Watchdog: Readers upset about city's fee for online payments
Sept. 23, 2011 at 4:23 a.m.
Several newspaper readers want to know: Is the City of Victoria breaking state law by imposing a "convenience fee" on residents who pay municipal utility bills online or via telephone?
That fee - an additional $3 each payment - became effective in January. From January through August, the city charged the fee 18,160 times for $54,480 in revenue, according to Andrew Jacob, the city's assistant director of finance.
"If they are turned into the (Texas) Attorney General's office," one newspaper reader wrote via Facebook, "the city could be prosecuted and lose the privilege of having a debit/credit processor."
This concern stems from Texas Finance Code, Chapter 339.001, which clearly forbids surcharges in certain situations.
"In a sale of goods or service," the law reads, "a seller may not impose a surcharge on a buyer who uses a credit card for an extension of credit."
The law, however, continues: "This section does not apply to a state agency, county or local governmental entity."
So the city conforms to state law when charging the $3 fee, according to the finance code. But why charge it in the first place?
Credit card companies are notorious for charging businesses, government agencies and others anytime they accept payment by credit card. Ask any small business owner, and they're likely to tell you these fees chip away at profits.
Municipalities, in this case, are no different.
"We started getting so many online payments - and, of course, we are charged a fee for processing those - that we had to start passing that fee along to our customers," Lynn Short, the city's director of public works, said. "Rather than passing that cost on to all of our customers, even those who don't generate the fee, we decided to pass it on only to those who pay online or by telephone."
Thus, the "convenience fee" was born. As residents became technologically savvy, they made more and more water payments, for example, online or over the phone via credit card.
This practice resulted in more than $100,000 in yearly processing fees incurred by the city. Each credit transaction costs the city $2.85.
"Our convenience fee doesn't cover our total costs, but it does help to offset them," Jacob, the assistant finance director, said. "We're still not recouping about one-third of our costs, so we are definitely not profiting from this."
To highlight this, Jacob notes that while the city collected $54,480 in convenience fees through August, its credit card processing fees totaled $77,364. Considering the city processes about 3,400 credit card transactions per month - including in-person transactions, which are not assessed a fee - it's not surprising.
If you want to avoid paying a $3 convenience fee, incurred even if you use a debit card online or via telephone, you can:
Pay in person at the utility billing office, 700 Main Center, Suite 106. Credit card payments made in person do not result in an added fee.
Sign up for automatic bank drafts.
Mail your payment.
For more information, contact the utility billing office 361-485-3400.
While the city can by law charge the $3 fee, Victoria businesses cannot. Texas is one of 10 states, including Colorado and Florida, that forbid such private sector surcharges.
If a business penalizes you for paying by credit card, you can file a formal complaint with the Texas Attorney General's Office. Call 1-800-621-0508 or visit oag.state.tx.us and click the "Consumer Protection" tab.
It should be noted businesses can, by law, offer discounts to those who pay by check, cash or debit - thus helping merchants to avoid credit card processing fees.
"We've received numerous calls about our convenience fee, especially when we first started initiating it," Short, the director of public works, said. "Typically, when we explain the reason behind it, and that there are other payment options, people understand."
Gabe Semenza is the Public Service Editor for the Advocate. Comment on this story at VictoriaAdvocate.com.