Advertisers hit consumers with sneaky credit report fees

As posted on March 20, 2010 on www.ajc.com

By Lucy Soto

Type the words credit report into any online search engine and thousands of sites pop up, nearly shouting the word “free.” In-boxes routinely get hit with e-mails offering “free” reports and credit scores.

But keep an eye on the fine print. With a few clicks, consumers can get stuck with unwanted fees and even a credit monitoring agreement that costs in the range of $14.95 to $29.99 a month.

Beginning in April, the Federal Trade Commission is requiring its own fine print. Web sites that advertise free credit reports must include, across the top of each page, this disclosure: “THIS NOTICE IS REQUIRED BY LAW. Read more at FTC.GOV. You have the right to a free credit report from AnnualCreditReport.com or 877-322-8228, the ONLY authorized source under federal law.”

The disclosure must include clickable links to AnnualCreditReport.com and FTC.gov. Rules for similar new wording for television and radio ads will take effect in September.

Complaints about these free-but-not-exactly-free reports have been pouring into Better Business Bureaus and other consumer agencies for years.

“We’ve certainly had our share of complaints about these,” said Bill Cloud, spokesman at the Georgia Governor’s Office of Consumer Affairs. “The main things we deal with here are deceptive acts and practices and many people consider these that way.”

The Fair Credit Reporting Act requires each of the nationwide consumer credit reporting companies — Equifax, Experian and TransUnion — to provide a consumer who requests it a free credit report once every 12 months.

Georgians have an even better deal. Along with consumers in other states with similar laws, consumers here can get two additional reports annually from each of the credit bureaus.

“That’s a total of three free,” Cloud said. “What would be smart to do is to get one every four months, particularly if you believe you’ve gotten into an identity theft or somehow financial information has been misused or stolen.”

Consumers can get one report from AnnualCredit Report.com. The additional reports allowed under Georgia law are available by visiting each bureau’s Web site or calling each.

Despite this, links for “free” credit reports litter the Web. In fact, virtually anyone can place a link, and links often are imbedded in places like blogs and college Web sites and in online classified ads that ask for credit reports to rent or sell a house.

Typically, the links are “affiliates” that lead back to major companies that sell credit monitoring or other services. That means the person who places the links earns money every time a consumer clicks through and is persuaded to pay for what was advertised as free.

Here’s how FreeCredit Report.com, run by a branch of Experian, asks people to spread the word by joining its “affiliate team:” “Over 40 million people have ordered Credit Reports and Scores from FreeCreditReport.com. That amounts to many happy returns for our affiliates. Join today and start earning cash!” For each completed order, an affiliate link’s owner can earn $20.

At competitor CreditReport.com, affiliates can earn $22 for each completed order through links all over the Web.

The money often comes from consumers who are drawn in by the offer of a free credit report and persuaded to sign up, most commonly, for ongoing credit monitoring for a monthly fee. Typically, the company promises to alert consumers of any irregularities in their financial reports.

Consumers should never have to provide credit card information or create an account to receive a free credit report. In addition, Cloud, with the state consumer agency, believes most consumers can monitor their own credit.

“What you are doing by making these requests is monitoring your own [financial reports] already,” he said.

That’s especially true in Georgia, where customers can get two extra reports. “It goes back to the old saw, why pay for something when you can get it for free – and I mean free,” Cloud said.

Consumers who believe they’ve been duped or have a bad experience can file a complaint with the Better Business Bureau or the FTC.

The Council of Better Business Bureaus, the BBBs’ nonprofit umbrella group, weighed in on the new FTC disclosure rules in November. Rodney L. Davis, the council’s vice president for programs and services, cheered the changes as a way to cut through consumer confusion.

He said the updates to the FTC rules will help consumers avoid buying something they didn’t want and strengthen trust between consumers and credit reporting agencies.

“BBB receives thousands of complaints annually from consumers expressing confusion about where to go to obtain a free annual file disclosure ... and about the process to obtain such disclosures,” Davis said.

Knowing how to get your credit information, keeping track of it and making sure it’s accurate are important. But Cloud believes more consumers need to do something else: “Just protect your financial information. Don’t give it to strangers,” he said. “Don’t give it out and you avoid 99 percent of the problem.”