that to our attention.
Mr. Smith. I understand your point. To the best of my
knowledge, that data is not included in the breach, but I will
look into it.
Mr. Sarbanes. Thank you. I yield back.
Mr. Latta. Thank you very much. The chair now recognizes
the gentleman from Georgia, 5 minutes.
Mr. Carter. Thank you, Mr. Chairman. And I want to thank
you for allowing me to sit in on this today.
Mr. Smith, thank you for being here. I know it has been a
tough day. It has been a tough past couple of weeks. I
appreciate you being here and that is important. I am not going
to apologize for my colleagues and their questions and their
aggressiveness, if you will, because as you know people are
upset and they are mad. You get it and I get it, we all
understand it. But nor am I going to pile on, so I want to go a
kind of different route, if you will.
One of the things that I have learned in the 2 1A\1/2\
years that I have been up here is to be very careful about my
southern phrases, but one of my southern phrases has always
been that you know, fool me once shame on you, fool me twice
shame on me. And I want to know what we can learn from this.
Now this is not the first time that a data breach has happened.
Perhaps it is the biggest that has ever happened, but it has
happened to other companies before.
Now to the extent that you weren't prepared for this or
that it happened to you and I hope that was not due to
complacency, I hope it was not due to you not doing everything
that you could to have prevented it, but my question is this.
Can you share with us any information about the attackers? What
do you know and what do you not know about them at this point?
Mr. Smith. Congressman, thank you for that. As I mentioned
in my opening comments and my written testimony, earlier this
week we have engaged the FBI and they currently have the
investigation in their hands. So at this juncture we are not
disclosing what we know about the hackers.
Mr. Carter. How has your cooperation with the FBI been? Has
your experience with them thus far been good and anything
that--this is important. It is important for everyone. Yes,
everyone is upset and rightfully so. They should be upset. When
your personal data is out there obviously it is very upsetting.
But I am trying to go in a different direction. I am trying to
figure out how we can prevent this from happening.
Mr. Smith. The cooperation with the FBI as best I know has
been good. It is ongoing. We have lines of communication into
the FBI not just after a breach but routinely throughout the
year. So I would say it has been a very good cooperation,
Congressman.
Mr. Carter. Let me ask you this. Through this experience,
if you had to do anything different what would you have done?
Mr. Smith. Congressman, I was asked that question earlier
and my answer will be the same now as it was earlier. There
will be time for reflection personally and as an organization.
That coupled with the investigation that we continue to
undertake to look at processes in-house. But this juncture,
since I was notified in mid-August through this morning, it has
all been about the forensics. It has been about trying to
protect and do what is right for the consumer and there has
been no time to reflect on what I would do differently.
Mr. Carter. OK. Well, when that time comes we need to know,
because we don't need to let this happen again and other
companies need to learn from it. This is obviously as I said
earlier you are not the first company to suffer from this. You
are not the first Georgia company to suffer from this. We
understand that. It doesn't make it any less egregious to what
has happened, but where I am trying to go is what can we do
better to prevent this from happening again? These guys are
good, we know that. Listen, cybersecurity is hard. It is way
above my pay grade, I can tell you that.
Mr. Smith. Congressman, thank you for that. As I mentioned
in my comments I take full responsibility as CEO.
Mr. Carter. And I understand that and I appreciate that.
Mr. Smith. If there is one thing I would love to see this
country think about is, the concept of a social security number
in this environment being private and secure, I think it is
time as a country to think beyond that. What is a better way to
identify consumers in our country in a very secure way, and I
think that way is something different than an SSN, a date of
birth, and a name.
Mr. Carter. Well, you are exactly right. I remember my time
in the Georgia State Legislature when we changed the, you used
to have your social security number on your driver's license.
That used to be your driver's license number, and that was not
that long ago. And that is what tells me that this is something
that is changing dramatically and quickly and we need to be
prepared for it.
