220-04
HANDLING AND COLLECTION OF RETURNED CHECKS CURRENTLY UNDER REVIEW

POLICY & PROCEDURE

Subject:

HANDLING AND COLLECTION OF RETURNED CHECKS

Index: FINANCE

Number:    220-04

Effective Date

11/01/2002

Supersedes

1/24/2000

Page

1 of 5

Staff Contact

V. Runkle

Approved By

Mayor Jesse Tanner

1.0 PURPOSE:

To establish a policy regarding the handling and collection of returned checks.

2.0 ORGANIZATIONS AFFECTED:

All City Departments/Divisions except the Renton Municipal Court.

3.0 REFERENCES:

3.1    Revised Code of Washington (RCW) 62A.3-104 & 62A.3-515

3.2    Revised Code of Washington (RCW) 19.16.500

3.2    Policy & Procedure 220-02, Accounts Receivable

4.0 DEFINITIONS:

A returned check is defined as any check, money order, cashier’s or traveler’s check that is dishonored and returned unpaid to the City.

5.0 POLICY:

5.1    It shall be the policy of the City of Renton that any check returned unpaid through the City’s bank will be considered a fair and owing debt to the City.

5.2    All returned checks will incur a $15.00 handling fee. This fee will cover the bank costs and processing fees associated with handling a returned check. Additionally, a returned item may be subject to collection fees and interest as prescribed by RCW 62A.3-515, and RCW 19.16.500.

5.3    Returned checks will be held in the Finance & Information Services Department for a fifteen (15) day grace period, during which time the maker of the negotiable item may redeem the item, with guaranteed funds for the face value plus the $15.00 handling fee.

5.4    Payment for returned checks are to be made only to the Finance Department cashier. Departments are not to take payment for returned checks from any customer. It is the responsibility of the customer redeeming a returned check to inform the cashier if a payment is being made to redeem a returned item.

Once a check has been referred to the City’s collection agent for processing, the Finance Department cashier may no longer accept payment for that item, and the check must be redeemed with the collection agent.

5.5    At the expiration of the fifteen (15) day grace period, returned checks may be referred to the City’s designated collection agent. Exceptions to this referral are items listed in paragraph 6.3.

5.6    The issuance of three checks that are returned unpaid to the City within a two-year period may result in the City’s refusal to accept checks issued by that individual or company.

5.6.1    With regard to utility accounts, this policy will apply to three returned checks issued against any utility account by the current owner/resident. The owner is liable for the outstanding debt.

5.6.2    With regard to other accounts (departmental or accounts receivable), the policy means three returned checks issued to the City by the maker of the check..

5.7    If after one year the returned dishonored check has not been paid to the designated collection agent the amount shall be deemed uncollectible. Checks of $100.01 and over will be sent to the Finance Committee for approval to be written off as bad debt.

5.8    If after one year the returned dishonored check has not been paid to the designated collection agent the amount shall be deemed uncollectible. Checks of $100.01 and under will be sent to the Finance and Information Services Administrator for approval to be written off as bad debt.

6.0 PROCEDURE:

6.1    When an item is returned from the City’s bank, it will remain in the Finance Department for handling. A Finance representative will notify the appropriate department that an item has been returned unpaid. All returned items will be redeemed either through Finance or, if the allowed redemption period has expired, through the City’s designated collection agent.

6.2    Fifteen (15) days from the date an item is returned, it becomes eligible for referral to the City’s designated collection agent. During the fifteen (15) days, the maker of the check may redeem the check from the Finance Department at face value and incur the fifteen ($15.00) dollar processing fee. Once a check has been referred to the collection agent, the cost of redemption will increase in accordance with RCW 19.16.500 for those fees applied by the collection agent. Additional charges, added by the collection agent, will be paid by the debtor.

6.3    Items for which the City has other recourse will not be sent to collections. Examples include, but are not limited to utility payments, building permits, and Community Services reservations.

