The Free Credit Reports That Aren’t Free
You’ve probably seen the commericals, which run incessantly on CNN and other cable channels. A happy young man says: “I’m thinking of a number . . . ” That number is a credit score, which you can obtain at a website called FreeCreditReport.com. You probably have heard that under a new federal law, credit reporting agencies are required to provide each person with a free credit report once a year. That website, however, has the much more obscure name AnnualCreditReport.com. I previously blogged about my experiences using AnnualCreditReport.com. One of the problems is that if you don’t know that the correct website is AnnualCreditReport.com, then it is very easy to go to the FreeCreditReport.com website. After all, it is featured quite prominently in a Google search for “free credit report.”
But there’s one catch — it ain’t free. Far from it. From the fine print:
When you order your free report here, you will begin your free trial membership in Triple AdvantageSM Credit Monitoring. If you don’t cancel your membership within the 30-day trial period, you will be billed $12.95 for each month that you continue your membership.
ConsumerInfo.com and Freecreditreport.com are not affiliated with the annual free credit report program. Under a new Federal law, you have the right to receive a free copy of your credit report once every 12 months from each of the three nationwide consumer reporting companies. To request your free annual report under that law, you must go to www.annualcreditreport.com.
FreeCreditReport.com is run by Experian, one of the credit reporting agencies. Experian also has another website offering free credit reports: ConsumerInfo.com. Recently, the FTC settled a case against ConsumerInfo.com website. According to an FTC news release:
Consumerinfo.com, doing business as Experian Consumer Direct, will pay $300,000 to settle Federal Trade Commission charges that ads for its “free credit report” offer failed to disclose adequately that consumers who signed up would be automatically enrolled in a credit- monitoring program and charged $79.95. The FTC alleged that the failure to clearly disclose the enrollment and charges violated a previous settlement.
In August 2005, Consumerinfo.com, paid $950,000 to settle FTC charges that it deceptively marketed “free credit reports.” According to the FTC, Consumerinfo offered consumers a free copy of their credit report and added that they would provide “30 FREE days of Credit Check Monitoring.” The FTC alleged that Consumerinfo’s advertising and Web sites failed to explain adequately that after the free trial period for the credit-monitoring service expired, consumers automatically would be charged a $79.95 annual membership, unless they notified the defendant within 30 days to cancel the service. Consumerinfo billed the credit cards that it had told consumers were “required only to establish your account” and, in some cases, automatically renewed memberships by re-billing consumers without notice. In addition to the $950,000 payment, the settlement required Consumerinfo to pay redress to deceived consumers, barred deceptive and misleading claims about “free” offers, and required clear and conspicuous disclosure of terms and conditions of any “free”offer.
The FTC alleges that Consumerinfo.com ran ads after the settlement that violated the disclosure requirement. The settlement requires Consumerinfo to give up $300,000 in ill-gotten gains, and bars it from misrepresenting any affiliation with the annual credit report available to consumers under the Fair Credit Reporting Act.
This is just a slap on the wrist. And despite this, the other website, FreeCreditReport.com persists. This strikes me as “deceptive” advertising. True, the fine print discloses that the report isn’t free and provides the URL to AnnualCreditReport.com. But Experian seems to be exploiting the FACT Act, which required the credit reporting agencies to provide free credit reports. A statutory responsibility to protect consumers is turned into a money-making opportunity for Experian. This practice strikes me as deeply problematic.
The other irony is this: It is the practices of the credit reporting agencies that have put many consumers at risk for identity theft. Now, they are selling consumers protection from a problem that is at least in part their own making. It reminds me of the scene in The Godfather Part II, where the mob would rob and pillage people’s stores and then offer security protection for a fee.
So is Experian’s FreeCreditReports.com just a wise business move? Or a deceptive trade practice? Should Congress revisit the FACT Act to prohibit credit reporting agencies from creating sites touting “free credit reports” that aren’t really free?