Title of Regulation: 20VAC5-414. Bad Check Charges and Late Payment Charges (adding 20VAC5-414-10 through 20VAC5-414-70).

Statutory Authority: § 12.1-13 of the Code of Virginia.

Effective Date: December 1, 2008.

Agency Contact: Katie Cummings, Deputy Director, Communications Division, State Corporation Commission, P.O. Box 1197, Richmond, VA 23218, telephone (804) 371-9101, FAX (804) 371-9069, or email katie.cummings@scc.virginia.gov.

Summary:

The regulations govern local exchange telecommunications carriers in the determination and calculation of charges for bad or dishonored checks and payments not made by the customer by the stated due date on their bill. The regulations address bad check charges and late payment charges for local exchange telecommunications carriers notwithstanding 20VAC5-10-10. The regulations define terms used and set forth a basis for understanding the chapter; set forth the ability of a local exchange telecommunications carrier to impose a charge for checks made in payment by a customer that are dishonored by the payor bank, and sets forth a maximum charge that may be imposed; set forth the ability of a local exchange telecommunications carrier to assess a late payment charge for bills that are not paid by the due date stated on the bill and set forth the calculation of the charge; and set forth the commission’s authority to grant exceptions to any provision of the rules and is consistent with and similar to the language used in other chapters. A change in the adopted regulation (from the proposed version of the regulation) is the removal of one of the options in the calculation of the late payment charge. The regulations reflect changes suggested by the Virginia Telephone Industry Association in Case No. PUC-2008-00037, "Application of the Virginia Telecommunications Industry Association for change in the Commission’s Rules 20 VAC 5-10-10 regarding bad check charges and late payment charges."

AT RICHMOND, NOVEMBER 17, 2008

COMMONWEALTH OF VIRGINIA, ex rel.
STATE CORPORATION COMMISSION

CASE NO. PUC-2008-00054

Ex Parte: Adoption of New Rules Governing
Late Payment and Bad Check Charges for
Local Exchange Telephone Companies

ORDER ADOPTING AMENDED RULES

On June 27, 2008, the State Corporation Commission ("Commission") issued an Order Prescribing Notice and Inviting Comments ("Order Prescribing Notice") that established this proceeding for the purpose of considering the request of the Virginia Telecommunications Industry Association ("VTIA") to change the limits on bad check charges and late payment fees that may be charged by local exchange telephone companies in the Commonwealth of Virginia. A separate chapter for telecommunications, Chapter 414, has been proposed for this purpose and, if adopted, would be codified as 20 VAC 5‑414‑10 et seq. ("Proposed New Rules"). The Commission provided for publication of the Proposed New Rules, permitted interested persons to submit written and electronic comments thereon, directed the Commission's Staff ("Staff") to file a response to such comments, and permitted interested persons to request a hearing associated with the Proposed New Rules.

On September 22, 2008, the Staff filed a response to the written and electronic comments submitted in this proceeding. As part of such response, the Staff provided a summary of each comment and noted that comments were received from the following: Cavalier Telephone, LLC ("Cavalier"); AT&T Communications of Virginia, LLC and TCG Virginia, Inc. ("AT&T"); Cox Virginia Telcom, L.L.C. ("Cox"); the Virginia Cable Telecommunications Association ("VCTA"); the Office of the Attorney General's Division of Consumer Counsel ("Consumer Counsel"); the VTIA; and Verizon Virginia Inc. and Verizon South Inc. ("Verizon"). One additional comment was filed by an individual after the filing deadline of August 21, 2008. No request for hearing was received.

NOW THE COMMISSION, upon consideration of this matter, is of the opinion and finds as follows.

Bad Check Charges

The current bad check charge limitation applicable to public utilities in Virginia, set forth in 20 VAC 5‑10‑10 B, is $6.00. However, as explained by Staff in its response, almost all telephone companies in Virginia have been granted authority to charge more than $6.00 as a result of past regulatory proceedings or actions.¹ Moreover, several of the comments asserted that the current $6.00 bad check charge limitation, which has been in existence for over thirty years, is outdated and noted that there are significant costs associated with returned checks.²

As further support for their request, VTIA notes that the General Assembly has authorized public bodies to charge a bad check penalty of up to $35.³ Finally, no one who submitted comments objected to the proposed increase to a maximum of $30.00 for the bad check charge that may be imposed by Virginia's local exchange telephone companies.

