Sprint fined by FTC for tacking on fees to consumers with low credit scores
Story updated with comment from Sprint
Sprint has agreed to pay $2.95 million in civil penalties connected to a Federal Trade Commission investigation into the carrier failing to properly inform some customers of extra monthly fees.
The FTC investigation found Sprint did not inform customers with low credit scores on its Account Spending Limit program about an $8 monthly fee tacked onto their cellphone bill. In some instances, where Sprint did provide written notification of the move, the notices came after the time frame in which they could cancel their service without paying an early termination fee.
The FTC said the practice billed for services after they were used and thus ran afoul of the Fair Credit Reporting Act and its risk-based pricing rule.
“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,” explained Jessica Rich, director of the FTC’s Bureau of Consumer Protection, as part of the decision. “Companies must follow the law when it comes to the way they use consumer credit reports and scores.”
In addition to the fine, Sprint is required to alter the practice to meet FTC regulations, including providing the required notices to impacted customers within a time frame that allows them to cancel their service without being charged any additional fees. Sprint also must send corrected risk-based pricing notices to consumers who received incomplete notices from the company.
Sprint clarified that the fine was related to the format in which it was providing the information to consumers and not related to the fee itself, and that it has implemented the requested changes.
“The FTC’s relatively new Risk Based Pricing Rule requires certain specific disclosures in specific formats be provided by letter to ASL customers and applicants,” Sprint explained. “The FTC agreed that we were including almost all of the relevant information in our ASL letters, but requested that we modify the format of the letter. We appreciated the dialogue with the FTC and we have already implemented the changes requested by the FTC.”
Sprint earlier this year was cited by the FTC to the tune of $68 million in fines tied to allegations of bill cramming related to unauthorized charges from third-party premium text messaging services. Verizon Wireless, in the same decision, incurred $90 million in fines tied to the allegations.
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