Cable users are due refund TV franchise in city ordered to reimburse payers of late fees

$5 levy called 'unlawful'

Class action lawsuit to result in payback of more than $6 million

September 17, 1997|By Ivan Penn | Ivan Penn,SUN STAFF

Ruling that the late-payment fee charged by Baltimore's cable TV franchise is "unlawful and inappropriate," a city Circuit Court judge ordered the company yesterday to reimburse more than $6 million to subscribers who paid the fees over the past five years.

In a 25-page opinion, Judge Gary I. Strausberg said the $5 late-payment charge levied by United Cable Television of Baltimore -- a subsidiary of Telecommunications Inc. -- should have been 50 cents or less to cover only the costs of recouping the debt.

Strausberg criticized the fee as a way for the cable company "to swell its coffers of profitability, at the expense of the public." Besides ordering the $6 million repayment, he told the cable company to reduce its late fee to 50 cents.

"With its $5 late fee, the cable company has taken undue advantage of consumers," Strausberg said in his opinion. He later said in an interview that the refunds would not amount to much for individual customers, "but when you multiply it by the total number of cable customers, it represents a rather substantial amount."

The judgehas ordered the cable company to issue checks to every customer it has overcharged. The exact amount of refunds would depend on how many times a customer was charged the late fee.

The majority of customers can count on a refund of $4.50 for

each month the levy was assessed.

Lawyers for TCI are reviewing the opinion and have not decided whether they will file an appeal.

'Not a consumer victory'

The lawyers and the president of the Cable Telecommunications Association -- a national organization in Fairfax, Va., that represents cable operators -- said such rulings against cable companies will lead to a greater financial burden on customers ++ who pay their bills on time.

"This is not a consumer victory for people who pay their bills on time," said Stephen R. Effros, president of the Cable Telecommunications Association. "It's only a victory for people who don't pay their bills on time."

The lawsuit was originally filed in November 1995 by cable subscriber Louis Burch, who thought the fee was unfair.

It was made a class action in August 1996 on behalf of all city cable subscribers who had been charged late fees -- about 35,000 to 40,000 customers a month, or one-third of all of the city's cable subscribers, according to the plaintiffs.

TCI said it must review its records to see how many customers the judgment affects.

Similar finding in D.C.

Yesterday's decision is the second ruling against TCI's cable franchises in the past 12 months over its late-fee charges.

In October, a jury in Washington, D.C., ordered TCI to reimburse $6.7 million to subscribers in that city.

The jury also ordered the cable company to reduce the late fee in that city from $5 to $2.43.

That ruling was considered a major blow to the cable industry because some feared that it would prompt more lawsuits and financial losses for the business.

Before the District of Columbia ruling, courts in Wyoming, Alabama and Washington state upheld TCI's late fees as fair.

Philip Friedman, an attorney representing the plaintiffs, said Strausberg's decision is adding momentum to an effort against TCI's late fee charges as well as those of other cable companies.

Because cable companies have monopolies, Friedman said, he believes that the businesses should follow the same late fee structure that utility companies do -- an argument he made during the case and one that Strausberg supported.

Utilities typically charge late fees of 1 percent to 1.5 percent of the total bill, but one of two named plaintiffs in the suit had the $5 fee tacked on to a $31.23 cable tab, or about 16 percent.

'Just a rip-off'

"It's just a rip-off," Friedman said of the late fees. "This is an enormous revenue stream for TCI. I regard Judge Strausberg's opinion a great victory for the citizens of Baltimore."

Friedman said he has nine other cases across the country against TCI.

Effros, of the telecommunications association, said the late fees are designed to cover costs to such cable channels as ESPN and CNN, which charge the cable companies for each customer. So, when people don't pay their bills, that debt falls to the cable company.

Cable companies also can incur debt when they have to disconnect a cable system, Effros said. It can cost as much as $40 to send a cable truck to disconnect a customer who hasn't paid a bill, he said.

Robert Youle, an attorney for TCI, said that the cable company has such expenses in Baltimore and other places. He said the amount of the late fee might vary throughout the country, but $5 is common.

He said TCI is reviewing the details of Strausberg's opinion to see what the company's next step will be.

"We haven't had an opportunity to thoroughly analyze the opinion," Youle said. "I can't say for sure whether we would file an appeal."

TCI lawyers say the firm is planning to file an appeal of the jury decision in the District of Columbia case.

Pub Date: 9/17/97

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