Under the circumstances, we find that Proposed New Rule 20 VAC 5‑414‑30, authorizing Virginia's local exchange telephone companies to charge up to $30.00 for a bad check, should be adopted.

Late Payment Fees

The current late payment fee provision applicable to public utilities in Virginia, set forth in 20 VAC 5‑10‑10 C, limits the late payment fee to 1.5% of the unpaid charges. Proposed New Rule 20 VAC 5‑414‑50 C would authorize Virginia's local exchange telephone companies to charge either a late payment fee of 1.5% of a customer's unpaid charges per month or $5.00 per bill associated with residential accounts and $20.00 per bill associated with business accounts.

Those who submitted comments supporting the change to the late payment fee limitation contend that the local exchange telephone companies in Virginia that are currently subject to 20 VAC 5‑10‑10 C operate at a competitive disadvantage to other types of entities that have the option of charging higher late payment fees with respect to the timely collection of payments for services.⁴ As explained by the VTIA, given the range of late payment fees that are charged by various entities, "it is not surprising that a customer, when deciding which bills to pay, would be inclined to pay more quickly the bills with higher minimum finance charges."⁵ The VTIA also asserts that some of its members have experienced a "troubling rise in the number and percentage of delinquent accounts."⁶ Moreover, the VTIA represents that some of its members estimate "they incur an average monthly cost of between $9 and $11 per past due account."⁷

As noted by Consumer Counsel and Staff, however, no analysis has been provided as to whether the current 1.5% late payment fee limitation (which equates to an annual rate of 18%) prohibits Virginia's local exchange telephone companies from recouping their actual costs associated with late payments (including collection costs that may be incurred as a result of the choice of some consumers to delay their payment of local exchange telephone bills while electing to pay other bills to avoid higher late payment fees).⁸ Thus, we are unable to find, based upon the information that has been provided in this proceeding, that the proposed alternative late payment fee of $5.00 for residential accounts and $20.00 for business accounts is warranted at this time.⁹

Accordingly, we will revise Proposed New Rule 20 VAC 5‑414‑50 C to incorporate the same late payment fee limitation that is applicable to other regulated utilities,¹⁰ that is, limiting the fee that may be charged by local exchange telephone companies associated with late payments to 1.5% of the unpaid charges. We also find it appropriate to adopt Proposed New Rule 20 VAC 5‑414‑10 (setting forth definitions associated with the bad check charge and late payment fee limitations) and Proposed New Rule 20 VAC 5‑414‑70 (authorizing the Commission, in its discretion, to grant exceptions to the bad check charge and late payment fee limitations).

Therefore, IT IS ORDERED THAT:

(1) The Proposed New Rules, as modified, are attached hereto, made a part hereof, and are hereby ADOPTED effective December 1, 2008.

(2) This case is dismissed.

AN ATTESTED COPY hereof shall be sent by the Clerk of the Commission to: Richard D. Gary, Esquire, and Noelle J. Coates, Esquire, Hunton & Williams LLP, Riverfront Plaza, East Tower, 951 East Byrd Street, Richmond, Virginia 23219-4074; Mark Keffer, Esquire, AT&T Communications of Virginia, LLC, 3033 Chain Bridge Road, Room 3‑D, Oakton, Virginia 22185-0001; Jennifer L. McClellan, Esquire, Verizon Virginia Inc., 703 East Grace Street, Richmond, Virginia 23219; E. Ford Stephens, Esquire, and Peter E. Broadbent, Jr., Esquire, Christian & Barton L.L.P., 909 East Main Street, Suite 1200, Richmond, Virginia 23219; Bradley E. Lerner, Esquire, Cavalier Telephone, LLC, 1319 Ingleside Road, Norfolk, Virginia 23502‑1914; C. Meade Browder, Jr., Senior Assistant Attorney General, Division of Consumer Counsel, Office of Attorney General, 900 East Main Street, 2nd Floor, Richmond, Virginia 23219; and the Commission's Office of General Counsel and Division of Communications.

