Vol. 12, No. 2,856W - The American Reporter - March 18, 2006

by Joe Shea
American Reporter Correspondent
Hollywood, Calif.

LOS ANGELES -- Don't even be a day late with your $12 Pep Boys payment, = if you're a basic user of its charge card -- it will cost you $29. Be cert= ain to get your $5 Macy's payment in on time -- the company charges $25 if = it's late.

And don't make the Los Angeles Dept. of Water and Power sendsomeone out = to see you about a payment that's 10 days late -- that'sanother $18 tacked = on your electric bill.

Late with a parking ticket? The fee, levied by Lockheed Corp., the ser= vice vendor to the city's Dept. of Transportation, will bump your fine to $= 75 on a $32 ticket. But if you're four years late paying your property tax= es, don't worry about it -- Los Angeles County property owners routinely ge= t five years to pay their bills.

Late fees that range from 50 percent to = 500 percent of past dueamounts, often sprung on consumers who failed to rea= d the small type on credit agreements when they applied for cards or receiv= ed bills -- are becoming more common, and doing anything about them is beco= ming harder.

Pep Boys, for instance, mails out a bill from GE Consolidated Capital Co= rp., a unit of the multinational behemoth that owns NBC andthousands of oth= er businesses. That bill doesn't even list a phone numberto call to challe= nge the bill or ask for a break (numbers are listed forthe hearing-impaired= and for a recorded message about the company'sprivacy policy, but not for = customer service).

But it does say that if you are able to find it by phone, your phone cal= l won't be enough to guarantee that your records are changed or updated or = whatever; you have to spend $0.34 on a stamp and time writing a detailed le= tter to achieve that.

The Macy's bill does list a number, but like Pep Bo= ys, Macy's sells all of its credit accounts to other companies as soon as y= ou sign up for one of their cards.

In Macy's case, users are typically charged $25if they are even a day = late with payments, even though FederatedDepartment Stores, Inc., which own= s Macy's and many other formerlyindependent department store chains, says c= ompany policy is to provide a5-day grace period, said a spokeswoman for Fed= erated, Inc., in Cincinatti, Ohio.

The Macy's credit card services vendor, however, charges the latecharge = immediately, and a customer who has paid just a day or two late hasto conta= ct Federated Department Stores to get a break from the typical $25charge on= a late $5 payment.

The hard thing for most consumers to understand is that where once there= were thousands of consumer-conscious department-store competitors in an im= portant retail area like clothing, today there may be only a handfulthat ar= e meaningfully seperate from one another. The same is true ofbanks; in tod= ay's marketplace, where one bank may be the lone remnant of ahundred others= , they are calling the shots, and consumers just have tolearn the dance.

Buttressed by consolidation, the banking industry has standardized the p= ractice of charging a flat late fee for tardy payments that averages $26, a= ccording to the consumer watchdog group Consumer Union, and goes as high as= $35 at Fleet Bank.

The group said 70 percent of bankcard issuers will also raise the inte= rest rate on credit accounts for missing thedeadline on just one payment. = The range of penalty rate increases startsat a usurious 14.5 percent and so= ars to a meal-grabbing 29.99 percent oncards issued by Associates National = Bank, Direct Merchant Banks andHousehold Bank.

Your Education Is Cancelled

The practice of later charging late fees has also found solidfooting lat= ely in the academic arena. According to a study by Jeff von Munkton-Smith = of the University of Connecticut and Elizabeth Pyle of the University of Ma= ssachussetts at Amherst, a survey of 30 public and 19 private institutions = of higher learning in August 1999 showed that 22 colleges charge between $3= 5 and $99 per late payment, and six charge $100 or more. Another 11 charge= either hefty 1.5 percent late fees on student accounts, or flat rates betw= een $20-25 per month. Some charges are "progressive," meaning that late fe= es get charged for past-due late fees!

Many schools feel that such charges are immoral, the researchersfound, a= nd some not only do not charge late fees, but don't charge feesfor payment = plans, either; most do. However, about half of all the schoolssurveyed have= changed their policies recently, or are in discussions aboutdoing so. The = ultimate penalty is cancelled registration; one college had to cancel 11,00= 0 course registrations, the survey showed.

Asked how successful the late = fee policies have been, 21 schools claimed they were very effective -- but = another 21 declined to respond. The University of Massachussetts said it h= ad experienced "several campus relations nightmares due to misapplied sanct= ions," but did not elaborate.

The school's review found that 500 students withdrew after registering= for courses, and 60 who were forced to withdraw after the semester ended, = Pyle reported. She recommended new policies to prevent late-paying student= s from moving into student housing and adding new course, but not cancel an= y registration of students already on campus, and place more emphasis on in= -house payment plans.

At the University of Connecticut, the late fee policy was riddled with e= rrors. Errors are rarer, now, Smith said, but in some ways, thelate fee po= licies come down to one thing: "How many complaints can yourinstitution st= omach?" he asked.

"The first time through, the (college bursar's) review involved fewer of= fices and missed some problems; many of the 125 registrations that were can= celed should not have been," Jeff Smith reported. To some, the policies se= em draconian, he seems to say.

"In higher education it seems to be all sticks and no carrots," he dec= lared. "If we put as much time into coming up with incentives as we do sanc= tions, we might find some that are effective."

Only three of the schools were concerned about finding seats forstudents= who did pay in classrooms; for 19 colleges, the main objective ofthe late = fees, as in the commercial world, is simply to get bills paid ontime, the s= urvey showed.

What recourse do consumers have? Well, with Pep Boys and Macy'sthe answe= r is simple: Repair your car at an independently-owned garage where you ca= n deal with the owner on a personal basis. And shop for clothes and other = consumer items in stores that are big enough to offerselections you want bu= t not so big they want to provide you with a creditcard instead of a layawa= y plan.

In fact, most consumers would be far better off if they avoided bankca= rds altogether, and used debit cards with Visa or Master Charge imprints to= pay charges directly from cash in a checking or savings account. It's beco= me too expensive and dangerous to spend other people's money.

For parents who are hard-pressed to pay college tuition fees ontime, the= answer may be a community college for their kids that offers agood curricu= lum and time for parents to build up their bank accounts.

Or look for one of those schools where no payment plan and late fees a= recharged.

Joe Shea is Editor-in-Chief of the American Reporter. His lastpaymwent = to Pep Boys was one day late and he was charged $29. A Macy's late charge w= as dropped after he complained to the parent corporation, Federated Departm= ent Stores.

Copyright 2006 Joe Shea The American Reporter. All Rights Reserved.

Site Meter