Beginning April 2, new rules from the Federal Trade Commission take effect that will help consumers distinguish "free" credit report offers that actually cost money from the free credit reports reserved for consumers under federal law. Americans are entitled to one free annual disclosure from each of the three major credit bureaus -- Equifax, Experian and TransUnion -- thanks to the Fair and Accurate Credit Transactions Act of 2003.
"This rule specifically addresses sites that advertise a free credit report and confuse consumers into thinking it's AnnualCreditReport.com, the official centralized source," says Chi Chi Wu, staff attorney at the National Consumer Law Center in Boston.
The Credit CARD Act of 2009, which mostly went into effect in February, required the Federal Trade Commission to establish a rule that addresses commercial advertising of free credit reports.
People trying to find the official Web site for free credit reports can find a multitude of commercial Web sites that promote free credit reports as part of the purchase of products or services. In comments on the rule the FTC first proposed, many consumers said they paid "various sums for unwanted services when they attempted to obtain what they thought was their free annual file disclosure."
New disclosure requirementsAs of April 2, commercial Web sites and print ads that promote free credit reports must include specific disclosures to comply with the CARD Act.
Commercial Web sites must disclose this statement at the top of each page: "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."
Print ads require a similar statement, minus the hyperlinks.
The Web sites must provide a clickable button that reads, "Take me to the authorized source" and operational links to AnnualCreditReport.com and FTC.GOV.
The CARD Act mandates specific formatting requirements to make the disclosures prominent. The disclosure must have a distinctive style such as bold and a "high degree of contrast" from the immediate background, for example.
Consumers will also no longer see any advertisements or hyperlinks that lead to other offers while on AnnualCreditReport.com until after they have obtained their free credit reports. "Previously there were hyperlinks to the three nationwide credit reporting agencies on the front page," says Tiffany George, attorney in the division of privacy and identity protection at the FTC. "People would click on those and they would get taken to the commercial site and taken away from AnnualCreditReport.com without realizing it."
The required wording of disclosures for television and radio ads takes effect Sept. 1, 2010. Until then, radio and TV advertising must disclose the interim disclaimer: "Free credit reports are available under federal law at AnnualCreditReport.com."
Formatting requirements for TV and radio ads go into effect April 2. For example, TV ads must display the disclosure on screen for at least four seconds, and radio ads have to include the statement in "close proximity" to the first mention of "free credit report."