Transcript V G YOUNG –TACA

Electronic Payment Processing
Tarrant County Tax Office
Tarrant County Tax Office
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Working with 1.75 million citizens
181 employees in tax office
Eight locations county wide
Serving over 800,000 property accounts
Register about 1.5 million cars each year
Over $3 billion in tax collections each year
Over $300 million in motor vehicle collections per year
Answer over 35,000 calls per month
Tax Office Collections
Property Tax & Motor Vehicle
$3,250,000,000
$3,200,000,000
$3,150,000,000
$3,100,000,000
$3,050,000,000
$3,000,000,000
$2,950,000,000
$2,900,000,000
$2,850,000,000
$2,800,000,000
$2,750,000,000
$2,700,000,000
FY 2006
FY 2007
FY 2008
FY 2009
FY 2010 (9mo)
Payment Options
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Cash – Still a popular payment method
Checks – Traditional method favored by Seniors
Credit Cards – Growing but expensive
E checks (ACH) – fastest growth, favored by younger
tax payer
• CSR – Many like to talk to someone to pay
• Next – Payments by Phone/PDA
Payments by Type
14%
1%
2%
2%
4%
48%
29%
Ops Center
Checks
Cash
Credit Cards
ACH
E-checks
Fed Funds
Why Did We Change?
• Cash and checks are hard to handle
• Buried in paper & old processes
• Taxpayer wants it
• Staff / budgets – more with less
• Risks of handling millions of dollars
• Bank requirements
• I like being Tax Assessor / Collector
What Have We Done?
2001 – Credit cards on line
2002 – ACH transfers to pay entities
2003 – Lock Box with ARC
2004 – E-Checks on line
2007 – Hybrid ACH & Ck21 – the big one
2008 – Face to face credit cards
2010 – eLock Box for bank checks
What are the
Electronic Deposit Options?
• Account Receivable Conversion (ARC) – convert or
truncate data on check to a data file & send to bank
electronically
• Image Cash Letter (ICL) – image check front & back
to send to bank electronically; may be referred to as
Check 21
• A combination or hybrid system – ARC & ICL
Electronic Check Deposits
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You are going to need a scanner(s)
Verifying data is critical
Statement must provide notice
Scan check and data
Store paper checks
Destroy paper checks
Manage check images for office use
Hybrid Solution
• ARC & ICL Combined
– Image of check (front & back) is created
– Check data obtained from check
• Both files sent to bank
• Bank determines if check can be sent as image or
data file
ACH – Where did it start?
ACH - Automated Clearing House
- Electronic transfer of funds and information
- Idea started in early 1970s in California
NACHA - National Automated Clearing House
Association, began in 1974
- Oversee the ACH movement nationwide
- Regional Payment Associations oversee the ACH
movement in their area (SWACHA)
Check 21 and September 11, 2001
• September 11, 2001, changed everything
• On October 28, 2004, the Check Clearing for the
21st Century Act, more commonly known as
Check 21, became law
• Creates a legal equivalence of the original check
and a substitute check
• The Federal Reserve’s objectives:
– Facilitate check truncation and promote the use of
electronics
– Foster innovation without mandating receipt of images
– Improve overall efficiency of the nation’s payments
systems
Check 21-ICL (Image Cash Letter)
• Check processing & electronic transmission to collect
instead of sending paper checks (cash letter) to the
Fed or Clearing House
• Checks are imaged; thus, checks are not returned to
the customer from bank
• If cancelled check is needed, bank can provide an
image of the check
• Check 21 is the check world, NOT to be confused
with ACH
ACH - CHECK 21
Check conversion and check truncation — partners for the future
ACH: ARC/POP/RCK
Conversion
Truncation
Image Exchange: Substitute Checks
• Check conversion transforms a check to electronic settlement - NACHA
world
• Check truncation transforms a check to an image-enabled electronic
transaction for settlement - Check world
Substitute Check Overview
• A substitute check is the legal equivalent of the original
check for all purposes
- Contains legible image of front and back of check
- Conforms to industry standards (MICR, physical characteristics of
check)
- Includes all endorsements
Requirements
• Notice must be provided prior to consumer
writing check
• Must provide opt-out option
• Must be machine-read
• Source document must be destroyed within 14
days
• Retain copy of front of source document for two
years
Benefits
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Improved collections
Additional re-presentments
Faster notification of returns
Timing of payment can be selected
Reduction in costs
- Transport fees, lockbox locations, processing fees
- Image of check readily available
What Checks can be Converted?
• Consumer size checks
• $25,000 or less
• Business size checks that do not have the auxiliary
on-us field in MICR line
• Contain a pre-printed serial or check number
• Completed and signed by the customer
• Bank can be a big part of managing this
Opt-Out Requirements
• Consumer must have the ability to opt out
• Consumer must tell company each time check is
presented that they do not want their check
converted
• Company is not obligated to accept the check, can
suggest alternative payment method
• Opt out is good for one time only
Copy/Retention of Check
• Company is required to retain a legible image or
copy of the front of the check for two years
• Company must use commercially reasonable
methods to securely store
- All checks until destruction
- All related banking information
• Note: there is no destruction requirement unlike
the 14 days for ACH
How Will This Affect Customers?
• Customers will see notices of check conversion at
the point of sale
• Funds may be debited from the check writer’s
account more quickly than through a paper check
clearing process
• Your customers will see a description of the
transaction on their bank statement indicating:
- Your business’ name, check number, settlement
date, amount
• Customers will no longer receive a cancelled check
back from their financial institution
Face to Face Debit/Credit Cards
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Transaction posted to database
Check secured in cash drawer
Check is imaged & verified in back office
Transactions sent downtown to verify
Deposits sent to bank
Savings
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Bank charges reduced
Deposit (float) earnings increased
Taxpayers checks processed quicker
Entities get their money faster
More personnel involved with error corrections
New equipment used by multiple departments
Selected Results
Any Office Can Do This
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Even small – mid size tax office
Limited or no IT support can be resolved
Do your homework: analyze costs & benefits
Evaluate alternate solutions
Good partners are essential
Look to your bank for help
Make a plan to implement in logical steps
Involve commissioners, budget, auditors
Rear View Mirror
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Next Generation expects it
Savings are significant
Security is greatly increased
Banking partner may demand it
Do you like your job?
Lessons Learned
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Not for faint of heart
Business processes changed
Quality vendor partners essential
Involve all stake holders early
Never enough testing
Happy hour is good
Two Quotes
• Only two things in life are certain, death and taxes,
and death never gets worse.
• INTAXICATION – Euphoria at getting a tax refund,
which lasts until your realize it was your money to
start with.