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Fed Takes Steps Against Shady Web Sites Offering “Free” Credit Reports

By Faye Mergel
Published: Monday, March 1st, 2010

Owing to the delicate situation of the economy, consumers are keeping a close eye on their finances and making sure that they will not be getting any surprises in their credit standings. The increased consciousness among consumers regarding their credit standing has led to an increase in consumers taking the time and effort to check out their credit reports.

Fed Takes Steps Against Shady Web Sites Offering “Free” Credit ReportsChecking out their credit reports is perhaps one of the healthiest things that consumers can do regarding their financial standing. In fact, the government encourages such behavior and has passed regulations allowing consumers to get a limited number of free credit reports every year. Unfortunately, a few institutions are taking advantage of the increased interest on credit reports among consumers.

Consumers who are looking to find ways to secure their free credit reports can go online and find a few services offering just that. Unfortunately, the so called “free” credit report services that they find may not be as “free” as the ads and banners in the website says. The internet nowadays is replete with websites that offer free credit reports only to bill their subscribers without warning for what is usually termed as “credit monitoring services”.

Obviously, such a ruse can be devastating to consumers who were only looking to keep ahead with their credit reports. Expecting free credit reports, many consumers have instead found themselves billed for a service they were not aware of signing up for and they may not have the finances to cover for. These websites, while they may provide a necessary service, by being sneaky in their service, end up costing consumers who only want to save money even more.

Fortunately for consumers, the Federal Trade Commission recently announced a new set of disclosure rules which it will be applying to web sites that offer free credit reports. The new rules will require websites that offer “free” credit reports while charging hidden fees to display a large banner, colored yellow, right on their home page which would inform consumers that they can get free credit reports annually courtesy of the government. The banner also directs consumers to the actual website where the free credit reports can be obtained.

This recent move of the Federal Trade Commission marks a first in online advertising regulations. The Fed regularly regulates deceptive advertisements in TV and in product packaging but this is the first time that online advertisement has been directly regulated.

Support for the regulation while it was still being proposed was quite overwhelming, with a large group of supporters coming from consumers who ended up paying for a variety of unwanted fees unwittingly due to these shady websites. A few even suggested that credit report advertisements should no longer carry the word “free”.

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