Sprint will pay $2.95 million in fines for failing to properly notify consumers who had lower credit scores that they were charged an extra monthly fee.

The Federal Trade Commission charged the nation’s fourth-largest mobile service carrier with violating the Fair Credit Reporting Act by putting consumers with lower credit scores in a payment program requiring a $7.99 monthly fee on top of standard cellular and data charges.

“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 consumer protection bureau in a statement announcing the settlement. “Companies must follow the law when it comes to the way they use consumer credit reports and scores.”

Risk-based pricing rules, which Sprint must follow because it bills after the fact for services, require that consumers are informed when they are offered service on less favorable terms based on credit report findings.

In many cases, Sprint failed to give consumers placed in the more costly program all of the information required by law, including credit report information that may have alerted them to possible errors on their reports. “It is vital that consumers know what information is used to make decisions” based on their credit reports, said acting FTC associate director Malini Mithal. That’s because one in 5 consumers with credit report errors find items that can be fixed, she said.

Beginning in November 2013, Sprint began sending deficient notices “to a significant number of consumers,” Mithal said. “That led to a sizable penalty,” the largest the FTC has seen since the laws went into affect in 2011. An FTC settlement from December 2013 with Time Warner Cable resulted in the company paying $1.9 million.

Sprint neither admitted nor denied issues in the FTC’s complaint, she said. The company will send corrected notices to consumers who got incomplete ones in the past, the FTC says. And going forward, Sprint will provide proper notices to consumers within five days of signing up for Sprint service — or by a date that allows them to take action to avoid the additional recurring charges.

The company in July 2015 made changes to its letter format. “Sprint puts its customers first and is always working to provide clear and necessary information to customers,” the company said in a statement. “The FTC’s relatively new Risk Based Pricing Rule requires certain specific disclosures in specific formats be provided by letter to ASL (Account Spending Limit) customers and applicants.  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.”

Follow Mike Snider on Twitter: @MikeSnider

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