Pac Bell Reveals $3.5 Million in Improper Late-Payment Fees

Pacific Bell said Thursday that it charged its customers as much as $3.5 million in improper late fees last year because of delays in processing telephone bill payments.

The state’s largest phone company told the California Public Utilities Commission that it had taken steps to correct the problem and planned to notify the 5 million customers who paid late fees last year that they may be eligible for refunds.

The response did not satisfy a lawyer for a consumer group that has asked the PUC to fine Pacific Bell $50 million for the overcharges.

“The amount of money strikes us as completely inconsistent with Pacific Bell’s claim that this was an inadvertent mistake,” said Tom Long, lawyer for Toward Utility Rate Normalization, or TURN. “We don’t see how they could have collected that much extra money and not known that there was something wrong with their payment processing.”

He said TURN believes that the overcharges have occurred for at least two years and probably were not limited to customers who mailed their payments in regular envelopes rather than those provided by the company. Pacific Bell said the problem involved primarily the processing of bills in regular envelopes, about 13% of the payments received each day.

In a letter to the PUC, Pacific Bell said that because of staffing shortages, some bill payments in non-company envelopes were received on time but were not processed until after the date for late fees. Those fees are 1.5% of the total on bills above $20.

The company said it did not know which accounts were charged improper late fees because its records show only the date a payment was processed and not when it was received.

Assuming a delay of three days between receiving and processing a payment, the “longest average processing delay that could have occurred,” residential customers in 1990 were charged between $285,000 and $500,000 in improper fees, averaging $1.24 each, and business customers were charged between $1 million and $3 million, averaging $4.06, the company said.

The total overcharges therefore could have been as high as $3.5 million, out of $55.8 million in total late fees billed, the company said.

Pacific Bell said it has assigned up to 42 additional employees to its two payment offices, in Van Nuys and San Francisco. As of Feb. 5, all payments in non-company envelopes were being processed on the same day they were received, except for some payments needing special processing for reasons such as the lack of a bill stub, the company said.