Experian settles free credit report charges

Credit bureau Experian has settled charges that it misled consumers with the lure of a free credit report and instead enrolled them in costly credit monitoring services, the Federal Trade Commission said Tuesday.

Under the terms of the settlement, Experian admitted no wrongdoing but agreed to give refunds to some consumers and surrender $950,000 in what the FTC called “ill-gotten gains.” In addition, Experian, one of the nation's three major credit bureaus, has changed the way it advertises credit monitoring services at ConsumerInfo.com and FreeCreditReport.com.

A free annual peek at a credit report, mandated by Congress in 2003, will finally be available to all U.S. consumers on Sept. 1. On that day, consumers on the East Coast will get their first crack at the only site which offers the federally-mandated free credit reports, AnnualCreditReport.com. The free reports have been phased in across the country from west to east; West Coast residents have been eligible to get them since last December.

What Experian did, according to the FTC, was to use the lure of a free credit report to trick consumers into paying for costly subscriptions. Television and radio advertising campaigns drove consumers to the ConsumerInfo.com and FreeCreditReport.com Web sites, but when consumers filled out the forms for what they thought was a free peek at their credit histories, they were automatically enrolled in paid credit monitoring services, the FTC alleged. Consumers who didn’t cancel within 30 days were charged a full year’s subscription of the services at $79.95.

“They charged consumers for services they may not have intended to buy,” said Lydia Parnes, director of the FTC’s Bureau of Consumer Protection. “Consumers paid the price for ordering free credit reports from FreeCreditReport.com.”

Experian's Peg Smith said the company was happy to reach a settlement and "put this behind us." She said the company had worked with the FTC since 2002 to offer additional disclosures on its site, but said consumers were always shown detailed information about the products they were buying before their credit cards were charged.

"Experian does regret any confusion we caused consumers," she said.

Experian purchased ConsumerInfo.com in May 2002, and was first contacted with complaints by the FTC in July of that year. By September of the following year, she said, the firm had made all the changes requested by the FTC. 

"We thought we had put the issue behind us then," she said. The firm wasn't contacted by the FTC with additional complaints until December 2004, just as the AnnualCreditReport.com site was launched, Smith said. Experian has now made the additional changes requested by the FTC, including a notice atop its sites indicating that they are not affiliated with the government program.

Smith added that disclosures must be "balanced against marketing opportunities."

Until recently, the text atop ConsumerInfo.com said “Free! Free! Free!  Get your FREE Credit Report Online in Seconds!!!”  When consumers clicked on “Free report,” they were sent to a sign-up page. At the bottom of that page, in small print, was the message that a credit card was required and a fee will be charged.

On Tuesday, a warning about the possible membership fee was featured prominently at the top of the Web site. “When you order your free report here, you will begin your free trial membership in CreditCheck Monitoring,” the message read. “If you don't cancel your membership within the 30 day trial period, you will be billed $9.95 for each month that you continue your membership."

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