A pair of mortgage lenders have filed an antitrust suit against Equifax, alleging that the credit reporting agency has monopolized electronic verification of income and/or employment (VOIE).
The antitrust suit accuses Equifax, one of the country’s three most prominent consumer credit reporting agencies, of “willful acquisition and maintenance of monopoly power in the market” for electronic VOIE services. Such verification can be done manually — via calling an employer, for example — but such steps can be slower and less cost efficient over the course of processing multiple loans.
The suit claims that Equifax exclusively controls more than 40% of the payroll data required for electronic VOIE, therefore wielding a disproportionate amount of control on the market. The company is able to do so, the suit states, via its control of the TALX Work Number product, originally developed by the Talx Corporation and attained by Equifax via the acquisition of Talx in 2007.
The Work Number is an automated VOIE system that’s widely used by most major financial institutions, lenders and other companies. As a product, it’s currently within the purview of the Equifax Verification Services division. The suit claims that almost 40% of Equifax’s profits come via that division, and that the prices Equifax charges for electronic VOIE are “far higher than a competitive market would bear,” with the company continuing to raise its price every year.
Other companies have attempted to enter the VOIE market beginning in 2017, but the suit alleges that Equifax has responded to the uptick in competition with a “multifaceted anticompetitive scheme to maintain its monopoly.” This “scheme” included exclusive, multi-year agreements with large payroll providers like ADP, Paychex and Intuit, as well as conglomerate employers like Walmart and Home Depot, that control the employment and income data for millions of Americans. In return, the suit contends that Equifax shares a portion of its profits with those data contributors to induce them to provide their data only to Equifax.
With such figures exclusive to Equifax, the suit contends that it was impossible for rivals to build databases of sufficient scope. Furthermore, Equifax, per the suit, also spent “billions of dollars” acquiring companies that presented any potential competition.
The suit even points to public statements from Equifax executives about the lack of competition within the VOIE market, and also notes that the company’s verification services are marketed under the slogan “Only Equifax,” highlighting company’s outsized power in the industry. It also notes statements by potential competitors about how Equifax’s have served as a barrier to market entry. California-based VOIE startup Certree, for example, “companies like ours face enormous obstacles competing in a market where major players [such as Equifax] use their overwhelming scale and ability to incentivize exclusivity arrangements to undercut competitors.”
It’s not the first time adverse action has been taken in response to Equifax’s VOIE market share. The Federal Trade Commission filed a complaint against Talx in 2008 after it became a subsidiary of Equifax. And Consumer Financial Protection Bureau Director Rohit Chopra noted that “significant price increases from income verification services” and mentioned Equifax directly in a speech to the Mortgage Bankers Association last month.
The plaintiffs are bringing up the suit on behalf of themselves and other companies that have purchased electronic VOIE services from Equifax, and are demanding a jury trial. Equifax, in a statement, has acknowledged that they are “aware of a lawsuit filed against the company in Pennsylvania,” but added that it does not comment publicly on pending litigation.