So I know that you are putting out fires right now, but at
some point we need to learn from this. We need to know, look,
we shouldn't have done this and we should have done that. What
could we have done differently? What will benefit another
company to allow that this doesn't happen? And I hope, and thus
far you appear to have been honest about all this, I hope that
if part of what the problem was complacency that you admit that
and say don't ever let your guard down.
Mr. Smith. Thank you, Congressman. I would love to be part
of that dialogue about what lies ahead to protect individuals'
identities.
Mr. Carter. Well, again I want to thank you for being here
and it says a lot about you and about your company.
Thank you, Mr. Chairman. I yield back.
Mr. Latta. The gentleman yields back. The chair now
recognizes the gentlelady from California for 5 minutes.
Ms. Eshoo. Thank you, Mr. Chairman. First, I would like to
recognize a former colleague that is here in the chamber with
us. Saxby Chambliss who served in the House and in the Senate,
it is good to see you, very nice to see you.
Mr. Smith, it seems to me that you have accomplished
something that no one else has been able to accomplish and that
is that you have brought Republicans and Democrats together in
outrage and distress and frustration over what has happened,
because this is huge. This is almost half of the country and
their information.
The American people are, I think they have privacy in their
DNA. We don't like Big Brother. We don't like people having
information on us. We know in an information age and then the
digital age that that is impossible, but boy, when that is
breached, when the privacy goes out the window it really puts a
dent in people's lives. I equate it with because they don't
feel that they can do anything about it. They feel helpless. I
come from earthquake country and when that rattle first starts
you really do feel helpless. You feel absolutely helpless.
Now, the question has been posed rhetorically by some
members, because I have been sitting in for awhile at this
hearing, what can be done. I have the privilege of representing
most of Silicon Valley. I have asked this question about the
protection in terms of privacy breaches in our country to just
about every CEO I have met and they have responded like a
chorus and said there are two main reasons for breaches in our
country, number one, a lack of hygiene in systems and very poor
security management. That is why I have legislation. Senator
Hatch is the lead sponsor in the Senate. I have the bill in the
House.
So it is distressing to me knowing this information that
Homeland Security notified Equifax, this is almost 7 months
ago, this has to do with a patch. So I know there are a lot of
questions that have probed this, but you as CEO at the time,
when Homeland Security informed your company that there was a
breach what did you say to your CIO officer? Did you understand
what the breach was? Did you understand what the patch meant?
Did you understand the timeliness, the need for timeliness to
have this fixed and did anything change in that department? Was
there a new policy put in place by you?
Mr. Smith. Congresswoman, to clarify, when the CERT came
out in March there was no notification of a breach. There was
notification----
Ms. Eshoo. What did it mean?
Mr. Smith. What it meant was----
Ms. Eshoo. I mean if I got a notice from Homeland Security
that is like the FBI knocking on the door. It is the federal
government. That in and of itself is a bit menacing, isn't it?
Mr. Smith. What it meant was an open source software
commonly used and deployed around the world called Apache
Struts had a vulnerability and the notification was the
vulnerability should be patched.
Ms. Eshoo. All right. And did you ask if it was patched?
Mr. Smith. We get notifications----
Ms. Eshoo. No, you got the notification from Homeland
Security, all right? What did you do about it the day you found
out? The company was notified on, I believe, the 9th of March.
When did you know?
Mr. Smith. The team, security team followed a protocol and
instantly within a day sent notification out to many people in
the organization that a patch needed to be applied to Apache
Struts.
Ms. Eshoo. And did you ask your team when it was applied?
Mr. Smith. The security team did and they spoke with the IT
team as well.
Ms. Eshoo. When did they take care of it?
Mr. Smith. Throughout the testimony we talked about what
occurred was there was a communicate----
Ms. Eshoo. Well, just tell me when it happened. When was it
actually----
Mr. Smith. The following day communication was sent out to
those that needed to be notified.
Ms. Eshoo. You already said that. I want to know when they
did it, when they took care of it.
Mr. Smith. They took care of it in July because we never
found it. It wasn't until, if you recall, we had the human
error, we did the scan, the technology never found it. In July
we saw suspicious activity, took the portal down, found the
vulnerability, applied the patch.
