Late charges are fees added to a customer’s account for unpaid charges, which can accrue interest and negatively impact credit records. Accounts cannot be closed until late fees are paid, and back charges can be initiated by both consumers and providers to correct errors or damages.
The financial industry uses the term “surcharges” in a number of different ways. It should also not be confused with a chargeback, in which funds are returned to the consumer’s credit card or bank account at the direction of the consumer’s financial institution.
In the first sense, late charges are charges that were made to a customer’s account, but not paid. The provider of services or goods may require full payment of current and past due charges to bring a customer’s account up to date. Late charges will appear on each bill until paid, and may accrue interest and fees if unpaid for too long. Having late charges pending on an account generally reflects poorly on a consumer’s credit record, even if he or she can show that the charges have not been paid for a good reason, such as an ongoing dispute over whether the charges they are correct or not.
As long as an account is unpaid, it generally cannot be closed. If a consumer attempts to close an account and there are late fees, the full amount must be paid in full before the company closes the account. In some cases, consumers can negotiate a reduced rate for the unpaid debt, with the understanding that their debt will be canceled and the account closed.
In other cases, a consumer’s account is current, but additional charges are made to correct deficiencies in the account. For example, a utility company might realize that it was charging the customer an incorrect rate for service and generate back charges that are designed to correct months during which the consumer was wrongly given a lower rate. Late charges can also be assessed when a customer pays a flat fee for something and the fee is not calculated correctly, such as when a shipping company realizes that the flat fee paid for a package was not enough to cover the transportation costs.
Consumers can also initiate back charges, billing providers if they need to take corrective action to fix something a provider damaged or failed to do correctly. For example, if a contractor damages someone’s hardwood floor, the consumer could repair the floor and bill the contractor for back charges if they can show that the damage was caused by the contractor and that the contractor failed to protect the floor by negligence. Companies can also issue surcharges to each other, such as when an architectural firm bills an engineering firm because engineering drawings related to a new project are incorrect and need to be corrected.
Smart Asset.
Protect your devices with Threat Protection by NordVPN
