Late Fee on Returned Merchandise

[Anonymous]

Can a credit card company enforce a late fee for merchandise that was returned after the payment due date?  I was unable to return the merchandise sooner because I had to go out of state due to a family emergency.  The company, Kohl's, has not only charged a late fee for the first month but for the next two months as well - even after I explained the situation (by e-mail, mail and phone!).  

They have reported a late payment and an outstanding balance of $108 (which is all late fees and interest) to all 3 CRAs.  I sent them a letter explaining that the CSR I spoke with said she'd remove one late fee.  When I told her that pyramiding of late fees was illegal, she said that it was legal under the FDCPA.  I received the following response: 

 "We have determined that the info previously furnished to the CRAs is accurate.  Updating the info as you have requested will create an inaccurate representation of the status of your account with us." 

Any suggestions as to how to resolve this matter?? 

[haulingthescoreup]

If I'm reading correctly, it looks like there's been a unpaid balance on your account for three months or more. (One late fee + two more.)

If so, then yes. It doesn't matter that you eventually returned the merchandise, other than they should credit you back the original cost. But during the interim, you had borrowed money from Kohl's/Chase (which is what charging really is: borrowing money), and you didn't make the minimum payments during that time. So you incurred late fees on the unpaid minimum payments. And when those late fees are posted, you then owe on them as well. I don't think that the CC Act prohibits banks from doing this; someone please correct me if i'm wrong.

There are two different things happening here, and I think that maybe you've tangled them up: there's the fact that you bought something and then returned it, meaning that yes, you should be credited back your original amount charged, and then there's the fact that you borrowed money to buy this item but didn't make payments on it at the assigned times.

At any rate, it sounds like you now have 3 30-day lates on your credit reports. Or is it a 30-60-90? There's not a lot that you can do about these, other than to start sending GW (goodwill) letters. There are stickied threads here on the boards with GW examples. The thing to remember with GW's is that they (the lenders) have the power, and you are begging them for a little mercy. You'll probably have to keep trying, and I don't know how good Chase is about GW.

If they're only 30-day lates, they will lose much of their punch after one year, and after two years, they essentially won't affect your FICO scores at all. (This is unique to 30-day lates. It's certainly not true of more severe derogatories.)

[MarineVietVet]

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@Anonymous wrote:

Can a credit card company enforce a late fee for merchandise that was returned after the payment due date?  I was unable to return the merchandise sooner because I had to go out of state due to a family emergency.  The company, Kohl's, has not only charged a late fee for the first month but for the next two months as well - even after I explained the situation (by e-mail, mail and phone!).  

They have reported a late payment and an outstanding balance of $108 (which is all late fees and interest) to all 3 CRAs.  I sent them a letter explaining that the CSR I spoke with said she'd remove one late fee.  When I told her that pyramiding of late fees was illegal, she said that it was legal under the FDCPA.  I received the following response: 

 "We have determined that the info previously furnished to the CRAs is accurate.  Updating the info as you have requested will create an inaccurate representation of the status of your account with us." 

Any suggestions as to how to resolve this matter?? 

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I'm not sure I understand. Was the payment made after the due date? Then I would consider it late. Whether the mechandise was returned or not is a separate issue. Unless I'm completely missing something that's the way I see things.

ETA: Beaten by the fast typing HTSU once again. 

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[Anonymous]

Thanks for your responses!  To clarify, I purchased household items and clothing items.  Some items did not fit and two were defective.  Before I could return them, I had to go out of state for a family emergency.  I paid the $20 minimum amount due online while out of town, which covered the household items that I kept.  I was still out of state and  did not return the clothing before the next statement posted.  I did not have regular PC access and wasn't even aware that I'd received another statement.  Since I was planning to return all the merchandise (and was preoccupied with my family), I didn't even think about needing to make a payment.  

Once I came back home, I returned the merchandise.  Unfortunately, it was after the 2nd minimum payment was due and a late fee was assessed.   I wrote Kohl's and explained the situation, assuming that they would reverse the late fee.  They never responded and the next month, I had another late fee!  This was clearly pyramiding of late fees, which is illegal.  I called Kohl's.  The CSR said she would remove one late fee.  When I told her that since it was illegal to charge a late fee for a late fee, both should be removed.  She told me that it was legal under the FDCPA.   Rather than argue with her, I thanked her for removing the one fee and sent another letter to Kohl's.  Since I had also learned that they had reported me 30 days past due from my credit alerting service, I asked that they remove the negative from my credit report as well as all late fees.   I apologized that I was unable to return the items sooner but it was beyond my control. 

