New Rule to Shed Light on Free Credit Report System

(March 16) -- It's not just that those pesky "free" credit report Web sites can snooker you into buying credit services.

The federal government's own official, authorized Web site, where consumers are really supposed to get a free credit report -- no questions asked -- is also a minefield of credit service come-ons.

Effective April 2, that's changing -- or at least that's the plan.

In the latest adjustment to the Fair And Accurate Credit Transactions (FACT) Act (a major 2003 amendment to the Fair Credit Reporting Act -- FCRA), any company advertising "free" credit reports will be required to specifically and prominently disclose that consumers have a right to a truly free, no-strings-attached credit report only from AnnualCreditReport.com or by calling 877-322-8228.

(Consumers can also complete the official Annual Credit Report Request Form and mail it to Annual Credit Report Request Service, P.O. Box 105281, Atlanta, GA 30348-5281.)

The Federal Trade Commission says the notice must read: "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."

Web sites additionally will be required to include the same disclosure at the top of every page that mentions free credit reports. Also, Web site disclosures must include clickable buttons (hot links) to three locations: "Take me to the authorized source," "AnnualCreditReport.com" and "FTC.GOV."

Effective Sept. 1, radio and television commercials likewise will have to include the disclosures.

Previously, the rule only required Web sites and advertisers to include the phrase: "Free credits reports are available under Federal law at: AnnualCreditReport.com," in their advertising.

Since 2004, when the FACT Act began to roll out, consumers actually have been entitled to three free credit reports a year, one each from the three major credit report agencies -- Equifax, Experian and TransUnion.

The rule was designed to allow consumers, without charge, to detect and dispute inaccurate or incomplete information retained by credit reporting agencies.

But from the beginning, there's been confusion because of misleading advertisements from companies claiming to offer "free" credit reports, only to lure consumers into buying credit-monitoring services, credit scores and other credit services not available for free under federal mandate.

The FTC says the services, including those offered by the big three credit reporting agencies, take advantage of consumers' knowledge of "free" credit reports to reel them in with "free" come-ons.

Internet pitches are particularly notorious for adding to the confusion.

A recent Google search for "free credit report" put AnnualCreditReport.com at the top of the list of ranked Web sites, but above those ranked Web sites were three "sponsored links."

At the very top of the "sponsored links" was the popular FreeCreditScore.com, aka FreeCreditReport.com, the Experian-run operation known for a television ad campaign starring a band of lovable goofs who have also gone viral on YouTube.

The typical pitch goes something like this: Order your "free" credit report, get a "free" seven-day trial credit-monitoring service. If you don't cancel after seven days, you'll be billed $14.95 every month you don't cancel.

In the past five years, the FTC has wrenched $1.25 million in fines from Experian to settle charges that its ads have been misleading. The federal agency also says other credit reporting agencies have similar operations.

As part of the FTC's war against misleading advertisements, the federal agency even spoofed FreeCreditReport.com ads to make the point about misleading tactics.

But the feds goofed when the original free credit report rules left the job of establishing and running the AnnualCreditReport.com operation up to -- believe it or not -- the three credit reporting agencies.

They continue to run the site, but in addition to helping consumers obtain the federally authorized free credit report, the three agencies heavily hawk their services with three prominent click-through buttons on AnnualCreditReport.com.

Confused consumers who've diligently gone to the official free credit report site, but click through, wind up on one of the three agencies' Web sites, ablaze with offers for credit scores and credit-monitoring services.

Fortunately, the new rule also attempts to address this problem.

It says, "The amended rule also restricts practices that might confuse or mislead consumers as they try to get their federally mandated free annual credit reports. The amended rule requires nationwide consumer reporting agencies -- Equifax, Experian and TransUnion -- to delay any advertising for products or services on AnnualCreditReport.com until after consumers get their free credit reports."

Whether or not Experian's plucky FreeCreditReport.com band of pitchmen will be singing a different tune after the rule takes effect will likely continue to rely upon consumers being extra diligent when they go after their free credit reports.