Credit

Fell for a “free” credit report? You may be part of a class action suit

Photo: Brian Turner

Have you ever heard of a company called Consumerinfo.com?  You probably have not.  But, chances are that you have heard of (or seen) FreeCreditReport.com and FreeCreditScore.com.  Both of those sites are owned by Consumerinfo.com and guess who owns Consumerinfo.com… Experian.

On March 22, 2011 David Waring, a consumer who lives in San Diego, filed a class action lawsuit against Consumerinfo.com, essentially Experian, because of the actions of FreeCreditReport.com and FreeCreditScore.com.  As with all class action lawsuits there is a large number of potential class members. Could YOU be a member of the class?  Read on to find out.

The plaintiff alleges that he and other consumers who signed up for services via the aforementioned sites were deceived because the credit score provided by Consumerinfo is not the actual score sold to lenders, yet their advertising suggests that it is used by lenders to assess creditworthiness. The score on their websites is the “PLUS” score, which isn’t even commercially available to lenders so it can’t be used to determine your creditworthiness.  Experian discloses as much, “Calculated on the PLUS Score model, your Experian Credit Score indicates your relative credit risk level for educational purposes and is not the score used by lenders.”

The problem is that on another one of their sites they state that your “Free Credit Score Matters” and “Your credit scores determine the amount credit lenders will make available to you and the interest rates and payments on mortgages, credit cards, auto loans, insurance policies, and more.” This, of course, isn’t true because none of the aforementioned lenders use your “Free Credit Score” for anything. Further, there is no disclosure in their ubiquitous television ads about how the score you get for free is not used by lenders.

The core service offered by the Consumerinfo sites (and there are a lot more than just the two mentioned in the lawsuit) is actually a credit monitoring service that includes a free score as the “loss leader” to get consumers to sign up. Despite the use of the word “free” in the URL the services aren’t actually free.  There is a trial period of seven days and if you don’t cancel your trial credit monitoring service during that time frame your credit card, which you gave them when you signed up, is charged $14.95 each month until you do cancel.  At best I’d call this “conditionally free.”

FTC fines and CARD Act requirements

Experian has gotten their hands slapped by the Federal Trade Commission in the past for how they market their “free credit report” services. They’ve paid two fines to the FTC equaling $1.25 million because of deceptive sales practices. The CARD Act even addresses how free credit reports can be marketed, which is funny considering the CARD Act was meant to curb egregious practices of credit card issuers.

The CARD Act states websites that give away free credit reports must contain the following mandatory disclosure across the top of each and every web page that mentions free credit reports;

THIS NOTICE IS REQUIRED BY LAW. Read more at FTC.GOV. You have the right to a free credit report at AnnualCreditReport.com or at 877-322-8228. The ONLY authorized source under federal law.

Experian, in response, simply started charging $1 for their “free” credit report and then subsequently changed their marketing focus to free credit scores instead of free credit reports.  If you haven’t figured it out already, the marketing of free credit SCORES does not require the above mandatory disclosure.  As I said in this interview with the New York Times, Experian remains two steps ahead of the FTC.

I reached out to Experian regarding the litigation and this was their statement, “Experian’s practice is not to comment on pending or ongoing litigation involving the company.”

Who’s in the class

The lawsuit class “period” covers the time frame from March 22, 2007 to present.  This means everyone who purchased services from FreeCreditReport.com, FreeCreditScore.com or Consumerinfo.com during that four-year period could be a member of the class. Clearly this means the class size could number in the millions.

I’ve been involved in several class action lawsuits as an expert witness. These types of cases can take years to resolve.  As such, we should not expect news any time soon and we certainly should not expect a quick resolution. But, I’ll be watching the process closely and will provide you updates as often as possible, given that many of you are probably members of the class.

John Ulzheimer is the President of Consumer Education at SmartCredit.com, the credit blogger for Mint.com, and a contributor for the National Foundation for Credit Counseling.  He is an expert on credit reporting, credit scoring and identity theft. Formerly of FICO, Equifax and Credit.com, John is the only recognized credit expert who actually comes from the credit industry. The opinions expressed in his articles are his and not of Mint.com or Intuit. Follow him on Twitter here.