Earlier this year, Kris Steele, a Web developer in Madison, Wis., who was planning to buy a car, decided to check his credit score.

Steele, 27, remembered a number of commercials for Free CreditReport.com featuring a young slacker singing about various life problems — living in the in-laws’ basement, dressing as a pirate to wait on tables in a seafood restaurant — all because he had neglected to check his credit score. The ads were lighthearted and catchy, with lyrics like: “F-R-E-E, that spells free creditreport .com, baby. Saw their ads on my TV, thought about going but was too lazy.”

So Steele headed to the site and filled out the information form, including his credit card number, which he thought the site needed to verify his identity.

But a couple of months later, Steele noticed the site had been charging his credit card. While he believed he had signed up for a free report, he had actually enrolled in a credit-monitoring service that cost $14.95 a month. He says he never expected that it would cost anything.

“It’s called FreeCreditReport .com,” he said. “It’s kind of easy to make that assumption. I didn’t see anything in the process of signing up that said, ‘Hey, if you don’t cancel in 30 days or whatever, you’re going to get charged.’”

Consumer groups have long objected to sites like FreeCredit Report.com. Consumers may obtain a free credit report each year from the three major agencies, as mandated by an act that Congress passed in 2003. The only authorized site for that is Annual CreditReport.com.

The three major credit bureaus, Experian, Equifax and TransUnion, are required to offer reports through the authorized AnnualCreditReport.com, but the bureaus also make money from their own credit reports.

Catchy ads

Experian, which owns Free CreditReport.com, increased both its site visitors and new member sign-ups by 20 percent in 2007. The company attributes those increases to its catchy ads.

“We’ve always been a very aggressive marketer,” said Mike Dean, the chief marketing officer for the Experian consumer direct division, which runs FreeCredit Report.com. He said the company had increased its advertising budget by 200 percent over the last five years. The site spent $70.7 million on major media advertising in 2007, according to TNS Media Intelligence.

A previous round of commercials, which began in October, has been a pop-culture hit. There are more than 70 YouTube homages, including one with a 5-year-old singing the ditty, and another with a high school boy singing “C-A-L-cu-lus AP, hardest class in history.”

The ads on YouTube have been viewed more than 3 million times, the company says, and the radio and television ads have run about 90,000 times in the last year.

“We’re just trying to do something that’s talked about and seen, and gets passed around in pop culture,” said Steve Sage, an associate creative director at the Martin Agency, which worked on the spots. The agency, based in Richmond, Va., is part of the Interpublic Group of Companies.

The set of commercials starting today features the same three musicians as the previous set. The director, Danny Leiner, has a background in slacker films, like “Dude, Where’s My Car?” and “Harold and Kumar Go to White Castle.”

The idea behind the existing and the new commercials is to appeal to a young crowd, Dean said.

“We knew our creative was good, and we were targeting a younger audience,” Dean said. “That’s exactly what we’ve received with that: We have a lot younger demographic coming into our site.”

On this round of FreeCredit Report.com ads, the lead singer of the band of merry losers finds he can no longer afford to have a car and downgrades to a bike; attends a Hollywood party, but as a waiter; and plays a character at a Renaissance fair. The ads focus on identity theft rather than on checking one’s credit score, as the previous set did.

“There’s a lot of elements, I think, that help the campaign work as a whole,” said David Muhlenfeld, the copywriter at the Martin Agency who wrote both sets of commercials. “It’s not just a catchy song. The performances of the actors are great, and really, the characters of the singer — and the band — I think a lot of people identify with him. He’s a bit of a lovable loser.”

Misleading pitch?

The contention is not over the ads’ aesthetics but over their substance. Consumer advocates said the site’s pitch was misleading.

“It’s what I call a protection racket; the companies are charging you a fee, and they’re making a promise that it’s going to improve your credit and protect against identity theft, but in fact it does neither,” said Edmund Mierzwinski, consumer program director for the U.S. Public Interest Research Group. “The sites are designed to trick people into taking on overpriced, useless credit monitoring, and they do so by attempting to make it appear as if you’re going to get something for free.”

The Federal Trade Commission, too, has criticized Free CreditReport.com. In 2005, the agency settled a case against ConsumerInfo.com, an Experian division that ran FreeCredit Report.com, saying that the advertisements said there was no catch to the report and that the Web site did not have adequate disclosure that the service was not free. Experian paid the FTC $950,000 and had to offer refunds to certain consumers.

On its Web site, the FTC warns about sites other than Annual CreditReport.com, noting that “in some cases, the ‘free’ product comes with strings attached.” The Florida attorney general is conducting an investigation into FreeCreditReport.com.

Dean said he could not comment about either case.

Disclosures

FreeCreditReport.com now has a disclosure on its home page saying that it is not affiliated with the annual free credit report program. But that language is in small print on the side of the home page on a subdued background, versus the large font and rich colors promoting enrollment.

Dean said that he did not think the site was misleading.

“It absolutely is the free credit report,” he said. “It’s not the one by the government, which is why we put the link on our front page of the landing site, and it is a free report. It’s really a test drive for people to understand what’s in that report, because a report can be very complex.”

Consumer groups disagree.

“It’s of great concern,” said Linda Sherry, director for national priorities of Consumer Action, a San Francisco-based consumer advocacy group. “I think it’s just a shabby way to market anything.”

The ads themselves, she said, were also a problem. “I don’t think they’ve cracked down hard enough on the television and other kinds of radio ads that are deceptive to consumers because there’s no room to put adequate disclosure,” she said.