Money tip: New rules crack down on 'free' credit reports

It's no joke: Starting this past Friday, the day after April Fools' Day, those "free" credit reports you hear about just might truly be so.

To crack down on misleading advertising, the Federal Trade Commission is requiring companies offering "free credit reports" to state clearly that there's only one authorized site to get them: AnnualCreditReport.com.

The new rules, a mostly overlooked piece of last year's massive credit-card reform bill, are aimed at deceptive radio, TV and online ads that hook consumers with catchy jingles and promises of "free"credit reports. In too many cases, the FTC says, consumers were duped into monthly fees for credit monitoring and other services that many didn't want or didn't know they were signing up for.

"People all the time ask, 'Why am I being charged when all I wanted was a free credit report?' " said John Ulzheimer, consumer-education president for Credit.com, a personal-finance Web site.

In many cases, "It's either because they didn't read the fine print or didn't cancel or opt out of the trial membership (for fee-based credit services)," Ulzheimer said.

Web sites must now prominently state that a free credit report is available from www.annualcreditreport.com or by phone at 877-322-8228. The same requirement for TV and radio ads goes into effect Sept. 1.

Under a 2003 federal law, consumers are entitled to receive one free credit report annually from each of the three credit-reporting bureaus — Experian, Equifax and TransUnion. The reports are a record of your credit history, detailing balances and payments on loans, bills and other debt.

To get a credit score, you have to pay a fee, typically $15 and up.

One company affected by the FTC's new rules is FreeCreditReport.com, whose popular pitchman is a guitar-strumming young rocker whose credit woes are chronicled in a series of humorous TV ads that have attracted avid followers on YouTube and Facebook.

In 2005 and 2007, Experian, which owns FreeCreditReport.com, was fined a combined $1.2 million and ordered to pay refunds to consumers who requested a free credit report, but wound up paying for credit-monitoring services they didn't want.

Even though the ads said a person's credit card would not be charged during the free trial period, the FTC said they failed to adequately explain that consumers automatically would be charged a $79.95 annual membership with automatic rebilling, unless they canceled within 30 days.

Changes were also required of the AnnualCreditReport.com site. "To alleviate consumer confusion," there's now a ban on any advertising popping up from Experian, Equifax or TransUnion until after a person has completed their request for a free credit report, said FTC attorney Tiffany George.

In the past, she noted, consumers on the Web site were "bombarded by lots of confusing offers,"or were shuttled off the main page to paid sites offering fee-based services.

Also, consumers can't be required to set up an account or agree to terms and conditions to receive a free annual credit report. "It's all designed to remove any barriers to consumers receiving their free reports,"said George. "It's supposed to be an unfettered right."