Credit giant Experian has settled government charges that one of its online units, ConsumerInfo.com, duped consumers into buying credit-monitoring services by failing to adequately disclose the terms of its free-trial offer of credit reports, the Federal Trade Commission said yesterday.
The FTC also said it has sent warning letters to the operators of more than 130 other Web sites that it claims are failing to disclose the terms of credit-report free-trial offers, and that it will monitor them to see if further action should be taken.
According to the FTC, Experian’s ConsumerInfo.com failed in a national ad campaign and on two Web sites to disclose adequately that consumers would automatically be charged $79.95 annually for a credit-monitoring service if they registered for a free credit report and then failed to unsubscribe before the 30-day free-trial period ended.
The company promoted the reports on its FreeCreditReport.com and ConsumerInfo.com Web sites, the FTC said.
“It’s unfair and deceptive to promise consumers something for free and then trick them into paying for products they didn’t want in the first place,” said Lydia Parnes, director of the FTC’s Bureau of Consumer Protection, at a press conference in Washington. “Consumers were promised a free credit report and were tricked into buying expensive credit-monitoring systems.”
As part of the settlement, Experian has agreed to pay $950,000 to the FTC and provide refunds to some consumers who signed up for credit reports between November 2000 and September 2003. Since September 2003, Experian has adequately disclosed the terms of its free-trial offer of credit reports, the FTC said.
Experian maintained that ConsumerInfo.com has always disclosed the terms of its free-trial offer, but that it has been working with the FTC to allay its concerns.
Peg Smith, executive vice president for Experian, estimated the company will offer refunds or partial refunds via e-mail and direct mail to about 1 million consumers who paid for credit-monitoring services.
“We believe very firmly that it is important to disclose the terms to any consumer on a free-trial offer,” she said in an interview. As part of the settlement, Experian clarified its free-trial terms and changed the placement of the disclosures, she said.
Prior to September 2003, the terms of ConsumerInfo.com’s free trial offer were placed above the “submit order” button. They are now placed on ConsumerInfo.com’s landing page, or the first page consumers hit when they click through an ad, Smith said.
Smith said she believed the FTC targeted Experian “because we are the largest by far. We are also the one that most publicly uses broadcast advertising to market to consumers.”
When asked if she thought the FTC’s charges were unfair, Smith said, “I’ve been in this business 30 years and I never know what’s fair with the FTC.”
The $950,000 paid by Experian will either go to the Treasury or be used to educate consumers, said Parnes.
A federal law enacted in December 2003 enables consumers to get one free credit report every year from each of the three national consumer-reporting companies. The program began in western states on December 1, 2004, and will cover all U.S. consumers by September 1, 2005.
The FTC also accused ConsumerInfo.com of failing to adequately disclose that its Web sites are not affiliated with the official free credit report program at AnnualCreditReport.com.
To educate consumers about their right to a free annual credit report, the FTC for the first time has begun buying keyword advertising on major search engines to make sure an FTC-sponsored link appears on results pages delivered to consumers searching for free credit reports, Parnes said.
Network
