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Sprint will pay $2.95 million to settle charges that it mistreated consumers with low credit scores, the Federal Trade Commission announced Wednesday.

According to the FTC, Sprint violated the Fair Credit Reporting Act by placing credit-challenged customers in an Account Spending Limit program without proper notice. The program required consumers to pay a monthly fee of $7.99 in addition to their standard cellphone plan charges.

Under FCRA’s Risk-Based Pricing Rule, companies that bill for services after they’ve been used are required to notify consumers when they are offered less favorable terms on services as a result of information on their credit reports or their credit scores. The FTC complaint alleges that, while Sprint notified consumers placed in the program, in many instances, it failed to provide all of the disclosures the rule requires. Specifically, the complaint alleges that Sprint didn’t tell consumers what factors were driving their scores down far enough to put them in the program and cause them to incur the fee. It also alleges Sprint’s notifications did not contain language encouraging consumers to verify the accuracy of the information in their reports.

In other cases, the company provided notice after early termination fees went into effect, rendering consumers unable to shop around for better terms, the FTC said.

Sprint said in an email that the company believed it was previously in compliance with the Risk-Based Pricing Rule, but had agreed to make changes to its disclosure letters to settle the FTC’s charges.

“Sprint puts its customers first and is always working to provide clear and necessary information to customers,” the company wrote. “We appreciated the dialogue with the FTC and we have already implemented the changes requested by the FTC.”

The proposed settlement, which is currently pending court approval, also requires Sprint to send corrected risk-based pricing notices to consumers who received the incomplete ones.

How to Prevent Score-Related Fees

The Sprint settlement may serve as a reminder of the importance of knowing your rights when it comes to the use of your credit score. It also underscores the importance of regularly checking your credit report or credit score. (You can pull your free annual credit reports each year at AnnualCreditReport.com and see your credit scores for free each month on Credit.com.)

Finally, it’s a best practice to read terms, conditions and billing statements carefully when starting a new contract with a service provider. If you see something that doesn’t make sense, you may want to call the company directly to ask about its policies and whether any fees can be waived or avoided.

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