Sprint Corp. and AT&T Corp. have agreed to pay a total of nearly $1.5 million to settle government charges that they denied or limited phone service to hundreds of thousands of customers they considered credit risks without notifying the consumers of their rights.
While it is permissible to deny or restrict service because of credit concerns, the Federal Trade Commission said neither company gave affected consumers an opportunity to obtain a free credit report and/or challenge its accuracy.
"Most consumers don't know they are entitled to this notice when conditions are placed on their service," FTC attorney Ron Isaac said. The conditions included requiring deposits or limiting the amount of calls a consumer could make.
Sprint has agreed to pay a penalty of $1.1 million, and AT&T will pay $365,000. The money will go to the government; there is no redress for consumers.
Both firms denied any wrongdoing, saying they settled to avoid protracted litigation. Both said they remain committed to complying with all federal and state fair credit laws.
Isaac said the FTC learned of the phone companies' actions through a review of their operations. There were few problems with other carriers.
Isaac said the agency found more than 546,000 affected consumers who sought to sign up for Sprint's long-distance or local phone service, and 175,000 consumers who wanted to use AT&T long-distance.
These consumers were either denied service or they declined to sign up because of the added conditions that were imposed, he said. There may have been many more customers who signed up for restricted service who did not know the restrictions were the result of a bad credit report, Isaac added.
Two months ago, the commission reached a settlement with two casinos that allegedly failed to tell applicants that they were denied jobs because of unfavorable credit reports. The two firms agreed to pay $325,000.