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More on finance fees and late charges
January 29, 2021
More on finance fees and late charges from article on January 18, 2021
            The article on Avoiding Finance Charges [January 18, 2021] and more directly the $600,000 penalty caught my eye. Yes we understand the issue of financing and the "Creative" ways to charge interest can be a problem. 
            What about "Late Fees"?  When I am paid late on a customer account can I charge late fees? 
            All of our suppliers charge late fees and I have no complaint with them and eagerly pay them if I am paying my supplier late.  I pay them with a smile and say "Thanks for working with me". I always do that because I might need to rely on them again someday in the future when I am not paid timely by my customers. I feel it is rude if I need to pay late and I do not pay the late fee. The supplier may be just as rude to me if my customer payments are running slow. My suppliers and my central stations are essential to my business and they can put me out of business too.
            I notice the Kirschenbaum Contracts are silent on Late fees. Can I add a late fee tactic without subjecting myself to a $600,000 penalty?
Jersey Jerry
            You are correct that the Standard Form Agreements do not include a provision for finance charges or late fees.  It's not that you can't impose those charges, it's that you have to be very careful doing it.  I think you have enough issues to be concerned with without those.
            Finance charges and late fees are different issues and present different considerations.
            Finance charges:  If you impose finance charges you have to comply with Truth and Lending Law disclosure and that requires not only a calculation but numerous consumer notices and provisions.  The alarm industry has more than enough issues that have to be dealt with in the contracts, in my opinion, and these issues are far more important than finance charges and late fees.  If you want to finance your contracts then use the Lease forms.  You can calculate the monthly lease charge any way you want because the customer never gets to buy the equipment, which would turn the transaction into a retail installment contract.  
            Late charges:  I know some of you like late charges.  You routinely charge the late charge and your customers routinely pay the charge; one way to increase RMR.  But I don't think paying a late charges is a matter of being rude, as you mention, but in your case a matter of contract terms.  While late fees are not governed like finance charges, by Truth and Lending laws, late fees are regulated by statute in some states.  Call me lazy, but I don't want to check state by state for late fee laws that might limit a late fee to under $10, or under a certain percentage, or can't be imposed until a certain number of days have elapsed or can only be imposed if the contract has specific warnings, etc.  The Standard Form Agreements have a simple provision dealing with charges; they need to get paid timely or you can deem the customer in breach and accelerate the term of the contract.  Why confuse that right with a potential claim that you waived the right to demand timely payment as long as a late fee is paid, or worse, accruing?  
            If your goal is to incur prompt payment by your customer then turn it over to K&K's collection department as soon as there is a default.  Your customer will learn a quick lesson, that I promise.
            If your goal is to boost your RMR, I think you can find better ways to do that.
            K&K has put a lot of thought, time and effort to design and prepare our Standard Form Agreements.  I strongly suggest you use them the way they are drafted.
            By the way, you're in New Jersey, perhaps not the worst state but trying hard to be number one.  You have a deceptive business practice act that is quite consuming.  Watch your step.

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Ken Kirschenbaum,Esq
Kirschenbaum & Kirschenbaum PC
Attorneys at Law
200 Garden City Plaza
Garden City, NY 11530
516 747 6700 x 301