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Home My WebLink About25D - AGMT - COLLECTION AGENCY SRVSREQUEST FOR COUNCIL ACTION CITY COUNCIL MEETING DATE: MAY 16, 2017 TITLE: FIRST AMENDED AGREEMENTS WITH PENNCREDIT AND AMERICAN CAPITAL ENTERPRISES, INC. FOR COLLECTION AGENCY SERVICES {STRATEGIC PLAN NO. 4, 1} CIT AGER RECOMMENDED ACTION CLERK OF COUNCIL USE ONLY: APPROVED ❑ As Recommended ❑ As Amended ❑ Ordinance on 1s' Reading ❑ Ordinance on 2n° Reading ❑ Implementing Resolution ❑ Set Public Hearing For CONTINUED TO FILE NUMBER 1) Approve and authorize the City Manager and Clerk of the Council to execute an amended extension to the current agreement with PennCredit for a two -year period effective July 1, 2017 through June 30, 2019, for collection agency services, subject to non - substantive changes approved by the City Manager and CityAttorney. 2) Approve and authorize the City Manager and Clerk of the Council to execute an amended extension to the agreement with American Capital Enterprises, Inc. for a two -year period effective July 1, 2017 through June 30, 2019, for collection agency services subject to non - substantive changes approved by the City Managerand CityAttomey. DISCUSSION The Treasury and Customer Service Division of the Finance and Management Services Agency ( "Treasury") is responsible for assuring the collection of all monies due to the City. Treasury has an in -house collection program, to which delinquent account referrals from all agencies of the City are received, including but not limited to: Paramedic Billing, Municipal Utility Services, Dog Licensing, Business Licensing, and Miscellaneous Accounts Receivable. The current City process provides for the issuance of a minimum of three City issued collection letters. They are sent to individuals and companies who fail to pay monies owed to the City. Collection letters inform individuals and companies of the outstanding debt and may provide alternatives for payment. The City strives to ensure that a resident or business is provided an opportunity to make payment without sending them to collections. Often times this may include a payment plan. If a customer fails to respond or does not adhere to a payment schedule, the matter is assigned to the City's principal collection agency. 25D -1 Agreements for Collection Agency Services with PennCredit & American Capital Enterprises, Inc. May 16, 2017 Page 2 The Federal Fair Credit Reporting Act (FCRA) sets guidelines for one of the primary methods the City's principal collection agency employs, which includes reporting outstanding debt to credit reporting agencies. Effective September 2016, there are two types of debt categories under the FCRA: 1) "Permissible Debt" — such as, unpaid utility billings, unpaid paramedic billings, and any unpaid sums relating to City services which were electively sought or contracted for from the City; and 2) "Prohibited Debt" — such as, taxes, licensing and permit fees, parking citations, towing & impound fees /costs, administrative code violations, and damage to City property. Permissible debts may continue to be reported to credit reporting agencies; prohibited debts may not. Prior to June 30, 2014, the City utilized American Capital Enterprises, Inc. as its assigned collection agency. On March 11, 2014, staff issued an RFP for said services and PennCredit was most responsive to the evaluation criteria and to the City's collection agency service requirements. As such, PennCredit was selected and was assigned as the City's principal collection agency effective July 1, 2014 through June 30, 2016 and was authorized to collect on outstanding debt placed for collection after July 1, 2014. The City Council also authorized staff to award a secondary agreement to American Capital Enterprises, Inc. to continue collecting on existing outstanding debt balances prior to July 1, 2014, due to their knowledge regarding the nature and collection status of previously placed debt. Given the recent regulations regarding reportable debt, and the likelihood that pending judicial interpretations of these regulations will be issued within two years, staff is recommending extending amended agreements with both PennCredit and American Capital Enterprises, Inc. for a two -year period as follows: 1. PennCredit will collect on "permissible debt" reportable to credit reporting agencies under the FCRA commencing July 1, 2017, and will continue to collect general outstanding debt balances previously placed for collection between July 1, 2014 and June 30, 2017; provided, however, that outstanding debt balances placed between September 1, 2016 and June 30, 2017 which constitute prohibited debt shall not be reportable to credit reporting agencies in accordance with the FCRA. 2. American Capital Enterprises Inc. will utilize other legal methods to collect on "prohibited debt "; i.e., debt that cannot be reported to credit reporting agencies under the FRCA commencing July 1, 2017, and in addition will continue to collect outstanding debt balances placed prior to July 1, 2014. STRATEGIC PLAN ALIGNMENT Approval of this item supports the City's efforts to meet Goal #4 - City Financial Stability, Objective 1 (maintain a stable, efficient and transparent financial environment). 