According to a Federal Trade Commission (FTC) press release, the prominent mobile service provider Sprint has agreed to pay $2.95 million to settle Federal Trade Commission (FTC) charges that it violated the Fair Credit Reporting Act’s (FCRA) Risk-Based Pricing Rule. The FTC’s allegations focus on Sprint’s purported failure to provide a required notice to customers subjected to additional fees because of their lower credit scores.
The FCRA is a federal law regulating how credit-reporting agencies collect, manage, and disseminate consumers’ credit information. The statute also applies to companies like Sprint that use credit information in making service decisions. The Risk-Based Pricing Rule, found in the Code of Federal Regulations, mandates that if a company offers a consumer credit or services on less favorable terms because of the consumer’s credit score or other information in his or her credit report, that company must provide notice to the consumer. The FTC explains that a company must provide a risk-based pricing notice if it does not offer a customer the best terms provided to a substantial number of other customers because of information in the customer’s credit report. Sprint is subject to the rule because of its billing structure, which allows customers to be billed for services they have already used.
Understanding Your Rights: The Fair Credit Reporting Act
In Sprint’s case, the FTC alleged that the company improperly failed to notify customers with lower credit scores who were placed into its Account Spending Limit program (ASL), the result of which was that these customers were charged an additional monthly fee of $7.99 on top of their regular cell service and data charges. According to the FTC’s complaint, Sprint either failed to tell consumers why they were placed in the ASL program, or gave notice too late for the consumers to switch service providers without an early termination fee.
The FTC maintained that Sprint failed to provide its customers in the ASL program with required information that would have helped them discover errors in their credit reports. According to the FTC, this information is important because a 2013 FTC study showed that one in five consumers had errors on one of their credit reports from the three main reporting agencies, with five percent of consumers having errors that could affect their credit scores, and therefore their ability to obtain credit.
Sprint has neither admitted nor denied the FTC allegations, but as part of the settlement it has agreed to send the required notices within five days of the date that a customer signs up for Sprint service or by a date that allows the customer to avoid being charged the extra ASL program fee. In addition, Sprint will send corrected notices to customers who should have received them in the past.
Although both sides have agreed to the settlement, it is still subject to court approval. If you have questions about the FCRA or consumer protection, the experienced attorneys of The Kim Law Firm LLC, with offices in Philadelphia, Pennsylvania and Cherry Hill, New Jersey, can help. Contact the Kim Law Firm LLC today for a consultation.