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F-E-E Spells Trouble For Site On Experian Credit Reports

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The New York Times

Published: August 10, 2008

This year, Kris Steele, a Web developer in Madison, Wis., who was planning to buy a car, decided to check his credit score.

Steele, 27, remembered a number of commercials for FreeCreditReport.com featuring a young slacker singing about various life problems - living in the in-laws' basement, dressing as a pirate to wait on tables in a seafood restaurant - all because he had neglected to check his credit score. The ads were lighthearted and catchy, with lyrics like: "F-R-E-E, that spells free creditreport.com, baby. Saw their ads on my TV, thought about going but was too lazy."

So Steele headed to the site and filled out the information form, including his credit card number, which he thought the site needed to verify his identity.

But a couple of months later, Steele noticed the site had been charging his credit card. Although he thought he had signed up for a free report, he had enrolled in a credit-monitoring service that cost $14.95 a month. He says he never expected that it would cost anything.

"It's called FreeCreditReport.com," he said. "It's kind of easy to make that assumption. I didn't see anything in the process of signing up that said, 'Hey, if you don't cancel in 30 days or whatever, you're going to get charged.'"

Consumer groups have long objected to sites like FreeCreditReport.com. Consumers may obtain a free credit report each year from the three major agencies, as mandated by an act that Congress passed in 2003. The only authorized site for that is AnnualCreditReport .com.

The three major credit bureaus, Experian, Equifax and TransUnion, are required to offer reports through AnnualCreditReport.com, but the bureaus also make money from their credit reports.

Experian, which owns FreeCreditReport .com, increased both its site visitors and new member sign-ups by 20 percent in 2007. The company attributes those increases to its catchy ads.

"We've always been a very aggressive marketer," said Mike Dean, the chief marketing officer for the Experian consumer direct division, which runs FreeCreditReport.com. He said the company had increased its advertising budget by 200 percent over the past five years. The site spent $70.7 million dollars on major media advertising in 2007, according to TNS Media Intelligence.

A previous round of commercials, which began in October, have been a pop-culture hit. There are more than 70 YouTube homages, including one with a 5-year-old singing the ditty, and another with a high-school boy singing "C-A-L-cu-lus AP, hardest class in history."

The contention is not over the ads' aesthetics, but over their substance. Consumer advocates said the site's pitch was misleading.

"It's what I call a protection racket; the companies are charging you a fee and they're making a promise that it's going to improve your credit, and protect against identity theft, but in fact it does neither," said Edmund Mierzwinski, consumer program director for the U.S. Public Interest Research Group. "The sites are designed to trick people into taking on overpriced, useless credit monitoring, and they do so by attempting to make it appear as if you're going to get something for free."

The Federal Trade Commission, too, has criticized FreeCreditReport.com. In 2005, the agency settled a case against ConsumerInfo .com, an Experian division that ran Free CreditReport.com, saying that the advertisements said there was no catch to the report and that the Web site did not have adequate disclosure that the service was not free. Experian paid the FTC $950,000 and had to offer refunds to certain consumers.

On its Web site, the FTC warns about sites other than AnnualCreditReport.com, noting that "in some cases, the 'free' product comes with strings attached." The Florida attorney general is conducting an investigation into FreeCreditReport.com.

Dean said he could not comment about either case.

FreeCreditReport.com now has a disclosure on its home page saying that it is not affiliated with the annual free credit report program. But that language is in small print on the side of the home page on a subdued background, versus the large font and rich colors promoting enrollment.

Dean said that he did not think the site was misleading.

"It absolutely is the free credit report," he said. "It's not the one by the government, which is why we put the link on our front page of the landing site, and it is a free report. It's really a test drive for people to understand what's in that report, because a report can be very complex."

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