Edition: U.S. / Global

PERSONAL BUSINESS; Credit Cards Get Tough On the Tardy

Published: January 31, 1999

AFTER five years of using the same credit card to buy gasoline and paying the entire balance each month, Michael S. Lamar got a rude awakening from his card issuer, First USA Bank: a $29 late fee on charges of $21.66.

True, he had missed the July 26 due date on his Visa card by seven days, but he thought the penalty was excessive. He called First USA to complain, and the bank, a unit of Banc One, rescinded the charge, though it cautioned that it granted only one waiver a year.

But in October, another late fee of $29 showed up, this time on a $48.15 bill that had been paid six days late. Mr. Lamar, a 40-year-old software programmer from Felton, Calif., cut up the card and demanded that the account be closed. It remains open, however, and is accruing monthly late fees as the dispute continues.

Mr. Lamar said that in more than five years he was never hit with a late fee until the recent flurry. He thinks the company has changed its policies on late-payment penalties, making it hard for him to make on-time payments. For example, he says, his November bill arrived on Nov. 12 with a Nov. 24 due date -- a tight deadline for him because he is paid every two weeks. He also considers the $29 to be excessive.


Jeff Unkle, vice president for corporate affairs at First USA, said he could not discuss details of Mr. Lamar's case, citing confidentiality concerns. He did say, however, that the case was being examined to determine whether Mr. Lamar had been treated fairly.

Mr. Unkle said customers must pay bills on time for the bank to maintain low interest rates, that the bank urged customers to mail payments 7 to 10 days before due dates and that all card holders received written copies of credit agreements.

Fierce competition among credit card issuers in recent months has indeed pushed down interest rates on unpaid balances. But to make up for the lost income, consumer advocates say, the companies are increasing their late fees and applying them more rigorously than in the past. They also say banks are raising penalty rates, and in some instances confusing card holders with due dates that change month to month.

''With so much money to be made, banks are taking advantage of every loophole, nook and cranny in the law to mislead, deceive and gouge consumers,'' said Edmund Mierzwinkski, consumer program director at the Public Interest Research Group in Washington.

Nancy Ness Judy, consumer affairs manager at the American Bankers Association, acknowledged that the industry was taking a stricter line. But she denied that it was misleading or gouging customers. ''It is now a pay-as-you-go system,'' she said. ''Rather than having high interest rates and high fees for everybody, the fees are being applied to the people who use the services.''

IF you have cash-flow problems or are just absent-minded, though, watch out. In a 1998 survey of 117 bank cards from 74 banks nationwide, Consumer Action, a San Francisco-based education and advocacy group, found that credit card companies had increased their late fees about 75 percent since 1995, to an average of $21.82 from $12.53.

Consumer Action said that in the last two or three years some companies had been charging penalty interest rates on overdue accounts that were on average 4.5 percentage points higher than standard rates. The survey also found that banks had raised penalties for exceeding credit limits, had shortened grace periods for interest-free balances and had become stricter about imposing late fees. In the past, most customers got 5 to 15 days beyond the official due date to make payments, but nearly two-thirds of the banks questioned said they now imposed late charges immediately.

Stephen Brobeck, executive director of the Consumer Federation of America, recommended that consumers keep only one or two credit cards and pay balances quickly.

Ms. Judy also urged consumers to scrutinize monthly statements for changes in late fees, interest penalties or billing procedures. While she acknowledged that companies were being more rigorous about late payments and might be charging higher penalities, she said she knew of no companies that were shortening their grace periods.

Ms. Judy encourages consumers who believe they have been wrongly penalized to talk to representatives at card companies.

That hasn't worked for Mr. Lamar, though, in his fight over his bill, which had grown to $58.59, comprising two late fees and a 59 cent finance charge, on his December statement.

''When do we decide enough is enough?'' he asked. ''When it gets to the point you have to use Fedex or they'll charge you a $50 late fee?''

Photo: Michael S. Lamar is battling a credit card issuer over recent changes that he says have made paying his balance on time more difficult while imposing exorbitant penalty fees. (Darcy Padilla for The New York Times)