Bell Express Vu, which markets one of the two major home tv satellite options in Canada, was recently sued successfully in a class action by people who were charged between $19 and $25 per month late fees if they were late paying their bills.
Satellite TV customers scored a small victory when an Ontario
Superior Court judge ruled on Monday that late fees charged by Bell
ExpressVu, now called Bell TV, were illegal because they totalled more
than the 60 per cent annual interest charges allowed under the Criminal
Code.
Peter De Wolf, who lives outside Ottawa, launched the class-action
lawsuit over "administration fees" of $19 to $25 on his television
bill, contending they were illegal. The company argued that the fees
were levied because he was late paying his monthly bills.
The judge's decision that the fees were illegal applies to Bell ExpressVu's roughly 1.8 million customers.
From an earlier article in the Globe & Mail,
Bell ExpressVu argued that the fee was not an interest charge but
was based on the cost the company incurred collecting overdue bills.
Mr. Baert [a lawyer for the plaintiffs] said the judge recognized that the general concept of an
interest payment is that it makes money for the lender and covers the
lender's cost.
A lot of companies today impose flat fees on late-paying customers.
The trouble is that they are normally not proportional to what the
customer owes, he said.
"When you have small balances, a short time period and a fairly
large administrative fee, you can't help but go over 60 per cent," he
said. "It's a very good decision, because what [the judge] did was he
looked at the substance of the fee, not the name. You can call horse
meat roast beef, but that doesn't mean it is."
This is not the first instance of a court determining that late fees
charged by a company amount to interest fees in excess of 60 per cent.
In 2004, the Supreme Court of Canada ruled against Enbridge Inc. (at
the time called Consumers' Gas) in a class-action suit over excessive
levies. Enbridge and other utilities were forced to change their
billing practices.
I will not take issue with the decision of the court. Rather, I will question whether the law should be on the books at all. The problem here is not exploitation of consumers; it is exploitation of ignorant and lazy consumers.
When people make a decision to sign up with ExpressVu, they have options. ExpressVu has never had a monopoly. There is Star-choice, and in most areas there is also a cable television option. If people do not check to see what the late fees are, it is not clear to me that they should be protected from their own laziness (or irrationality? see this).
Furthermore, although switching can sometimes involve costs, people do it all the time, and the satellite companies vie with the cable companies, urging us to switch from one to the other.
If "late fees" are a problem for consumers, surely (as with video rentals) charging lower late fees can become an advertising point for one company or another. And if it turns out the competitors drive the late fees down to, say $10 or even $5 per month, then we will know that the market has worked to address this situation.
Of course, one thing that keeps this market from working as well as it might are the very high barriers to entry imposed by federal gubmnt regulations, namely those that ban US satellite firms from providing service in Canada. If we had our choice from among the US firms, you can bet your boots we'd have more competition on all grounds.
The really scary thing for me is how many people in the comments to these articles want more gubmnt intervention and more gubmnt control of markets. I am distressed that economists have done such a poor job of explaining how costly and inefficient these protectionist interventions generally are.