¹ Staff Response at 3.

² See Cox Comments at 3; VCTA Comments at 3; Consumer Counsel Comments at 1‑2 and VTIA Comments at 1‑2. See also Staff Response at 11.

³ VTIA Comments at 2 (citing Va. Code § 2.2‑614.1). See also Consumer Counsel Comments at 2.

⁴ See VTIA Comments at 3; VCTA Comments at 4. See also Cox Comments at 3-4 (asserting that the new proposed late payment fee limitation is "more consistent with current state and commercial late payment charges"); AT&T Comments at 2 (arguing that the optional late fee mechanism should be adopted because it "conforms with the practices of unregulated businesses"); Verizon Comments at 2

⁵ VTIA Comments at 3. See also VCTA Comments at 4.

⁶ VTIA Comments at 3-4.

⁷ Id. at 4.

⁸ Consumer Counsel Comments at 2; Staff Response at 11.

⁹ Similarly, there is no support for Cavalier's contention that local exchange telephone companies should be authorized to charge both a 1.5% fee and a separate $5.00 or $20.00 charge for late payments. We also deny Cavalier's request to delete subsection F from Proposed New Rule 20 VAC 5‑414‑50. Subsection F provides that late payment fees shall not be assessed on the tax portion of customer bills, and it does not constitute a change in the manner in which late payment fees are currently assessed in accordance with 20 VAC 5‑10‑10. Thus, Cavalier's contention that the requirements of subsection F will "create an administrative burden" is unpersuasive. See Cavalier Comments at 1‑2.

¹⁰ See 20 VAC 5-10-10 C.

CHAPTER 414
BAD CHECK CHARGES AND LATE PAYMENT CHARGES

20VAC5-414-10. Definitions.

The following words and terms when used in this chapter shall have the following meanings unless the context clearly indicates otherwise:

"Bad check charge" means a service charge imposed for a check received in payment of a customer's account, which check is lawfully dishonored by the payor bank.

"Commission" means the State Corporation Commission.

"Customer" means any person, firm, partnership, corporation, or lawful entity that purchases local exchange telecommunications services.

"Late payment charge" means a fee assessed against any customer charges not timely paid.

"Local exchange carrier (LEC)" means a provider, certificated pursuant to Chapter 10.1 (§ 56-265.1 et seq.) of Title 56 of the Code of Virginia, offering local exchange services.

20VAC5-414-20. (Reserved.)

20VAC5-414-30. Bad check charge.

A LEC's bad check charge shall be governed by this section notwithstanding 20VAC5-10-10. A LEC may impose and collect a charge for every check received in payment of a customer's account, which check is lawfully dishonored by the payor bank. Provided, however, the charge shall be uniformly applied to all customers of the LEC, but in no event shall the individual charge exceed $30.

20VAC5-414-40. (Reserved.)

20VAC5-414-50. Late payment charge.

A. A LEC's late payment charge shall be governed by this section notwithstanding 20VAC5-10-10.

B. A LEC may assess a late payment charge for any charges not timely paid by the customer.

C. Calculation of the late payment charge shall be as follows:

1. A LEC may assess a late payment charge of [ : a. One one ] and one-half percent per month [ ; or .

b. Five dollars per bill for a residential customer account and $20 per bill for a business customer account. ]

2. Appropriate calculation of [ either the ] late payment charge shall be made at the time of each successive, usual billing date.

3. The amount of any late payment charge shall be included as a separately identified line item upon the current bill.

D. Before implementing a late payment charge program, the LEC must show on a customer's bill, in addition to other necessary and required information, the date on which the bill is delivered to the United States mail, or delivered to the customer's premises, together with showing the date by which payment must be received by the LEC to avoid late payment charges.

E. In no case shall payment for current service be considered overdue if received by the LEC within 20 days from the mailing date or delivered date of the bill.

F. The late payment charge shall not be applied to any amount billed as taxes that the LEC is required to collect on behalf of a local government.

20VAC5-414-60. (Reserved.)

20VAC5-414-70. Commission authority.

The commission may, at its discretion, grant exceptions to any provision of this chapter.