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HomeMy WebLinkAboutAgenda Report - July 16, 2003 I-04111 jqjii�11�1�111 AGENDA TITLE: Adopt Resolution Increasing Fee for Returned Check Charges from $%00 to $2500 for Each First Returned Check and Increasing Late Fees for 30 -Day Past Due Utility Bills from $5.00 to MEETING DATE PREPARED BY July 16, 2003 Finance Director RECOMMENDED ACTION: Adopt resolution increasing fee for returned check charges from $10.00 to $25.00 for each first returried check and increasirid late fees for 30-d ay past d ue utility bills from$10 .00. BACKGROUND INFORMATION: In 1997, the City Council adopted resolutions numbers 135 and 184 setting fees for returned checks and 30 -day past due utility bills as noted-. g_urrent ftpo_sed First return ed check (within 12 month period) $10.00 $25.00 Second returned check $25.00 (no change) Current utility bill Utility Rate only (no change) 30 day Past Due Utility Rate plus $5.00 late charge $10.00 60 day Past Due Utility Rate plus $15.00 late charge (no change) 90 day Past Due Utility Rate plus $25,00 late charge (no change) The primary goal of the proposed increase in fees for the first returned check and the 30 -day past due utility bill is to encourage customers to address payment problems before the dollar amount of the utility bill is so large that shut�off is unavoidable and payment of delinquent amounts impossible. In addition, this action will reduce account inquiries, partial payments, multiple collections efforts by Finance staff and increase efficiency. Examination of the current two-tiered fee system for returned checks revealed that of the 694 checks returned by the bank through April 2003, 549 were a first returned check and were all charged a $10-00 service fee. The $10.00 fee does not recover costs. (ExhibitA) AB 2643, signed into law effective Januaryprovided the local retail community with the support to charge $25,00 on each first returned check and $35.00 for each subsequent returned check. At this time, Finance is not asking for an increase to each subsequent returned check. continued COUNCIL COMMUNICATION The remaining 10,002 accounts on Exhibit C have multiple occurrences of a $5.00 late charge fee and then progress to the $16.00 late charge, 60 -days past due, signifying potential payment problems. The City and staff want to encourage customers to pay utility bills on a timely basis in full and to discourage delinquent utility bills and payments on account. Currently an average monthly utility bill with all four services is approximately $150.00. 3 MUM Funding: None Prepared by: M. Mune Cadwallader, ftenue Manager VickyM�cAth e �Rnance director­� Ala 2043 Assembly Bill - CHAPTERED 51T NUMBER; AS 2643 CHAPTERED BILL TEXT CHAPTER 1000 FILED WITH SECRETARY OF STATE SEPTEMBER 23, 1996 APPROVED BY GOVERNOR SEPTEMBER 2i, 1996 PASSED '.7.HE ASSEMBLY AUGUST 30, 1996 PASSED THE SENATE zwCCUST 21, 1996 AMENDED 1N SENATE AUGUST 20, 1996 L:I"ENDED IN SENATE AUGUST 5, 1996 AMENDED Vii:N SENATE ju E, 11, 1996 AMENDED 1N ASSEMBLY APRI[, 0, 1996 >:Ni'RODUCED BY Assembly Members Bordonaro and. Kaloogian FEBRUARY 21, 1996 An act to amend Section 1719 of the Civil Code, relating to commercial paper. LEGISLATIVE COUNSEL'S DIGEST AD 2643, 3ordonaro. Commercial paper; insufficient funds. Existing law creates a cause of action for the amount of ra cheek passed on insufficient funds minus any partial payment made within 30 days of a specified written demand for payment, damages equal to treble that amount:, as specified, plus the costs of mailing the written en d ma~ d for payment only if the person who passed the check failed to pay either the amount of the check or the anount of the bad check .fee charged to the payee by his or 'ler financial institution witl.i.n a pr.esc, ibed period, except as specified. This hi__E would revise and recast these provisions to create a cause of action for the amount of the check and a Specified service charge, payable .to the payee. The bill would provide; that the person shall have 30 days from the date a prescribed written demand was mailed to pay the amount of the check, the service charge, and the cost to mail_ the demand. if the person fails to pay this amount in till, this person shall instead be liable for specified amounts, including treble damages. The bill would make conforming changes. The bili would, among other things, provide that for purposes of the above provisions, the term "payee" includes an assignee or holder of the check. THE PEOPLE OF THE STATE OF CALTFORNTA DO ENACT AS FOLLOWS: SEC`l'TON 1. Section 1719 of Lige Civil Code is amended to read; 131.9. ,a) ,l) Notwithstanding any penal sanctions that may apply, any person who passes a check on insufficient funds shall be VabJ e to the payee for the amount of the check and a service charge payable to the payee too an amount not to exceed twenty-five dollars ($2S) for the .first check passed on insufficient funds and an amount not to exceed thirty-five dollars ($35) for each subsequent check to that payee passed on _ asufticieot funds. 