Opinion ID: 1198613
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Heading: Application of Interest Laws to Late Charge

Text: Complainants characterize the late charge as usurious interest, relying upon K.S.A. 16-201. They argue that since they did not agree to the imposition of the 5% charge the highest rate of interest they can be assessed is 6% per annum; therefore, all charges in excess of the legal rate are usurious. This argument overlooks the clear language of the statute and the settled case law of this state, both of which limit the application of 16-201. Interest is defined as compensation allowed by law or by agreement of the parties for the use or forbearance of money. ( Shapiro v. Kansas Public Employees Retirement System, 216 Kan. 353, 357, 532 P.2d 1081; Brown v. Hiatts, 15 Wall. 177, 185, 21 L.Ed. 128.) The following cases have held that late payment charges are not interest: Ferguson v. Electric Power Board of Chattanooga, Tenn., 378 F. Supp. 787 (E.D. Tenn. 1974), aff'd mem., 511 F.2d 1403 (6th Cir.1975); Delich v. Iowa Electric Light & P. Co., 9 P.U.R. 4th 335 (1975); Re Utah Power & Light Co., 19 P.U.R. (N.S.) 369 (1937). Public utilities have now been specifically excluded from the restraints of consumer credit laws because of their regulated status. During the pendency of this suit Kansas adopted the uniform consumer credit code, known as the UCCC (K.S.A. 16a-1-101, et seq. ). The Kansas Comment to K.S.A. 16a-1-102 states that [o]ne of the primary purposes of the U3C is to place under a single statutory umbrella all aspects of consumer credit, thereby treating the subject as a functional unity. The Comment to 16a-1-108 states that the act displaces prior usury laws relating to consumer transactions. Thus, even if late payment charges are considered interest they are not subject to 16-201 because the sale of commodities is a consumer transaction. Credit charges by public utilities are specifically exempted from the UCCC (16a-1-202 [3]), however, because they are regulated by other means. (K.S.A. 66-101, et seq. ) Public utilities have also been freed from application of the Kansas Truth In Lending Act (K.S.A. 16-801, et seq., now repealed) and the Federal Truth In Lending Act (15 U.S.C., Sec. 1601, et seq. ) because of specific statutory exemptions, and complainants' argument that utilities must comply with these laws has no merit. (K.S.A. 16-804; 15 U.S.C., Sec. 1603; 12 C.F.R., Sec. 226.3 [d].) See also, Ferguson v. Electric Power Board of Chattanooga, Tenn., supra; State Ex Rel. Guste v. Council of City of New Orleans, 309 So.2d 290 (La. 1975). The appropriate basis for regulation of late charges by a public utility is neither the usury statute nor consumer credit laws; regulation of late charges rests solely with the agency of the state vested with the authority to supervise operation of the utility, subject to judicial review of the reasonableness of the rate. ( State Ex Rel. Guste v. Council of City of New Orleans, supra.)