Online payment processor PayPal has put together a joint venture with Equifax to offer "free" credit monitoring to PayPal customers but, not surprisingly, careful consumers need to read the agreement carefully.

Like Equifax's other credit monitor offerings, the service would notify PayPal customers if inquiries for credit are made in their names, and if their credit balances rise or fall according to pre-set alerts.

The service would be free for PayPal users, including a toll-free number to call in case of possible fraud or identity theft.

Equifax executive Steve Ely said in a press statement that "Our credit alert product gives PayPal users a convenient and easy way to help prevent their information from getting into the hands of identity thieves."

Equifax's agreement with PayPal comes on the heels of a similar venture with SunTrust Bank, where the credit bureau is offering "select" SunTrust customers its "Credit Watch Silver" product for free, while normal subscriptions cost $49.95

Look Again

But a closer look at the offer indicates that all might not be so rosy for users of these services.

According to the "Terms Of Use" agreement provided by Equifax when signing up for the PayPal monitoring service, the company reserves the right to change the offer at any time, possibly including switching from a free service to a paid subscription.

The agreement also specifies that users are forced into binding arbitration if they have any disputes with the service, rather than pursue litigation, except in small claims court.

According to the agreement, "you will not be able to bring a class action or other representative action in court, nor will you be able to bring any claim in arbitration as a class action or other representative action."

Arbitration has been heavily criticized by consumer groups, and even some lawyers, for shifting too many costs of a dispute onto the consumer, and placing them at a disadvantage in negotiations.

Many consumers, even those who have been victimized by identity theft, are reluctant to utilize free credit monitoring because they fear they'll be "baited and switched" into using a paid service. Others simply don't trust the company that lost their data to watch over it effectively after the fact.

When a laptop containing data on thousands of students, faculty, and retired employees for the Vermont State College system was stolen, one former faculty member signed up for Experian's free credit monitoring service provided by the university.

She ended up subscribing to Experian subsidiary ConsumerInfo's paid "Credit Monitor" service at $7.95 a month without her consent.