Feeling like they might be ripe for attack on late fees now
that cable has been successfully sued, Maryland industries will support a law on late-fee
policies during the state's next legislative session.
The coalition may feature some strange bedfellows:
Companies including local banks, MCI WorldCom Inc. and big local-exchange carriers Bell
Atlantic Corp. and GTE Corp. are reportedly interested in backing a bill on the issue.
The businesses' concerns were heightened as they
observed a lawsuit challenging late fees charged by then-United Cable of Baltimore LP.
That litigation began in 1995 when consumer Louis Burch challenged the operator's $5
late fee. The challenge was certified as a class action representing between 35,000 and
Following a trial in Baltimore Circuit Court, plaintiffs
were awarded a $7.59 million judgment in 1997. The judge said the $5 fee was
"unlawful and inappropriate," and the judgment would have returned $4.50 of
every $5 charged to late-paying consumers.
The operator appealed the judgment, and this past July, the
ruling was upheld on appeal.
The court also refused to grant plaintiffs' lawyers
fees of about 30 percent, or $2.5 million, of the judgment. The lawyers included Philip
Friedman, who was instrumental in filing dozens of lawsuits on this issue.
Another action Friedman brought -- against the United Cable
system now operated by AT&T Broadband & Internet Services -- also resulted in a
substantial judgment of $6.7 million. Due to appeals, the attorneys have yet to collect on
AT&T Broadband's last resort on the Baltimore case
could be an appeal to the U.S. Supreme Court.
AT&T Broadband's appeal was backed by the Maryland
Chamber of Commerce and the Maryland Bankers Association. The chamber will take the lead
role in building a coalition and floating a bill legalizing late fees.
The Maryland industries were jolted by the court's
language on the appeal. The panel offered the opinion that perhaps late fees -- based on
the actual cost of collection -- ought to be as low as 10 cents.
The ruling also sent signals to other industries. For
instance, bank fees are legislatively protected in Maryland, but the appeals panel
suggested that those late fees should be subjected to a "reasonableness and
Wayne O'Dell, president of the Cable
Telecommunications Association of Maryland, Delaware and the District of Columbia, said
the coalition would seek multiple sponsors for a bill from among the leadership in the
state house in the 2000 legislative session.
Bill supporters want open-ended legislation -- a bill that
codifies the concept of late fees with no legislative cap of their amounts. Supporters
will stress that late-paying and nonpaying customers shift an unfair economic burden to
customers in good standing.
While Maryland seeks clarity on late fees, suits across the
country continue to progress. Most recently, a suit against Comcast Corp. was certified as
a class action in the state of Pennsylvania. The plaintiffs asserted that the
company's $6 late fee violates the state Unfair Trade Practices and Consumer
Protection Act. That action, in Philadelphia Common Pleas Court, represents 300,000
Adelphia Communications Corp. was also hit with a statewide
action in Vermont in September. Both the company's $5 late fee and its $15 collection
fee (the amount collected by the tech at the door to forestall a disconnect) were
challenged in the suit there. The fee amounts to 17 percent on a $30 cable bill and,
compounded annually, it totals 200 percent, the suit said. That amounts to usury,
The plaintiffs are seeking $1.5 million in refunds for late
fees paid since 1993.