Best of the ISP-Lists

Late Fees

In a perfect world, every customer would pay on time, or even in advance. In the real world, that's not the case, and ISPs have to discipline their own customers.

[June 21, 2005]

On the ISP-Marketing list in March, WC asked a question many had thought long and hard about:

We have a good group of clients who pay us on time for the most part. We usually are pretty good about giving leeway when someone is off schedule. Of course we give a bit more leeway if the client is a good long term person with a higher monthly bill. We typically will charge a 15 dollar late fee for accounts that are 15 days late. And simply leave it at that rate if they continue. After they get one late fee they usually are okay from then on.

We have one delinquent who is testing our resolve though. He is now 3 months late and is disputing late fees. He claims poor service from time to time for this reason that reason this problem that problem. Some of it is valid and the rest of it is his "inner 2 year old" making noise to show himself as the victim. The question is, I want to implement some draconian late fees as a general policy for chronic late payers like this.

The question is how draconian can I get in accordance with the law. The client is in another state so federal law would apply here I believe. Can anyone direct me to a legal reference that points out what is legal. Keep in mind that there is no signed contract in place with this guy. So I have fall back on the written law.

[AK recommended] "The best way to get their attention is to simply disable their service, until they pay. We try to get the recurring late payers to either pay with a credit card or offer them a substantial discount if they prepay 6 to 12 months in advance. The only legal advice you should take is from your attorney."

[RY added] "We whack 'em the first day after the payment is due. It takes a while for some to get the message. It is an automated systems that does this so we can blame the system. We cannot afford to chase every late paying wannabe. If poor service is an issue, they need to complain and an adjustment made at that time. Not at some point a month later. If you want to persist with your current way of doing business, make sure that your TOS has a late fee provision in it."

[GD agreed] "I concur with what's been suggested. My premise for this is that ISPs should have processes that are validated and repeatable to routinize, monitor, and control their services into a series of reliable functions for producing consistently solid results.

Your customers should be profitable. I'm sure you know that over time, the revenue stream you get from them should exceed your costs (of attracting, selling, servicing, and keeping that customer). Chasing around chronic late-payers with fees negates this—they're not paying in the first place! Customers that generate losses should be whacked. A whack 'em process will get their attention fast (whack 'em is pain) and cut your losses."

WC liked the advice.

"Well I agree with 99 percent of what has been said. However I do not agree with whacking them on day one. Check payers sending via US Mail may take an extra day or so to arrive. So we give them some leeway. And we have about a 100 percent collection rate on the 15 day / 15 dollar late fee. Why, because it is reasonable and by the 15th day they have nothing to complain about.

In this case, the client is pure profit and is certainly able to pay. My thought is to leave him up and simply send the debt to a collection agency to let them be the bad guy. Heck we will be the good guy as we did not turn him off so he will have no reason to whine anymore."

[AK replied] "We send statements to those who pay by check 5 days before the end of the month and give them 40 days after the first before they are shutdown. Thus they get two bills. CC customers get their bills on the first and have 20 days. Of course CC customers get early warning when their CC is due to expire."

[GD noted] "No whacking on day one. That would be too harsh. Establish a reasonable time that's tolerable to your cash flow and customers possibly forgetting. We see some users whose ISPs' business rules give the customer a five day or so a grace period for "check in the mail" events. The rest of it is logical If / Then stuff."

[EL suggested] "If you're invoicing one month in advance—and you should be especially if you're a virtual ISP—the customer and you have a built in 30 days and then its whack 'em. I would not do like our local cable company—even if they had decent service or marginal programming this one item would still be unforgivable—they bill 30 days in advance, if you are one day late on the 30 days in advance payment they charge $5.00 but they don't even send out another invoice or call or e-mail or anything, they just charge $5.00 because you're late on paying in advance!"

—End