HomeMy WebLinkAbout12 Credit Reporting agency Agenda Item # 1
Memorandum
To: Board of Directors
From: Mary Chapman, Administrative Services Manager
Date: December 12, 2003
SUBJECT: Consideration of authorizing staff to use a credit reporting agency
1. WHY THIS ITEM IS BEFORE THE BOARD
The Board has asked that the staff research ways to make it easier for customers to establish credit with
the District and thereby not have to pay a deposit. One way to do that is to use the customer's credit
history that has been established with one of the major credit reporting agencies. We are proposing
that the Board authorize us to enter into a contract with a credit reporting agency.
2. HISTORY
The District's deposit policy requires all customers to pay a deposit for utility services in order to
establish credit with the District. The policy allows new residential customers to provide us with a letter
of payment history from a prior utility showing that they paid their account promptly and did not have any
past due balances. Recently, the Board exempted new homeowners from paying a deposit provided
they pay their account promptly.
In the last year or so, Pacific Gas & Electric has refused to provide customers with letters of payment
history. Many of our new customers have or had service with PG & E. We have also received requests
from many customers asking that we run a credit report on them to prove that they have good credit
history.
3. NEW INFORMATION
At an American Public Power Association annual meeting that I attended recently, a presentation was
made entitled "Are Deposits Obsolete?" The gist of the presentation was that several utilities are using
Equifax to screen customers to determine whether or not a deposit would be required. They also use
Equifax to run credit reports on closed accounts with outstanding balances for skip tracing. The credit
report will provide us with a more current mailing address. Mark Schlesinger, our collections supervisor,
said that many customers do not give us a forwarding address when they close their account. Once
these accounts are turned over to the credit bureau, who has access to a customer's current credit
information, they are frequently paid promptly. Mark says that we would be able to get the same results
and not have to pay the credit bureau on the accounts that are easy to collect. Having a current
address would also help us on those accounts we want to pursue through the small claims procedure.
There are fees associated with the credit screening and credit report services. The cost to run a
screening to determine if a deposit is required is $2.50 to$5.00 each. The cost to run a credit report for
skip tracing on closed accounts is$2.25. There are also some account setup fees and annual dues to
participate. I have budgeted $6,000 in the 2004 budget to cover the account set-up, annual dues and
skip tracing expenses.
When using a credit reporting agency, the staff will have to do two things.
1. Obtain permission from a new customer to run a screening to determine if the customer needs to
pay a deposit. We will use a separate sheet to obtain the customer's authorization. This form
will list all of their options to establish credit with the District.
2. Notify a customer in writing if their credit screening requires that they pay a deposit. This means
that the customer's credit request was denied. We would provide them with the information of
who to contact and their phone number if they want to pursue why their request was denied.
In both cases, the customer can still choose to provide us with a letter of payment history from another
utility as they currently do.
RECOMMENDATION:
That the Board take the following actions:
Adopt the attached resolution to authorize staff to enter into an agreement with a credit reporting
agency for the purpose of determining whether a customer must pay a deposit and for the
purpose of skip tracing should the customer close their account and not pay their final bill. The
cost of the screening service would be passed on to the customer on their first bill. The cost of
the skip tracing credit report would be absorbed by the District as an operating cost.
�E DONNER
Public Utility
Resolution No. 2003-
AUTHORIZATION TO USE A CREDIT REPORTING AGENCY
WHEREAS, the District's policies require that new customers establish credit with the District; and
WHEREAS, in order to establish credit with the District new residential customers either have to pay a
deposit, provide evidence of a good payment record with another utility or prove that they are the new
owner of the house being provided with utility service; and
WHEREAS,the Board of Directors wishes to provide additional ways to make it easier for customers to sign
up for new service with the District and meet the credit requirements; and
WHEREAS, the District's staff is frequently unable to get a record of payment history from a customers
current or previous utility, and
WHEREAS, new customers frequently ask if we would run a report on their credit history in order to
establish credit and not have to pay a deposit; and
WHEREAS, the credit reporting agencies charge a fee to run a credit history on a customer.
NOW, THERFORE, BE IT RESOLVED that the General Manager and District Treasurer are authorized to
enter into a contract with a credit reporting agency such that when a new customer applies for service and
asks that we run a credit report in order to establish credit with the District and therefore not pay a deposit,
District staff will do so only with the customer's permission and agreement that the customer will pay the fee
charged to the District by the credit reporting agency. If the customer's credit score does not meet the
District's credit criteria, a deposit will be charged.
PASSED AND ADOPTED by the Board of Directors at a meeting duly called and held within the District on
the by the following roll call vote:
AYES:
ABSTAIN:
NOES:
ABSENT:
TRUCKEE DONNER PUBLIC UTILITY DISTRICT
By
James A. Maass, President
ATTEST:
Peter L. Holzmeister, Clerk of the Board