Consumerinfo.com Inc., a subsidiary of Experian North America, which is also the parent company of the credit reporting company Experian Information Services, has agreed to pay $950,000 to settle a lawsuit brought by the Federal Trade Commission (FTC).
The lawsuit alleged that Consumerinfo.com mislead consumers by implying they could obtain free credit reports and get 30 days of free credit report monitoring, when in fact the company was automatically charging consumers $79.95 for membership in a credit monitoring service if they did not cancel their accounts within 30 days.
In addition to relinquishing $950,000 in profits gained by the deception, the settlement requires Consumerinfo.com to make refunds to consumers who were deceived by the marketing campaign. The company also agrees to refrain from making further deceptive and misleading claims about “free” offers without disclosure of the exact terms and conditions.
According to the FTC, the company advertised through radio, television, and email as well as the websites www.consumerinfo.com and www.freecreditreport.com. The promotions emphasized that the credit reports would be absolutely free and that credit card information was required only to set up an account and would not be used to charge the customer for anything.
Once this was done, however, the company automatically charged the credit card given to it for the cost of an annual membership fee of $79.95 and placed the burden of canceling the account on the customer.
Also misleading to the consumer was the close similarity between the company’s website www.freecreditreport.com and the website maintained by the federal government itself at www.annualcreditreport.com. That site was set up pursuant to a federal law enacted in December 2003, which allows consumers to obtain one free credit report every 12 months from each of the three national consumer reporting companies including Experian Information Services.
This truly “free” program began in western states on December 1, 2004, and will cover all U.S. consumers by September 1, 2005. Consumers can choose to get their free credit reports by telephone or mail.
The FTC alleged that Consumerinfo.com engaged in a deceptive practice by not disclosing it was not associated with the official annual free credit report program sponsored by the federal government.
The company has denied that it ever intended to deceive or mislead anyone by its actions.
Lydia Parnes, Director of the FTC’s Bureau of Consumer Protection, warned consumers “to be alert about impostor sites – sites that misspell annualcreditreport.com or use sound alike names, but don’t link to the authorized site. We are sending letters to operators of more than 130 impostor sites to inform them that we know they are out there and that attempts to mislead consumers are illegal.”
While the FTC does not know how many consumers were scammed, the settlement requires Consumerinfo.com to compensate those who enrolled in their credit monitoring program between 2000 and 2003, canceled the monitoring service and received a partial refund or filed a complaint about the charges for the service. Qualifying consumers should receive a notice from Consumerinfo.com by email or first class mail within the next few months.
For consumers who need help determining if they qualify for a refund, the FTC provides answers to frequently asked questions (FAQ) at www.ftc.gov/freereports and on its information hotline at (202) 326-3457.
For additional information on obtaining a free credit reports through official sites, the FTC has published two consumer brochures which educate consumers about their right to a free copy of their credit report, and discusses other consumer rights under the Fair Credit Reporting Act and the FACT Act. Both publications are available in English and Spanish at www.ftc.gov/freereports.