The Federal Trade Commission said Wednesday that Sprint would pay a $2.95 million penalty to settle charges that it didn't properly notify customers with low credit scores about why they were being placed in a special program that included an extra monthly fee.
Those customers were placed in Sprint's "Account Spending Limit" program which cost an extra $7.99 a month, the watchdog agency said. The agency did not say how many customers were affected by Sprint's conduct, but said that it occurred at least between November of 2013 through June of 2014.
“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,” said Jessica Rich, director of the FTC’s Bureau of Consumer Protection. “Companies must follow the law when it comes to the way they use consumer credit reports and scores.”
Under federal law, companies with Sprint's billing structure are required to tell customers if they are being offered service on less favorable terms because of their credit reports or scores. The FTC's complaint said that in many cases Sprint failed to give consumers all required information — specifically the company was supposed to point to which parts of a consumer's credit reports caused them to be put in the program and give them information about how to dispute errors, the FTC said. An earlier FTC study found that one in 20 Americans had errors on their credit reports that result in lower scores.
Under the terms of the settlement, Sprint neither admitted nor denied the allegations. “Sprint puts its customers first and is always working to provide clear and necessary information to customers," the company said.
The FTC's rules on the issue are "relatively new," and the "FTC agreed that we were including almost all of the relevant information," but requested that it "modify the format" of the notifications, Sprint said.
In addition to paying the nearly $3 million penalty, under the terms of the settlement, Sprint will be required to notify consumers within five days of signing up or by a date that lets them avoid recurring charges when it puts them in such programs. It will also have to send corrected notices to those who received incomplete ones before the settlement.