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HomeMy WebLinkAboutRes2022-124 Cornerstone Contract Sponsored by: Bower CITY OF SEWARD,ALASKA RESOLUTION 2022-124 A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF SEWARD, ALASKA, AUTHORIZING THE CITY MANAGER TO ENTER INTO A CONTRACT WITH CORNERSTONE CREDIT SERVICES, LLC FOR THE PROVISION OF COLLECTION AGENCY SERVICES WHEREAS,the City of Seward strives to provide a high level of services to residents and taking actions to keep rates, fees, and charges as equitably priced as possible; and WHEREAS, the City of Seward currently has approximately $375,300 in past due payments that are eligible to be sent to a collection agency for collection efforts; and WHEREAS,lost revenue has a negative impact on the rate paying citizens of Seward;and WHEREAS,Cornerstone Credit Services, LLC is an Alaska based company with over 35 years of experience; and WHEREAS,the rate contingency fee in the contract paid to Cornerstone Credit Services, LLC as a percentage of the revenue collected; and WHEREAS,the rate contingency fee established in this contractual agreement are within the normal amount in the collection agency industry; and WHEREAS,this contract will have a positive impact on the finances of the City of Seward as well as the citizens. NOW,THEREFORE,BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF SEWARD,ALASKA,that: Section 1.The City Manager is authorized to enter into a contract with Cornerstone Credit Services, LLC for the provision of collection agency services. Section 2.This resolution shall take effect immediately upon its adoption. PASSED AND APPROVED by the City Council of the City of Seward, Alaska, this 12th day of December, 2022. THE CITY OF SEWARD,ALASKA StmettrcirelAg Sue McClure,Mayor CITY OF SEWARD, ALASKA RESOLUTION 2022-124 AYES: Osenga, Wells, Finch, Calhoon, Barnwell, McClure NOES: None ABSENT: DeMoss ABSTAIN: None ATTEST: Brenda J. Ballou M City Clerk 1.0"'nies, AI ��OFsF (City �L'�al? ?C,O�O,Qq�y�j•l = 4oFA PS�Po%�� ••.,IuI'I%' City Council Agenda Statement Meeting Date: December 12, 2022 To: City Council From: Janette Bower, City Manager Agenda Item: Resolution 2022-124: Authorizing the City Manager to Enter into a Contract with Cornerstone Credit Services, LLC For the Provision of Collection Agency Services Background and justification: The City of Seward strives to provide a high level of service to our community and regularly evaluates mechanisms to increase the efficiency of how we conduct operations. At this time, the City does not have a provider of collection agency services, which often leads to a loss in revenue. This loss in revenue has a negative impact on the customers who do pay for services in a timely manner as the lost revenue requires an increased rate for provision of services to accommodate for lost payments. It is in the best interest of the community to ensure as high of a level of payment compliance as possible. As of November 2022, the City of Seward has $375,322 in past due payments that would be eligible to for collection agency action. The proposed agency, Cornerstone Credit Services, LLC is an Alaska based company with over 35 years of experience. Cornerstone Credit Services, LLC collects a fee based upon the amounts collected. Variable Rate contingency fee included in the proposed contract: • $ 0 to $ 700 = 35% Rate per account • $ 701 to $ 2,000 = 30% Rate per account • $ 2,001 to $ 999,999 = 25% Rate per account Comprehensive and Strategic Plan Consistency Information This legislation is consistent with (citation listed): Comprehensive 3.7.1.3 Continue to improve the quality and efficiency of city governmental Plan: services. Strategic Plan: Other: Certification of Funds Total amount of funds listed in this legislation: $ 0 This legislation (✓): x Creates revenue in the amount of: $ Creates Revenue from collected amounts X Creates expenditure in amount of: $ Expends a portion of the collected revenue to compensate the collection agency Creates a savings in the amount of: $ Has no fiscal impact 115 Funds are (✓): Budgeted Line item(s): Not budgeted x Not applicable Fund Balance Information Affected Fund (✓): General SMIC Electric Wastewater Boat Harbor Parking F1 Wat F1 Healthcare Motor Pool Other Note: amounts are unaudited Unassigned Fund Balance Net position — restricted $ Net position — unrestricted $ Available Unrestricted Cash Balance: $ Finance Director Signature: f r+ Attorney Review RxYes Attorney Signature: Not applicable Comments: Administration Recommendation eAdopt Resolution Other: 116 AGREEMENT FOR COLLECTION SERVICES Cornerstone Credit Services, L.L. C. ("CCS") and City of Seward ("Client"), hereby agree that all Accounts and/or Dishonored Checks referred to CCS are subject to the terms and conditions of the following Agreement between the parties: 1. CCS agrees to provide Collection Services to Client for all Accounts and/or Dishonored Checks referred to it by Client("Referrals"). CCS agrees to comply with all federal, state and local laws and regulations including the Fair Debt Collection Practices Act in providing Collection Services. 2. CCS will make available for audit or inspection all records pertaining to Client and Client Referrals. 3. CCS will deposit payments made on Referrals into a trust account maintained for all clients. Client will receive a monthly statement reflecting all payments made on Client Referrals.Payments will be remitted to Client,less CCS's collection fee, 15 days after the end of the month in which the collection is made. Any additional fees due CCS and reflected on the monthly statement to Client are due and payable upon receipt of the statement by Client. 4. Client agrees to immediately notify CCS of any direct payments it receives on Referrals. Merchandise accepted for return and credit is considered the same as payment.Upon receipt of such payment,Client shall submit to CCS the fee provided for in this Agreement. 