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Archive for Wednesday, February 2, 2011

City of Lawrence makes change to utility bills after concerns are raised about calling late fees ‘adjustments’

February 2, 2011

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City officials are making a change to Lawrence utility bills after concerns have been raised that the city is not doing enough to call attention to late fees it charges its customers.

An article in the Sunday Journal-World detailed how one customer had unknowingly paid three-years worth of late fees because the city lists the charges on the bill as an “adjustment,” rather than a late fee.

That practice soon will change. The city director who oversees the utility billing division said bills going out next week will have the term “late fee” on them rather than the less specific “adjustment” category.

Originally, the city had thought making such a change would not be feasible, given that the city does not own the billing software system that it uses. But Ed Mullins, the city’s finance director, said the city investigated the matter further after concerns were raised.

“We were able to make the change in house,” Mullins said.

Some city commissioners said they thought the terminology needed to be changed.

“Frankly it could be clearer,” City Commissioner Mike Dever said. “If it is a cost that people are paying, I think it is only fair that we know what we’re paying for.”

The Journal-World article also found that the percentage of city bills that have a late fee is significantly higher than several other area utilities. The city estimated about 30 percent of all bills have a late fee. That was much higher than the 10 percent found in Manhattan, the 17 percent with the Board of Public Utilities in Kansas City, Kan., and the 7 percent with Rural Water District No. 4 in Douglas County.

City Commissioner Aron Cromwell said he wanted to find out why that percentage had reached such a level.

“That is definitely worth taking a look at,” said Cromwell, who also said he wanted to change the adjustment terminology. “That is a large number. I could understand 10 to 20 percent. Twenty percent would be too high, but 30 percent is definitely too high.”

Mullins said his department was preparing a report on that issue to deliver to City Manager David Corliss.

Mullins also provided information to other questions that have arisen about the city’s billing practices.

• He said the city is developing a request for proposals for a new company to process credit card payments and other electronic payments made to the city. Mullins said he hopes that as part of that process the city can begin offering a no-fee method for the city to make electronic payments.

Currently, the city offers a no-fee auto-bill pay service, but that requires the customer giving the city access to their bank account so a withdrawal can be made on a certain day of each month. For people wanting to make an electronic payment directly to the city, they must do so via credit card. The city charges a $3.95 convenience fee to cover fees the city is charged by the credit card companies.

Some utilities, like Westar Energy, have a system that allows people to pay their bills via an electronic payment online without a fee. Mullins said the city hopes to have a similar system.

• Customers are making electronic payments to the city using online bill paying services offered by many banks. But Mullins said customers need to understand that those electronic transfers are processed by a third-party consolidation company before the payment is received by the city. Mullins said that processing could result in a payment that is initiated on one day not being received by the city for two to three days later. Generally, electronic transfers initiated before 2 p.m. are considered received by the processing company on that day, and then delivered to the city’s bank account the next business day. Transfers initiated after 2 p.m. generally are not considered received until the next business day, and then are delivered to the city’s account the following day.

Comments

JackRipper 3 years, 10 months ago

It would be nice if the city would send the bill out in time to pay at the end of the month like all the other utility bills instead of a few days after the first and want payment in two weeks before the next bill paying time. Since they have farmed out the billings I believe to an outside source (imagine that, all the talk about jobs for Lawrence and we do that) you'd think they could bill in the same billing periods as the other utilities.

Instead of talking about getting rid of the sanitation workers to a corporate enterprise why don't we get rid of the buffoons who farm out the jobs out of town?

shadowlady 3 years, 10 months ago

Well, they are messed up, while you need yours before the end of the month, I need my at the beginning, cause I'm always having to pay late fees, cause I get paid at the beginning.

gudpoynt 3 years, 10 months ago

i <3 words. I like learning new ones, and being corrected if I'm using them incorrectly or misspelling them. I'm doing unto another as I would have another do unto me. I'm saving Healthcare_Moocher from embarrassment if he ever tries to use "skittish" or "tweak" in a letter to the editor, job application, or other formal writing where correct use of the English language is expected.

hail2oldku 3 years, 10 months ago

I was just helping you out in helping mooch. Though I do see the confusion since the spelling I was correcting could be seen as asking you why you were correcting mooch. My apologies.

jafs 3 years, 10 months ago

They may easily just raise the rates, don't you think?

Jay_Bird 3 years, 10 months ago

Class Action Lawsuit!!! This is criminal behavior.