Ms. Eshoo. Well, I thank the chairman. We have in the rules
of the full committee which are approved at the beginning of
every Congress that members of the full committee can
participate in subcommittees where they are not members and I
appreciate the legislative courtesy. And I think there is a lot
more to be done on this issue, Mr. Chairman, if I might make
the recommendation. I think we should have the CIO, the chief
information officer, come in because I don't think that this
resolved. So thank you.
Nice to see you, Saxby.
Mr. Latta. Thank you very much. The gentlelady's time has
expired. And we are just going to ask one quick follow-up
question so I am going to yield to the ranking member first.
Ms. Schakowsky. First of all, Mr. Chairman, I would like to
insert for the record a letter from consumer groups, too, a
letter from Credit Union National Association, and an article
from WGN-TV.
Mr. Latta. Without objection, so ordered.
[The information appears at the conclusion of the hearing.]
Ms. Schakowsky. Oh, sorry.
So in closing, Mr. Smith, I want to quote again from you,
from your testimony. You mentioned the five fixes, so-called,
and you put, ``This puts the control of consumers' credit
information where it belongs, with the consumer.'' So I want to
ask you a question. What if I want to opt out of Equifax? I
don't want you to have my information anymore. I want to be in
control of my information. I never opted in. I never said it
was OK to have all my information and now I want out. I want to
lock out Equifax. Can I do that?
Mr. Smith. Congresswoman, that requires a much broader
discussion around the rule that credit reporting agencies--
because that data as you know, today, doesn't come from the
consumer it comes from the furnishers and the furnishers
provide that data to the entire industry.
Ms. Schakowsky. No, I understand that and that is exactly
where we need to go, to a much larger discussion because most
Americans really don't know how much information, what it is,
that you have it, and they never said OK. So I am hoping this
will lead to a wider discussion. Thank you.
Mr. Latta. Thank you very much. The gentlelady yields back.
And if I may just go back to what we had a little discussion
earlier, again going back to your testimony. From August the
15th when you were informed that it appeared likely that
consumer, that information had been stolen, again why was there
again a 10-day delay between finding out about that personal
information that could have likely been stolen to developing
that remediation plan? That 10-day window, why did it take 10
days to start that remediation?
Mr. Smith. Well, Congressman, there was continuous motion
going on around the clock from that time through yesterday
trying to develop the product, build the communication plan,
stand up web sites, inform those that needed to be informed. It
wasn't like on a certain date something occurred, it was
continual motion by many people for many, many weeks.
Mr. Latta. Let me ask just a quick follow-up on that then,
because again with that 10-day period of time, when was the
appropriate time that it was really to start talking to the
consumers at that point in time or again waiting until when you
did in September? Because again there was that lag time there
when information could have been stolen on individuals.
Mr. Smith. Yes. The whole goal was to make sure the data we
had was accurate, was as clear for the U.S. consumer as
possible. Number two was to make sure for the forensic
cybersecurity specialists that our environment was as secure as
possible. Remember, they said expect increased attacks. Number
three was to stand up the call centers and the web sites for
hundreds of millions of consumers and that just took time as I
alluded to earlier.
Mr. Latta. Well, thank you very much. And seeing that there
are no other members present to ask questions, we want to thank
you very much for testifying before the subcommittee today. And
pursuant to committee rules I remind members that they have 10
business days to submit additional questions for the record and
I ask that the witness submit his response within 10 business
days upon request of any questions submitted. Without
objection, the subcommittee is adjourned.
[Whereupon, at 1:03 p.m., the subcommittee was adjourned.]
[Material submitted for inclusion in the record follows:]
Prepared statement of Hon. Michael C. Burgess
Today the DCCP subcommittee will focus on a massive data
breach executed against Equifax, but this is just one of many
recent data breaches nationwide. Millions of consumer data,
including personally identifiable information, have been
compromised leaving customers vulnerable to criminal entities
operating mostly on the dark web. In addition, Equifax did not
notify consumers until 40 days after observing suspicious
traffic and shutting down the source of this traffic.