121 Notwithstanding any penal sanctions that may apply, any person who passes a check on znsufficl_ent funds shall be liable to the payee for damages equal to treble the amount of the shed of a Page I sof 4 lAtp:ll'anib.sen.ca.gov,puli/45-96/billlsnVab 2601-2650/ab_2643_biII-960929_chaptered.h... 5/27/2003 IT 2643 AssernkAy Lill m C"EIAPTI RED written demand for payment is mailed by certified mail to the person who had ,passed a check on insufficient funds and the written demand informs this person of (A) the provisions of this section, (I3) the amount of the check, and (C) the amount of the service charge payable to the payee. The person who had parsed a check on insufficient fends shall neve 30 days from the date the written demand was mailed to pay the amount of the check, the amount of the service charge payable to the payee, and the costs to mail the written demand for payme t. ;f thO person fails to pay in full the amount of the check, the sere ce charge payable to the payee, and the costs to mail the written demand within this period, this person shall then be liable instead for the amount of the check, minus any partial payments made toward the amount of the check or the service charge within 30 days of the written demand, and damages equal to treble that amo ar, which shall_ not be less than one hundred dollars ($100) nor more than one tnousand five hundred dollars ($1,500). When a person becomes liable for treble damages :€for. a check that is the sub ect or a writ_eu demand, that person shall no longer be liable :for any service charge for that check and any costs to mail the written demand. (3) Notwithstanding paragraphs (1.) and (2) , a person shall not be liable for the service charge, casts to :rail the written demand, or treble damages if he or she stops payment in order to resolve a good fait's dispute with tree payee. The payee is entitled to the service charge, costs to mail the written demand, or treble damages only upon proving by c=lear and convincing evidence that there was no good faith dispute, as defined in subdivision (b) , (4) Notwithstanding paragraph. (1) , a person shall, not be liable under that: paragraph for the service c=harge if, at any time, he or she presents the payee with written confirmation by is or her financial institution that the check was returned to the payee by the financial .institution due to an error on the part of the financial institution. (5) Notwithstanding paragraph (1), a person small not be liable under that paragraph for the service charge if the person presents the payee with written confirmation that his or her account had insufficient funds as a result of a delay in the .regularly scheduled. transfer of, or the posting of, a direct deposit of a social_ security or government, benefit assistance paymeI;t. (6) As used in this subdivision, to "pass a check, on insufficient fund -s" means to make, butes', draw, or delver any check, draft, or order for the payment of money upon any bank, depository, person, firm. or corporation that refuses to honor the check, draft., or order for any of the following reasons: (A) Lack of funds or credit in the account to pay the check. (2) The person who wrote the check does not have an account with the drawee.'.. (C) The person who wrote the check instructed the drawee to stop payment on the check. (c:) For purposes of this section, in the case of a stop payment, the existence of a "good faith dispute" shall be determined by the trier of fact. A "good faith dispute" is one in which the court finds that the drawer had a reasonable belief of his or her legal entitlement to withhold payment. Grounds for the entitlement include, but are not limited to, the following: services were not rendered, goods were noL delivered, goods or purchased are faulty, not as promised, or otherwise unsatisfactory, or there was an overcharge. (c) In `:ale case of a stop payment, the notice to the drawer required by this section shall be in substantially the following Page 2 of 4 littp:l/info.sen,ealo pWV9&96$ill/asmlab_260I-26501ab 2643_bil1 960929_chaptered.h .. 