56_Kruiser 3 years, 10 months ago

The reason they have such a high percentage of late fees, as pointed out in comments on the other article, is because they process online payments the day after they are received, and do NOT take into consideration that they were received the day before. If you instruct your online payer to pay exactly when due, then the City's process of handling the next day results in a late fee being charged.

This is why so many people, at least it is the case for me, did not look into the 'adjustment', because paying online electronically to all other bills, including Westar mentioned in this article, do give credit for based on the date it is received. So, the adjustment is assumed to be some sort of normal function/add on. Once looked into, then it is discovered to be late fees.

So again, in the case of the City of Lawrence, right now, if you pay electronically , EXACTLY ON TIME, you are still charged the late fee, marked adjustment, because they don't get processed until the next day, and do not take into consideration it was received the day before.

Quite unethical in my opinion. I think all customers who have been paying electronically and being charged these fees should be refunded.

jafs 3 years, 10 months ago

If Mullins is correct, then it's possible the transfer doesn't get to the city until the next day.

I don't know which is the case.

BBalls 3 years, 10 months ago

What is not clear is whether the 3rd party processor is the City's or the Banks. The banks guarantee that the payments will be received by the due date if the customer processes in a timely manner and if it is not timely the online banking will tell you the earlies date your payment will be received. If the 3rd party is part of the online banking then the processing time is factored into the banks payment date and guarantee. If the the 3rd party is working for the City then the payment should be on-time when received by the 3rd party. The customer should not be held respnsible for inefficient processing by the City. Online banking is not going to go away and the City needs to try to move into the 21st century. It is a simple fix, post the payments based on the date they were received like most other companies.

jafs 3 years, 10 months ago

Agreed.

I'll just keep sending checks in the mail, which generally works fine.

BrianR 3 years, 10 months ago

"...do NOT take into consideration that they were received the day before."

Then they are wrong.

brewmaster 3 years, 10 months ago

This story deserves a detailed investigation. It may reveal more questionable activity similar to the municipal abuse in Bell City, California.

It's rather telling how quickly the director's smug attitude changed after public awareness of the deliberately misleading terminolgy.

Between the coflicts-of-interest that intertwine among local real estate developers, builders, city commissioners and the KU athletics / ticket office that exist in this town; it would not be surprising if there isn't more to this "billing" situation, too.

Thanks to Kelly Elsten and the LJ World for bringing it to the public's attention.

Rex Russell 3 years, 10 months ago

This is what investigative reporting used to be about. Thanks for bringing this to the light. Seems a lot of the system here was softly and deftly designed to give people the impression that they were paying on time but actually not. The wording of "adjustment" was so ambiguous as to not raise any flags when someone was to read their bill. I'm sure a great number of people would contact someone about it if they had paid their bill the day before the due date and then read LATE FEE on their next bill. If they realize or were told the truth, they would then change their paying behavior and therefore...no more extra fees. Heck, even the people who set up their online automatic billpay to ensure their bills were paid on time probably bit over and over again. I realize their are deadbeats who dont pay their bills. This seems to have been worked to get good responsible people too.

hail2oldku 3 years, 10 months ago

What investigative reporting? It was brought to their attention by a customer that finally got fed up being nickel and dimed to death so she called the city. Upon learning that she was getting dinged for a late fee hiding as an adjustment SHE took it to the paper. The investigating was already done and served up on a silver platter.

BBalls 3 years, 10 months ago

I think Chad did a great job investigating the issue and presenting in a manner that the public could grab on to. Many investigations begin with a "Tip" and Chad had to do his homework to make sure the facts were accurate.

hail2oldku 3 years, 10 months ago

Chad does a fine job. I just think there is more digging to be done before handing out too much credit.

IMHO D-III's editorial had as much to do with the backpedalling by Mullin as either story.

Richard Heckler 3 years, 10 months ago

A new question for the city report.

Are WE ratepayers being charged additional money on our water bills for the $100 million dollar sewage treatment plant that is on the table?

The next question: Why shouldn't that money come from developers after all it is because of them that this new plant was requested?

If that thought is not appropriate why not bill the cost of that plant to a new "benefit district" thereby new users pay for the new convenience?

