Phone companies want to charge higher penalty fees

BY GREG EDWARDS
Media General News Service
Published: April 30, 2008

Virginia’s local phone companies are asking state regulators to approve an increase in the fees they are allowed to charge for bad checks and late payments.

The state limits on the fees were last changed more than 30 years ago, according to a filing by the Virginia Telecommunications Industry Association with the State Corporation Commission.

Regulated, local phone companies — those that have a franchised service territory such as Verizon and nTelos — are limited by state rules to charging no more than $6 for bad or dishonored checks. The limit on late payment fees is 1.5 percent of the unpaid balance, which for a $50 monthly bill, for example, would be 75 cents.

Durant A. Walton Jr., the telecommunications association’s executive director, said the phone companies are asking that they be allowed to charge a fee of up to $30 for a bad check, as many retailers and deregulated telecommunications providers do.

And for late payments, the companies want to assess either the current 1.5 percent or a flat $5 for residential customers and $20 for business customers, whichever is higher, according to the SCC filing. That is their minimum request, they said.

“I think the timing for this is just really sorry . . . at a time when we know people are struggling every day, when energy costs are going up,“ said Irene Leech, president of the Virginia Citizens Consumer Council.

The SCC’s current fee rules apply to all state-regulated utilities, including electric, gas and water utilities. The phone companies, however, are asking that an increase in fees apply just to them.

Walton said his association had discussed requesting a fee increase with other utilities, and some were interested. However, no agreement on how to move forward could be reached except by the phone companies, he said.

The phone companies are basing their request for the fee increases on what other companies, including their unregulated competitors, are doing rather than on an analysis of the actual costs of processing bad checks or late payments, Walton said.

For example, the association’s filing notes that Cavalier Telephone and Comcast — both unregulated telecommunication providers — charge bad-check fees of $20 and $30, respectively. Among the examples of late-payment fees that the association cited were a 5 percent fee by Comcast and a $25 fee by a school credit union in Virginia Beach.

The association suggests that some customers of regulated phone companies are choosing to make their payments late because of the low penalty they pay for a late payment. Several companies have seen an increase in delinquencies, which can lead to cash-flow problems, Walton said.

Leech disputed whether phone companies could prove that their delinquencies are up because of their lower fees, saying that delinquencies are up in other businesses, too.

When the SCC approved the current fees in 1977, they were intended to offset the expense of collection efforts and to serve as a deterrent to consumers inclined to pass bad checks or make late payments, Walton said.

Phone companies are making enough money that they don’t need to impose this penalty on consumers, Leech said.

Contact Greg Edwards at (804) 649-6390 or .