House OKs bill allowing late charges to be raised; Critics say measure rewards greedy; In Annapolis


Legislation allowing businesses to charge higher late fees cleared its last major hurdle in Annapolis yesterday, gaining overwhelming approval from the House of Delegates despite some lawmakers' complaints that it rewards corporate greed.

With business lobbyists and the president of Bell Atlantic-Maryland watching from the gallery, the House voted 106 to 29 to permit monthly late charges of up to $5 or 10 percent of an unpaid bill, whichever is greater.

"It's a great day for business," said W. Miles Cole, a vice president of the Maryland Chamber of Commerce, after the vote.

But Paul D. Gleiberman, a Rockville lawyer who has filed several class action lawsuits accusing Bell Atlantic and other companies of levying excessive late fees, said the House vote was "an absolute disgrace." He vowed to file a legal challenge to the bill if it becomes law.

The measure, a top priority for Maryland's business community, has been amended slightly at the behest of Gov. Parris N. Glendening to soften its impact on late-paying consumers. The Senate is likely to concur, sending it to the governor for his expected signature.

The bill would reverse a Court of Appeals decision last year that limited the fees imposed on delinquent consumers to no more than 0.5 percent of the outstanding monthly balance.

The ruling alarmed the state's business leaders, especially because it upheld a Baltimore Circuit Court order to refund $6.7 million in late fees to city cable television subscribers.

Supporters argued that businesses will have to raise prices for everyone, or could go out of business, if they are not allowed to collect meaningful late fees from tardy customers.

"If somebody pays late and they do not pay for paying late, everyone else will," said Del. Carolyn J. Krysiak, a Baltimore Democrat who noted that she has seen plenty of delinquent accounts in her work as a bookkeeper.

Some complained, though, that the bill would let businesses charge fees of up to 30 percent or even 120 percent a year -- far higher than the 18 percent a year typically collected by credit-card companies.

"They're not just about teaching consumers to pay their bills on time," Del. Sharon M. Grosfeld said of the proposed maximum fees. "This bill is about greed," said the Montgomery County Democrat.

Under the bill, 10 percent monthly fees can be levied for no more than three months at a time on an unpaid bill. For longer-running account balances, businesses can charge no more than 1.5 percent a month, or 18 percent annually, similar to the interest charged by credit-card companies.

The most hotly debated aspect of the bill was its retroactive application.

It would effectively wipe out at least 15 lawsuits pending against Bell Atlantic, cable television companies and other businesses around the state. Those cases, most filed since the appellate court ruling, could result in judicial orders or settlements refunding millions of dollars in allegedly excessive late fees.

That provision troubled some lawmakers, even those who otherwise favored letting businesses impose higher late fees.

"We are not a court of special interest appeals," said Del. Robert L. Flanagan, a Howard County Republican. Noting that legislative leaders have publicly criticized the appellate courts and are pushing other bills to reverse rulings they dislike, the GOP leader warned, "We are setting ourselves up for a very dysfunctional relationship with the courts."

But others defended the bill's retroactivity, saying that businesses should not be penalized for charging late fees that until recently no one questioned.

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