The FTC settlement demands the company pay $950,000 and stop using deceptive practices for Web-site offers of 'free' credit reports; a warning is issued to 130 other sites.
Posted Aug 17, 2005
Experian on Tuesday settled government charges brought by the FTC against a practice within one of its units, ConsumerInfo.com, that it deceived consumers by claiming credit reports were free. The settlement addresses consumers who enrolled in the program between 2000 and 2003, canceled the monitoring service, and received a partial refund or filed a complaint about the charges for the service. Under the settlement ConsumerInfo, a provider of online credit and identity-theft protection products (acquired by Experian in 2002), must provide refunds to deceived consumers, stop misleading free-trial offers, disclose terms and conditions of alleged free offers, and pay $950,000. The FTC also noted that those eligible for a refund should receive a notice from ConsumerInfo via email or first-class mail within the next few months.
ConsumerInfo did business as Experian Consumer Direct, and led consumers to believe they could obtain free reports at its freecreditreport.com site. However, its advertising and Web sites inadequately explained that if consumers did not cancel the service within 30 days they would be hit with a $79.95 annual membership charge, according to the charges. "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," Lydia Parnes, director of the FTC's Bureau of Consumer Protection, said in a statement. "Consumers paid the price for ordering free credit reports from freecreditreport.com." Parnes said the FTC is "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."
The FTC also said that ConsumerInfo misled consumers into believing that it was associated with the Congress-mandated annual free credit report program. Under a federal law enacted in December 2003, consumers have the right to one free credit report every 12 months from each of the three national consumer-reporting companies. The program, which started in western states on Dec. 1, 2004, will branch out to include all U.S. consumers by Sept. 1, 2005. Free reports are available at www.annualcreditreport.com.
Experian denies its sites were ever misleading to consumers, and maintains that it has completely cooperated with the FTC over the past three years to resolve the commission's concerns, first expressed in July 2002, that consumers did not fully understand certain terms of the monitoring program, according to ConsumerInfo. Peg Smith, executive vice president, says the company has changed its site so that cost disclosures are on the first page, according to Associated Press.
The fact that there was a penalty is the most important consequence of the event, according to Robert Lerner, senior analyst at Current Analysis. "That hurts an organization in terms of public perception," he says. Part of the situation, though, is a data quality issue. "You have to have accurate data, data that's fit for a particular purpose, is good within the context, and is [understandable]." This situation is "some of the failures of that. It didn't provide the appropriate data to the customer."
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