It is in fact due to having 2 characters in the same realm with the same name. Example; I did a faction change and server change but before server changing, I created a "dummy" character on the server I wanted to change to with the same name as the character I was going to transfer. When the transfer happened, my character had numbers in his name (because there was another character of the same name on the realm) so I got a free name-change along with my paid faction+server transfer.