Raiden 3 years, 10 months ago

question 1 - most likely question 2 - because the city is in the developers pockets question 3 - that would be too simple and straightforward

dragonfly0221 3 years, 10 months ago

Now that we have uncovered this dirty little secret, I would like to see some one compare our city utility service to other city's and see if our bills are higher then average for general service also.

nekansan 3 years, 10 months ago

Please follow up to see how they plan to make whole those who were mislead and charged fees by this easily fixed misleading billing system. I'd also like to hear some response from the commission on what they consider to be timely processing of bills. I think it is perfectly reasonable to expect payments to be credited the day they are received regardless of the time of day the payment was credited or processed. A payment received at 4:30 PM on the due date is still received during normal business hours that day and should be treated as on time. If it takes the city 3 days to process a paper check, then that is the delay and responsibility of the city. Those payments should be credited as of the date the mail was received in their PO box.

just_another_bozo_on_this_bus 3 years, 10 months ago

"The city charges a $3.95 convenience fee to cover fees the city is charged by the credit card companies."

"Convenience" fee? They certainly like their euphemisms.

BBalls 3 years, 10 months ago

The probelm with their explanation is they keep refering to a 3rd party for processing. If the payment is made thru online banking in a timely manner (which is guaranteed to be received by the payment date) it should not matter if there is a 3rd party processing for the Bank or for the City. If it is the City's 3rd Party doing the processing then it should be on-time if received by the 3rd Party by the due date. I have never had a probelm with any other company with late payments that were processed thru my online banking in a timely manner except the City of Lawrence. I pay every bill I can thru online banking and have for years. The City is doing something different than everyone else and continues to place blame with their customers.

OldEnuf2BYurDad 3 years, 10 months ago

"An article in the Sunday Journal-World detailed how one customer had unknowingly paid three-years worth of late fees because the city lists the charges on the bill as an “adjustment,” rather than a late fee."

This may seem deceptive to the layman, but this is the proper term to use for a "collection item". "Adjustment" is the politically correct accounting term for something late. I don't think they deserve our criticisms for using that term. They may have to 'splaining to do about their policies, but the terminology is "correct".

BBalls 3 years, 10 months ago

There is no such thing as a "Politically Correct" accounting term. "Adjustment" would typically reference a change to a bill which could be a penalty for being late. Most companies call a late fee a late fee or something similar. It is as if they wanted their customers to pay late. The origninal article mentioned they were looking to change the terminology for some time but could not do so because they did now own the software but shockingly bills next week will refelct the change in the terminology and they were able to do so in-house. There is more to the story and it would be intereting to see of the 30% of cusomters who were late, how many were "1" day late because of this evil 3rd party processor.

OldEnuf2BYurDad 3 years, 10 months ago

I worked in the collection industry for a number of years. "Adjustment" means what I said it means to those who do collection work.

bad_dog 3 years, 10 months ago

Well Dad, these are municipal utility bills for current goods/services, not collection work for past due accounts. While some of the payments involve delinquent accounts the city employees that send out billings and collect payments are not doing "collection work". Just guessing, but I'll bet most users of the municipal water supply aren't familiar with terms used by the collection industry. Given the absence of familiarity, why would you use that language in an invoice for current services?

Here's an idea. If it's a fee for submitting a late payment, how about we just call it a "Late Fee" or "Past Due" charge?

hail2oldku 3 years, 10 months ago

I work in collections now, and have for years, and have never used the term adjustment for a late fee.

56_Kruiser 3 years, 10 months ago

The customer getting the bill does NOT work in collection. The term used should be one understood by the customer.

But in my mind the real issus is the fact that they are charging the late fee to those who pay on time via electronic payment.

Adrienne Sanders 3 years, 10 months ago

They're not sending bills to accountants. They're sending them to regular people. No other bill I get would use terminology for a late fee that was not understandable by the general public.

BigPrune 3 years, 10 months ago

How about the "convenience fee" terminology? Convenient for whom? $3.95 for a $40 water bill is about 10%. Another rip off.

Danielle Brunin 3 years, 10 months ago

It seems like it would be more economical to pay the $0.40 late fee than $3.95 for online payments.

bad_dog 3 years, 10 months ago

Convenient for the consumer to use a credit card to pay at the eleventh hour or when they don't have enough $$s on hand to pay with cash. Convenient for the merchant/provider who gets paid when they might not otherwise. Every credit card transaction comes with a 3-4% charge for facilitating the transaction. It's just a question of who gets to eat it-the vendor or the consumer.

hail2oldku 3 years, 10 months ago

I'd willingly eat a 3% fee for the transaction, they are making a profit off of the fee.

bad_dog 3 years, 10 months ago

Hence, if you go that route, you're paying for the "convenience". Just like if you buy a gallon of milk in the Kwik Shop "convenience" store it will cost you more than parking in the lot at Dillons and walking in to make your purchase. You're paying for the "convenience" of a short walk and little if any, line.

hail2oldku 3 years, 10 months ago

I'm not arguing about the convenience fee but the LEVEL of the convenience fee. Of course, I don't pay it at all because I pay by check far enough in advance to not have to worry about either that fee or the adjustment.

