Q&A: New Developments in 'Free' Credit Reports

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Q: I keep hearing that I can get only one free credit report every year from annualcreditreport.com. But I see what seems like dozens of other sites that offer free credit reports, too. What’s the deal? — R. Nagy, Lambertville, N.J.

A: The short answer is this — you can only get a free credit report from annualcreditreport.com. According to the recently-enacted CARD Act of 2009, all other Web sites and companies must insert language on their Web homes pages or marketing collateral (when mentioning free credit reports) that read the following:

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

The FTC adds that consumers can get one copy of their credit reports annually, from each of the three major credit reporting agencies — Experian (Stock Quote: EXPN), Equifax (Stock Quote: EFX) and Trans Union, via AnnualCreditReport.com.

That said, there have been some interesting developments in the “free credit report” market since the passage of the CARD Act, and it’s tougher rules on disclosure. Before the new legislation took effect, companies like FreeCeditReport.com would use a free credit report as bait. Once you agreed to getting the free report, you’d find yourself signed up for a “credit monitoring” service for $14.95 a month or so — if you don’t cancel the service within seven days of signing up. In essence, you couldn’t really get the free credit report without the monthly monitoring service.

CNN recently reported that the FTC received 1,000 consumer complaints on those “strings attached” free credit report services. Most claimed they were duped into using their credit card to sign up for the free reports, and were forced to “opt out” to cancel the deal — a painstaking process involving a telephone call to a customer service agent who, according to the FTC, would likely badger the consumer into buying one of the company’s services.

The New York Times also reports that FreeCreditReport.com paid out $1.25 million in fines in 2005 and 2007, to settle a pair of court challenges from the FTC on behalf of consumers. The FTC charged the company was “misleading” consumers who were looking for free credit reports, with no strings attached.

To dodge the new CARD rules, FreeCredit Report.com, which is owned by Experian, has started charging customers $1 for every free credit report, and then donating that $1 to charity. That helps the company accommodate the new language citing AnnuaCreditReport.com as the only source for free annual credit reports. In other words. FreeCreditReports.com can fully disclose that its credit reports aren’t free — but they can say that, at $1, they are dirt cheap.

And that could leave the window open for charging bigger dollars for things like credit monitoring services once consumers sign up for the $1 credit report.

So, your takeaway up there in Lambertville? Unless you really want a monthly credit monitoring service, the only true free credit report service is via AnnualCreditReport.com.

Anything else leaves you open to hard-to-get-rid-of monthly charges — which are anything but free.

—For the best rates on loans, bank accounts and credit cards, enter your ZIP code at BankingMyWay.com.

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