FTC Urged To Place Tighter Controls On 'Free' Credit Reports

Consumers are confused, New York officials say

By Mark Huffman
ConsumerAffairs.com

December 17, 2009

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New York has joined the states urging the Federal Trade Commission (FTC) to tighten rules governing ads for commercial services that offer "free" credit reports. Consumers continue to confuse these services, that end up charging for other products, with the free copies of their credit reports mandated by law.

The New York State Consumer Protection Board (CPB) says the FTC should revise its proposed amendments to the Free Annual Credit Report File Disclosures Rule, also known as the Free Credit Report Rule, to better protect consumers.

For example, Freecreditreport.com, which advertises heavily on TV, will provide a credit copy of your Experian credit report but enrolls you in its other credit protection services, and will charge your credit card unless you cancel. But many consumers don't cancel because they aren't aware they've been enrolled in anything.

"I had filed for a free credit report in July," Alfred, of San Diego, told ConsumerAffairs.com. "I didn't notice the initial grace period, The result was they had the default right to charge me for a service and then they enrolled me into their monthly service. Upon realizing this I called to cancel my account. I looked at my billing statement and they had already charged my account on 1 October 2009. Calling in for a refund they said the expense were non-refundable."

Many consumers confuse this commercial service with the free credit reports every consumer is entitled to by going to www.AnnualCreditReport.com. At that government-approved site, consumers may download copies of their credit report from all three credit reporting agencies once a year.

The CPB said it believes that the most significant risk of deception comes from the manner in which some commercial businesses advertise their "free credit report" offers to the public. The CPB called on the FTC to supplement its proposed amendments with rules prohibiting the deceptive use of the word "free" in these advertisements and presentations.

"Some commercial marketing of credit reports has mislead consumers who thought they were accessing their free credit report only to have signed up for costly services, which they did not intend to purchase," said New York Governor David A. Paterson. "It is important that free credit report advertising rules be changed to aid consumers in making a more informed choice about purchasing extra services beyond receiving their free report."

The FTC's proposed amendments require in part, that online, print and television ads for free credit reports carry the following notice:

"This is not the free credit report provided for by Federal law."

In its letter to the FTC, the CPB called on the federal agency to require that this notice be prominently placed within all advertisements.

"In the case of print ads, the notice should be presented in a box and/or in a contrasting color to help ensure its prominence. The CPB also proposes that the notice requirement be applied in all non-traditional advertising contexts," said Mindy A. Bockstein, Chairperson and Executive Director of the CPB.

Under the Fair and Accurate Credit Transactions Act (FACTA) , consumers are allowed one free credit report a year from each of the three major credit reporting agencies. Consumers can request their free report by visiting the actual free federal website www.AnnualCreditReport.com or by calling 1-877-322-8228.

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