Late Charges, Regular Billing, and Reasonable Consumers: A Rationale for a Late Payment Act

Abstract

This essay considers the reasonable behavior of consumers in relation to law and the policies that tolerate the assessment of late payment penalties, fees, and surcharges. Attention is trained principally on the inadequately-regulated cycle of creditor billing and debtor repayment practices, rather than on excessively high fees. The focus here is on the credit card issuers and, to a lesser degree, the wireless telecommunication vendors. Problems associated with late fee billing cycles cut a wide swath of billing for recurring debt repayment, however. A variety of different demands on consumers imposed sector-by-sector interact to magnify the consumers' difficulties.

Part I addresses the multitude of ways that billers can impose late fee charges. This Part also identifies those deficiencies in legal regimes that aid and abet those who send out bills, by acquiescing to strategies that induce late fee revenue. Part II considers some information-processing and other cognitive difficulties that arise from the late payment regime, and contends that unearned redistribution from consumers to billers results from such incoherence and confusion, and also results in general welfare losses. Part III reviews existing statutory and common-law causes of action through which consumers might hope to recover from billers who intentionally or recklessly diminish the likelihood that deadlines will be met. Part IV proposes a Late Payment Act that illustrates the type of approach that could be adopted on a state - or nation - wide basis to address several of the key shortcomings.

Keywords: behavior, reasonable, consumers, late, charges, fees, credit cards, payment, penalties, surcharges, debt