Pursuant to a stipulated order with the Federal Trade Commission, Sprint will pay $2.95 million in civil penalties for alleged violations of the Fair Credit Reporting Act’s Risk-Based Pricing Rule. The Rule ensures that consumers who are offered less favorable service terms will receive notice of, among other things, any credit score used by the company in making its determination and the key factors that adversely affected that score.
The order was entered in Kansas federal court on October 21 – the same day that that the FTC, represented by the U.S. Department of Justice, filed its complaint against Sprint. According to the complaint, Sprint relied on consumers’ credit reports to place consumers with lower credit scores in an Account Spending Limit (ASL) program, which requires consumers to pay an additional fee of up to $7.99 per month. Sprint failed to notify such consumers that they were enrolled in the ASL Program or being charged additional fees until it was too late to switch to another provider without incurring an early termination fee. Additionally, the notification that Sprint eventually sent omitted the key factors that adversely impacted the consumers’ credit scores. Thus, consumers were not provided with the information necessary to determine whether their credit scores were based on errors in their consumer reports.
In addition to the $2.95 million in civil penalties, the proposed settlement with the FTC requires Sprint to now abide by the Risk-Based Pricing Rule’s requirements. Sprint must provide consumers a Risk-Based Pricing Notice within five days of signing up for Sprint service or by a date that gives the consumer a reasonable opportunity to avoid incurring any future financial obligation to Sprint. Finally, Sprint must also provide a Risk-Based Pricing Notice to all consumers who previously received incomplete notices from the company.