Here is a case example of how one city in America mishandled its municipal bill payments during the COVID-19 pandemic, leaving citizens paying up to $1.2 million worth of processing fees for online bill pay. While you may not be a resident of this specific city, the matter is still important. Other cities may face similar challenges in the future and changes must be implemented so this issue is not repeated in other areas of America.
Worcester’s City Hall closed its doors during the COVID-19 pandemic and instructed its residents to make their municipal bill payments online or by mail directly to People’s United Bank. People’s United Bank is a third-party vendor that charges fees for each bill payment. For context, when Worcester’s City Hall is open, residents can make their payments in-person or by mail directly to the city, which does not incur fees.
Citizens of Worcester, Massachusetts, paid roughly $37 million worth of bill payments from March 2020 through January 2021. These bill payments covered personal property tax, real estate tax, sewer and water as well as other municipal bill payments. This totals to anywhere from $11,350 to $1.2 million worth of processing fees paid to People’s United Bank.
People’s United Bank has not provided the total amount of fees collected while Worcester’s City Hall was closed. The $11K-$1.2M range is provided by the following estimation:
The bank charges anywhere from $0.25 to $1,000 per online transaction, depending on the amount of the transaction and form of payment – i.e. debit card, credit card, electronic check. Paying by electronic check incurs a flat $0.25 fee whereas paying by a Visa debit card is a flat $3.95 fee. All other payment methods including Visa credit, MasterCard debit and credit, American Express and Discover are determined by the amount of the transaction and can go all the way up to $1,000.
There were 45,403 total online bill payment transactions made while Worcester’s City Hall was closed. The average municipal bill payment was $813. If an $813 payment was made by any of the “other” payment methods listed above, a $27.50 fee would be incurred for that single transaction.
A public records request with the City of Worcester was made for any communication between the city and bank regarding processing fees for bill payments during the time periods City Hall was closed. Worcester responded to this records request and indicated that there is no record of such communication, solidifying that the matter was never considered in the first place.
It is alarming to find that a city did not consider additional costs incurred as a result of their actions to close City Hall. Preventative measures to protect residents against paying extra fees should had been taken before the decision to close doors was made.
A city councilor recently filed an agenda item for their next council meeting requesting the city to provide a bill payment service that does not leave citizens paying processing fees with their bill payments.
Overview by Sophia Gonzalez, Research Analyst, Debit Advisory Service at Mercator Advisory Group.
