Equifax Battling Class Actions and Small Claims Lawsuits From Data Breach

A massive data breach. A CEO's departure. Communication failures. It's been a bumpy ride for Equifax since nearly half of Americans discovered that their personal information may be floating around the underworld of the internet due to the credit reporting agency's inability to protect its data. After the initial news of Equifax's breach, technology attorney Mark Grossman told CNBC's "Closing Bell" that he was skeptical of the company's ability to stay in business. "This is ugly," Grossman said at the time. "It's going to get worse. We're pointing to a bankruptcy. We're pointing to a takeover."

Well, it's six months later, and Equifax is doing more than staying in business. The company is on the rebound on Wall Street. The company's stock value jumped off a cliff in the immediate timeframe in September — before the news spread, its value was hovering around $140 per share before crashing to under $93. But over the past six months, that value has climbed back toward the neighborhood of $120.

Still, it's not all blue skies ahead for this credit reporting company. From losses in small claims courts to battles with state attorneys general, Equifax continues to face numerous legal challenges as a result of the fallout from its privacy debacle.

The Power of One

You may hate hearing positive news about Equifax because, if you're like a lot of Americans, you hate Equifax. The company topped the list of the most-hated companies in the country earlier this year. However, there's a promising story if you're one of the many frustrated people who doesn't want thieves accessing their private data and who doesn't like seeing Equifax walk away with nothing more than a few PR bruises.

That story belongs to Christian Haigh, the co-founder and chief technology officer of a company called Legalist. Rather than venting about Equifax and monitoring his credit, Haigh actually did something: He sued the company. More importantly, he won. Haigh took Equifax to small claims court in California and the decision sent him home with nearly $8,000. "Companies like Equifax need to be taught that consumers are more than commodities," Haigh wrote. "In a world of big data, it’s inevitable that personal data will be collected and sold by companies."

It's also inevitable that those companies will not let an unfavorable verdict go without an appeal. Nearly two months after his first encounter, Haigh had to go back to court to make his case again and it seemed like Equifax, a company with more than $3 billion in revenue last year, was taking the $8,000 decision very seriously. The company brought to the appeal its in-house counsel, a vice president of legal and an attorney from an outside law firm that probably could have paid for Haigh's credit monitoring services for the next 200 years.

But Haigh still came home with a victory. The appellate judge reversed his $2,500 worth of punitive damages, but he still walked away with more than $5,000 from the most-hated company in the country.

State-Sized Lawsuits

While Haigh's legal proceedings are certainly a victory, it's safe to say that most Americans aren't going to invest the energy necessary for a battle against a massive company. Lawsuits are awful, time-consuming endeavors, and it's doubtful that many of the 147 million consumers impacted by the company's data debacle will bother to take their cases to court.

Some of them may not have to, though. Earlier this month a judge in Massachusetts ruled that the state's attorney general can sue Equifax for statutory damages for every resident affected by the breach. West Virginia followed up on April 12 with a lawsuit that seeks $150,000 for every security breach and $5,000 for each violation of the state's Consumer Credit and Protection Act. That tab could add up quickly — the case claims that around 730,000 West Virginians were impacted by Equifax's lax data protection.

Bottom Line

So could Equifax still go out of business? It's possible — particularly if every other state attorney general takes its cue from Massachusetts. Still, my bet is that Equifax will continue to collect and sell your data, playing a crucial role in whether you're approved for credit cards, mortgages, and a range of other financial products.

The company knows it's in for a long legal haul and expects costs related to the breach to climb by $275 million this year. That may sound like a staggering amount, but companies like Equifax have war chests built for a seemingly indestructible layer of protection. If only they had added a similar layer of safety for your data.