A lawsuit filed in December 1997 on behalf of two Comcast
Cablevision of Philadelphia customers who had been charged what they considered excessive
late fees gained class-action status last week
If won, the case could bring a judgment against Comcast
Corp. worth millions of dollars for thousands of local cable customers.
Seeking potentially large windfalls and an easy-to-hate
target, class-action attorneys have brought similar suits against cable operators across
the country in recent years.
And while some suits have been thrown out of court as
nuisance cases and certain states have passed legislation to thwart such suits, other
cases have resulted in hefty judgments against cable operators.
At issue is whether the $6 to $6.30 per month that Comcast
of Philadelphia charges in late fees is based on the actual costs that it incurs in
recouping late payments.
Plaintiff co-counsel Jim Bonner of New York law firm
Shalov, Stone & Bonner said a $6.30 late fee on a $50 cable bill adds up to an annual
interest rate of 150 percent. Bonner added that he's found that Comcast of
Philadelphia charges about 300,000 late fees each year for a customer base of roughly the
same size.
Because the class-action suit covers late fees imposed
since December 1991, Bonner estimated that this translates to 2.5 million late fees.
Comcast senior vice president of external affairs Joe Waz
said there is still a possibility that the case won't go to trial, based on
procedural grounds. "To this point, we've never had a challenge of late fees go
to trial on its merits," he added.
If the case does go to trial, Comcast plans to demonstrate
that its late fees are related to the actual costs of collecting and processing late
payments, such as the cost of labor, time, stationery, postage and accounting.
"The late fee is intended to place on the person whose
payment is late the cost of collection, instead of spreading that cost around to all of
our customers," Waz said.
Michael Nachman, an attorney with Philadelphia-based
Spector & Roseman P.C., who also represents the plaintiffs, said Comcast's actual
costs of recovering late payments would be determined at trial.
Both of the plaintiffs' law firms specialize in
class-action suits, although neither has filed a late-fee suit against a cable operator.
"We thought this would be a good class action
case," Bonner said. "Everybody hates their cable company."
Bonner said courts in other jurisdictions have ruled that
other cable operators have costs as low as 50 cents per late payment. Other sources said
late fees of $5 are not unusual, but anything much higher than that can raise eyebrows.
A spokesman for the National Cable Television Association
said that because late fees represent a local business issue, the association has no
national policy on the matter.
Beyond the legal ramifications of the case, it raises the
industrywide concern of how late fees and other matters relating to the way cable
operators bill their subscribers can influence customer goodwill.
"Cable creates a problem for itself in the way it
dates its bills," The Yankee Group analyst Bruce Leichtman said, adding that in many
cases, a bill is due within a few days of receipt by the subscriber.
"People don't pay bills that way," Leichtman
said. "They pay in cycles." He added that if the lag time were larger, it could
ease things up a bit for operators and their customers.
Bob Davis, managing director for Dove Associates, agreed.
"Cable operators tend to have much shorter
billing-collection windows than other utilities," Davis said. "You'll start
getting nasty-grams and service-shut-off letters sooner than you would from other
utilities."
Shorter billing windows and threatening letters not only
tend to make customers bitter, but they also drive phone calls back to the call centers,
especially in cases when a customer may have missed a bill simply because of being out of
town.
Davis said that when his company helped a client to look at
ways to reduce unnecessary inbound phone calls, it changed its billing cycle so that late
fees weren't imposed at 30 days, but at 60 days.
"We found that the volume of inbound calls on billing
issues dropped 50 percent," he added.
Barbara Sullivan, president of Denver-based B.G. Marketing,
recommended that operators be especially careful in dealing with first-time offenders, and
that they consider one-to-one contact, rather than a mass mailing.
"If you've got a three-pay customer who's
never had bad debt before, that deserves a phone call," she added.
Although Sullivan doesn't recommend dropping late fees
altogether, she does believe customer-service representatives should be empowered to waive
late fees if customers call in, especially if there's a good reason for the late
payment.
"My wish would be that cable operators would take a
hard look at their billing practices on a proactive basis," Davis said, because doing
so could obviate the need for lawsuits.
Cable companies would need to do some economic analysis to
see how changes in their billing practices would influence revenues and cash flow, Davis
said. But he believes better billing practices would help to strengthen customer
relationships, leading to greater revenues from new services.
"The last thing this industry needs is bad press just
when it is trying to extend its relationships with its customers" into new services
such as high-speed data and telephony, Davis added.
Stories in the Philadelphia media last week drove calls to
both Comcast and the class-action attorneys. Bonner said co-counsel in Philadelphia was
taking names and phone numbers of Comcast subscribers "because we may need some
testimony at trial."
