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    Edelman, Combs, Latturner, & Goodwin, LLC

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    Suite 1500
    Chicago, IL 60603

    info@edcombs.com
    Phone: 312-739-4200
    Fax: 312-419-0379


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    Not so free credit scores

    Company to pay $22 million for offering “free” credit scores that turned out to be not so free

    We’ve brought law enforcement actions – dozens of ‘em. We’ve held workshops, issued reports, and sent warning letters. If it takes sky writing, tap dancing, and a float in a Thanksgiving Day parade, we’ll do that, too. But here’s what’s not going to happen. The FTC is not giving up until businesses get the message that: 1) Free means free; and 2) Key terms and conditions have to be clearly and conspicuously disclosed. A $22 million settlement announced by the FTC and the AGs of Illinois and Ohio with a national credit monitoring service advertising so-called “free” credit scores emphasizes that point. Another note for practitioners: It’s the FTC’s third case alleging violations of ROSCA.

    One Technologies and related outfits marketed their credit monitoring programs, MyCreditHealth and ScoreSense, through at least 50 sites, including FreeScore360.com, FreeScoreOnline.com and ScoreSense.com. Their strategy was simple. Buy advertising on search engines so their ads show up near the top when people look for phrases like “free credit report” and then follow up with a persuasive pitch: “View your latest Credit Scores from All 3 Bureaus in 60 seconds for $0!”

    According to the lawsuit, the defendants failed to clearly tell consumers that if they availed themselves of those “free” services and didn’t cancel within seven days, the defendants would ding their credit cards for $29.95 a month over and over and over again. The complaint includes screen shots of the defendants’ sites, but before looking at them, take out your reading glasses because they’ll come in handy in trying to locate where the defendants chose to tell people about that $29.95 monthly fee.

    One line of fine print added in late 2012 said “Free 7-Day trial when you order your 3 Free Credit Scores. Membership is then just $29.95 per month until you call to cancel.” The first problem: The type was tiny – a fraction of the size of the defendants’ multiple use of the word “free.” The second problem: Why should consumers even have to be on the look-out for the cost, given that the defendants so prominently advertised it as “free”?

    A second purported disclosure appeared as an obscure hyperlink on the page where people typed in their Social Security number and birthdate.  Sandwiched between the logos of various security firms and a large color button that said CONTINUE was this less-than-crystal-clear statement:

    By clicking on the ‘Continue’ button, you agree to the Offer Details, to the Terms and Conditions, acknowledge receipt of our Privacy Policy and agree to its terms . . .

    The “Offer Details” link triggered a small pop-up that said, among other things, “At the end of the 7-day trial period, your credit/debit card will be charged $29.95 on a monthly basis until you call to cancel.”

    Another place the defendants put the information was on a side panel of the Payment Form in white letters on a grey background – a color combination one of the defendants’ own employees described as “known to cause seizures in lab rats.”

    According to the complaint, once people spotted the unauthorized charges on their accounts, the defendants didn’t make it easy to stop the billing.  And even when people asked for their money back because they hadn’t approved of the charges, the defendants denied refunds to many of them.

    The lawsuit alleges violations of the FTC Act, as well as the Illinois Consumer Fraud Act, the Ohio Consumer Sales Practices Act, and related state rules. In addition, the complaint is the third FTC action to charge violations of ROSCA, the Restore Online Shoppers’ Confidence Act. The FTC says the defendants failed to disclose material terms, didn’t get consumers’ express informed consent for the negative option feature, and didn’t provide a simple cancellation method – all violations of ROSCA.

    In addition to the $22 million judgment, the stipulated order puts a host of provisions in place to protect consumers in the future. For example, the companies will have to clearly disclose the terms before a consumer consents to pay via a negative option. What’s more, the defendants have to provide a mechanism for people to stop recurring charges that is at least as simple as the mechanism consumers used to initiate the service.