`On time' payment lesson in relativity

CONSUMING INTERESTS

October 02, 2007|By DAN THANH DANG

Joe Clements Jr. was extremely peeved about his Baltimore Gas and Electric bill.

Not about the size of his August bill: $151.42. Not about the steep rise in rates over the past year. Not even about the lack of competition that prevents him from shopping around.

So what got Clements' knickers in a bunch? A lousy 47-cent late fee.

"I am never late," said Clements, 72, a retired federal employee from Randallstown. "I've never had a late payment. I called up BGE and told them that's not right. It was postmarked before the bill was due."

Don't get distracted from the real issue as you pshaw the piddly amount. Clements has a worthy gripe about late fees and timing.

Answer the following question: A payment is considered on time when: A. You mail it off before the due date, or, B. The company receives your payment and logs it into their records by the due date.

Trick question! The answer is C. - It depends.

The rules on due dates can vary from industry to industry and even from business to business.

"If you're somebody who really wants to avoid late fees, then the only response you have is to send things more and more days before the deadline," Ronald Mann, Columbia University law professor, told Sun intern Sara Murray.

"The second way is to pay online," Mann said. Even then, you have to read the fine print to see exactly when the e-payment will be posted, consumer advocates warn.

Do yourself a favor and read all contracts to see what their terms are on late fees. Don't assume anything, because all are likely different.

This is by no means absolute, but for example, many mortgage companies specifically state on a bill that if a payment is received after a certain hour on the day it is due, you'll be charged a late fee. That usually means if a payment is not registered to your account by some absurdly random hour of that particular day (or when the clock strikes three times after the witching hour or some such nonsense), you're levied a late fee.

Many government treasurers will honor postmark dates when it comes to property tax payments. Many universities will not honor postmarks for tuition payments. Some utilities allow for a grace period before a late fee is charged.

On the other hand, credit-card companies are notorious for charging heavy fines for late payments if they aren't received and recorded on the due date - although some will waive the penalty if you're a good customer.

Late fees are a major revenue stream for credit-card companies, Mann said, adding that the combination of late and over-limit fees jumped by 50 percent from 1990 to 2002.

"In the short term, consumers probably want to pay their bills as soon as they come in to play it safe," said Gail Hillebrand, senior attorney for Consumers Union, a Washington-based advocacy group. "In the long term, we probably need to take another look at the system so that you shouldn't have to pay a late fee because the mail was slow or it arrives a couple hours late."

The common misconception about postmarks and due dates likely developed, Hillebrand said, from the days when consumers paid most bills to companies that were based close to their hometowns.

"Businesses were typically local back then," Hillebrand said. "That meant if you mailed it on a Monday, it got there Tuesday. These days, billing centers are further away. Many companies have also shortened the amount of time between when they mail you the bill and when the bill is due.

"I don't think this postmark issue is going away," she added.

In 1995, Congress debated the Postmark Prompt Payment Act, which would have required that all bills and invoices paid by mail be deemed punctual based on the postmark date rather than the date actually received by the creditor.

At the time, news organizations quoted Rep. John M. McHugh of New York saying that, "We have an opportunity to remedy one of the unfair burdens placed upon the conscientious citizens of this country who pay their bills on time but who through no fault of their own are slapped with interest charges because of the delays of others."

The bill won widespread support from consumer groups. Credit unions, banks and credit-card issuers weren't so thrilled. The bill languished in a subcommittee after opponents argued that businesses would have to hire more workers, add new technology and keep extensive records to track and save postmarked envelopes.

So the Postmark Act eventually died. But memory of it probably lives on to add to consumer confusion - not that we're the only ones confused.

When we did some digging into exactly what "due date" means to some businesses, we found that some of them weren't sure, either.

Delmarva Power, for instance, knew that bills are due by the due date, but when Sun intern Murray pressed them about whether postmark dates are acceptable, spokesman Matthew Likovich said, "It depends." Then he said, "It has to do with billing." Then he confessed to being unsure, adding, "Let me check on that."

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