5. CCS shall have authority to receive payment in cash,check or money order,and shall have authority to endorse checks,drafts,money orders,or other negotiable instruments made payable to Client that are received in payment of a Referral. 6. For Account Collection Services provided by CCS under this Agreement, CCS will charge a collection fee of % on all payments made to CCS or directly to Client once the account has been referred to CCS for collection.CCS will charge a collection fee of %in cases where it commences legal action,submits required bankruptcy filings or refers the account to an attorney or agent. 7. For Dishonored Check Collection Services provided by CCS under this Agreement, CCS will charge a collection fee of$30.00 or the highest amount allowed under A.S.09.68.115,whichever is greater.CCS will deduct the collection fee from the payment(s)received from the debtor. If payment is made directly to Client,Client shall notify CCS and pay CCS the collection fee provided for in this Agreement. Except as otherwise provided in this Agreement,this shall be the only compensation to CCS for the Dishonored Check Collection Services provided. 8. During the term of this Agreement, Client may access CCS's check verification system provided CCS receives Client's dishonored checks directly from Client's bank. 9. Client authorizes CCS to add and retain interest to Referrals at the rate allowed by law. 10. All Client Referrals will specify the date the debt became due;which portion of the Referral is principal;which portion is interest, if any; which portion is a late fee, if any; and will separately state what agreement, if any, Client has with the debtor for charging interest and/or late fees. 11. CCS will obtain Client's consent prior to making any settlement for less than the Referral amount. Should legal action be required, the amount of the claim may be adjusted to reflect the principal amount of the Account or Dishonored Check. 12. CCS will obtain Client's consent prior to commencing any legal action on Referrals. CCS agrees to pay all normally incurred court costs and attorney fees up to five hours of attorney time.If CCS determines that additional attorney time is necessary and warranted,Client may request that CCS incur additional Attorneys fees.Client must reimburse CCS for the additional fees. 13. If CCS commences litigation and the opposing party is awarded attorneys fees or damages as a result of acts or omissions of the Client,including but not limited to a determination that the amount was never legally owed,or that Client included unlawful interest, or a finding that Client failed to comply with the Federal Truth-in-Lending Act, Client will be liable for such award. If CCS pays the award, Client agrees to reimburse CCS immediately upon receipt of written notice of the amount and CCS's payment. 14. Client will reimburse CCS for its own costs and attorneys fees if Client fails to appear at scheduled trials or hearings or fails to report direct payments from the debtor. 15. Client may not cancel its request for collection services for a particular Referral unless the claim was paid prior to the Referral or the parties agree to the cancellation. A service fee may be charged for Referrals canceled after the referral date,or on an amount referred that was not legally owed. 16. Client warrants,that so far as is known to Client,each Referral assigned for collection is a valid and existing debt. 17. This Agreement shall be effective as of the date shown and continue in effect until terminated as hereinafter provided. Either party may terminate this Agreement by giving the other party at least 30 days prior written notice of the date of termination. Referrals placed with CCS before the cancellation shall remain with CCS until which time,in CCS's opinion,all collection activity has ceased. 18. The provisions of this Agreement shall override any and all contrary or conflicting provisions contained in any previous agreements. This Agreement is entered into by and between CCS and Client,this 12th day of December 2022 by their duly authorized and empowered representatives. Cornerstone Credit Services,L.L.C. City of Seward Client Authorized Signature Date Authorized Signature Date Client City of Seward Address Pp Box 1671410 Adams Street City Hall Building City Seward State AK Zip 99664 Contact Name Stephen Sowell Phone# (907)224-4066 Extension Fax#(907)224-4038 Special Instructions: *Variable Rate 117=$1-700=35%701-2000=3 o 2001-99999=25%Reg F-Charge-off Date November 3, 2022 City of Seward Attn: Stephen Sowell PO Box 167 - Mail Seward, AK 99664 Re: Request for Proposal Dear Stephen, Thank you for providing Cornerstone Credit Services, LLC., the opportunity to respond to your request regarding collection needs. Cornerstone Credit Services is an Alaska-based firm that believes in protecting the interests of the businesses and consumers in our communities. With a management team that has over 35 years of experience in the industry, we believe Cornerstone has the expertise to continue to provide the ideal collection system for the City of Seward, and to provide the professionalism, service, and recoveries you should expect. Our website at www.comerstonecredit.net can provide you with an additional perspective of our agency and the services we offer. There are no upfront costs associated with our debt collection service; we are paid a contingency fee only when we are successful in collecting money for our clients. Our contingency fee is variable based upon the balance of the submitted accounts. Here is the variable rate contingency fee schedule for clients with larger account balances: $0 to $700 = 35% Rate per account $701 to $2000 = 30% Rate per account $2001 to $999999 =25% Rate per account Collection Procedures Cornerstone Credit Services utilizes the same collection strategy on all accounts regardless of age or perceived account recovery. All accounts regardless of the amount receive the standard validation 119 notice. If