5!27/2003 AIS 2643 assembly Bill - CH P1 ERED farm Co. (name of drawer) (name of payee) or $ NO`I'TCF,, is the payee of a check you wrote The: check was not paid because (amount) you stopped payment, and the payee demands payment. You may have a good faith dispute as to whether you owe the full amount. if you do not have a good faith dispute with the payee and fail to pay the payee the full amount of the check in cash, a ,service aharge of an amount not to exceed twenty-five dollars ($25) for the t .:rst check passed on insufficient funds and an amount not to exceed thirty -.lave dollars ($35) for each subsequent check passed on .i.nsuificient. Fends, and t.he costs to mail this notice within 30 days after this notice was mailed, you could be sued and held responsible to pay at least both of the following; (1) The amount of the check. (2) Damages of at least one hundred dollars ($100) or, if higher, three times the amount of the check up to one thousand five, handred dollars ($1,500). if the court determines that you do have a good faith dispute with the payee, you will not have to pay the service charge, treble damages, or mailing cost,, if yoga stopped payment because you have a good faith dispute with the payee, you should try to work out your dispute with the payee. You can contact the payee at (name of payee) (street. address) (telephone number) You may Nish to contact a Lawyer to discuss your legal rights and responsibilities, (name of sender of notice) [d) in the case of a stop payment, a court may not: award damages or costs under this section unless the court receives into evidence a copy of whe written demand which, in that case, shall have been sent to rhe drawer and a signed certified mail receipt showing delivery, or attempted delivery if refused, of the written demand to the drawer` s last known address. (e) A cause of:: action under this section may be brought in small claims __=t by the original payee, ii it does not exceed the jurisdi_cLr_on of that court, or in any other appropriate court. The payee shall, in order to recover damages because the drawer instructed the drawee to stop payment, ,show to the satisfaction of the trier of Fact that there was a reasonable effort on the part of the payee to reconcile and resolve the dispute prior to pursuing the dispute through Lhe courts. ,f.) A cause of action under this section may be brought in municipal court by a holder of the check or, an assignee of the payee. Page 3 of 4 hap: /linfo,sen..cB.goOpuW95-96/ bi Ii/asmflab_?601065Wab_2643_bill_960929._eliaptered.h... 5/27/2003 AB 2643 Assembly Bill -- C=`HAI'` FRED however, if Eche assignee is acting on behalf of the payee, for a flat 7','ee or a percentage fee, the assignee may not charge the payee a greater flat fee= or percentage fee for that portion of the amount collected that represents treble damages than is charged the payee for collecting the face amount of the check_, draft, or order. This subiivision .shall not apply to an action brought in small claims court, (q) Notwithstanding subdivision (a), if the payee is a municipal cour�: , the written demand for payment described in subdivision {a) may be made& to the drawer by a municipal court clerk. Notwithstanding subdivision (d), in the ease of a stop payment where the demand is mailed by a municipal court clerk, a court may not award damages or costs pursuant to subdivision jd), unless the court receives into evidence a copy of the written demand, and a certificate of mailing by a municipal court clerk in the form provided For in ,subdivision (4) of Section 1013a of the Code of Civil Procedure for service in civil actions, .dor purposes of this subdivision, in courts where a single court clerk serves more than one c:ourn, the clerk shall be deemed the court clerk of each court. (h) The requirements of this section in regard to remedies are mandatory upon a court. fi) The assignee of the payee or a holder of the check may demand, recover, or en arce the service charge, damages, and costs specified in this section to the same ext=ent, as the original. payee, (j) (1) A drawer is liable for damages and costs only if all of the requirements of this section Have been satisfied.. (2) The drawer shall in no .anent be liable more than once u.rsder. this section on each )_heck for a service: charge, damages, or costs. (k) Nothing in this section .i5 intended to condition, curtail, or otherwise prejudicethe rights, claims, remedies, and defenses udder Division 3 „commencing wivh Section 3101)) of the Commercial Lode of a drawer, payee, assignee, or holder, including a holder in due course as defined in Section 3302 of the Commercial Code, in connection with the enforcement of this section, Page 4 of 4 http./;`i .Co.seia.cmgoWpub/95061HI/8s���/ab_26010650lab_2643_bzkl_ 960929_chaptered.h 5/27/2003 iI MINIPUMP 119111 1 FIRM 11111 1 1� I III I I III IMMM: gill III III � I 1 111 11111 1 1 It paid, Physical Turn on ( requires 2 person) Sub Total (Field) Each Check EXHIBIT A 5 minutes $1.40 WEBB= 5 minutes $1 AO 5 minutes $1,40 3 minutes $0.84 $6.00 $14.68 25 minutes $17,50 25 minutes $875 $31-50 $4618 CITY OF LODI - FINANCE, REVENUE SECTION PROCESSING COSTS FOR RETURNED CHECKS k?LH �131T A��2 Continual Shut Off Situation Data entry and update list to include Issuer name, address, account #,$ amt, Meter info/com. 5minutes $1.75 Physical site visit to determine if service is still sealed or customer moved. 