In an effort to quickly respond to consumers, Equifax's
website and call centers were overwhelmed and initially unable
to inform individuals if their information had been
compromised. Another frustrating factor was the inclusion of a
mandatory arbitration clause in the terms and conditions of
credit monitoring services being offered, but I understand this
has since been removed.
The issue of data breach notification has been before this
subcommittee for many years. There is a history of bipartisan
cooperation, indicating a strong desire to get this right for
all consumers. At this point, there is likely not a single
Member of Congress who has not had a constituent, or
themselves, affected by a data breach or cyber attack. Without
a reasonable federal standard on data security and breach
notification, companies are implementing various security
protocols and hoping they don't become the next victim of a
breach. The lack of a single, federal standard has led to
numerous state laws, but data breaches transcend physical
boundaries.
Last Congress, this subcommittee passed the Data Security
and Breach Notification Act, which would have required breach
notification to customers within 30 days, including ways to
inquire with the company as well as how to contact the Federal
Trade Commission. Companies also had to alert customers that
reasonable measures were taken to restore the integrity,
security and confidentiality of the data system.
One of the most important sections of the bill would have
required entities to implement and maintain reasonable security
measures and practices appropriate to the size and type of
entity, as well as protect personal information against
unauthorized access. These reasonable measures are based on
industry accepted practices while remaining flexible to allow
advancement in accordance with the security technology market.
Currently, such measures might include 2-factor authentication
as well as immediate patching of known software
vulnerabilities. According to Mr. Smith's testimony, the flaw
used to perpetrate the Equifax breach was a known security
vulnerability that had an existing patch.
Had the Data Security and Breach Notification bill passed
out of this committee with bipartisan support, it may well have
become law and prevented, or at least softened the blow of, a
data breach on the massive scale experienced by Equifax.
As we work through what happened and how consumers can
recover their data security, I hope we can again find
bipartisan consensus on data security and breach notification
going forward.
----------
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|---|---|---|---|---|---|---|---|---|
| Rush, Bobby L. | R000515 | 7921 | H | D | COMMMEMBER | IL | 115 | 1003 |
| Upton, Fred | U000031 | 7991 | H | R | COMMMEMBER | MI | 115 | 1177 |
| DeGette, Diana | D000197 | 7859 | H | D | COMMMEMBER | CO | 115 | 1479 |
| Shimkus, John | S000364 | 7939 | H | R | COMMMEMBER | IL | 115 | 1527 |
| Schakowsky, Janice D. | S001145 | 7929 | H | D | COMMMEMBER | IL | 115 | 1588 |
| Walden, Greg | W000791 | 8115 | H | R | COMMMEMBER | OR | 115 | 1596 |
| Murphy, Tim | M001151 | 8723 | H | R | COMMMEMBER | PA | 115 | 1744 |
| Blackburn, Marsha | B001243 | 8154 | H | R | COMMMEMBER | TN | 115 | 1748 |
