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this pageVerizon Wireless’s Illegal Charges Cost California Cell Phone Customers Millions, Class Action Suit Alleges
OAKLAND, CA — June 15, 2007 — Cellular customers are accustomed to getting hit with extra fees, but a new class action lawsuit alleges that Verizon Wireless’s late payment policy takes this too far. When Cathy Gellis paid her $131 cell phone bill a few days late, Verizon Wireless tacked on an additional $5 minimum late fee, resulting in a 154% annual interest rate charge for a payment that turned out to be about nine days late. A class action lawsuit filed today in Alameda Superior Court alleges that such late fees are well in excess of what California law allows.
Marin–based plaintiff’s firms Brayton Purcell LLP and Chavez & Gertler LLP are jointly representing Ms. Gellis and the proposed class of affected Verizon Wireless customers in the case titled Catherine Gellis v. Verizon Communications, Inc., Verizon Wireless and Cellco Partnership (Alameda Superior Court, RG 07330354).
“As far as consumer contracts like this are concerned, companies are only allowed to use late payment fees to recoup the actual costs associated with the late payments. We believe that these late fees are wildly inflated relative to that standard, with the intent and effect of having the fees operate as a profit center, charging California users millions in extra penalties in order to pad Verizon Wireless’s bottom line,” said Brayton Purcell attorney Peter Fredman.
Verizon Wireless imposes the late charges pursuant to a provision of its standard “Customer Terms & Conditions” that allows for a late charge of 18 percent annually, or a flat $5 fee, whichever is greater. The lawsuit alleges that this provision is in violation of California law, which permits a company to charge preset fees of this type only when it is “impracticable” or “extremely difficult” to ascertain the actual damage.
“It is clear that Verizon does not incur anywhere near a $5 cost for the late payments to which it applies this minimum charge. The company is simply taking advantage of fine print in the contract, the inability of individual customers to bargain for their rights, and the fact that consumers are locked into these contracts for 1–2 years and have no choice but to pay,” said Mark Chavez of the class action firm Chavez & Gertler. “Fortunately, California law protects consumers against this unconscionable use of late fees.”
According to the complaint, the actual carrying costs that Verizon Wireless incurs in connection with a late payment are well known to Verizon, and the $5 minimum fees are applied automatically by billing software. “Verizon Wireless may be entitled to charge a fair interest rate for the period of time the payment is late,” Mr. Fredman explains, “but that’s all they can charge in situations like this, where the fee is imposed without any human action at no discernible cost to Verizon.” The complaint alleges that “the $5 minimum late fee drastically exceeds the actual cost to Verizon Wireless in every instance in which it is applied.”
Mr. Fredman also noted the fundamental unfairness of these late fee practices because they result in disproportionately higher late charges to customers with lower bills without corresponding expense. For example, Verizon Wireless charges the same $5 late fee to a customer who pays a $40 bill five days past the due date as they would charge to a customer who pays a $300 bill 30 days past the due date.
Current or former California Verizon Wireless customers can contact Peter Fredman, Esq. via email at pfredman@braytonlaw.com or telephone at 415–898–1555.