ReveNews
The Credit Report/Repair Niche Feels The Long Arm of the FTC
At first glance, the credit report/repair niche looks highly lucrative – with high lead generation payouts and search volume at stratospheric levels – one might wonder, “What’s not to like?”. That is, until you factor in the Federal Trade Commission’s (FTC) keen interest at online marketing practices in the niche.
High search volume + high offer payouts = A perfect niche?
Is the financial niche a strong one? You betcha.
Comparing “head traffic” via a broad keyword like “credit report”, it’s not surprising that it has 7 times the search volume as another high traffic keyword phrase “internet marketing”. The phrase “credit repair” is no laggard either, posting about half the search demand as “internet marketing”.
Couple that with CPA street payouts ranging from $20 to $50 per lead and you can see why consumer credit repair is a great niche to be in.
So where has it gone wrong in the eyes of the FTC?
The key issue the FTC seems to have with the way “free credit reports” are being marketed is how rebill offers and upsells are placed ahead of giving consumers their federally mandated free credit report which is available through a centralized website, AnnualCreditReport.com.
Navigating through an advertisers site embedded with upsells, uninformed consumers may feel they are required to sign up for the CPA advertiser’s premium and/or rebilling services in order to receive their credit reports. The FTC reports in paragraph 4 of the release that they’ve received “consumer complaints about promotions for products and services that confuse and frustrate consumers as they attempt to obtain their free annual credit reports.”
The fact is few people go to these sites to “just check” their credit report. Most people seek their credit report when they are faced with a big decision: because they want/need / or where denied a home loan, personal loan, auto loan, student loan. When a consumer pulls their report they are probably anxious about an upcoming decision or perhaps they’ve been denied a loan and are now confused about why their scores are low. In this state they arrive on a site to get an onslaught of upsells and rebill offers only to feel mislead by the site afterwards which leads to complaints.
With the FTC stepping in to address these complaints, existing credit report affiliates might feel that the FTC’s proposed disclosures are draconian in nature. An example:
“for any Internet site offering free credit reports, the Commission proposes a requirement that, before the consumer may obtain a credit report from that Web site, such site must first display a separate landing page with the required disclosure: “This is not the free credit report provided for by Federal law.”
Giving consumers the message “you don’t have to enroll for any upsells and by the way, here’s a link to your free credit report” will obviously hurt conversions in a significant way. If these measures come into effect, advertisers who provide these credit-related services will have to step up their game and offer compelling information/content that will add to the free credit report, or risk their offer going up in flames.
Think the FTC’s proposed measures lack bite?
A day later (8th October 2009), the FTC issued a media release stating that two credit repair companies and their principals settled FTC charges that they falsely claimed they could repair consumer’s credits and collected upfront fees, in violation of federal law.
Although offering a free credit report is a far step from claiming to being able to repair a consumer’s credit score, the FTC is showing its online mettle when it turns a keen eye on what’s happening in the online space.
The FTC isn’t choosing to deal with internet marketers by slapping them gently on the wrist either. Imposing fines of $8.3 million and $2.5 million against the defendants, the credit repair businesses were suspended due to an inability to pay the fines.
Impact for affiliates and marketers?
Although an affiliate or merchant with a vested interest might think the government is actively seeking and destroying the lucrative livelihoods of online marketers, it’s a stretch to come to that conclusion.
In the scenarios highlighted above, consumer complaints were the catalyst that got the ball rolling, with the resulting legal consequences. This past July, the FTC solicited public feedback on proposed amendments to the Free Annual File Disclosures Rule, also known as the “Free Credit Report Rule.”
Furthermore, the Credit Card Act of 2009 requires the commission to issue a rule by Feb 22, 2010 to prevent deceptive marketing of “free” credit reports. If advertisers are under the impression that the legislative “perfect storm” has passed, there’s going to be more bad news for them, but good news for consumers down the road.
Some advertisers within the credit report/report space have chosen to build their business model around rebills and/or offering premium upsells to uninformed consumers. It might even sound like a great business proposition. The reality as has been shown in the FTC’s recent actions, will likely result in more shady operator’s “businesses” collapsing like a house of cards.
FTC Resources:
Credit and debt related issues
Hi Andrew,
I have seen blogophere to explode with interpretations of that media release & left a lot of readers wondering, confused & lost.
I think your point of view is the most logical possible so far. However, I would say it looks incomplete with some suggestions for the lost ones around. I feel confident that it would have taken your post to another level altogether.
I just finished a tutorial that explains the constant cat-and-mouse game between the FTC and the the reporting companies. This should clear things up for anyone who is confused:
http://www.homebuyinginstitute.com/reports/
Hope that helps!
-Brandon
@Brandon
Thanks for the link.
I noticed a paid upsell to http://www.consumerinfo.com/3bonline/3bonline_internal.asp
So I think this is one of the issues that consumers might have about the free credit report issue.
But I think you’re selling it more softly than some of the others I’ve seen in the course of preparing this piece.
This is obviously a pressing issue for the performance marketing industry. The networks need to make sure their advertisers comply so their publishing partners don’t get caught up in the mess. The better networks that seek to elevate the industry’s image will prevent non-compliant advertisers from pushing dodgy offers. If a network fails in this obligation, the FTC will eventually catch up with them. Advice to publishers: ask your affiliate manager if the advertisers comply!
Hi Andrew.
There are no paid upsells anywhere on the page. Elsewhere on the site, I give people links where they can get their credit SCORES, which the consumer must pay for. But I never send them to a paid site when they only want their REPORTS, because that’s unethical. Reports and scores are two different things, though many people don’t realize it. You can always get your reports for free. You can never get your scores for free (without some kind of purchase). That’s what causes all of the confusion, and that’s what I go to great lengths to clarify on my site.
Take care. ~Brandon
Just looking at the new warning on craigslist regarding internet scams goes to show how much damage some marketers did with these type of offers. Its no wonder the ftc is all over it.
How embarassing it is for the rest of us though.