25D -2 Agreements for Collection Agency Services with PennCredit & American Capital Enterprises, Inc. May 16, 2017 Page 3 FISCAL IMPACT As payment for services for both collection agencies is contingent upon successful collection, both PennCredit and American Capital Enterprises, Inc. will independently share in the total revenue recovered from their individual efforts. There is no direct fiscal impact on any expenditure accounts of the City or its related agencies. Francisco Gutierrez Executive Director Finance and Management Services Agency Exhibits: 1. First Amended Agreement with PennCredit 2. First Amended Agreement with American Capital Enterprises, Inc. AC:WH 25D -3 25D -4 EXHIBIT 1 FIRST AMENDMENT TO AGREEMENT THIS FIRST AMENDMENT TO AGREEMENT, made and entered into this 10^ day of May, 2017 by and between PennCredit, a California corporation (hereinafter "Consultant "), and the City of Santa Ana, a charter city and municipal corporation organized and existing under the Constitution and laws of the State of California (hereinafter "City "). RECITALS: A. The parties entered into that certain Agreement ( #A- 2014 -146), dated June 17, 2014 (hereinafter "said Agreement') by which Consultant having special skill and knowledge in the field of debt collection agreed to perform such services to the City for debts owed to the City and placed for collection commencing July 1, 2014, by which Consultant has provided debt collection services to the City. B. The Term of said Agreement was three (3) years effective as of July 1, 2014 and ending June 30, 2017. C. The parties wish to amend the Term of said Agreement to provide for an additional two (2) year period beginning July 1, 2017 and ending June 30, 2019. D. The parties also wish to amend the Scope of Services with respect to the types of debt for which the Consultant shall provide collections services to the City to include only "permissible debts" as set forth in the Federal Fair Credit Reporting Act (FCRA) guidelines effective September 1, 2016. E. The parties also wish to amend the Compensation set forth in the Scope of Services for the extended Term. NOW THEREFORE, in consideration of the mutual and respective promises, and subject to the terms and conditions hereinafter set forth, the parties agree as follows: The parties hereto now desire to amend Section 1, subsection (A) of said Agreement, "SCOPE OF SERVICES" as follows: a. Define the term "overdue miscellaneous accounts receivable billings" to include only "permissible debts" as set forth in the Federal Fair Credit Reporting Act (FCRA) guidelines in effect beginning September 1, 2016. b. Add a part 15 to Section 1, subsection (A) of said Agreement requiring Consultant to discontinue reporting of "prohibited debts" as set forth in the FCRA for any overdue miscellaneous accounts receivable billings placed for collection with Consultant by City between July I, 2014 and June 30, 2017, and reported by Consultant to a credit reporting agency after August 31, 2016. 25D -5 c. Amend Section 1, subsection (A), part (2) (i) (a) setting compensation at 20% for accounts placed for standard collection. d. Amend Section 1, subsection (A), part (2) (ii) (a) setting compensation at 22% for accounts placed for standard collection. Section 3 of said Agreement, "TERM" shall be amended as follows: This First Amendment to said Agreement shall commence on July, 12017 and terminate on June 30, 2019, unless extended by subsequent amendment of this Agreement or terminated earlier in accordance with Section 12 of said Agreement. 3. This First Amendment to said Agreement must be signed below and may be signed in counterpart and delivered by fax, emailed as a PDF (Portable Document Format) file attachment, or by other means that displays the original or a copy of the signatures. Any subsequent amendments may be signed and delivered in the same manner. IN WITNESS WHEREOF, the parties hereto have executed this First Amendment the date and year first above written. ATTEST: MARIA D. HUIZAR Clerk of the Council APPROVED AS TO FORNI: SONIA R. CARVALHO City Attorney By: 6& � LISA STORCK Assistant City Attorney RECONINIENDED FOR APPROVAL Francisco Gutierrez, Executive Director Finance & Management Services Agency CITY OF SANTA ANA: CYNTHIA J. KURTZ Interim City Manager PENNCREDIT RICHARD S. TEMPLIN Chief - Executive Officer Tax ID # 23- 2470030 25D -6 EXHIBIT 2 FIRST AMENDMENT TO AGREEMENT THIS FIRST AMENDMENT TO AGREEMENT, made and entered into this 16°i day of May, 2017 by and between American Capital Enterprises, Inc., a