Mortgage lenders use payroll data during the underwriting process to determine borrower eligibility, and without this data, many consumers would not be able to get a mortgage. The companies can manually check the messages by calling employers, but the process is slow and expensive. It is more efficient to rely on E-Verify services.
According to the lawsuit, Equifax controls the market through a product called TALX Work Number, which it acquired in May 2007.
The plaintiffs allege that the company exercises monopoly power through three main strategies: entering into multi-year exclusive agreements with large payroll software vendors and employers; allocating “revenue shares” to these data providers; and spending “billions of dollars” to acquire competing companies. risky company.
The plaintiff’s lawyer has yet to respond housing line Request to comment. A spokesman for Equifax said the company was “aware” of the lawsuit filed this week in Pennsylvania and “will respond to the lawsuit as appropriate.”
“Every day, The Work Number®’s verifications help people deal with important life events, like applying for a mortgage, buying a car, or seeking social service benefits. Our model starts with consumer engagement and empowers consumers, employers, and verifiers A frictionless process that delivers the highest class customer experience, quality, security, speed, accuracy and privacy,” the spokesperson added.
The plaintiffs claim that one of the evidences of Equifax’s monopoly power is that its electronic VOIE service has a gross profit margin of over 50% because the prices it charges are “well above what a competitive market will bear.”
The price of the service has risen from $17.85 in 2012 to $66.45 today, an increase of 272%. That’s the cost of a single transaction using current information, and the lawsuit says the price would rise to $200 for records with more historical information.
Equifax’s verification services ultimately generated nearly $2 billion in annual profits, accounting for nearly 40% of the company’s total profits, the filing said.
Further evidence of monopoly is that “through exclusive agreements with data contributors, Equifax has been able to prevent competitors from obtaining at least 40% of the data inputs necessary to make VOIE’s competing products viable. This remains the case today So,” the lawsuit states.
According to the lawsuit, two competitors— Argyll and setri — Submitted a letter to Federal Trade Commission (FTC) “alleged in the fall of 2022 that the barriers to entry imposed by Equifax slowed or prevented their entry into the market.”
As of April 2024, Equifax had 670 million job number records, a key repository of employment and income data, according to the lawsuit. That’s more than double the 300 million records it recently had in 2021. Much of the data is exclusive to Equifax.
In 2008, the FTC charged the company with speech — Sold electronic VOIE products to Equifax — Acquired four competitors to reduce market competition.
TALX (then a subsidiary of Equifax), Equifax and the FTC signed a 10-year consent order in August 2008 that restricted the company from acquiring other businesses in the electronic VOIE market.
Since 2021, after the consent order expired, Equifax has completed 14 acquisitions, a third of which related to Equifax Workforce Solutions, the filing added.
Equifax’s work number product has caught the attention of regulators. CFPB Director Chopra said in a recent speech that the bureau has observed significant price increases. “Users told us that Equifax’s market dominance gave it the pricing power it has exercised over the past several years,” he said.
The lawsuit is based on public statements from Equifax, regulators, competitors and interviews with confidential witnesses. The lender is seeking damages and injunctive relief and a jury trial.
Editor’s note: This article has been updated with a statement from Equifax.