20 minutes $7.00 Continual maintenance of shut off list to determine credit and require deposit in future. 5 minutes $1.75 Additional Fees $10.50 Grand Total $56.68 CITY OF LODI -- FINANCE REVENUE SECTION I LATE CHARGE c . , MAY 2002 TO APRIL 2003 $5.00 47181 $15M 13771 9.00 IiLo—()W5.00 Number of Number of Tot 1 Number r of Number of Total Number of Number of Total Accounts Occurances Numbers Accounts Occurances Numbers rs ants Occurances Numbers 41491 4149 2384 1 2384 17 1 67 2294 2 4588 1250 2 2500 24 2 48 17261 3 5176 872 3 2636 7 3 21 16103 4 6412 745 4 2980 9 4 36 16W 5 8180 493 5 2465 4 5 20 1456 6 8736 139 6 834 2 6 12 7.25 7 5075 2 7 14 310 8 2480 1 8 6 959 9 1431 1 9 .9 71 10 710 1 90 io 22 11 2.42 2 11 22 14151 47181 5883 13779 144 287 $5.00 47181 $15M 13771 ASSESS PCTJ AT WHAT POINT 00 YOU ACCESS MINIMUM ORGAWATION LATE FEE FLAT FEE LATE FEE IN COLLECTION CYCLE FEE SHN43 City of Vacaville Yes 10% 30 days after bill date $10 First late fee is $10 or 1 (''/o,whicheve.r is greater City of Sunnyvale Yes 5% 31 days from bill date None City of Santa Clara Yes 1.50% 25 days after the bill due date $5 1.5% of delinq. arra or whichever is greater Modesto Irrigation District Yes 1.5% 28 days after a bill is rendered $5 1.5% of delinq. amt or whichever is greater City of Palo Alto Yes I% On the 5th day after due date Delinquent fees only for :.gal. of $15 and more City of Napa Yes $10 45 days>end of billing period $10 City of Lodi Yes $5/$15 $5 at 27 days delinquent; $15 $5/$15 assigned 30 days later Turlock Irrigation District Yes S3+1 1/2"/,15 days past bill due -date $3+1 1/2% Truckee -Donner Public Utility Yes $5/1.5% When the nx bill is generated $5 District with a past due of at least $25 City of Roseville Yes $10 21 days after bill is mailed $10 City of Pleasanton Yes 10% 30 days None City of Redding Yes $12 23 days from mailing $12 City of Brentwood Yes 5% Late fee assessed on the first day after the due date None INFORMAMN COMNLED APRIL 7. tow RESOLUTION NO. 2003-137 A RESOLUTION OF THE LODI CITY COUNCIL INCREASING FEE FOR RETURNED CHECK CHARGES FROM $10.00 TO $25.00 FOR EACH FIRST RETURNED CHECK AND INCREASING LATE FEES FOR 30 -DAY PAST DUE UTILITY BILLS FROM $5.00 TO $10.00 WHEREAS, Section 1719 of the Civil Code provides that damages equal to treble the amount of an insufficient funds check could be enforced under specific circumstances; and WHEREAS, returned checks made payable to the City of Lodi have increased in the last six-year period; and WHEREAS, an analysis of cost incurred by staff in an attempt to collect exceed $25.00 for each check, and the total cost is currently $56.68 excluding any cost by the accounting department to reverse entries and balance the bank reconciliation; and WHEREAS, on September 27, 1996, Governor Wilson signed into law AB 2643, effective January 1, 1997, which provides that a check -writer of the dishonored check shall be liable to the "payee" (person named on the check) for a service charge in an amount not to exceed $25.00 for the first check dishonored; and WHEREAS, it is the policy of the City Council that the enterprise activities (electric, water, wastewater, and solid waste) of the City be efficiently managed and based on sound economic principles by following prudent business practices; and WHEREAS, it is the policy of the City Council to encourage customers to pay utility bills on a timely basis in full and to discourage delinquent utility bills; and WHEREAS, it is the policy of the City Council that City staff will be sensitive to customer hardships or other unusual and one-time circumstances that preclude timely payment of utility bills. NOW, THEREFORE, BE IT RESOLVED that the Lodi City Council hereby increases the fee for a first check and all subsequent checks returned for non -sufficient funds, account closed, and referred to maker from $10.00 to $25.00 and increases late fees for 30 -day past due utility bills from $5.00 to $10.00. BE IT FURTHER RESOLVED by the Lodi City Council that this Resolution shall become effective immediately. Dated: July 16, 2003 I hereby certify that Resolution No. 2003-137 was passed and adopted by the City Council of the City of Lodi in a regular meeting held July 16, 2003, by the following vote: AYES: COUNCIL MEMBERS — Beckman, Hansen, Howard, and Land NOES: COUNCIL MEMBERS — None ABSENT: COUNCIL MEMBERS — Mayor Hitchcock ABSTAIN: COUNCIL MEMBERS — None Susan Blackston City Clerk 2003-137