This Hidden Inflation is Making Home Buying More Expensive
The costs of entry into homeownership continue to rise, making it more difficult for working families to grab hold of the American dream and secure a path to prosperity. And while technology has made home-buying more accessible and seamless, institutional players maintain a death grip on certain services allowing them to increase their fees with impunity.
One example is The Work Number, a little-known but massive service operated by Equifax. Their price increases contribute to higher home-buying costs.
The Work Number bills itself as “the country’s largest centralized commercial database of income and employment information.” Companies pay The Work Number for the privilege of handing over detailed income data on their employees, allowing these companies to outsource employment verification and save on time and costs.
Over two million employers, including many major corporations like Facebook, Ford Motor Company, Amazon, and Wal-Mart, directly provide The Work Number with sensitive income data on their employees. As a result, The Work Number has data on vast swaths of the American workforce — personal information that it sells to clients, including debt collectors.
The sheer amount of sensitive information that The Work Number possesses raises data security issues. A few years ago a cybersecurity expert identified a “gaping hole” in The Work Number’s online consumer portal that allowed anyone to view a person’s salary and employment history with just a social security number and date of birth. Of course, Equifax’s historic 2017 data breach made obtaining those pieces of information much easier.
The Work Number has become the go-to database for consumer income and employment verification. So when The Work Number jacks its prices on verification, there is essentially no alternative, and its customers are forced to pay the added costs.
As recently as August of last year, The Work Number was charging $41.95 to verify employment information and $48.95 to verify both employment and income information. But today, just 16 months later, The Work Number is charging $54.95 for verification. That’s a price increase of over 12 percent for income and employment verification and an increase of 31 percent if only considering employment verification — even though the data hasn’t changed.
Why would they raise the cost of the product without enhancing it? To leverage their monopolistic advantage to attain excess profit.
Equifax’s “workforce solutions” division, which includes The Work Number, is responsible for nearly 35 percent of the company’s operating revenue. The Work Number plays a significant role within the division; Equifax identified it as a top factor in its verification services experiencing a revenue increase of 58 percent in 2020 compared to 2019.
In 2020, The Work Number serviced more than 223 million verification requests. With as many transactions as it conducts, the organization’s price increases would result in a substantial revenue influx.
The problem is these price increases ultimately reach consumers — making borrowing more difficult. When lenders are forced to eat the ever-increasing costs of verifying borrower income and employment information, extra costs are passed along to the consumer in the form of higher rates or higher application fees. These excessive costs inflict the most harm on low-income consumers, a disproportionate number of which come from communities of color.
The Work Number’s rising prices are impactful because the company essentially exerts control over the verification of income and employment market. With so many Fortune 500 companies forking over their employees’ information, The Work Number has become the entrenched provider of this unique service with virtually no competition.
And it’s been this way for a while. In 2009, the Federal Trade Commission settled with the company that then operated The Work Number for, according to the FTC when it announced its challenge, “acquiring virtually all of its competition in a series of transactions,” resulting in “substantially increased concentration” for verification of income and employment services.
Without a change from the companies that offload their verification to The Work Number or action by policymakers, The Work Number can continue its unabated price escalation, sticking homebuyers and other borrowers with a higher bill.
Kevin B. Kimble, Esq. is the Founder and CEO of the Financial Services Innovation Coalition (FSIC). He is a founding member of the Coalition’s Housing Task Force, which seeks to eliminate bias in the housing marketplace.
