An attempt to legalize late-payment penalties in Maryland
has blossomed into a battle between corporate lawyers and class-action litigators.
Cable operators in Maryland -- backed by the state Chamber
of Commerce and other industries -- got a bill introduced (Senate Bill 145) that would add
late fees and regulated amounts to state law.
The bill, in its current form, does not address the amount
of late fees. It only states that the charge -- whether a flat fee or a percentage of the
amount owed -- must be disclosed to customers when they sign contracts. This would protect
current late-fee collection, as well as insulating operators and other businesses from
The bill also covers late-fee practices retroactive to
The bill is a direct result of a successful class-action
lawsuit against United Cable of Baltimore L.P., which is now operated by AT&T
Broadband & Internet Services. The class -- made up of 35,000 to 40,000 cable
customers -- was awarded a judgment of $7.59 million, and the ruling and amount were
upheld on appeal.
Losing the lawsuit was alarming enough to businesses that
charge late fees, including cable operators. They were motivated to contact the
legislature, though, after reading the wording of the appeals panel.
The appeals judges opined that late fees should be
subjected to a "reasonableness and equivalency" test. They faulted the cable
amount, which exceeded the state-constitution limit of 6 percent per year, and suggested
that late charges should be as low as 10 cents per month.
Supporting cable are lobbyists from varied companies,
including Bell Atlantic Corp. But that comrade-in-arms brings its own baggage: The telco
was followed to the hearing table by attorneys for class litigants against it. In an
action against the regional Bell operating company, attorneys representing 1 million
residential phone users urged the panel to protect consumers.
Business operators argued that low late-fee rates do not
provide a strong incentive for consumers to pay their bills on time. Revenue lost from
those late payers must be recovered from other customers who do pay their bills on time,
At a state Senate hearing, one lawyer held up an ad
soliciting plaintiffs for yet another late-fee case, warning legislators that it is open
season on industry without standards set in state law.
Cable's coalition has attracted a high-powered sponsor in
Thomas Bromwell (D-Baltimore County), the chairman of the state Senate Finance Committee,
which hosted the first reading of the bill earlier this month.