Former Chairman & Chief Executive Officer, Equifax
Former Equifax CEO Richard Smith On Giving Power Back To Consumers On Credit Data Access | CNBC
In front of the House Digital Commerce and Consumer Protection Subcommittee, former Equifax CEO Richard Smith answers questions from Rep. Ben Lujan (D-N.M.)
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About Richard Smith
Former Equifax CEO Richard Smith testified before Congress in 2017 and 2018 regarding a data breach that compromised personal information of over 145 million Americans. Smith stated that the criminal hack "happened on my watch" and said he took "full responsibility" for the incident. He apologized to affected consumers and attributed the breach to a combination of human error, including a failure to apply a software patch, and technological error involving a scanner that failed to detect the vulnerability. During questioning, Smith said that Equifax's general counsel and other executives who sold stock in early August 2017 did not know it was a breach at the time, describing the incident as "suspicious activity" with no indication that personally identifiable information had been compromised. Smith stated that upon his retirement he agreed to step down with no further compensation, no bonus, and no severance. In a separate hearing, Senator Elizabeth Warren questioned Smith about Equifax's profits, which Smith confirmed had increased by more than 80 percent since 2013 despite multiple data breaches. Smith also acknowledged that Equifax receives revenue from LifeLock, a credit monitoring service that saw increased enrollment after the breach.
Transcript (17 segments)
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Richard Smith0:00
As you know, for one year then a free lifetime lock product for life starting January 31st, 2018, and that also extends to Experian and TransUnion.
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Congressman0:12
No sir, does not. Would 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 by it through Equifax?
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Richard Smith0:25
Congressman, the companies come out with what they feel as a comprehensive five different services today in a lifetime lock. I would encourage, to be clear, I would encourage TransUnion and Experian to do the same. It's time we changed the paradigm, give the power back to the consumer to control who accesses his or her credit data.
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Congressman0:49
It's ok, down to limited time. Mr. Smith, I apologize. I'll 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?
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Richard Smith1:09
We take this seriously. I've apologized, apologized again to the American consumer. We've offered a comprehensive set of products for free.
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Congressman1:17
Mr. Smith, with those comprehensive sets of products, make consumers whole? It will protect them going forward? It will? They make them whole? Yes or no?
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Richard Smith1:28
It's hard for me to tell if someone's been harmed, so I can't answer the question. If someone's credit has been stolen and someone when it opened up a bunch of their accounts, bought furniture, bought cellphones, bought a bunch of fuel, and now this consumer can't fix their history, they've been harmed. In that case, will Equifax make that person whole? Congressman, as I said, I apologize. We've offered them a comprehensive... Thank you very much, sir.
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Congressman1:52
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 are aware of a large amount of consumer PII. On August 15th, it says in your prepared testimony, PII had been stolen, it appeared likely, and that you requested a detailed briefing to determine how the company should proceed. On August 17th, says you held the 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?
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Richard Smith2:29
Congressman, on the 17th I had a full debrief from Mandiant, our forensic auditors, were outside counsel and my team. I was aware on the 15th that there's been some PII compromised. How much, the scope.
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Congressman2:46
I appreciate that clarification. You were aware it was stolen, you just were not aware how much. I was not aware it was stolen? It was where there was? You just... It says in your prepared testimony that you were aware, that you asked for a detailed briefing to determine how the company should perceive. So you were aware the PII was stolen on the 15th. Is that true or not true?
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Richard Smith3:03
At that time, it's 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 on AG.
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Congressman3:19
Mr. Smith, on August 15th, were you aware that there was PII that was stolen or not? On August 15th, regardless of the amount, were you aware of that?
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Richard Smith3:31
August 15th, I was made aware that hackers, criminal hackers, had gotten into our system. I had some PII information. Well, we can revert to your prepared testimony.
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Congressman3:42
The other question that I have that Miss Schakowsky was asking on is: Chief legal officer John Kelly, still employed by you or by Equifax?
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Richard Smith3:53
Yes, he is.
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Congressman3:55
And you were the CEO at the time that approved the terms of the retirement for David Webb and Susan Moll Dean. Is there a classification: has retired permanent, or could it potentially change to fired for cause, like yours? There's an investigation going on by the board at this time. Mr. Chairman, I know that my time has collapsed, if you will. Is it but there's an odd... There's 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 just, I guess they must have a pretty good investigative team there, because between the press release that happened on Friday or whatever 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.
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