6.3.1    Returned items that are payments on utility accounts will be charged back to the appropriate account(s). Additionally, a processing fee of $15.00 will be charged to the account on which the check was issued. Only one charge will apply per returned check, regardless of the number of accounts for which it was written. Payment arrangements will not be made on accounts with outstanding returned item charges. If the account balance is not brought current the account holder will receive a final notice of impending shut-off. If the charges are not paid prior to the shutoff date, it will result in water service for that account being shut off for nonpayment. If the returned item was issued after receiving a final notice and the payment prevented the water service from being shut off, the service becomes subject to immediate shutoff without further notice.

6.3.2    Returned checks which were issued as deposits or payments for events or activities that have not taken place may result in the cancellation of the reservation or enrollment if not redeemed within the fifteen (15) day grace period. Departments are responsible for notifying individuals who have issued items in this category. Items issued for events which will occur before the fifteen (15) day window expires are subject to immediate cancellation, and it is at the discretion of the Department concerned whether to notify the customer of the cancellation.

6.3.3    Returned items that were issued as payment for any type of permit within the City may result in revocation of said permit(s). This determination will be made by the issuing department in conjunction with the Finance & Information Services Department.

6.4    Finance Department Handling Procedures for Returned Checks:

6.4.1    When the City’s bank returns any unpaid checks to the Finance & Information Services Department, the Department representative will review the checks and sort them into the following categories:

a.    Checks issued as payment on City utility accounts.

b.    Checks issued to the Renton Community Center/Renton Senior Center.

c.    Checks issued to Planning/Building/Public Works or Fire Prevention for permits.

d.    Other.

6.4.2    Returned checks will be handled in the following way:

The Finance Department will send a letter to the customer giving them fifteen (15) days to respond. If after the fifteen (15) day grace period the customer has not responded, then it will do the following:

a.    Checks issued for utility accounts:

For water utility accounts - A Utility billing employee from the Finance Department will debit the utility account for the face value of the check and a fifteen ($15.00) returned check fee.

If the customer does not respond to the notice in a reasonable time then a final shut-off notice is created and mailed to the customer. The balance on the utility account will remain with the property regardless of the person actually owing the debt.

For Garbage only accounts - A Utility Billing employee will debit the account for the face value of the check and a fifteen ($15.00) returned check fee. A Finance employee will send notification to the customer of the returned dishonored item. If the customer does not respond in a timely manner the check and/or account will be sent to the City’s designated collection agent.

b.    Checks issued for Renton Community Center/Renton Senior Center: If the event for which the dishonored check has not occurred the department will be contacted and made aware of the customer and amount that is still owed. It is the responsibility of the department to refuse service to these customers.

If the event has already occurred, the Finance Department will send these items to the City’s designated collection agent after notifying the department that the item was not collectable through the City’s process.

c.    Checks issued to Planning/Building/Public Works or Fire Prevention (Permits only): When the City receives a dishonored item for a permit, the department will be contacted and made aware of the dishonored item and notification to the check’s writer. It is the responsibility of that department to revoke the permit. That department is to contact the Finance Department if a payment is made to reinstate the permit.

d.    For all other checks issued to the City: The Finance Department will also notify the appropriate department to which the item was written. If after the fifteen (15) day grace period the customer has not responded, the item will be sent to the City’s designated collection agent.

e.    The Finance Department will release the dishonored item back to the maker of the check once the debt owing is paid in full. For all items that were already sent to the City’s designated collection agent the customer will need to pay the agent, and the City will be reimbursed with a check from the agent.

f.    When all efforts to collect the outstanding bad debt have been exhausted as outlined, and the face value of the check is $1,000.00 or more, the City retains the right to take the customer, business, or individual to small claims court.

g.    If after one year the dishonored item(s) have not been collected through the City’s process or through the City’s designated collection agent, the Finance Department will then compile a list with the Customer Name, Check Number, Date of the Check, Dollar Amount of the Check, and the Department Owed.

h.    All items $100.01 and over need to be sent to the Finance Committee to be written off.

i.    If the item is $100.00 and under, it is at the discretion of the Finance and Information Service Administrator to write those items off as a bad debt.