Should consumers subsidize creditors’ risk AND bear greater risk?
…we’re unwilling participants of the credit history market who got opted in for the benefit of creditors.
Credit Bureaus were setup for the protection of creditors. These were a mechanism of tracking consumer and corporate repayment history to ensure that creditors are able to distinguish between degree of creditworthiness of an applicant.
Over the passage of time, the credit history tracked by these bureaus has become extremely prized data.
This entire initiative of credit bureaus was not at the behest of the consumer.
However, given that this data is about the consumer, it’s leak effects at the consumer only.
This is leading to a very strange mechanism of funding of the credit bureaus. Creditors profit from this data while consumers pay to protect it (read credit history monitoring, repair, freeze and unfreeze). In other words consumers are subsidising the cost of storing, maintaining and securing the data that creditors need.
One might argue that creditors pay for running inquiries against credit reports, however, it should also be remembered that this cost in indirectly borne by the consumer too when s/he pays the creditor for the service.
There appears to be a problem in this model. Consumers are solely subsidising (directly and indirectly) data which benefits creditors.
Shouldn’t the onus of data protection lie with the credit bureaus and the creditors.
Consumers have been opted into a market where they carry significant risk and creditors are able to minimise there.
The balance of this market needs some restoration.
Update 9/15: A first step has been taken! Democratic Senators are introducing a bill to let people freeze credit for free (https://apple.news/AkJgtXQ7tR9yDXM4p2X7cpw)