I have already posted their response.  I also received another statement in the interim and have been billed yet another late fee!  The FTC strictly prohibits the pyramiding of late fees, which is exactly what they are doing.   Plus the CSR who told me she'd remove the late fee, didn't.   I can understand having to pay the interest for the "borrowed money"  -  but a $39 late fee for items that were returned?   

What's really annoying is that I've been trying to pay cash for most items these days.  The only reason I used my Kohl's card is because they always offer great discounts when you use your card.  Guess I've learned my lesson! 

I have two other Chase accounts and have never had a problem.   I feel like they aren't even reading my letters.  I will be sending another, certified this time.  Do you know how I can ensure that it gets to a person in charge? 

Thanks again for your input!

[thrasher865]

You got charged another late fee?  Why have you not paid the balance yet????

Once you saw the first late fee, you should have just paid it and then asked for a credit, not just assume that it would be reversed and keep getting charged additional late fees each month just for being stubborn.

You made a late payment.  You refused to pay late fees that were assessed by the due date the following month.  That's another late payment.  Where in the legislation did you read that this is illegal?  I'd like to see it quoted, as I'm not sure that's the case.

[Anonymous]

I haven't paid the balance because the balance is 3 late fees!  I don't owe anything because the merchandise that they are "late feeing" me for was all returned (with some of it being defective).  My second post explains the situation.  If you want to see the FTC rules regarding pyramiding of late fees,  see this Federal Trade Commission website (www.ftc.gov) which states:    "A creditor can charge a late fee if you do not make your loan payment on time. However, it is illegal under the Rule for a creditor to charge you late fees or payments simply because you have not yet paid a late fee you owe. This practice is called "pyramiding late fees." 

I would also like to add that Kohl's made over 30 calls to my cellphone in less than a week - even after I e-mailed them and asked them to stop.  I had to e-mail them again and inform them that they were in violation of the FDCPA before the calls ceased.   Now they have also violated the FTC rules. 

My position is that the CSR said she would reverse the late fee.  Since any subsequent late fees were illegal, wouldn't it follow that they should be reversed as well?  If I still had the merchandise and there was still a balance on my account, it'd be a whole different story.  But it's absurd to expect someone to pay $100 in fees for merchandise that was returned.  When I finally received a response from them, it didn't even address the issue of the late fees.  The icing on the cake is getting another late fee in this month's statement! 

I hope this answers your questions. 

[waqaszm1]

normally i would not interrupt this thread, but i believe the OP is wrong. a late fee is a finance charge which has to be paid - once a late fee is charged, unless the creditor credits it back, it stays on your statement and needs to be paid since a late fee, or any other finance charge, or fee for that matter in essence is a transaction. when you accepted your credit card you should have more closely read the terms and conditions.

this issue had a simple solution; you should have paid the first late fee. allow your payment to post, and then call the customer service dept. for a courtesy refund and they may have granted it - once the credit was issued, you could have left it as a credit balance on your kohls card to settle against a future purchase or simply called the cust. services dept. and requested a cheque for the credit balance - problem solved - and you would have not even got a 30 day delinquency reporting on your credit bureaus.

any finance charge or fee, once assessed is essentially a transaction. kohls is not "pyramiding" late fees on you !! once you had the first late fee, on your statement, you must have got a statement for the next month's payment. It appears that you did not make that payment, therefore you were charged another late fee for when that billing cycle ended. - the late fee is for not paying the minimum payment due on your balance. It does not matter whether the balance is from a retail transaction or a finance charge - what matters is that you have a balance and thus a minimum payment becomes due.

instead, you persisted in your argument with kohls, refusing to make your minimum payment. Therefore, you got another late charge when the next billing cycle ended, and so it continues. It is surprising to me that you still think that you are in the right when (from what i understand of your posting), you are clearly at fault here. yet, instead of making amends you are cheerfully awaiting your fourth late fee.

i think you fail to realize that the issuer of the kohl's card (Jp morgan chase), backs quite a few other cards as well and by destroying your current relationship with them, you are pretty much writing off chase as a future potential lender. moreover, if you have any other lenders, there is a good chance that they review your credit profile either monthly or quaterly to ascertain risk and credit payment patterns. your continued delinquency with chase may also cast a negative outlook on their decisions which may result in a decrease in current credit limits, account closure with other lenders, and denial of requests to increase existing credit lines etc.

the best solution for you this late into this fiasco is to pay the remaining balance, and hope they dont close your account, unless they have already closed it.

just one word of advice, on many of chase's co-branded products, especially affinity cards, dept store cards, etc. chase will not report you 30 days late unless you are actually 60 days late from the payment the initial payment was due. *** for others, discover follows this policy for all their cards ! 

in all honesty, there is no one to blame for this but ......................... !

moreover,

[Creditaddict]

I don't want to pour salt in the wounds but you returned the merchandise after the fee had already been charged, therefor you owe the fee and you not paying that fee, allows them to then charge another fee the next month and it will continue to grow until you just pay it off... they are not breaking any laws and they are right in this situation from what I have read.