| Burgess, Michael C. | B001248 | 8182 | H | R | COMMMEMBER | TX | 115 | 1751 |
| McMorris Rodgers, Cathy | M001159 | 8209 | H | R | COMMMEMBER | WA | 115 | 1809 |
| Matsui, Doris O. | M001163 | 7810 | H | D | COMMMEMBER | CA | 115 | 1814 |
| McNerney, Jerry | M001166 | 7816 | H | D | COMMMEMBER | CA | 115 | 1832 |
| Bilirakis, Gus M. | B001257 | 7881 | H | R | COMMMEMBER | FL | 115 | 1838 |
| Castor, Kathy | C001066 | 7883 | H | D | COMMMEMBER | FL | 115 | 1839 |
| Loebsack, David | L000565 | 7915 | H | D | COMMMEMBER | IA | 115 | 1846 |
| Sarbanes, John P. | S001168 | 7978 | H | D | COMMMEMBER | MD | 115 | 1854 |
| Walberg, Tim | W000798 | 7992 | H | R | COMMMEMBER | MI | 115 | 1855 |
| Clarke, Yvette D. | C001067 | 8072 | H | D | COMMMEMBER | NY | 115 | 1864 |
| Welch, Peter | W000800 | 8204 | H | D | COMMMEMBER | VT | 115 | 1879 |
| Latta, Robert E. | L000566 | 8095 | H | R | COMMMEMBER | OH | 115 | 1885 |
| Scalise, Steve | S001176 | 7959 | H | R | COMMMEMBER | LA | 115 | 1892 |
| Guthrie, Brett | G000558 | 7954 | H | R | COMMMEMBER | KY | 115 | 1922 |
| Harper, Gregg | H001045 | 8021 | H | R | COMMMEMBER | MS | 115 | 1933 |
| Lance, Leonard | L000567 | 8049 | H | R | COMMMEMBER | NJ | 115 | 1936 |
| Lujan, Ben Ray | L000570 | 8058 | H | D | COMMMEMBER | NM | 115 | 1939 |
| Tonko, Paul | T000469 | 8082 | H | D | COMMMEMBER | NY | 115 | 1942 |
| Schrader, Kurt | S001180 | 8118 | H | D | COMMMEMBER | OR | 115 | 1950 |
| Olson, Pete | O000168 | 8178 | H | R | COMMMEMBER | TX | 115 | 1955 |
| Kinzinger, Adam | K000378 | 7931 | H | R | COMMMEMBER | IL | 115 | 2014 |
| Bucshon, Larry | B001275 | 7947 | H | R | COMMMEMBER | IN | 115 | 2018 |
| Long, Billy | L000576 | 8015 | H | R | COMMMEMBER | MO | 115 | 2033 |
| Johnson, Bill | J000292 | 8096 | H | R | COMMMEMBER | OH | 115 | 2046 |
| Flores, Bill | F000461 | 8173 | H | R | COMMMEMBER | TX | 115 | 2065 |
| McKinley, David B. | M001180 | 8222 | H | R | COMMMEMBER | WV | 115 | 2074 |
| Cardenas, Tony | C001097 | H | D | COMMMEMBER | CA | 115 | 2107 | |
| Ruiz, Raul | R000599 | H | D | COMMMEMBER | CA | 115 | 2109 | |
| Peters, Scott H. | P000608 | H | D | COMMMEMBER | CA | 115 | 2113 | |
| Brooks, Susan W. | B001284 | H | R | COMMMEMBER | IN | 115 | 2129 | |
| Hudson, Richard | H001067 | H | R | COMMMEMBER | NC | 115 | 2140 | |
| Cramer, Kevin | C001096 | H | R | COMMMEMBER | ND | 115 | 2144 | |
| Collins, Chris | C001092 | H | R | COMMMEMBER | NY | 115 | 2151 | |
| Mullin, Markwayne | M001190 | H | R | COMMMEMBER | OK | 115 | 2156 | |
| Walters, Mimi | W000820 | H | R | COMMMEMBER | CA | 115 | 2232 | |
| Dingell, Debbie | D000624 | H | D | COMMMEMBER | MI | 115 | 2251 | |
| Costello, Ryan A. | C001106 | H | R | COMMMEMBER | PA | 115 | 2266 | |
| Doyle, Michael F. | D000482 | 8132 | H | D | COMMMEMBER | PA | 115 | 316 |
| Engel, Eliot L. | E000179 | 8078 | H | D | COMMMEMBER | NY | 115 | 344 |
| Eshoo, Anna G. | E000215 | 7819 | H | D | COMMMEMBER | CA | 115 | 355 |
| Green, Gene | G000410 | 8185 | H | D | COMMMEMBER | TX | 115 | 462 |
| Barton, Joe | B000213 | 8162 | H | R | COMMMEMBER | TX | 115 | 62 |
| Pallone, Frank, Jr. | P000034 | 8048 | H | D | COMMMEMBER | NJ | 115 | 887 |
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