March 2, 2010 at 9:00 AM ETLike the song says, he should have seen it coming at him like an atom bomb.
The singer of those FreeCreditReport.com jingles might sound a bit less peppy now that the Federal Trade Commission is making the company behind the ads -- credit bureau Experian -- face the music. Heavy-handed disclosures aimed at ending years-long confusion over free credit reports will begin to appear in the ads next month. The changes are among new consumer protections enacted by Congress in the 2009 Credit Card Accountability Responsibility and Disclosure Act.
In one disclosure viewed by msnbc.com, the top of the FreeCreditReport.com Web site was covered with a large grey block with type that read: "You have the right to a free credit report from AnnualCreditReport.com ... the only authorized source under federal law," with an obvious link to the site. Consumers who still want to sign up with FreeCreditReport.com would have to scroll down and enroll in the paid service offered by Experian.
"That's what we were aiming for," said Maneesha Mithal, an FTC attorney. "Congress wanted the disclosure to be really prominent."
Many Web sites, including FreeCreditReport.com, claim to offer free credit reports, but do so only as a come-on for costly credit monitoring subscriptions services.
Market leader Experian, which owns the coveted FreeCreditReport.com Web address, began advertising heavily in 2003 after Congress mandated that U.S. consumers were entitled to a free copy of their credit reports every year. The FTC has been in a legal battle with the site ever since. Experian has been forced to issue refunds and pay more than $1 million in fines, but that didn't quiet the crooning of Eric Violette, the star of the FreeCreditReport.com ads.
In what might be a first in consumer protection history, the protracted FTC-Experian legal fight actually included a foray by the government agency into comedy. Last year, the FTC created a spoof ad, poking fun of the FreeCreditReport jingles while trying to warn consumers that they might end up paying for something they could get for free.
Throughout the legal wrangling, the FTC has fielded numerous complaints from consumers who thought they were getting their congressionally authorized free credit report, only to find they had been signed up for a $14.95 monthly subscriptions they didn't want. Msnbc.com has been inundated with complaints too, and has written several stories about the issue, including a 2007 piece titled "Don't fall for FreeCreditReport.com."
It's hard to imagine the new warnings not putting a dent in the confusion – and that could be bad for Experian's bottom line.
Experian does not break out its FreeCreditReport.com sales, but in advertising for the site the firm claims to have served 20 million consumers. ComScore MediaMetrix says the site is the No. 1 ranked "financial advice" Web site, with 6 million visitors each month. Experian invested heavily in the market back in 2002, when it acquired FreeCreditReport.com for $130 million.
In anticipation that the gravy train might end, Experian has been spending about $70 million annually on FreeCreditReport.com ads, according to the New York Times.
The new disclosure law applies to any firm that claims to offer a free credit report, Mithal said. Anticipating the next round of regulatory cat-and-mouse, the rule requires the prominent disclosure to appear on every page where the words "free credit report" appear, she said.
Experian and its competitors must begin adding disclosures to their sites immediately, but the precise warning prescribed by the FTC doesn't have to appear until April 1. That's why some visitors to the FreeCreditReport.com are currently seeing much more humble disclosures, with only a single line of text -- in a small font and not hyperlinked -- atop the page. The firm said it was testing different disclosures.
Television ads also will have new warnings: visual and audio disclosures directing viewers to AnnualCreditReport.com.
The Web site warnings were designed by the FTC's Web design staff, Mithal said, after receiving input from industry members and consumer groups. It's unusual for a government agency to tell a company precisely what to put on its Web site, but Mithal said the FTC has at times forced firms to include new disclosures through court orders or other rule-making procedures. This new disclosure has a bit more legal heft, however, arising from a direct order by Congress.
It's taken a long time -- five years -- for the FTC to settle on a way to clear up the confusion over free credit reports. What took so long?
"We've been monitoring the marketplace for a long time," Mithal said. "We have had a lawsuit against (Experian), we've done (court) orders. But at some point Congress said this isn't working. So it's been a process."
Experian, in a statement, said it was playing by the rules and has always done so.
"Experian has been, and will continue to be, in compliance with the FTC's rules regarding the marketing of free credit reports," the firm said in a statement to msnbc.com. "We remain committed to clearly and conspicuously disclosing to consumers that the free report we offer is not the free annual credit file disclosure provided by federal law, and plan to comply with the FTC's rules by April 1."