I provide Internet services on a month-month or annual basis. Our T&C's provides contracts renew automatically unless cancelled with a signed 30 day written notice by account holder. No phone calls or emails are accepted. Late payment fee is $35. APR is 30% compounded daily. If someone fails to pay I have been charging the renewable service fee, associated late fee, and finance charges on the prior unpaid balance, but mostly late fees and finance charges. I'm assuming I can continue assessing fees until cancelled. I have tried repeatedly to contact the customer via mailings, email, telephone calls with no response or no resolution when I do get a response. I'm now threatening legal action. Am I able to continue to assessing these fees without it being considered unreasonable?
The T&C's have always been available online and the customer were able to review and agree to these terms prior to starting service. Interests today on credit cards are as high as 29.99%. So it's not unheard of. What would make it not collectible? All these are business accounts, no consumer accounts.
I doubt that any court would consider your 30% APR compounded daily a "reasonable" interest rate on "finance" charges, so that might not be an enforceable. This may depend on whether your customers were able to review and agree to these T&C before siging on to your service.
See a lawyer to review your T&C and your contract with your customers before trying to enforce these charges, or try ot sue this customer, and see what happens, although even if you get a judgment, it may not be collectible.
Disclaimer: Please note that this answer does not constitute legal advice, and should not be relied on, since each state has different laws, each situation is fact specific, and it is impossible to evaluate a legal problem without a comprehensive consultation and review of all the facts and documents at issue. This answer does not create an attorney-client relationship.
You can continue charging these late fees and finance charges, but I think they are unreasonable and you are going to have a difficult time collecting.
By way of background, in considering personal, consumer loans in the State of California, the general legal, usury interest rate attached to these loans is 10%. Generally speaking, courts in California will strike down as illegal and unenforceable in its entirety any loan agreement that calls for an interest rate to be paid above and beyond that which explicitly is permitted by the laws and regulations of the state.
In transactions for the purchase of goods or services which are not for personal, family or household purposes, there are normally no limits to finance charges except those set by the parties.
Here, it appears that the late fees and finance charges for your Internet services, although not controlled by the usury laws, are unreasonable and you are going to have a difficult time collecting.
Do not use credit cards as a pattern as banks are exempt from the usury laws in California.
The charges you make are not interest, but “time-price differential.” That is, you charge one price for cash sales with immediate payment, another price for deferred payment. As such the state does not regulate the rates.
Reasonableness is in the eye of the beholder. Many stores have more reasonable rates for regular accounts, running from 10% to 18%. The ones I see generally reserve rates over 25% for delinquent accounts only. So your rates do seem a bit high. I would recommend using 18% or less. But that does not mean you should not try to enforce the rates you have been using.
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(Bryant) Keith Martin