Tarra Jackson

On
July 22, 2019, Equifax Inc. agreed to pay $575 million as part of its
settlement with the Federal Trade Commission (“FTC”), the Consumer
Financial Protection Bureau (“CFPB”), and all 50 U.S. states and
territories concerning its 2017 data breach.

The
proposed settlement includes a $300 million payment to a Consumer fund that
will provide protection and compensation to 147 million affected consumers. The
settlement also includes a provision that if Equifax’s initial $300 million
payment is insufficient, then an additional amount of up to $125 million will
be contributed.  Therefore, Equifax could
pay $700 million dollars: up to $425 million to the Consumer Fund; $175 million
to the states, the District of Columbia and Puerto Rico; and $100 million to
the CFPB related to civil penalties.

What
happened?

On September 7, 2017, Equifax disclosed
that a massive data breach exposed the sensitive personal information of 147
million consumers  (“Breach”).
A vulnerable version of Apache Struts,
“open-source, MVC
framework for creating elegant, modern Java web applications,” used in Equifax’s
Dispute Portal opened their system to hackers the Breach. Although Equifax
received notification of the Apache Struts vulnerability in March of 2017, it
failed to address the problem adequately. 

In the summer of 2017, the Equifax identified
suspicious traffic on the Dispute Portal. It blocked the traffic but after noticing
additional suspicious traffic the portal was ultimately taken offline.  

Equifax hired a forensic
consultant to determine the extent of the security issue. Between May 2017 and
July 2017, multiple hackers gained access to Equifax’s network through the
vulnerability in the Dispute Portal. Once inside, the hackers searched dozens
of Equifax’s databases which contained consumer’s personal information well
beyond what was just contained in the Portal. Hackers also accessed unsecured
files which contained administrative credentials enabling further access to Equifax’s
network. By August 11, 2017, it was clear that the Breach exposed a large
amount of sensitive consumer personal information.

How
much was sensitive consumer information was exposed?

The forensic
consultant revealed that the compromised files included approximately 147
million names and dates of birth, 145.5 million social security numbers, 99
million addresses, 20.3 million telephone numbers, 17.6 million email
addresses, and 209,000 payment card numbers with expiration dates. Unfortunately,
and ironically, much of this data came from consumers who had purchased
products such as Equifax’s credit monitoring and identity theft prevention.

On
July 22, 2019, the
FTC brought an action to obtain permanent injunctive relief, restitution, and
other relief against Equifax under the Federal Trade Commission Act, the
Safeguards Rule, Gramm-Leach-Bliley Act alleging that

Equifax
failed to take simple steps that could have prevented the Breach.  The proposed settlement
between the parties includes four years of credit and identity monitoring for affected
consumers from Equifax, Experian, and TransUnion in addition to $1,000,000 in
identity theft insurance and Identity Restoration Services.

However,
those affected also have the option of an alternative Reimbursement
Compensation of up to One Hundred Twenty-Five Dollars ($125),  out of pocket expenses which include credit monitoring,
costs incurred as a result of placing or removing a security freeze on a
Consumer Report with any Consumer Reporting Agency or any other misuse of
affected consumer’s information as a result of the Breach.

Were you affected?

To determine if you were affected, use the Equifax Eligibility tool which can be found here: https://eligibility.equifaxbreachsettlement.com/en/eligibility. If you were affected, you have to make a claim to receive any compensation related to the settlement.

Do you need information on how to claim the $125 plus additional expenses?

Check out Sandy Smith from Yes, I am Cheap’s Step by Step Claim process.

Don’t jump to take the cash

According
to Javelin Research, 16.7 million Americans were victims of identity fraud in 2017.  Although the FTC reported the median amount lost to fraud was
only $375, that’s three times the minimum settlement amount.

According
to the Identity Theft Resource Center’s 2018 End of Year Data Breach Report,
there were 1,244 reported breaches and 446,515,334 sensitive records with identifying
information exposed. What’s
more alarming is that although breaches were down from 2018 but the number of
confidential records exposed increased by two and a half times. It is
apparent that consumer information will continually be at risk for use.

Unless you have purchased additional credit monitoring
or have already been adversely affected and paid money out of pocket, consider
taking the four years of credit and identity monitoring mainly for the
$1,000,000 of identity theft protection. 
The four years of monitoring provides more protection than the money.
The question is not if your identity will be compromised but, when.

Even if you weren’t affected by the Breach, you can receive six free credit reports each year for seven years in addition to the free annual credit report already provided.

