Susan Tompor: Don’t bank on getting $125 out of Equifax data breach deal: Here’s why

Aug. 3--Give people the idea that they can get a quick $125 out of the Equifax data breach and, well, they're going to see what kind of money they can get.

No kidding.

More than 4.5 million consumers have visited the FTC site where you can link to a spot to file a claim. We're talking about a lot of activity in less than two weeks since a $700 million settlement was announced on July 22 regarding the 2017 Equifax data breach. You can find out more about the settlement at ftc.gov/Equifax.

The FTC is not actually receiving claims. Instead, the claims are going through the Equifax Data Breach Settlement Administrator

Now the FTC says: "There's a downside to this unexpected number of claims."

"The pot of money that pays for that part of the settlement is $31 million," the FTC said in a July 31 alert.

Just $31 million, so guess what? The math isn't likely to work in your favor.

If there's only $31 million, a simple calculator shows that only 248,000 people would ever have had the chance at getting $125.

Equifax's massive data breach potentially compromised sensitive data, including Social Security numbers, for 147 million people.

So even if only 5 million people requested $125, the payout would likely be closer to $6.20 each.

Yet, the money wasn't meant to be a cash settlement, even if people interpreted it that way. It was meant to compensate those who already had credit monitoring services or planned to obtain them elsewhere.

"A large number of claims for cash instead of credit monitoring means only one thing: Each person who takes the money option will wind up only getting a small amount of money," the FTC said.

Translation: Don't expect to get a full $125.

The amount, frankly, is likely to be "nowhere near the $125 they could have gotten if there hadn't been such an enormous number of claims filed," the FTC said.

Didn't submit an Equifax claim yet?

Don't worry, the FTC has an answer for those who have yet to submit a claim. The deadline to file is January 22, 2020.

The FTC suggests opting for the free credit monitoring service for the next 10 years instead.

"Frankly, the free credit monitoring is worth a lot more -- the market value would be hundreds of dollars a year," the FTC said.

The alert, frankly, goes on to read a bit like an ad for credit monitoring.

"This monitoring service is probably stronger and more helpful than any you may have already," the FTC said.

It monitors your credit report with all three nationwide credit reporting agencies, and it comes with up to $1 million in identity theft insurance and individualized identity restoration services. The service is provided by a third party, not Equifax.

Should you take the cash?

Yet some consumer watchdogs say they'd rather opt for even a small amount of cash because many times consumers can obtain free credit monitoring elsewhere.

Some even suggest that you freeze your credit instead of opting for credit monitoring, if you really want to stop a crook from using your identity to open up a credit card or take out another kind of a loan in your name.

Credit report monitoring only alerts you to any suspicious activity or changes.

"Cash is king," said Chi Chi Wu, staff attorney at the National Consumer Law Center in Boston, in a Tweet.

Wu told me she'd definitely recommend the cash, particularly since you can probably get free scores and/or credit reports from another source or your credit card.

Some other consumer watchdogs agree.

"Your most important identity theft protection isn't in the Equifax deal; it's your right by federal law to freeze your credit reports for free," said U.S. PIRG's Federal Consumer Program Director Ed Mierzwinski.

And what if you've already submitted an Equifax claim?

Look for an email from the settlement administrator if you've already submitted a claim. They will be asking you for more information about the credit monitoring service you already have.

Technically, the settlement stated that: If consumers choose not to enroll in the free credit monitoring product available through the settlement, they may seek up to $125 for the cost of another credit-monitoring product of their choice.

Or, if you filed a claim already and requested the $125, well, you still can change your mind and switch to the free credit monitoring service.

The sort of good news: The FTC says there is still money available under the settlement to reimburse people for what they paid out of their pocket to recover from the breach -- such as if you paid for a credit freeze after the breach or if you hired someone to deal with actual identity theft that took place as a result of the breach.

There is a larger pool of money for those claims. Of course, it's going to be much harder to fill out the documentation and apply for up to $20,000 for lost time and money.

That part of the deal calls for paying consumers $25 an hour for up to 20 hours for time spent protecting personal information or addressing ID theft after the breach.

Costs that could be covered would include:

-- Any cost of freezing or unfreezing credit reports at any consumer reporting agency, such as TransUnion or Experian, after the breach.

-- Money you spent out of pocket buying credit monitoring or ID theft protection after the breach.

-- Up to 25% of the amount paid to Equifax for credit or identity monitoring subscription products between Sept. 7, 2016, and Sept, 7, 2017. That would reimburse some expenses before the breach was announced. Equifax first discovered evidence of cyber crime, the company said, on July 29, 2017. The company said the unauthorized access took place from mid-May through July 2017.

-- Any reimbursed costs, expenses, losses or charges you took on as a result of ID theft.

-- Miscellaneous expenses associated with ID theft-related issues, such as notary, fax, postage, mileage and telephone charges.

Should we be surprised that consumers are being set up for an unsettling surprise out of this Equifax settlement? Not at all. Not at all.

Contact Susan Tomporat 313-222-8876 or [email protected]. Follow her on Twitter @tompor. Read more on business and sign up for our business newsletter.

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