Amex Changes The Way That It Assesses Card Late Fees
<B>Amex Changes The Way That It Assesses Card Late Fees</B>
By Annalise Bomenblit
<I>New York - </I>American Express has changed the way it charges late fees to holders of its Corporate Card to encourage more timely payments and to become more in line with its competitors.
The company now is charging cardholders 60-day delinquency fees not only on the original delinquent balance, but also on charges made in the 30 days following that balance's due date. In other words, fees assessed Nov. 30 for a Sept. 30 past-due date now are calculated on the accumulated balance shown Oct. 30, rather than as of Sept. 30, as was the previous policy. American Express said the decision does not represent a change in fees, but rather a change in the method of assessment. The fee continues to be 2.75 percent or $15, whichever is greater, on cumulative balances.
Christine Levite, American Express vice president of communications, said the new approach is a standard industry practice that the company has decided to adopt. "We are making this change to encourage more timely payments, remain competitive in the market and reinforce contractual commitments," said Levite. The change will not apply to corporate accounts with contractual provisions to the rate and assessment of these fees.
Cindy Perper, global commodity travel manager with New Jersey-based Invensys Inc. and president of the National Business Travel Association, agreed that this puts American Express in parity with its competitors. "One of Amex's distinguishing differences has been in the amount they charged their corporate customers for delinquency. As most companies do not reimburse employees for the penalty, it will hopefully spur employees to attend to their expenses," she said.
"It's a very small number of card members who are impacted by this change, and overall it's a declining group, because there exists now better travel management," Levite said.
Others disagreed. "I've seen delinquency on the rise," said Tony McEwen, executive vice president of products and marketing services for Visa USA. This fact, in turn, hurts companies looking to take advantage of rebates or opportunities for enhanced reporting, he said.
Other payment system companies responded to the move by saying that, while delinquency fees remain negotiable, most companies are pushing for increased efficiency in reporting and payment. GE Capital assesses a late penalty of 2.5 percent with a $10 minimum charge on transactions that are 60 days and older, said Robert Clarkson, vice president of business development.
Mike Edgar, vice president of marketing for First USA Paymentech, said that while fees are negotiable, the company's general structure is a charge of $10 at 30 days, 2.5 percent at 60 days and an added 2.5 percent every 30 days thereafter. U.S. Bank also charges a $10 fee at 30 days, then 2.5 percent at 60 and 90 days, although fees also are negotiable.
Walter Sanders, vice president of industry relations with Diners Club, said Diners allows customers two full billing periods before assessing late fees, allowing for the fact that many card members are on the road. Diners assesses a 2.5 percent charge after 60 days, plus a $20 late fee.
Amy Frantti, spokeswoman for U.S. Bank, said fees provide just enough incentive for cardholders to make good on their balances. The company has found a clear correlation between fees and lower delinquency rates, she said.
"We've really tried to focus on enticements for paying early rather than charging for paying late, and offering the convenience of side products like electronic payment. It's more about getting rid of impediments to paying on time," said First USA's Edgar.
"There is no reason for delinquencies in an age of automated expense reporting," said David K. Hillman, president of New York-based D. Hillman & Associates. "That's an issue the corporations should be dealing with. Meanwhile, such changes will motivate corporations to improve their expense reporting systems.