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Sprint to pay $2.95 million to settle FTC charges it failed to give notice to consumers with lower credit scores who were charged more

Cell paidphonesSprint will pay $2.95 million in penalties to settle Federal Trade Commission charges that it didn’t give a notice to consumers who were charged an extra monthly fee because they had lower credit scores.

In its lawsuit, the FTC alleges that Sprint placed consumers with lower credit scores in an Account Spending Limit program. The program requires consumers to pay $7.99 a month in addition to the charges for cell phone and data services.

“Sprint failed to give many consumers required information about why they were placed in a more costly program, and when they did, the notice often came too late for consumers to choose another mobile carrier,” Jessica Rich, director of the FTC’s Bureau of Consumer Protection, said Wednesday. “Companies must follow the law when it comes to the way they use consumer credit reports and scores.”

The Fair Credit Reporting Act has a Risk-Based Pricing Rule, which requires companies to inform consumers if they’re offered service on less favorable terms as a result of information from their credit reports or scores.

The lawsuit alleges that Sprint failed to provide consumers placed in the Account Spending Limit program with the required notice, omitting information that would help consumers understand that information in their credit reports may have been responsible for them receiving less favorable credit terms. An FTC study showed credit reports often contain significant errors.

In addition, the lawsuit charges that Sprint often provided notices to consumers after the period of time in which they could cancel their service and change to another provider without paying an early termination fee. This meant consumers were not able to shop for another carrier that could have offered them better terms.

In addition to paying a $2.95 million penalty, Sprint is required to follow rule requirements in the future and to provide the required notices to consumers within five days of signing up for Sprint service or by a date that gives them the ability to avoid recurring charges such as those in the Account Spending Limit program.

The proposed settlement also requires Sprint to send corrected risk-based pricing notices to consumers who received incomplete notices from the company.

The proposed order is subject to court approval.

Copyright 2015, Rita R. Robison, Consumer Specialist

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