MarketNeutral
8th April 2010, 07:10 AM
The credit report you get from freecreditreport.com is no longer free, no matter what that Web address promises.
In the face of a legislative and regulatory crackdown, Experian, the credit data company that owns the site, has begun charging $1 for the report and then giving that money to charity.
Why would it bother with such a token transaction, only to hand over the money to somebody else?
If you have been even half awake in front of a television in the last few years, you have probably heard the trio of young musicians that appears in the site’s advertisements singing promises of credit salvation for anyone who gets a free report from the site.
At the end of the commercials, there is also a speed-reading disclosure noting that anyone who wants the free report must enroll in something called “Triple Advantage.â€
This turns out to be a monthly credit monitoring service that is not free. Those who fail to quit before an initial trial period expires are then charged up to $14.95 a month on their credit card.
The company’s disclosures have drawn the attention of regulators for some time now. The company paid a total of $1.25 million in 2005 and 2007 to settle two sets of charges from the Federal Trade Commission that it was misleading consumers who were seeking the free credit reports. Those reports are available by law at annualcreditreport.com, where individuals can get free reports each year.
Congress also required more extensive disclosures in the Card Act that President Obama signed last year. The act directed the F.T.C. to write new rules for sites that offered free credit reports.
The new F.T.C. rules went into effect on April 2, and they required sites to include a prominent notice across the top of each Web page that mentioned free reports declaring that the only authorized source under federal law for such reports is annualcreditreport.com.
Rather than include such disclosures, Experian added the $1 charge, saying that “due to federally imposed restrictions, it is no longer feasible for us to provide you†with a free credit report. And now that the report costs $1, the new F.T.C. rule would presumably no longer apply.
Or would it? Rebecca E. Kuehn, assistant director for the division of privacy and identity protection at the F.T.C., declined to comment on any particular company. But she pointed to language in the new rules stating that they apply to any company that “either expressly or impliedly†offers a free credit report to a consumer and ties it to enrollment in a paid service or product.
An Experian spokeswoman, Susan Henson, defended the new fee. “The offer for the $1 report is very clear and in compliance with the F.T.C.’s rule,†she said in an e-mail reply to questions. “There is no express or implied offer on our site for a free report.â€
Edgar Dworsky, who was once a member of Experian’s consumer advisory panel, questioned how that argument would work in practice.
“How are they going to get away with singing ‘freecreditreport.com’ when it’s not really free?†asked Mr. Dworsky, who now runs Consumerworld.org. “It’s like advertising glutenfree.com and then selling a product that contains nothing but wheat flour.â€
Ms. Kuehn would not say whether the F.T.C. planned any action against Experian specifically. “We are carefully monitoring the industry,†she said.
It is possible that Experian’s changes are merely a test to see how the F.T.C. reacts. Ms. Henson of Experian declined to address this idea directly except to say in her e-mail, “We continuously evaluate all of our offers and will continue to do so.â€
Whatever Experian’s intention, it left one experienced industry watcher impressed with its agility.
“You can love Experian or you can hate Experian,†said John Ulzheimer, president of consumer education for the Web site credit.com, who has twice served as an expert witness for the opposing side in cases involving Experian. “But I don’t think that anyone can argue with the fact that Experian continues to be two steps ahead of the F.T.C.â€
http://www.nytimes.com/2010/04/08/your-money/credit-scores/08credit.html?src=me
In the face of a legislative and regulatory crackdown, Experian, the credit data company that owns the site, has begun charging $1 for the report and then giving that money to charity.
Why would it bother with such a token transaction, only to hand over the money to somebody else?
If you have been even half awake in front of a television in the last few years, you have probably heard the trio of young musicians that appears in the site’s advertisements singing promises of credit salvation for anyone who gets a free report from the site.
At the end of the commercials, there is also a speed-reading disclosure noting that anyone who wants the free report must enroll in something called “Triple Advantage.â€
This turns out to be a monthly credit monitoring service that is not free. Those who fail to quit before an initial trial period expires are then charged up to $14.95 a month on their credit card.
The company’s disclosures have drawn the attention of regulators for some time now. The company paid a total of $1.25 million in 2005 and 2007 to settle two sets of charges from the Federal Trade Commission that it was misleading consumers who were seeking the free credit reports. Those reports are available by law at annualcreditreport.com, where individuals can get free reports each year.
Congress also required more extensive disclosures in the Card Act that President Obama signed last year. The act directed the F.T.C. to write new rules for sites that offered free credit reports.
The new F.T.C. rules went into effect on April 2, and they required sites to include a prominent notice across the top of each Web page that mentioned free reports declaring that the only authorized source under federal law for such reports is annualcreditreport.com.
Rather than include such disclosures, Experian added the $1 charge, saying that “due to federally imposed restrictions, it is no longer feasible for us to provide you†with a free credit report. And now that the report costs $1, the new F.T.C. rule would presumably no longer apply.
Or would it? Rebecca E. Kuehn, assistant director for the division of privacy and identity protection at the F.T.C., declined to comment on any particular company. But she pointed to language in the new rules stating that they apply to any company that “either expressly or impliedly†offers a free credit report to a consumer and ties it to enrollment in a paid service or product.
An Experian spokeswoman, Susan Henson, defended the new fee. “The offer for the $1 report is very clear and in compliance with the F.T.C.’s rule,†she said in an e-mail reply to questions. “There is no express or implied offer on our site for a free report.â€
Edgar Dworsky, who was once a member of Experian’s consumer advisory panel, questioned how that argument would work in practice.
“How are they going to get away with singing ‘freecreditreport.com’ when it’s not really free?†asked Mr. Dworsky, who now runs Consumerworld.org. “It’s like advertising glutenfree.com and then selling a product that contains nothing but wheat flour.â€
Ms. Kuehn would not say whether the F.T.C. planned any action against Experian specifically. “We are carefully monitoring the industry,†she said.
It is possible that Experian’s changes are merely a test to see how the F.T.C. reacts. Ms. Henson of Experian declined to address this idea directly except to say in her e-mail, “We continuously evaluate all of our offers and will continue to do so.â€
Whatever Experian’s intention, it left one experienced industry watcher impressed with its agility.
“You can love Experian or you can hate Experian,†said John Ulzheimer, president of consumer education for the Web site credit.com, who has twice served as an expert witness for the opposing side in cases involving Experian. “But I don’t think that anyone can argue with the fact that Experian continues to be two steps ahead of the F.T.C.â€
http://www.nytimes.com/2010/04/08/your-money/credit-scores/08credit.html?src=me