A Texas state court judge has dropped claims that Time Warner Cable's late fees constitute usury under state law.
The jurist, state District Judge Scott Brister, let stand a claim that the cable company gave customers inadequate notice of the late charge. The case qualified as a class action earlier this year on behalf of the division's 660,000 customers in and around Houston.
The attorney for the plaintiffs argued that Time Warner's fees violated state law capping interest. Prior to 1998, Time Warner changed 5 percent of the overdue bill as a late fee. In 1998, it changed the fee to a flat $5. The lawsuit was filed in 1999.
In dismissing the usury claim, Brister equated the late fee with a service charge, and not interest, which disqualified the fee from regulation under usury law.
Attorneys argued strenuously that they should learn the true cost of pursuing past-due accounts, but the judge wrote that if creditors were put to that test, the cost of collecting debts would switch from those who caused the debts to the entire customer base.
A suit against former Tele-Communications Inc. on behalf of its customers statewide is still pending in a Dallas court.
Meanwhile, in Maryland, the state House approved a bill supporting late fees by cable and other industries. The state Senate previously passed its own version of the bill. The two houses must now reconcile their versions before sending the bill to the governor.
The Maryland bill legalizes a late fee of $5 or 10 percent of the unpaid balance-whichever is greater. No more than three monthly late fees can be assessed for a single payment that is past due.
The bills passed by large margins in both houses despite some loud criticism from the Maryland State Bar Association and consumer groups.