Is The Annual Credit Report Scam Doomed? Not Likely
As most of you probably already know, AnnualCreditReport.com is the one and only official source of the absolutely free credit reports mandated by federal law. The airwaves are clogged with commercials offering free access to your credit report if only you sign up for a free trial of some credit monitoring service (which you’ll probably forget to cancel, of course). FreeCreditReport.com is probably the most well-known of these too-good-to-be-true deals, but there are many others. I’m sure you could probably come up with 3 or 4 you saw on television in the past week.
I should say that these credit monitoring services are not technically scams and I, being the clever little writer I am, intentionally chose to use “Annual Credit Report Scam” in the title to get your attention (it worked, didn’t it?). But if you read the fine print, you’ll see exactly what you’re getting. Nobody ever does, of course.
Enter The FTC
Of course, with AnnualCreditReport.com, there’s no need to bother with anything else, but it seems the general population was having a hard time seeing past those catchy ditties sung by a group basement-dwelling, renaissance-fair working musicians. So bad is the situation, in fact, that I actually get several searches a day along the lines of “annualcreditreport.com scam?“.
Enter the FTC with its new ruling that says all websites offering access to a “free credit report” must prominently display a disclaimer pointing to AnnualCreditReport.com as the only official source of free credit reports (a ruling I disagree with, by the way). Sure enough, a quick visit to FreeCreditReport.com reveals an extremely ugly disclaimer right at the top of the screen with a link to the official site.
Will These Sites Disappear?
Of course not. The “free credit report” line was just a ploy to get people to their site. Once their, the perpetrators would aggressively up-sell some other good or service, mostly commonly credit monitoring. Note, this is neither illegal nor immoral, it’s simply good salesmanship.
The aggressive disclaimer placement will undoubtedly lose these operators some customers. But how many? My guess is not a whole lot once they’ve adjusted to the new legal reality. Before, their business model was simply to get as many people as possible to sign up and hope some significant percentage of them never bothered to cancel. Since few people bother to read the fine print, it was probably akin to taking candy from a baby. I have no doubt conversions were through the roof and these companies made sizable profits (Need proof? Just look at how much they are bidding credit-related advertising online).
Now, the business model will shift to a more traditional loss-leader-then-up-sell business model. Sure, you take a small loss upfront because you have to give away a credit report for free (which presumably isn’t free to the operator), but selling just one credit monitoring subscription should more than make up for dozens of cancellations. And since these charges are recurring, the site operator stands to build a very large and stable income stream once they reach scale. No, these “annual credit report scam” sites aren’t going anywhere.