When Is "Free" Not Free? When It Isn't Really Free.

The Federal Trade Commission has to date collected about $1.25 million (over five years) from Experian, one of the three major credit-reporting services, to settle charges that the firm misled consumers seeking genuinely free credit reports.

But it might not be enough.

As reported in Ron Lieber's article in today's New York Times, the annual revenues for monthly credit-monitoring services range from $650 million to $700 million. Experian is by far the biggest player in the sector. When an annual report is free, why are so many people -- upwards of nine million -- paying for monthly reports?

Could it be that these consumers are confused about what they're getting, and what they're paying for? Heaven forbid. If you've seen the many ads for freecreditreport.com, you too might think that what is being sold is a free credit report.

(I considered embedding one of the ads for freecreditreport.com, which Experian owns, here, but the jingle is one of the worst earworms out there. The FTC is now sufficiently annoyed about the freecreditreport situation that it has created and run its own parody ads, which are actually quite funny; I've posted one, below.)

Experian, of course, denies that it is doing anything dishonest. Lieber quotes the president of the firm's Consumer Direct division: "You get a free credit report and free score for test-driving our product... We've always felt that it's been very upfront and a fair opportunity for the consumer to become more aware and comfortable with the credit reporting concept."

That first report is free, but if you do not cancel immediately, you get hit with a monthly fee of $14.95. It appears that the amount is small enough that many consumers let such a relatively small amount slide, often for months, before they get around to canceling (canceling the service is not a completely stress-free experience, either; for example, while you can sign up for the service online, you can only cancel it by phone).

Remember that a genuinely free -- but annual, not monthly -- credit report is available from annualcreditreport.com, which is the only authorized (by the government) source for a free annual report. Obtaining a genuinely free report will still route you through the major suppliers (Experian, TransUnion, and Equifax) who will of course try to upsell you to a monitoring program before they provide the single free report (For more information, go to freecreditreport.gov -- which will redirect to an FTC site, ftc.gov/freereports).

Congress has since 2003 required the three major credit bureaus to provide one free credit report to every American each year. The similarity between the URLs has been confusing consumers since day one, to the point that, according to Lieber, "the FTC [at one point] asked Experian to give it the freecreditreport.com URL to end the confusion, but the company declined.")

I would feel a lot less suspicious of Experian's motives if they had given up that URL, wouldn't you?