Report to: General Committee Report
Date:
SUBJECT: Interest on Outstanding Debts and Collection Agency Administrative Fee
PREPARED BY: Joel Lustig, Director Financial & Client Services
RECOMMENDATION:
THAT the report entitled, “Interest on Outstanding
Debts and Collection Agency Administrative Fee” be
received.
AND THAT Council endorse the policy of adding interest of 1.25% per
month on outstanding debts on a discretionary basis consistent with the annual
rate being charged for property taxes in arrears.
AND THAT Council endorse the policy of adding an administrative fee up
to 30% to outstanding debts for collection agency charges.
AND THAT Staff be authorized and directed to do all things necessary to give effect to this resolution.
EXECUTIVE SUMMARY:
Not applicable.
PURPOSE:
The purpose of this report is obtain
Council approval to amend the fees and charges By-law 2002-276 to charge interest
on outstanding debts on a discretionary basis on accounts that are 30 days or
more overdue and to endorse the policy of adding an administrative fee to
outstanding debt for collection agency fees.
BACKGROUND:
The Town currently does not add an interest component to outstanding debts and an amendment to the By-law will enable the Town to add an interest element to outstanding debts on a discretionary basis.
The Municipal Act, 2001 sets out the procedure to be followed for establishing and revising fees and charges to be imposed by a municipality. Section 304 of the Municipal Act, 2001 empowers that if a municipality uses a registered collection agency in a good standing under the Collection Agencies Act to recover the debts payable to the Municipality, the collection agency may recover its reasonable costs of collecting the debt but those costs shall not exceed an amount approved by the municipality. 2001, c, 25, s. 304.
The Municipal Act 2001 authorizes the recovery of costs associated with the use of an authorized collection agency. An amendment to the fees and charges By-law 2002-276 will enable the Town to recover the costs charged to the Town by the collection agency retained to pursue recovery of the outstanding debt.
OPTIONS/ DISCUSSION:
Interest on outstanding debts
In order to be consistent with other municipalities Staff recommend that interest @ 1.25% per month be charged on a discretionary basis on outstanding accounts which are 30 or more days overdue.
Collection Agency Administrative Fee
Delinquent accounts are referred to a collection agency after the internal processes have been determined to be unsuccessful. Commissions are paid to the agency once the debt has been successfully collected and the Town then receives an amount net of the collection agency cost. Staff recommend that an administrative fee up to 30% be added to the outstanding debt for collection agency fees. The 30% rate is based on the maximum fee the collection agency will charge the Town if it successfully recovers the debt.
Staff has reviewed the policy of other municipalities as it relates to adding interest on overdue accounts and administrative fees to recover the cost of collection agency charges. The comparable municipal information is as follows:-
|
Municipality/Region |
Interest |
Collection
agency administrative fee |
|
City of |
Charge interest @1.25% per month consistent with the annual rate charged on property taxes in arrears |
Charge an administrative fee up to 20% for recovery of collection agency fees |
|
City of |
Charge interest @1.25% per month when sent to a collection agency |
Charge an administrative fee up to 17% for recovery of collection agency fees when overdue accounts are referred to first collection agency and 30% when overdue accounts are referred to second collection agency |
|
Region of |
Currently do not charge interest on overdue accounts |
Charge an administrative fee up to 15.85% for recovery of collection agency fees |
|
Town of |
Charge interest @1.25% per month consistent with the
annual rate charged on property taxes in arrears |
Currently do not charge an administrative fee but are currently investigating the possibility |
|
City of |
Charge interest @1.25% per month consistent with the annual rate charged on property taxes in arrears |
Currently do not charge an administrative fee, however the City offers a payment plan for delinquent accounts |
|
City of |
Charge interest @1.25% per month consistent with the annual rate charged on property taxes in arrears |
Currently do not charge an administrative fee |
FINANCIAL CONSIDERATIONS AND TEMPLATE: (external link)
The addition of interest on outstanding debts will allow the Town to collect a surcharge on a discretionary basis.
The addition of an administrative fee to outstanding debt charges for collection agency fees will allow the Town to recover the net amount owed, if the collection agency is successful on the debt recovery.
ENVIRONMENTAL CONSIDERATIONS:
Not applicable.
ACCESSIBILITY CONSIDERATIONS:
Not applicable.
ENGAGE 21ST CONSIDERATIONS:
Not applicable.
BUSINESS UNITS CONSULTED AND AFFECTED:
Legal Services Department.
RECOMMENDED
BY: ________________________ ________________________
Barb Cribbett, Treasurer Andy Taylor, Commissioner,