Experian Unit Settles Allegations
An Irvine company has settled charges that it tricked consumers seeking free credit reports into signing up for a credit monitoring service that costs $79.95 a year, the Federal Trade Commission said Tuesday.
Under the agreement, ConsumerInfo.com Inc., a unit of Experian Information Solutions Inc., is required to provide refunds to consumers and to pay the government $950,000 in “ill-gotten gains.”
The FTC first contacted the company in July 2002, concerned that it had failed to explain that by ordering a free credit report, consumers automatically would be signed up for a credit monitoring service and charged $79.95 if they did not cancel within 30 days.
“Consumers ordered their free credit reports, and there was no adequate disclosure that they would be charged anything,” said Lydia Parnes, director of the FTC’s Bureau of Consumer Protection. “When this promotion first went up [on the websites], in the first four lines the word ‘free’ was in capital letters half a dozen times.”
The company used radio, television, e-mail and Internet ads to drive traffic to two websites, www.consumerinfo.com and www.freecreditreport.com. To get the free report, consumers were required to provide detailed personal information and a credit card number.
According to Costa Mesa-based Experian, 11.5 million free credit reports have been ordered since 1997. The settlement covers consumers who ordered free reports from Nov. 1, 2000, to Sept. 15, 2003.
“We believed that we had been providing full disclosure but believed that we could improve communication with our consumers and make the language even more clear,” said Peg Smith, executive vice president of Experian. “We’re very pleased to have this settled and put behind us.”
Under the terms of the agreement, those eligible for a refund include:
* Individuals who were enrolled in ConsumerInfo’s monitoring service from Nov. 1, 2000, to Sept. 15, 2003;
* Those who were enrolled during that time but canceled the service within three years and received a partial refund;
* Those who were enrolled during that time but complained about the charges within three years.
The FTC said ConsumerInfo would notify those eligible for a refund over the next few months. Consumers with questions about the settlement can go to www.ftc.gov/freereports or call the FTC at (202) 326-3457.
The FTC also alleged that ConsumerInfo failed to notify consumers that its two sites were not associated with the government’s free credit report program.
Under the Fair and Accurate Credit Transactions Act, consumers can receive one free credit report each year from each of the three national consumer reporting agencies -- TransUnion, Equifax and Experian. The legislation required that the three companies set up a central hub to process consumer requests; that website is www.annualcreditreport.com.
The law went into effect for residents in Western states in December 2004 and is being rolled out across the country. By next month consumers in all 50 states, as well as the District of Columbia, Puerto Rico and all U.S. territories, will be able to request the free reports.
The ConsumerInfo.com site now offers information about the federal law, provides a link to the government site and states that the ConsumerInfo.com site is not affiliated with the federal program. It also says that if an individual requests a free report from ConsumerInfo.com, that person will be automatically enrolled in a trial membership of the Experian monitoring program that, unless canceled within 30 days, will cost $9.95 a month.
A similar message is on Freecreditreport.com, where the monitoring program -- which covers all three reporting agencies -- is $12.95 a month.
“The right to a free, no-strings-attached credit report is important,” Parnes said. Consumers are encouraged to check their credit reports regularly to ensure that they have not become victims of identity theft.
Parnes said the FTC also would crack down on other sites that “mimic the federally authorized sites that allow consumers to get free credit reports.”