[Anonymous]

Hi Georgifornia!

I'm really sorry to hear about this whole mess that you've had with your Kohl's card. It is easy to neglect/forget payments when you've got family emergencies (I hope that everything is okay now). One thing I'd suggest to prevent any future occurences is to set up automatic billpay for the minimum each month. At least that way, you're covered for a mininum payment should you become preoccupied.

Unfortunately, it does appear that Chase is entirely in the right here...   The illegal practice of pyramiding late fees is not applicable in your situation. Chase didn't deduct your late fee from a payment to bring your account current & then charge another late fee for insufficient payment. The first late fee was legitimate. That you returned the merchandise (after the due date) is, unfortunately, immaterial. You didn't pay, or return the items within the contractual time limit that you had. When you didn't pay the late fee for the next statement, Chase is legally allowed to charge another late fee. It's not pyramiding at all. If you skip a month, even if the only payment due is a late fee, Chase can charge late fees on every subsequent statement until you bring your account current.

With regard to Chase repeatedly calling you, the FDCPA really applies to bad debt collections (which may be the case if they're ready to charge off your account-- let's hope not). The OC is allowed to call, even if they're collection calls.

I think that the safest thing to do is to pay in full the three late fees, and then ask Chase for goodwill to rescind some (or possibly) all of them. I think that the worst possible thing you could do is to go at them with alleged violations of the FDCPA. 1) It doesn't sound as if there are any violations, and 2) You need them to be sympathetic and "on your side" (vs. defensive) to request goodwill. It sounds like you made an honest mistake, and then misunderstood your legal obligations-- it happens. I don't think it's too late to try a Chase backdoor number to try finding a sympathetic ear that'll possibly preserve your credit standing and restore your relationship if you want to maintain it. Otherwise, I think you're going to take a ding, and you'll just have to chalk it up to a lesson learned, and move on.

Good luck!

[Anonymous]

Well... I have good news and bad news.  The good is that all the late fees and interest were credited back to my account - bringing it to a 0 balance.  I responded to a letter I received last Friday stating that my account had been temporarily suspended from future purchases.  I called the Collections Dept. number that was provided to "make arrangements to bring my account to a current status."   I apparently lucked out and caught a sympathetic ear.  The CSR put me on hold for a few minutes to talk to her supervisor; then came back on the line and said they were resetting my balance to 0.  I thanked her profusely and ended the call.  In my excitement, I forgot to ask her about removing the negatives on my CR. 

On Monday I checked my account online to see if the balance was 0.  Indeed it was but the account was also showing as "closed."  I called Kohl's Customer Service and inquired about the status.  I was told that the account had been closed on July 7.  I mentioned the letter dated 7/27 that I had received stating my account had been temporarily suspended and asked how a closed account could be temporarily suspended.  She said that  did not know the Collection Codes for letters which were showing on my account, so she couldn't answer the question.  When I asked if the account could be reinstated, she said that I would need to reapply. 

I pulled a copy of my Equifax report and it shows the amount past due as $28 with a balance of $91 (3 late fees + interest).  Date of first delinquency was 6/2010 and date closed 7/2010.  Current Status:  Pays 31-60 Days.   CL was $700.  The other two bureaus were showing a delinquency when I pulled them last month as well. 

LilMirth, I agree that automatic billpay is the way to avoid forgotten payments.  Would you believe that Kohl's does not offer it?  Every other credit card I have (which includes 2 Chase accts.) along with rent, phone and cable is set up with automatic billpay each month.  This is why it was so easy to forget about the Kohl's account while I was out of town dealing with my family emergency.  Also, I don't use the card that often so it's really not one I have to remember every month. 

I  want to thank you, LilMirth for your "friendly, supportive and respectful" response.  You certainly "walk the talk" and have encouraged me to do the same.  I will be sending Good Will Letters, but I am not sure if I should send to Kohl's, Chase or both.  The address listed on my CR is Kohl's HQ.  Who should the letters be addressed to?  Is it OK to use a title, such as Customer Relations Mgr., or should I endeavor to find out a person's name?  Do I ask them to reinstate my credit card as well as remove the negatives - or is that asking too much? 

Your thoughts and suggestions would be greatly appreciated!