It’s still unclear exactly how many people have filed for a $125 payment from the Equifax settlement, but according to updates on the FTC website, the number is somewhere in the millions. (A total of 147 million were affected by the breach, though it’s highly unlikely everyone will file a claim.) That’s great news because it suggests people really do care about this breach enough to take some small action to claim compensation—something the Federal Trade Commission might want to keep in mind for future settlements, and something policymakers could help with if they relaxed some of the stringent rules about what kinds of things the FTC is permitted to fine a breached company for. But because of the rush of interest, the FTC is now explicitly encouraging people to take the free credit monitoring offered as part of the settlement instead of the payment. The claims website still allows you to choose a payout, but the FTC no longer includes that option at the top of its own site describing the settlement.
Instead, one of the FAQs on the FTC’s site is now: “I thought I could choose $125 instead of free credit monitoring. What happened?”
The public response to the settlement has been overwhelming. Millions of people have visited this site in just the first week. Because the total amount available for these alternative payments is $31 million, each person who takes the money option is going to get a very small amount. Nowhere near the $125 they could have gotten if there hadn’t been such an enormous number of claims filed.
The free credit monitoring provides a much better value, and everyone whose information was exposed can take advantage of it. If your information was exposed in the data breach, and you file a valid claim before the deadline, you are guaranteed at least four years of free monitoring at all three credit bureaus (Equifax, Experian, and TransUnion) and $1,000,000 of identity theft insurance, among other benefits. The market value of this product is hundreds of dollars per year.
You can still choose the cash option on the claim form, but you will be disappointed with the amount you receive and you won’t get the free credit monitoring.
A couple of things to note about this response. First of all, the $31 million cap on $125 payouts only lasts for four and a half years, at which point, if there’s money left in the $380.5 million consumer fund set aside by Equifax for compensating consumers for their losses and providing them with credit monitoring, as well as paying the lawyers who negotiated the settlement, the rest of it is used to pay out those $125 payments. Whether there’s anything leftover at the end of that time depends on several things, including how much the lawyers ask for, how much people claim in out-of-pocket losses, and how many people sign up for credit monitoring—but if no one wants credit monitoring and everyone’s asking for the payout, then the odds go up that there will be leftover funds to adjust those payouts closer to $125.
Second, the idea that the “free credit monitoring provides a much better value” is purely imaginary, based on Experian’s own estimate that the service it is providing is typically priced at $1,200. (For the purposes of this settlement, each additional million people who enroll beyond the first 7 million will cost Equifax another $16.4 million, so the product actually appears to be worth about $16.40 per person when purchased in bulk.) If you want credit monitoring, by all means get it. But understand that it provides much less security than placing (free) credit freezes on your credit files at Experian, Equifax, and TransUnion.
Finally, the primary reason to encourage people to choose the credit monitoring would seem to be an attempt to drive costs up for Equifax by forcing it to pay for more monitoring subscriptions, since there’s no cap on those fees. That’s perfectly sensible, since the way to impose the maximum financial penalties is for everyone affected by the breach to sign up for credit monitoring—which would cost Equifax an additional $2 billion. On the other hand, that money just goes to Experian, which is providing the credit monitoring, so it’s a trade-off between what will actually benefit affected consumers and what will hurt Equifax the most.
Regardless of the FTC’s motives in deprecating the payout option on their website, it should be clearer that the consumer fund does, eventually, revert to making the $125 payouts if it is not depleted by other expenses. And ideally it should be more transparent about exactly how many people have filed claims and what the estimated cash payout is per person at this point.