Experian North America Inc., one of the three large companies that verify consumer credit, will pay $950,000 as part of a settlement with the federal government over charges that it deceived consumers who sought free credit reports.

Under an agreement announced yesterday by the Federal Trade Commission, Experian also will change how it markets credit reports, and offer refunds to qualifying consumers who were misled.

The FTC charged that California-based Experian, through its subsidiary Consumerinfo.com Inc., offered credit reports if consumers signed up for a free one-month trial of a service that monitors their credit and alerts them to possibly fraudulent activity.

But the company charged consumers $79.95, the yearly fee for the monitoring service, if they failed to cancel before the free trial ended. The firm deceptively disclosed the charge in small print on an order page under the heading "Privacy policy notice," according to Lydia B. Parnes, director of the FTC's consumer protection bureau.

The company heavily advertised the services and emphasized that they were free, Parnes said.

Peg Smith, executive vice president of Experian, said the company purchased Consumerinfo.com in April 2002 and was first contacted by FTC investigators three months later, after complaints were filed by a privacy-advocacy group.

Experian cooperated with the investigation, Smith said, although it did not consider the sites deceptive. It completed many changes to sites under its control by September 2003.

Credit-monitoring services have grown as incidents of identity fraud and theft have increased in the past several years. Credit reports also provide a way for consumers to determine whether their credit histories -- which are checked for many transactions -- are accurate.

In late 2003, Congress passed legislation giving consumers the right to receive one free credit report a year from each of the three major credit bureaus -- Experian, Equifax and TransUnion.

The program has been rolling out by region across the country, with consumers on the East Coast eligible starting next month. But Parnes said the FTC also is concerned about Web operators with sites offering "free" credit-protection services that are not part of the government-mandated program.

"Consumers need to be alert about impostor sites," she said, adding that the agency won't allow the official site (www.annualcreditreport.com) to be "Web-jacked." The agency is sending warning letters to more than 130 operators, she said.

Under the settlement with Experian, the company must refund improper charges to consumers who signed up for credit reports from November 2000 to September 2003. Information is available at www.ftc.gov/freereports for consumers to determine whether they are eligible.

Parnes said she does not know how many consumers might be eligible for refunds. She said the $950,000 payment by the firm was separate, and would pay for education and related FTC programs.

The agency also will purchase Web ads that will show up when consumers use search engines to look for credit-report providers, listing the official site and warning of pretenders.

As of yesterday, three Experian sites (www.experian.com, www.consumerinfo.com and www.freecreditreport.com) displayed prominent notices required by the FTC.

FTC consumer protection director Lydia B. Parnes announced the settlement.