Table of Contents: Chapter 8

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805 DEBT COLLECTION POLICY 3-1-09

805.1 Applicability

This policy applies to the collection of all bad debts, with the exception of ambulance (EMS) billing. The intent of this policy is to establish the guidelines and procedures for the collection of bad debt.

805.2 Objectives

805.2.1 Define bad debt and the applicability of this policy.

805.2.2 Outline guidelines for the procedure to collect bad debt.

805.2.3 Establish the responsibilities for administration of the collection of bad debts.

805.3 Rationale for Establishment

The City has various methods of collecting debt. This policy will standardize the procedure to collect debt, with noted exceptions, and assign responsibilities to departments. It is the intent of the City of Lee's Summit to take a compassionate approach to its collection process and harassing or aggressive tactics will not be tolerated. Any collection agency commissioned to work on behalf of the City will be notified as such.

805.4 Definition of Bad Debt

A debt owed to the City shall be declared a "bad debt" when efforts to collect delinquent debt per departmental policy have been unsuccessful or the customer is no longer a customer of the City and efforts to collect final payment have been unsuccessful as applicable.

805.5 Administration

805.5.1 Departments may implement internal procedures for the collection of debts to augment this policy. Once all efforts have been exhausted, the department shall refer the debt to Treasury as the centralized agency for collection of the debt.

805.5.2 Municipal Billings Procedure for Collection of Debt

805.5.2.1 Monthly Bills. Monthly billings will be sent to the customer for municipal billings. For municipal billing, the due date shall be thirty (30) days from the invoice date; and for water service, the due date shall be twenty-one (21) days from the invoice date unless otherwise state in adopted City ordinance. Any amount due shall be carried forward to the next monthly billing concurrently with the following collection procedures.

805.5.2.2 Final Bills. The customer will receive a final billing within 7 days of the account being closed. Final bills shall be due within 5 days. Any final bill in the amount of five dollars ($5.00) or less shall be written off of the applicable books with the approval of Finance and no collection procedure shall ensue.

805.5.2.3 Return Mail. In the event a final bill is returned by the Post Office, the account shall be considered delinquent and sent to Collections immediately.

805.5.2.4 Late Payments. All late payment charges shall be charged at a rate of 5% per month delinquent unless otherwise outlined in activity or program specific fees and charges.

805.5.2.5 Delinquent Accounts List. Once the account is past due, the customer shall be added to a delinquent accounts list. The billing department shall make all reasonable efforts to maintain a list of delinquent accounts in order to track the ineligibility of the customer for additional billable services or purchases until such time as the delinquent account is cleared. The list of delinquent accounts shall be shared among billing departments for cross-reference. Once the debt is cleared, the customer shall be removed from the delinquent accounts list.

805.5.3 Water Bills. For active water accounts, amount due shall be handled through normal shut-off practices.

805.5.4 Past Due Procedure.

805.5.4.1 Upon being 31 days past due, the billing department shall issue a first notice to the customer. The notice shall state:

"We have not received payment on your billing for . This may be an oversight, so please send payment at once to clear your name from our delinquent list. A past due penalty of 5% will be added monthly.

805.5.4.2 If payment is not received after 60 days, the billing department shall issue a final notice to the customer. The notice shall state:

"We have not received payment on your final billing for . Please send your payment at once to clear your name from our delinquent list. A past due penalty of 5% is being added monthly to your account. If payment is not received within 30 days of the above date, this account may be turned over to our collection agency."

805.5.4.3 If payment is not received after 90 days, the billing department shall refer the delinquent account to Treasury. Treasury shall verify the amount owed and, except for ambulance (EMS) billing, request that the Law Department issue a letter indicating that unless payment is received within seven (7) days, suit for collection may be instigated, or their account may be turned over to a collection agency.

805.5.4.4 After the seven-day period has expired, Treasury shall either refer such non-EMS debt to the Law department with the approval of the City Manager and with instructions to file suit for collection, or refer the debt to the collection agency with the approval of the Finance Director. The information shall include the following available information:

• Billing information;
• Transaction history;
• Supporting documentation to coincide with unpaid bills (such as meter reads);
• Return address information;
• Employment information.

805.5.4.5 Once the debt has been reduced to judgment by suit and determined to be uncollectible or is sent to a collection agency, the collection efforts by City staff will cease and the debt will be written off of the appropriate books with approval by Finance.

805.6 Write Off Policy

If the total amount due is less than $20, the City shall cease all collection efforts and write the debt off of the books.

805.7 Bankruptcy

Customers that have provided the City with documentation that a bankruptcy has been filed affecting the debt will not be referred to a collection agency, the debt will be written off, and the appropriate legal process will be followed on a case by case basis.

805.8 Bad Check Policy

Any account that is paid with a check that is subsequently returned by the bank (bad check) shall be treated as a non-payment. Within the above timelines, once the account is deemed delinquent, all procedures shall apply.

For all returned checks, a $20.00 returned check charge shall be applied to the account in addition to the 5% monthly late penalty. Accounts will be marked for those with previous bad check history, and checks will no longer be received as an acceptable payment method.

805.9 Municipal Court Fines

805.9.1.1 If the judge gives a defendant time to pay a fine, a letter will be sent by Municipal Court the day after the due date if the fine has not been paid. The defendant is provided ten (10) days to pay and if no response, a Contempt of Court charge is generated, and if found in contempt of court, then a warrant for their arrest is issued. The fine can be paid without an appearance in court.

805.9.1.2 If the defendant leaves court without paying the fine (no time extension granted), and if found in Contempt of Court, then a warrant for their arrest is issued. The fine cannot be paid without an appearance in court.

805.9.1.3 In the event a fine is paid and the check is returned unpaid, the bad check charges outlined in Section B shall apply. A letter is sent giving the defendant ten (10) days to pay and if not response, and if found in Contempt of Court, then a warrant for their arrest is issued.

805.9.1.4 For warrants and contempt charges that have been purged and dismissed by the Court, the outstanding accounts receivable shall be sent immediately to Collections pursuant to the procedure outlined in Section D.

805.10 Collection Agency Procedure

805.10.1.1 Upon receiving the bad debt, the collection agency shall follow established procedures as agreed upon by the City in the approved service agreement. Such efforts shall consist of not less than 3 mail efforts and a reasonable number of telephone calls.

805.10.1.2 The collection agency shall not, under any circumstances, use any threats, intimidation, or harassment of the debtor in the collection of said accounts; nor shall the collection agency violate any guidelines established by the Federal Trade Commission or Federal Communications Commission; nor shall the collection agency violate any local, state, or federal laws.

805.10.1.3 No employee of the collection agency shall represent themselves as an employee of the City, or any representative of a court of law enforcement agency.

805.10.1.4 The City shall retain the right at any time in the process to prosecute and authorize suits or litigation on all accounts. The City shall also retain the right at any time in the process to cease all collection efforts.

805.11 Policy Amendment

The City Manager will have the authority to approve amendments to this administrative policy provided notice of such changes is provided to the Council thirty (30) days prior to the effective date of said change.