Danielle Brunin 3 years, 10 months ago

That's the problem. By all accounts, people did pay their bills on time, but got late fees based on how the city processed them.

BBalls 3 years, 10 months ago

I would prefer if the City just reflected on time payments on time and late paymetns late like most companies.

bad_dog 3 years, 10 months ago

If I read the original article correctly, these were people that DID pay on time, but paid the higher total billing including the "adjustment".

3 years, 10 months ago

3rd party processing fault or not this is very unfair. Do it in house and drop the 3rd party and treat your customers with respect.

somedude20 3 years, 10 months ago

We have that Kansas store down on Mass that charged an extra 1% on sales tax and now the City of Lawrence is scamming us. I am getting the feeling that "The world is a vampire, sent to drain secret destroyers, hold you up to the flames and what do I get, for my pain betrayed desires, and a piece of the game even though I know-I suppose I'll show all my cool and cold-like old job" but hey, they are just tryin to keep the "rats" in their cages

tyson travis 3 years, 10 months ago

I grew up in Lawrence but live in another state now, I only occasionally pay online bills for my mother who lives in Lawrence. If I would see "adjustment" on a bill, I would assume a surcharge for higher energy costs being passed along to the consumer (i.e. higher cost of natural gas, etc.) and just pay it. "Late fee" on the other hand raises a red flag and I would modify my future behavior, especially if I thought I had paid the bill on time. A couple of suggestions: (1) Assuming you have the luxury of a little extra cash in your account and your payday and the due date are conveniently aligned, pay the bill a couple of days early, you'll pay no more and will save some money. (2) I would NEVER use a credit card payment service where the city tacks on a $3.95 "convenience fee." Figure out what the APR would be on the total amt. of your bill, and you'll quickly stop using services like this. The city is only being charged about a 5% merchant fee just like you used your card at Wally World, anything else is exorbitant. (3) for the city: publish a cutoff time on when payments will be credited on the day of receipt. Let's assume 5:00pm. At that time, go clean out the collection box previously mentioned, and the post office box and the mail slot, and any office collections and put all those in a bag clearly marked for that day. Then, take your own sweet time processing these if you like, but give credit for the date on the bag the payment was collected in. This isn't rocket science, folks. I pay all my bills using an online banking service, and always try to allow a couple of days for the process to work. Online banking services work fine if the payments are electronic, i.e., bank to major card company, but on smaller entities such as utilities, the bank has to cut a check and snail-mail it to the payee, and then you're at the mercy of the USPS. This is where you need to allow that extra time. Check with your bank, both of mine( BoA and DCB) reflect this delay factor by individual payee, and will usually refund any late charge if your payment doesn't arrive by the promised date, as long as you input the payment in time. BTW, was that faucet photo taken in mine or my Mom's kitchen? We both have faucets like this, they work fine.

Adrienne Sanders 3 years, 10 months ago

If some of the late payment fees are due to electronic payments that are processed by a third party or by the customer's bank, so the payment doesn't actually arrie until the next day, wouldn't those people also be getting late fees on their other bills b/c the same thing is happening?

I pay almost all my bills online (but not the water bill b/c I don't find the $3.95 charge very convenient) and rarely are they credited to my account the same day I pay, it almost always takes a day or two. Some of them even say on the site something like "payments received after 2pm will be credited the next business day." I agree that the city should not be disguising the late fee, but I'm not so sure why it's hard to figure out why such a high percentage are late.

Kontum1972 3 years, 10 months ago

late fees...> beer money for the CMgr. & Friends...

gudpoynt 3 years, 10 months ago

I'm guessing that the late fees were being labeled "adjustments" because "adjustments" might be more than just late fees.

From a programmer's perspective, if you have the potential for multiple extra credits (such as overpayments) and charges (such as late fees), and you want to total them up for the bill summary, then labeling that total as "adjustments" makes sense, since it is neither positive nor negative.

Of course, it would be ideal to itemize all of those adjustments and print that on another part of the bill. But again, from a programmer's perspective, sometimes features are left out for purely technical reasons.

