Vol. 22, No. 5,514 - The American Reporter - September 7, 2016

by Joe Shea
American Reporter Correspondent
Hollywood, Calif.
June 18, 2001
Dungeons of Debt

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LOS ANGELES, June 18, 2001 -- 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 certain 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 send someone 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 service 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 taxes, don't worry about it - Los Angeles County property owners routinely get 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 read the small type on credit agreements when they applied for cards or received bills - are becoming more common, and doing anything about them is becoming harder.

Pep Boys, for instance, mails out a bill from GE Consolidated Capital Corp., a unit of the multinational behemoth that owns NBC andthousands of other businesses. That bill doesn't even list a phone numberto call to challenge 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 call 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 letter to achieve that.

The Macy's bill does list a number, but like Pep Boys, Macy's sells all of its credit accounts to other companies as soon as you 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 owns Macy's and many other formerlyindependent department store chains, says company policy is to provide a5-day grace period, said a spokeswoman for Federated, Inc., in Cincinatti, Ohio.

The Macy's credit card services vendor, however, charges the late charge immediately, and a customer who has paid just a day or two late has to contact Federated Department Stores to get a break from the typical $25 charge 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 important retail area like clothing, today there may be only a handfulthat are meaningfully seperate from one another. The same is true of banks; in today's marketplace, where one bank may be the lone remnant of a hundred others, they are calling the shots, and consumers just have tolearn the dance.

Buttressed by consolidation, the banking industry has standardized the practice of charging a flat late fee for tardy payments that averages $26, according 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 interest rate on credit accounts for missing thedeadline on just one payment. The range of penalty rate increases startsat a usurious 14.5 percent and soars to a meal-grabbing 29.99 percent oncards issued by Associates National Bank, Direct Merchant Banks andHousehold Bank.

Your Education Is canceled

The practice of later charging late fees has also found solidfooting lately 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 Massachusetts at Amherst, a survey of 30 public and 19 private institutions of higher learning in August 1999 showed that 22 colleges charge between $35 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 between $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, and some not only do not charge late fees, but don't charge feesfor payment plans, either; most do. However, about half of all the schools surveyed have changed their policies recently, or are in discussions aboutdoing so. The ultimate penalty is canceled registration; one college had to cancel 11,000 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 Massachusetts said it had experienced "several campus relations nightmares due to misapplied sanctions," 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 students from moving into student housing and adding new course, but not cancel any 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 errors. Errors are rarer, now, Smith said, but in some ways, thelate fee policies come down to one thing: "How many complaints can yourinstitution stomach?" he asked.

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

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

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

What recourse do consumers have? Well, with Pep Boys and Macy's the answer is simple: Repair your car at an independently-owned garage where you can 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 but not so big they want to provide you with a creditcard instead of a layaway plan.

In fact, most consumers would be far better off if they avoided bank cards 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 become 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 a good curriculum and time for parents to build up their bank accounts.

Or look for one of those schools where no payment plan and late fees are charged.

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

Copyright 2016 Joe Shea The American Reporter. All Rights Reserved.

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