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Schumer Moves to Clean Up Credit Reporting Ads

Plan would require companies that offer free credit reports to provide free reports

By James Limbach
ConsumerAffairs.com

November 4, 2009

The New York Democrat says such companies dupe millions of consumers into buying credit monitoring services by offering a so-called "free credit report" and then tacking on a costly monthly subscriptions charge that can cost hundreds of dollars a year. His plan would require any company that purports to offer a free credit report to disclose that consumers do not have to pay for their services in order to get a free credit report and disclose in their advertising that consumers are entitled to a free credit report from the government once a year.

In addition, Schumer says his plan would require these companies, when someone requests their free report, to show that report on the computer screen before the customer provides their credit card information, that way the consumer has the choice of subscribing for year round credit monitoring. Nine million people spend a total of $650 million to $700 million annually on the services, according to Carter Malloy, a Stephens Inc. analyst.

"If these companies want to say -- or sing for that matter -- that they are giving people free credit reports, then they can't charge people $15 a month, simple as that," Schumer said. "For years, these companies have said with a smile that they will provide a free credit report -- even though the government already requires a credit report be provided for free every year - and then suddenly, months later consumers get a bill in the mail for their credit monitoring services. My plan would finally bust up this scam and give consumers some honest choices."

The commercials in question can be very catchy, and they may serve as a reminder to consumers to be vigilant about monitoring their credit. However, these ads, among many others that promote similar services, Schumer says "take advantage of Americans' very real worries about identity theft in a misleading and deceptive way, by tricking them into paying for reports they are entitled to get for free."

ConsumerAffairs.com has received scores of complaints about the practices of these kinds of companies. Among them:

• James M. of Maple Grove, Minn., tells us "I requested on freecreditreport.com my annual free credit report. Before I could receive my free credit report, I was required to enter my credit card number. This month I noticed a charge of $14.95 on my credit card for my 'free' credit report. Upon inquiry, I was told that I am automatically entered into a subscription service and that I have only 7 days to cancel. This is a SCAM and a FRAUD. I did not request nor do I want this service. This a bogus scam layered over into what is supposed to be a free report."

• Kim M. of League City, Texas writes ConsumerAffairs.com, "I pulled my credit report through freecreditreport.com. A couple of months later a $15.88 charge showed up on my card account from them. I called them and they said that when I pulled my credit I was enrolled in a credit-monitoring program that was free for the first couple of months and because I didn't cancel it they started charging me. I didn't even know I was enrolled. This is a scam!"

In 2003, Congress passed the Fair and Accurate Credit Transactions Act, which required that all Americans be allowed to access one free credit report annually from each of the three credit reporting bureaus, including the company that produces the FreeCreditReport.com commercials. In 2009, Congress added a requirement that the FTC issue new rules to prevent deceptive advertising. The FTC is currently considering proposals pursuant to that requirement.

Schumer is calling on the FTC to implement two important changes as part of its rulemaking. First, he asked the FTC to impose new regulations requiring that television advertisements include the exact same disclosure that is already present on websites and print mailings to inform consumers that they are entitled to a free credit report annually from the government, and that any offer that comes with strings attached is entirely unrelated to the website www.annualcreditreport.com. Consumers who still wish to enroll in credit monitoring services may do so, but they won't be fooled into thinking that they need to pay a subscription service for access to their credit reports.

He also asked the FTC to require those companies that continue to advertise free credit reports to provide consumers with their credit reports before they turn over their credit card information to sign up for the service. This way, consumers can actually get the free credit report that is advertised without being locked in to paying a monthly fee.

Schumer says if the FTC can't impose these rules through regulation, he will propose additional legislation.

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