What I seriously doubt is happening is that city officials, at some point, actively chose to mis-label late fees as "adjustments" in order to increase utility revenues. I really doubt that Mullins is the diabolical, moustache twisting type. A lot of these posts seem to be from wishful thinking conspiracy theorists salivating for a juicy scandal. Reality is often far less dramatic.

That being said, I think it's cool that the paper reported a story about one woman asking a question, and in less than a week, it has spurned enough public inquiry that the utility has not only responded, but has already taken measures to rememdy the issue.

Free press + WWW + the literate public = no more late fee injustice!

Kontum1972 3 years, 10 months ago

hmmm...... i have lived in Larryville for almost 21 years.....if this is retro-active... so instead of cash...just send me the credit-slip...that sez.....>>>>Its Free!

KansasPerson 3 years, 10 months ago

dulcinea47 (anonymous) says… "If some of the late payment fees are due to electronic payments that are processed by a third party or by the customer's bank, so the payment doesn't actually arrive until the next day, wouldn't those people also be getting late fees on their other bills b/c the same thing is happening?"

I called my bank, because by coincidence I had been thinking about setting up Online Bill Pay the day before this story broke. Their explanation was similar to one above; namely, if the company you're making a payment to accepts electronic payments, the bank will do it that way; if they do not, they cut a check. City of Lawrence is apparently one of the few, if not the only one, of the ones I'd be paying that would NOT be set up for true electronic pay.

The bank rep went on to say that (on their system at least) there's a way for the customer to tell which kind of company it is (set up for e-payments or not) even though it doesn't tell you directly. If you are setting up your payment and it allows you to set the payment date within a couple of days, it's an e-payment company. If the payment date it allows you is actually several days out, then it's the cut-a-check kind of company.

If I understood them correctly, they were also telling me that any payments received late by the company/utility would be covered by the bank, as long as I had in fact set it up to pay on time.

I haven't set it up yet, but when I do, I think these tips will be helpful. Also I intend to set the payments dates for about five days in advance unless they are "true" electronic payments.

Adrienne Sanders 3 years, 10 months ago

Interesting... I wonder if the bank explains that to people if they're not specifically asking questions about it. I guess it just seems to me that most people know that even if you're doing some kind of electronic transfer, it's not an instant transfer.

BBalls 3 years, 10 months ago

Maybe we should just pay the City 30 days in advance.

friendlyjhawk 3 years, 10 months ago

First KU ticket fraud and now Utility Payment fraud. Who would have thought all this would happen in ticky tacky Lawrence, KS?

tyson travis 3 years, 10 months ago

This has been mentioned a couple of times, but to re-iterate:

(1) If you are thinking of paying online thru a bank, communicate with them. If your payee is up-to-date and accepts online electronic payments, then the 'deliver on' date will reflect this after you set up your schedule of payees, many times it is same-day or mabye a day or two later. If your payee is stuck in the dark ages, the bank has to physically cut a check and mail it to them, and the 'deliver on' date will reflect this extended time, sometimes as much as a week later. The City of Lawrence needs to update itself to accept online electronic payments, it's the coming thing. BTW, neither of the two online banking services I use charge any extra for having to cut a check and pay the postage to mail it. I just had a one-day late payment on my rural water bill, the USPS delivered it late, and the utility assessed a modest late charge, which the bank (BoA) promptly credited back to my account. I don't know how the banks make money on these added costs, I guess it just comes out of the interest they don't pay on my checking account. It's free to me, saves lots of stamps or trips to a curbside drop box.

(2) Electronic banking is the way of the future, I can remember having to remember to write a check and keep lots of stamps on hand so I could mail a payment 5-7 days ahead and hope it still got there. No wonder the USPS is in trouble, I probably only mail 1-2 non-recurring payments a month where I used to do many times that number. In the old days, all the bills were due by the 10th, you would take your pay envelope to Watkins Bank, deposit it, save a little cash out, and take your horse-and-buggy around town and pay Innes and Round Corner and whoever else didn't take bank drafts. This took hours! Shop around for a competitive online banking service that doesn't charge much, pay attention to the 'deliver on' dates for payments, then you can sit at home in comfort and watch the 'Hawks. RCJH!

Raiden 3 years, 10 months ago

Let's just throw out all those whosits and whatsits in City Hall and start over... I'm tired of looking at Corliss' mug shot photo anyway.

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