Sprint will pay a $2.95 million fine for allegedly failing to provide adequate notice that it was charging customers with low credit scores more for their phone and data plans.
The Federal Trade Commission announced the action against the mobile service provider on Wednesday. In some cases, the FTC said, customers only found out they were being slapped with a monthly “account spending limit” fee of $7.99 after it was too late to opt out of their contract and find another carrier, although Sprint disputes this.
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Credit scores are used for all kinds of things besides determining what kind of annual percentage rate (APR) a customer will pay for a credit card, mortgage or other loan. Most insurance carriers use them as part of their underwriting process to set premiums, and many employers will pull a candidate’s credit when they apply for a job, on the grounds (disputed by consumer advocates) that credit scores are a broader predictor of risk.
Under the Fair Credit Reporting Act, Sprint is supposed to inform customers about the charges -- including the reasons for levying them and information about the scores used -- and give them the opportunity to opt out of their contracts if they didn’t want to pay.
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“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 in a statement.
Sprint said it disputes the allegations but “appreciated the dialogue with the FTC” and had implemented changes in how it informs customers about the fee.
“We disagreed on the format used to communicate the information,” it said in an emailed statement. Sprint plans to keep the fee in place, arguing that the account spending limit plan lets them offer contracts to people who otherwise might not qualify.
Unfortunately for Sprint customers who were saddled with the account spending limit fee, there won’t be any consumer reimbursement.
“The FCRA doesn’t have a provision to seek redress,” said FTC spokesman Jay Mayfield, adding that Sprint’s fine will go to the Treasury Department.