Cornerstone has another account on the same person they are "linked"together in order to provide the most current contact and location information, and processed together. Delinquent Account Recoveries All accounts referred for collection are entered and posted in one step. Immediately upon listing, a validation notice adhering to the requirements of the Fair Debt Practices Act is generated. CCS utilizes an internal linking process to match duplicate consumers together even if the credit grantor is different. This process provides the most current location and asset information about the consumer to the collector. Telephonic attempts and letters are utilized on a regular basis. Typically, accounts are followed on a weekly or bi-weekly basis. In the event a consumer is out of town or is temporarily unable to pay, our agency may delay further contact, allowing for a consumer's circumstance to change before a follow up attempt is made. Once contact is made, the collector will request the balance in full, or negotiate a reasonable payment alternative. Payments may be made by cash, check, web-based credit card, money order or ACH electronic check. If the collector is unable to secure payment, the account is reviewed for the possibility of further collection activity. This activity may include filing an action, obtaining a judgment, and executing on this judgment. Accounts without telephone numbers are run through Intercept. Once the account runs through Intercept, the collector commences skip tracing. Skip tracing Cornerstone utilizes an internet-based real-time locator service. This product allows our collectors to immediately perform national skip tracing searches, to access nationwide telephone numbers, and to retrieve location information more specific to Alaska, such as business license, fishing and hunting license, and voter registration. As the largest collection agency in Alaska, Cornerstone further builds on its skip tracing system by matching and linking identical consumer accounts and information. Legal Resources Cornerstone has a fully staffed legal department with 3 full-time dedicated personnel. Additionally, we have established attorney relationships in Anchorage and Fairbanks, as well as other outside contractors to effect collections where legal action is required and authorized. Our legal department files actions each year across Alaska, with a complete post judgment execution process including wage garnishment, lien filing, asset execution, and the attachment of Permanent Fund Dividend(PFD) Checks. 120 Historically, we realize that a relatively small percentage of referrals will have an action initiated against them. However, by having an active legal department in place, our agency can affect collections on those accounts that ultimately fall into this category. Legal Procedures Criteria Cornerstone wants to ensure success when legal action is pursued, and strives to determine the outcome of legal action before the process formally begins. To this end, our collectors satisfy certain criteria before referring accounts to the legal department. Prior to assignment, collectors have typically established recent contact with the consumer and must have personal identification information, address verification and asset research completed(this includes Permanent Fund eligibility.) Collectors then finish the evaluation and submittal process by searching for prior judgments, garnishments, or liens that would make the post judgment process ineffective. Procedures Once an account has been approved for legal action, an assignment is sent to the client for lawsuit approval and a supplemental affidavit. Once the small claims suit is approved, the legal documentation is prepared, reviewed by counsel, and filed. Cornerstone pays all attorney fees, court filing fees, and process service fees. If a consumer files an answer in response to the suit, the proceedings may be moved to District Court. A Cornerstone legal representative attends all scheduled trials. • Post-Judgment: After judgment is entered, requisite legal paperwork is filed to place levies on the PFD. A Cornerstone legal representative attends any scheduled exemption hearings. • Bankruptcy: Bankruptcies are addressed by changing the status of all collection accounts involved to accurately report a bankruptcy filing. Cornerstone files a proof of claim when required for both dischargeable and non-dischargeable debts. Client Services Online Client Services Online enhances our clients' ability to securely exchange information. Using an Internet connection,you can view information, update accounts, and access the following account and client information real-time: • Inquire on the status of accounts by name, your account number, or our account number. • Account action summary. • Client specific A/R: amount owed, delinquency, amount due client. • Client statistics: month-to-date and year-to-date. 121 • Client actuary reporting, which provides an overview of new,paid, and cancelled accounts and recovery numbers. Client Services Online is much more than a tool to view account information. You would also have the ability to: • Enter accounts on an individual basis, or in quantity. • Submit direct payments. Internal Performance Measures Cornerstone is committed to providing consistent recoveries for our clients. Performance standards reports are generated on a frequency basis dictated by the needs of the particular client. The key account manager then reviews the information and looks for specific recovery indicators such as age of accounts, the balance of the accounts, the consumer demographic background, and the type of debt. From that vantage point, Cornerstone can quickly determine if our collection efforts are aligning with predicted recovery levels. This regular process of review helps Cornerstone exceed national average collection recoveries, and increases our collection performance to our clients in a way that is responsive to their needs. 122