The FTC announced Wednesday that Sprint will pay nearly $3 million in civil penalties to settle charges it violated requirements of the Fair Credit Reporting Act.
According to a complaint filed by the FTC, Sprint has failed since at least Nov. 8, 2013 to properly notify subscribers who were placed in a program for customers with lower credit scores and charged an extra monthly fee of $7.99 on top of their regular charges for cell phone and data services. Though FTC Associate Director Malini Mithal declined in a Wednesday media call to specify the precise number of consumers impacted by the violation, she said the figure was “significant.”
Under the Fair Credit Reporting Act’s Risk-Based Pricing Rule, when companies extend less favorable terms to some consumers, they then have an obligation to provide customers with certain information including the credit score the terms were based on, the precise terms of the less favorable offer and details on how to dispute errors in credit reports.
The FTC’s complaint alleged that Sprint failed to meet these requirements, neglecting to include the key factors in consumer credit reports that were used in the decision-making process and failing to provide notice in a timeframe that would have allowed such consumers to cancel their Sprint service without early termination fees.
“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.”
According to Mithal, the $2.95 million fine is the largest civil penalty assessed for a violation of the Risk-Based Pricing Rule since it went into effect in 2011. Rather than going toward reimbursements for impacted customers, the money will go to the United States Treasury, Mithal said.
As part of the settlement, Sprint must also send out proper notices going forward as well as corrected notices to those who received incomplete information previously.
Mithal said that in agreeing to the settlement Sprint neither confirmed nor denied any of the allegations made in the complaint.
In an emailed statement Wednesday afternoon, Sprint said while it disputed the allegations and believed itself to be in compliance with regulations, it made changes to its letter format in July 2015 to settle the matter.
“Sprint puts its customers first and is always working to provide clear and necessary information to customers,” a Sprint spokeswoman said. “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.”
The $2.95 million payment is just one of several fines Sprint has faced in the past six months. In April, the carrier agreed to pay $15.5 million to settle a lawsuit alleging the company overcharged the U.S. government to collect and deliver information gathered under court-ordered wiretaps. Last month, Sprint was hit with a $1.1 million fine from the FCC for its failure to relay 911 calls that used applications utilized by Americans who are hard of hearing. The company is also facing a $300 million tax fraud lawsuit in New York state for failing to collect taxes on its interstate wireless services over the course of seven years.
Filed Under: Industry regulations
