SR-07-09-2013-3BCity Council Meeting: July 9, 2013
Agenda Item: 3313
To: Mayor and City Council
From: Gigi Decavalles, Director of Finance
Subject: Collections Agency Services
Recommended Action
Staff recommends that the City Council authorize the City Manager to negotiate and
execute a contract for collections agency services with NCO Financial Systems, Inc.
(NCO), a Pennsylvania -based company, for a total amount not to exceed $200,000,
over a two year term, with future year funding contingent on Council approval.
Executive Summary
In order to ensure that the City is realizing the full revenue for fees, taxes, and fines that
are due but not paid, the Finance Department requires the use of collection agency
services to assist with the collection of these delinquent debts. The City does not
currently contract with a collection agency for fees, taxes, or fines, with the exception of
parking citations and library fees. In order to implement the service, staff recommends
authorizing a two year agreement with NCO Financial Systems, Inc. (NCO) not to
exceed $200,000.
Background
The City of Santa Monica charges fees for services or facilities provided directly to an
individual or business, such as permits, police services for special events, utilities, and
fire inspections. In some cases, fees are charged after the service has been delivered
by invoicing the individual or business for the cost of providing the service. When a
business or individual does not pay the amount due by the due date, typically 30 days,
the account is considered delinquent.
The City also levies taxes that benefit the community at large and are deposited into the
General Fund, such as Business License tax. In some cases these taxes have
delinquent balances that are due. Additionally, the City issues administrative citations
when an individual or business violates the Santa Monica Municipal Code. When an
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administrative citation fine is not paid by the due date, it is considered delinquent.
Revenue from administrative citations is also deposited into the General Fund
The Finance Department currently employs one full time employee to follow up on
delinquent accounts for all delinquent debts owed to the City. This employee follows up
on delinquent Business License taxes, past due invoices that are referred by City
departments, and checks that are returned un- payable due to insufficient funds.
The collection of delinquent debts is heavily regulated by State and Federal laws.
Collections activities must comply with all applicable laws, including but not limited to
the Fair Debt Collection Practices Act (FDCPA), the California Robbins - Rosenthal Fair
Debt Collection Practices Act, the Fair Credit Reporting Act (FCRA), the Health
Insurance Portability & Accountability Act (HIPAA), the Fair Credit Billing Act of 1974
(FCBA), the Equal Credit Opportunity Act (ECOA), the Consumer Credit Protection Act,
and the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (APCPA).
Discussion
The City is owed monies by individuals and businesses for services rendered, taxes,
citations, including water, sanitation, fire and police services, recreational facilities, and
business license taxes. Entering into an agreement with a collection agency would
establish a consistent, citywide resource for the collection of delinquent monies due.
Implementing collection agency services is part of a broader effort by staff to establish a
uniform citywide approach for recovering delinquent debts owed to the City.
The Finance Department does not currently have the resources to collect on the volume
of various types of delinquent debt or the expertise to ensure full compliance with the
various Federal and State laws governing collections. A collection agency would
provide an efficient and cost effective solution to assist with ensuring that the City's
collections are handled in compliance with applicable laws and in a professional and
expedient manner. Payments to NCO for the collections services would be based on
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the actual revenue recovered by NCO with a fee of 22% on accounts that are less than
six months delinquent and no more than 30% for accounts that are referred for legal
action. The existing Finance collections employee would continue to act in the same
capacity by following up on higher dollar value accounts and filing small claims suits
when appropriate.
Vendor Selection
On April 2, 2013, staff issued a Request for Proposals (RFP) for collection agency
services. The RFP aimed to identify an agency to provide collection services to assist
the City with realizing all of the revenue for delinquent fees for service, taxes, and
citations due.
The RFP was posted on the City's online bidding system and nine responses were
received. A selection committee comprised of staff from Business and Revenue
Operations, Treasury, and Financial Operations evaluated the proposals, taking into
consideration criteria including but not limited to the quality of the services offered, the
ability to perform the service, the capacity to perform the service, the applicability of the
proponent's experience as it relates to the RFP's scope of work, price, and whether the
respondent would have available resources to accomplish all elements of the scope of
services.
The selection committee recommends NCO as the best bidder based on the company's
extensive experience working with California municipal agencies, its ability to meet the
requirements of the collection agency services RFP, and its ability to deliver a high
degree of customer service. NCO has over 86 years of collection experience since
1926 with 40 years of collections experience with government contracts. The collection
services would be provided by the company's Governmental Services Division that is
dedicated to serving public sector clients. The company maintains an office in
Sacramento, California and is licensed and bonded in all jurisdictions and all 50 states.
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The implementation of a collection agency, over a two year agreement with NCO
Financial Services, Inc. would not to exceed $200,000.
Financial Impacts & Budget Actions
The contract to be awarded to NCO Financial Services is for an amount not to exceed
$200,000. Funds are available in the FY 2013 -14 budget in division 01224. The contract
will be charged to account 01224.555060.
Prepared by: Salvador M. Valles, Business & Revenue Operations Manager
Approved:
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Gigi Decavalles
Director of Finance
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Forwarded to Council:
Rod Gould
City Manager
Reference:
Contract No. 9763 (CCS)