The post Equifax Data Breach: Why you shouldn’t take the cash appeared first on The Ivy Investor.

Bonus Material: Investing Tips

On
Thursday, July 11, 2019, two of the major market indices hit historical record
highs. For the first time, the Dow closed over 27,000. The S&P 500 also hit a
record closing at almost 3,000. However, the Nasdaq composite fell 6.49 points,
or 0.08%, to 8,196.04.

Should investors care?

Maybe. Over the last 123 years since its inception, the Dow has become a significant indicator of the U.S. economy. When the news reports stock market movements, it is usually referencing the Dow. The Dow is arguably the most watched stock index in the world. Initially, the Dow was an index focused solely on industrials. Now, the Dow covers 30 well-established, high investment quality companies in multiple industries. Dow has had 52 changes since inception to keep in line with the progression of the economy. In June 2018, Walgreens Boots Alliance, Walgreens (NASDAQ: WBA), gave General Electric (NYSE: GE) the “boot” from the Dow. Four years ago, Apple replaced dividend aristocrat, AT&T (NYSE: T).

Free Investing Tips eBook

The Standard and Poor’s 500 (“S&P 500”) tracks the 500 of the largest companies. As an important note, T-Mobile (NASDAQ: TMUS) will replace Red Hat Inc. in the S&P 500 starting Monday, July 15. IBM (NYSE: IBM)acquired Red Hat in a deal that closed Friday, July 12, 2019, and is no longer listed.

The Nasdaq Composite Index is an index of over 3,300 stocks traded on the Nasdaq stock exchange. Not surprisingly, there is significant overlap between all three of the indices. But for anyone who’s been paying attention, the market leaders of this recent surge are clear.  Apple (NASDAQ: APPL) and Microsoft (NASDAQ: MSFT) are a component of all three indices—the Dow, S&P 500, Nasdaq composite. Both the Dow and the S&P 500 include Visa (NYSE: V).  Amazon (NASDAQ: AMZN) and Alphabet (NASDAQ: GOOG), two-fifths of the FAANG stocks, are part of the S&P 500 and Nasdaq composite.

All these gains… so what happened to your portfolio?

If your portfolio did not perform as well as you expected on Thursday, it’s important to remember the indices are “averages.” Even if you own some of the stocks represented, your portfolio will not reflect the indices’ performance. For example, with Thursday’s record high, some of the Dow’s most well-known companies-  Apple, Johnson & Johnson (NYSE: JNJ), Merck (NYSE: MRK) – were down.

 Second, which is a more nuanced point, the
indices are weighted differently, which significantly affects its performance. The
Dow is a price-weighted index meaning that higher
priced stock will have more influence over the movement of the index than a
lower priced stock. On the other hand, market capitalization (“market
cap”) is used to calculate the weights of the Nasdaq Composite and the
S&P 500. As a result, the movements of a stock with a higher market value,
or market capitalization, will affect the index more than a company with a
higher price per share. 

Microsoft and
Visa provide a great example of the difference. 
Both companies are listed in the Dow and the S&P 500, but the
respective indexes give each company a different weight. Because Visa has a
higher price than Microsoft, it has more influence over the Dow. But Visa’s
market capitalization is approximately 40% of Microsoft’s, Microsoft has a
significantly higher impact on the S&P 500. 

Is there something lurking in the market?

The question many aren’t asking but should be, is this milestone more of an indication of a market slow down? This 1,000 point increase from 26,000 to 27,000  took almost 39 times longer, 17 months, than the Dow’s movement from 25,000 to 26,000, which took only two weeks. It’s been a bumpy ride.  Is this a function of the market just ignoring “all the scary headlines” or irrational exuberance fueled by overvalued tech unicorns much like what caused the dot.com bubble burst of the early 2000s? I would contend that it’s the latter, and investors should be cautious.

Investments that track the indices

If you want to get performance closer to the index, you might want to look into indices that seek to follow them directly.  Remember, the key is to buy low and sell high. Consider holding off on purchasing indexes because they are still at record highs. SPDR’s exchange-traded fund (ETF), DIA, tracks the Dow. Fortunately, or unfortunately, there’s no shortage of ETFs which track the S&P 500 including SPDR (SPY), iShares (IVV), and Vanguard (VOO). The ETF that tracks the Nasdaq Composite is Fidelity Nasdaq Composite Index Tracking ETF ONEQ. Note that several ETFs cover only Nasdaq’s top 100 including Invesco’s QQQ.

The post 3 Questions about the Dow’s Historic High appeared first on The Ivy Investor.