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FTC Changes Disclosure Rules For Sites Offering "Free" Credit Reports

In a press release late last month, the U.S. Federal Trade Commission (FTC) announced new disclosure rules that will go into effect on April 2 for Web sites offering "free" credit reports. The new rules aim to help consumers better understand Web sites offering "free" credit reports. The new FTC Credit Reports Rule effective April 2:

"... will require new prominent disclosures in advertisements for “free credit reports.” For example, any Web site offering free credit reports must include a disclosure, across the top of each page that mentions free credit reports, which states:

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 Credit CARD Act of 2009 required the FTC to change the Credit Reports Rule by February 22, 2010 to prevent deceptive marketing of “free credit reports.” During the interim period from February 22 until April 2, the disclosure requirement is shorter, includes only text, and excludes links:

“Free credits reports are available under Federal law at: AnnualCreditReport.com.”

After April 2, the disclosure includes longer text (see above), a clickable button to "Take me to the authorized source" for free credit reports, and clickable links to both AnnualCreditReport.com and FTC.GOV. Prior to issuing the revised rules, the FTC sought and received feedback about the proposed rule change from consumers, consumer reporting agencies, consumer report resellers, business and trade organizations, state attorneys general, consumer advocates, law firms, members of Congress, and academics.

This is the best that the FTC could do? It doesn't seem to prevent deceptive advertising but, moderate it instead.

Is the interim disclosure enough? Obviously not. While it is a step in the right direction, it is a small step. It includes minimal text and no links.

Is the April 2 disclosure enough? This is two steps in the right direction, but still not enough. While it includes more text and links, one link is to the FTC home page. A better link destination would be the FTC site page about free credit reports and the AnnualCreditReport.com site.

A even better solution would be for the rule to prohibit companies from making what is essentially, in my opinion, a "bait and switch" offer. Then, these micro-managing rule changes would be unnecessary and not waste limited government resources. At FreeCreditreport.com, the "free" credit reports really aren't. The site currently contains the interim disclosure, as required by the FTC.

I am sure that the credit reporting agencies are happy with the FTC's new rule change because it allows business-as-usual with minimal changes. Experian doesn't have to pull all of its FreeCreditReport.com ads that appear on both Youtube and late-night television and cable.

Sadly, the new rules are a business-friendly solution that allows companies to continue presenting Web sites with similar "bait and switch" offers; only to replace "free credit reports" with other freebies to evade the new disclosure rules.

How? I'll discuss one example tomorrow.

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