Goldman Sachs Buys TransUnion. What’s In It For You?
One of the major companies responsible for the nation’s credit meltdown will now control your personal credit history. Goldman Sachs Capital Partners, the private equity wing of the financial firm, has partnered with another private equity company to buy the credit reporting firm TransUnion. Collecting and reselling personal information about your borrowing and bill-paying behavior is apparently worth more than $3 billion.
For those at the top, it’s a sweet deal: one former TransUnion owner will see a 50 percent increase in return on its investment in the company after owning it for less than two years. Private equity funds selling to other private equity funds is a lucrative business.
But for consumers, the deal promises few benefits. Consider the problem of credit reporting errors: private equity companies buy firms for their potential to generate profit, and credit reporting companies like TransUnion earn the lion’s share of their profits from creditors rather than consumers— thus they have little financial incentive to conduct meaningful investigations when consumers find an error in their credit report. Instead, they rely on cheap automated dispute-resolution processes to resolve them. Nothing changes there, unless private equity pressures to keep costs down squeeze the dispute resolution process at TransUnion still more.
And the sale makes TransUnion no more likely to respond to a petition urging it to cease selling credit reports to employers on the grounds that they are unreliable and discriminatory in an employment context. Since when has Goldman Sachs listened to the Lawyers' Committee for Civil Rights or the National Council of La Raza?
This is a great time to have the Consumer Financial Protection Bureau on the job. In August, Demos submitted comments urging the CFPB to supervise the nation’s powerful credit reporting agencies, including TransUnion, Equifax, Experian and smaller entities that gather personal credit information about consumers and profit by selling it to lenders, insurance companies, and employers. This month the CFPB responded to the concerns raised by Demos and others, recognizing that “the consumer reporting market plays a critical role in the consumer financial services marketplace and in consumers’ financial lives” and issuing a proposed rule saying that the largest credit reporting agencies would fall under its highest level of scrutiny. That’s a power that even Goldman Sachs may have to listen to.