The fee that is added to unpaid utility bills in Spanish Fork may soon increase 40% of the billed amount, the maximum allowed under state law, after the City Council voted to partner with a new collections firm.
Every year, the city sends about $100,000 in unpaid utility accounts to a collections agency, according to City Treasurer Jordan Hales, a small fraction of the $45 million in utility bills collected annually.
Bonneville Collections, the agency Spanish Fork currently partners with, collects about about 18% of these unpaid fees every year, which is about $18,000.
A few months ago, the city put out a collections services bid to find a company with a better collection rate, Hales said. The bid was narrowed down to two companies, Mountain Land Collections in American Fork, who Spanish Fork had partnered with up to 2016, and The Cherrington Firm of Provo.
Collections firms typically keep a percentage of the total collected amount after a fee has been added on, said Hales, adding that Bonneville Collections collects an 18% fee.
Mountain Land Collections adds a 22% collection fee and keeps 22% of the total amount, meaning a $100 unpaid utility bill would have a $22 fee added on and the collections agency would keep $26.84 and give $95.16 to the city.
The Cherrington Firm adds a 40% fee, which Hales said is the maximum allowed under state law, and keeps 28.57% of the total amount, meaning the full original amount would be paid to the city.
“There’s pluses and minuses to both sides,” Hales told the council. “You’ve got to decide what’s more important to you. Is it more important to get the full principal back, or is it more important that we don’t bill that $18 to the customer?”
The city treasurer recommended the city partner with Mountain Land Collections.
“They do have a lower fee,” he said. “And I feel like it’s better to add on a smaller fee for those customers that were unable to pay their bill, even though it’s going to mean a little less money in the city’s pocket book.”
Councilman Brandon Gordon said hearing that nearly 80% of unpaid utility bills go uncollected makes him “less sympathetic to those that leave us high and dry.”
“These people are stiffing the city,” Gordon said.
Sometimes it’s the case that a resident “simply can’t pay” regardless of what the fee is because they don’t have the money, Councilman Keir Scoubes said.
“This is tough,” Councilwoman Stacy Beck said. “I’m right on the fence with this one.”
Councilman Chad Argyle motioned to approve a contract with Mountain Land Collections, but it was not seconded.
Beck made a counter-motion to approve a contract with The Cherrington Firm, which passed with no one opposed.
Mayor Steve Leifson made note that his daughter works for one of the two collections firms and didn’t want to sway anyone’s opinion. Gordon recused himself from voting, saying that he is the insurance provider of one of the firms.
According to Hales, the contract with The Cherrington Firm would last for three years.