California corporation (hereinafter "Consultant "), and the City of Santa Ana, a charter city and municipal corporation organized and existing under the Constitution and laws of the State of California (hereinafter "City "). RECITALS: A. The parties entered into that certain Agreement ( #A- 2014 -147) dated June 17, 2014 (hereinafter "said Agreement ") by which Consultant having special skill and knowledge in the field of debt collection agreed to perform such services to the City for debt's owing to the City and placed with Consultant for collection prior to July 1, 2014, by which Consultant has provided debt collection services to the City. B. The Term of said Agreement was three (3) years effective as of July 1, 2014 and ending June 30, 2017. C. The parties wish to amend the Term to provide for an additional two (2) year period beginning July 1, 2017 and ending June 30, 2019. D. The parties also wish to amend the Scope of Services with respect to the periods of debt placement and types of debt for which the Consultant shall provide collection services to the City to include all types of debt previously assigned by the City to Consultant through June 30, 2014, plus all "prohibited debts" (as set forth in the Federal Fair Credit Reporting Act (FCRA) guidelines effective September 1, 2016) assigned by the City to Consultant beginning.July 1, 2017. E. The parties also wish to amend Compensation set forth in the Scope of Services for the extended Tenn. NOW THEREFORE, in consideration of the mutual and respective promises, and subject to the terms and conditions hereinafter set forth, the parties agree as follows: 1. The parties hereto now desire to amend Section 1 "SCOPE OF SERVICES ", subsection (A) "Consultant Responsibilities ", including parts (1) and (2) of said Agreement, as follows: 1. SCOPE OF SERVICES A. Consultant Responsibilities. Consultant shall provide continuing collection services in connection with all overdue miscellaneous accounts receivable billings previously assigned by the City to Consultant through June 30, 2014, as set forth in Consultant's Proposal dated March 20, 2014, on file in the Santa Ana Purchasing Division. In addition to which Consultant shall provide collection services in accordance 25D -7 with said proposal in connection with all "prohibited debts" (as set forth in the Federal Fair Credit Reporting Act (FCRA) guidelines established effective September 1, 2016), which shall be assigned by the City to Consultant beginning July 1, 2017. Assignable debts shall not include parking citation debts. In performing said services, Consultant shall: 1. Make concerted efforts on behalf of the City to: a. collect all past due accounts previously assigned to Consultant by City in accordance with FCRA guidelines in effect at the time of said assignment or otherwise now applicable; and b. collect all new past due accounts assigned to Consultant by City in accordance with FCRA guidelines for prohibited debt established September 1, 2016. 2. Provide services on a contingency basis and retain commission on all monies collected on assigned accounts, whether paid to City or Consultant, at the following: (i) For accounts previously assigned by the City to Consultant through June 30, 2014: a. 20% for accounts placed for standard collection b. 35% for accounts requiring legal action (ii) For all accounts receivable initially placed for collection within 7 months of delinquency beginning July 1, 2017: a. 20% for accounts placed for standard collection; b. 33% for accounts requiring legal action. (iii) For all accounts receivable initially placed for collection after 7 months of delinquency beginning July 1, 2017: a. 22% for accounts placed for standard collection; b 35% for accounts requiring legal action. 2. Section 3 of said Agreement, "TERM" shall be amended as follows: This First Amendment to Agreement shall commence on July, 1, 2017 and terminate on June 30, 2019, unless extended by subsequent amendment of said Agreement or terminated earlier in accordance with Section 12 of said Agreement. 3. This First Amendment to said Agreement must be signed below and may be signed in counterpart and delivered by fax, emailed as a PDF (Portable Document Format) file attachment, or by other means that displays the original or a copy of the signatures. Any subsequent amendments may be signed and delivered in the same manner. 2 25D -8 IN'WITNESS WHEREOF, the parties hereto have executed this First Amendment the date and year first above written. ATTEST: MARIA D. HUIZAR Clerk of the Council APPROVED AS TO FORM: SONIA R. CARVALHO City Attorney By: LISA STORM Assistant City Attorney RECOMMENDED FOR APPROVAL Francisco Gutierrez, Executive Director Finance & Management Services Agency CITY OF SANTA ANA: CYNTHIA J. KURTZ Interim City Manager AMERICAN CAPITAL ENTERPRISES, INC. RONALD G. MATHESON President Tax ID # 95- 3840461 25D -9 25D -10