5.5. ERMUSR 11-17-2015 Elk River
Municipal Utilities UTILITIES COMMISSION MEETING
TO: FROM:
Elk River Municipal Utilities Commission Jennie Nelson—Customer Service Manager
John Dietz—Chair
Al Nadeau—Vice Chair
Daryl Thompson—Trustee
MEETING DATE: AGENDA ITEM NUMBER:
November 17, 2015 5.5
SUBJECT:
Review of Security Deposit Policy and Credit Card Procedures
BACKGROUND:
A recent commercial customer experience has led staff to look into the Security Deposit Policy
and our credit card procedures.
DISCUSSION:
The current security deposit procedure for commercial customers directs staff to estimate two
months of charges and bill that as the deposit on the first bill. Recent customer experiences have
shown that there is some risk in this. The first issue is that for new businesses, the deposit
amount is hard to estimate. If the deposit is not an accurate two months of charges,we don't
currently have a way to increase that after a few months have billed and history is established.
We could bill the increase,but the customer could stop paying and the increase in deposit dollars
would never get paid. We also could require the deposit to be prepaid before the account is setup,
however for most commercial buildings; we don't have a lot of leverage to disconnect without
shutting other businesses off if the customer does not prepay. We have that same challenge with
disconnecting for non-pay.
Another option, in addition to the deposit, would be to strengthen our commercial service
agreement and/or ask customers to sign a personal guarantee. Many businesses register as a
Limited Liability Company which takes the liability away from the specific person or owner,but
if that isn't the case and we did have a social security number for the owner, that could give staff
leverage for collections if the account has bad debt.
Staff has also had some difficult experiences recently with credit card chargebacks. Currently,
any residential or commercial customer is able to use credit cards with no extra charge. We have
had great success collecting money through credit cards that we likely would not have been able
to collect through other payment methods. Our write offs have decreased and our customers
greatly appreciate this option.
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Credit cards have introduced some new challenges, though. Staff has had several fraud claims,
which have resulted in chargebacks. A chargeback occurs when a person recognizes a fraudulent
purchase on their credit card, calls the card company, and requests the money to be returned to
them. The company will remove the funds from the payee's bank account and refund them to the
person claiming fraud. Staff has experienced legitimate fraud claims and the money was returned
to the rightful owner leaving the account with a balance, and staff has experienced illegitimate
fraud claims where it seems as though the customer regrets making a payment and just wants
money returned to them.
This past month staff disputed a$10,500 chargeback and the money was returned to the utilities'
bank account. This does not rid ERMU of the risk, though. In order to dispute the chargeback,
staff had to compile 57 pages of documentation that the person who made the payment truly
intended on making the payment with their credit card. Because the payer used the pay-by-phone
system, we had no in-person proof(signature capture, camera footage, etc)that the person on the
other end of the phone was who they said they were,but we had enough documentation to make
a strong case. Unfortunately,that might not always be true.
Staff would like to discuss different options with the commission for limiting commercial bad
debt risk:
1. Limiting commercial customers to deposit prepay or signing a personal guarantee.
2. Credit card payments that can only be made in person.
3. Strengthen the service agreement and require the commercial customer to sign-up for
service in the office.
ACTION REQUESTED:
Staff would like to have a discussion with the commission about these options to develop
revisions for the deposit policy.
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