Late fees and late payers

Court ruling: Legislature should resist imposing unlimited charges on dilatory consumers.

January 19, 2000

LATE FEES are the price we pay for not paying our bills on time. They are a nuisance for consumers and for businesses, who sometimes must go to extraordinary means to collect money owed.

But as Maryland's highest court has ruled, late fees should not be excessive, a way to make extra money off dilatory customers.

The Court of Appeals last year upheld a lower court decision that late fees must meet legal interest limits and approximate the actual loss of the business from the late payment. Its judgment should be upheld.

A coalition of Maryland business organizations is seeking help from the General Assembly this session to eliminate the late-fee restriction imposed by the court ruling. The Maryland Chamber of Commerce wants a law to allow businesses to charge whatever late fee they wish, as long as the customer agrees to it in a contract.

Letting late payers avoid meaningful penalties encourages delays in payment, the chamber argues. Maryland's law limits monthly fees to one-half of 1 percent. That's not enough to prod delinquents to pay on time, businesses say.

But there's little reason to give carte blanche to businesses to charge whatever they wish simply by listing it in the tiny print of a mostly unread contract. If businesses don't wish to extend credit to consumers, they don't have to. They can require customer deposits. They can cancel service and they can go to court to win a judgment (including court costs). And most businesses, large or small, already include the cost of delayed payment in setting their prices.

Yes, businesses deserve to collect late fees from delinquent customers. Modestly raising the legal percentage of interest on late fees seem warranted.

But the days of arbitrary flat fees have ended by court decision, something the legislature should sustain.

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