The Credit CARD Act of 2009 required the Federal Trade Commission to regulate marketing surrounding products offered by the credit reporting agencies (Experian, Equifax, and Transunion). Starting this month, offers like FreeCreditReport.com must be transparent about their offers when they are tied to “free trials.”

It’s easy for us to single out Experian’s FreeCreditReport.com because not only have they produced the most familiar advertising, with catchy jingles promoting a product that requires enrollment in an expensive and usually unnecessary service, but also because the FTC has used them as an example. Here is the official opinion from the FTC:

… [S]ince issuance of the original Rule [designating AnnualCreditReport.com as the official centralized location for customers to receive an annual credit report from each of the three bureaus], there has been a proliferation of confusing advertising regarding where consumers can obtain their free annual file disclosures. Some nationwide CRAs and others have advertised “free credit reports” in connection with the purchase of products and services, such as credit scores and credit monitoring. Although some advertising predated the original Rule, the bulk of the advertising for “free credit reports” now takes advantage of consumers’ general knowledge that free annual file disclosures are available under federal law. These advertisements direct consumers not to AnnualCreditReport.com, the authorized source for free annual file disclosures, but to commercial websites operated by nationwide CRAs or others that sell a variety of products and services. Further, when a consumer uses an Internet search engine to locate the website for free annual file disclosures, the search engine will usually list “sponsored” links — again, selling products and services — such as “FreeCreditReport.com” first.

As a result of this advertising, consumers are often misled and
confused about where to obtain the free annual file disclosure mandated by federal law. Indeed, the Commission has received numerous consumer complaints demonstrating confusion and frustration about how and where to obtain a free annual file disclosure. As discussed below, comments received during this proceeding further illustrate both consumer confusion with and frustration in obtaining “free annual file disclosures” and “free credit reports.”

Experian’s FreeCreditReport.com now does a better job of warning customers that obtaining a credit report through this commercial website requires enrollment in a service that costs $14.95 monthly. While the company is offering a “trial” of this program, if you don’t cancel within 7 days, you will be charged the first fee. In fact, if you look at the fine print, you have have less than 7 days after you receive your credit report.

Another major change is the program itself: FreeCreditReport.com no longer offers free credit reports. Presumably skirting some of the requirements of the new law, the website now offers these formerly free credit reports for sale for $1.

Whether the free trial period for a product is the original 30 days offered years ago or the more recent 7 days, customers should be fully informed from the start and should not have to face unreasonable obstacles when attempting to cancel membership. Some responsibility obviously rests on the consumer to fully research any product before providing personal information like Social Security Numbers and credit card numbers, and this is doubly so for any product advertised as “free.”

Customers should also be able to expect companies to advertise using statements that aren’t misleading and to be able to cancel any membership, whether in “trial” or “full” status, without much hassle. I’ve read many reports of customers working for months to cancel these memberships, with customer service representatives being unhelpful or willfully lying to those customers. If a representative from a company tells me my membership is canceled effective immediately, I would expect to see no further charges.

Free Annual File Disclosures; Final Rule [pdf], Federal Trade Commission, March 3, 2010

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