The Maryland Senate gave preliminary approval yesterday to a bill that would raise the limits on late fees that businesses can charge tardy customers, turning aside complaints that the measure rewards gouging by large cable television and telephone companies.
Final Senate passage of the bill, a top priority of the business community, is expected today. Then the high-stakes debate would shift to the House of Delegates.
The legislation would reverse a surprising decision last year by the Court of Appeals, which decreed that most Maryland businesses can levy monthly late charges of no more than a half percent of the unpaid balance unless the General Assembly authorizes a higher amount. The appellate court upheld a Baltimore Circuit Court ruling that ordered United Cable Television of Baltimore LP to return $6.7 million in late fees to city subscribers.
Supporters portray the Senate bill as an attempt to protect consumers while allowing business a higher late fee to spur customers into paying their bills on time. The maximum late fee allowed by the high courts ruling is too small to be meaningful, proponents say.
Opponents vowed to press for a more limited measure.
We have truly, truly tried to craft a bill that is fair and equitable, said Sen. Thomas L. Bromwell, the Baltimore County Democrat who chairs the Finance Committee.
The bill would allow most state businesses to charge late-paying customers $10 a month or 10 percent of the overdue amount, whichever is greater. Such fees could be levied for only three months.
This is going to have a more profound effect on consumers than any other bill we take up, said Sen. Leo E. Green, a Prince Georges County Democrat.
Critics contend that the bill would mainly benefit cable TV companies and Bell Atlantic, which have been targeted by lawsuits alleging that they have overcharged their customers tens of millions of dollars in excessive late fees.
The measure would authorize higher late charges than the $5 monthly cable TV fee found to be exorbitant in the Baltimore case, and it would apply retroactively, nullifying consumers claims in still pending class action suits.
The rates you would [authorize] would warm the cockles of a loan sharks heart, said Sen. Brian E. Frosh, a Montgomery County Democrat. He called the Senate measure a protection bill for special interests.
In the Baltimore case, Circuit Judge Gary I. Strausberg found that the $5 late fee levied by United Cable was a tool of profit that did not reflect the companys cost of collecting overdue bills.
The firm received nearly $1.9 million in late fees in 1996, the year before the case went to trial.
Frosh proposed setting more modest limits on late fees -- $2 a month, or 1.5 percent of the unpaid balance -- similar to the fees that the states electric and gas utilities are allowed to collect under a separate law.
His amendment failed, 30 to 17, after other senators argued that a $2 penalty would not prod most delinquent consumers to pay their bills on time.
Bromwell predicted that businesses would not raise their fees to the maximum allowed by law, and he vowed to push for a lower limit next year if they did.
Sen. John C. Astle warned that the states business climate is at stake in the debate. Unless the legislature approves the late-fee bill, he quipped, the state slogan might as well be: Maryland is for deadbeats.
If you pay your bills on time, this is all moot, the Anne Arundel County Democrat noted.
Some senators also questioned the bills retroactive application, aimed at shielding businesses from any more lawsuits accusing them of imposing excessive late fees.
Were trying to fix something that the court already ruled on and is in litigation, said Sen. Joan Carter Conway, a Baltimore City Democrat.
Bromwell brushed off such criticism, saying that the only people hurt by squashing the lawsuits are high-powered plaintiffs lawyers who stand to collect millions while most consumers refunds would be small, under $100 each.
An amendment proposed by Frosh to limit the retroactivity failed on a voice vote.
Its a tremendous heartache to have worked so hard for four years to change the law in Maryland to benefit consumers, said Philip Friedman, a Washington lawyer who filed the lawsuit challenging the cable TV fees only to have the legislature come back and allow fees double what they were in the past.