Electronic Payment Processing Tarrant County Tax Office

Electronic Payment ProcessingElectronic Payment Processing

Tarrant County Tax OfficeTarrant County Tax Office

Tarrant County Tax OfficeTarrant County Tax Office

• Working with 1.75 million citizensWorking with 1.75 million citizens• 181 employees in tax office181 employees in tax office• Eight locations county wideEight locations county wide• Serving over 800,000 property accountsServing over 800,000 property accounts• Register about 1.5 million cars each yearRegister about 1.5 million cars each year• Over $3 billion in tax collections each yearOver $3 billion in tax collections each year• Over $300 million in motor vehicle collections per yearOver $300 million in motor vehicle collections per year• Answer over 35,000 calls per monthAnswer over 35,000 calls per month

Tax Office CollectionsTax Office Collections

Property Tax & Motor VehicleProperty Tax & Motor Vehicle

Payment OptionsPayment Options

• Cash – Still a popular payment methodCash – Still a popular payment method• Checks – Traditional method favored by Seniors Checks – Traditional method favored by Seniors • Credit Cards – Growing but expensiveCredit Cards – Growing but expensive• E checks (ACH) – fastest growth, favored by younger E checks (ACH) – fastest growth, favored by younger

tax payertax payer• CSR – Many like to talk to someone to payCSR – Many like to talk to someone to pay• Next – Payments by Phone/PDANext – Payments by Phone/PDA

Payments by TypePayments by Type

Why Did We Change?Why Did We Change?

• Cash and checks are hard to handleCash and checks are hard to handle

• Buried in paper & old processesBuried in paper & old processes

• Taxpayer wants itTaxpayer wants it

• Staff / budgets – more with lessStaff / budgets – more with less

• Risks of handling millions of dollarsRisks of handling millions of dollars

• Bank requirementsBank requirements

• I like being Tax Assessor / CollectorI like being Tax Assessor / Collector

What Have We Done?What Have We Done?

2001 – Credit cards on line2001 – Credit cards on line

2002 – ACH transfers to pay entities2002 – ACH transfers to pay entities

2003 – Lock Box with ARC2003 – Lock Box with ARC

2004 – E-Checks on line2004 – E-Checks on line

2007 – Hybrid ACH & Ck21 – the big one2007 – Hybrid ACH & Ck21 – the big one

2008 – Face to face credit cards2008 – Face to face credit cards

2010 – eLock Box for bank checks2010 – eLock Box for bank checks

What are theWhat are theElectronic Deposit Options?Electronic Deposit Options?

• Account Receivable Conversion (ARC) – convert or Account Receivable Conversion (ARC) – convert or truncate data on check to a data file & send to bank truncate data on check to a data file & send to bank electronicallyelectronically

• Image Cash Letter (ICL) – image check front & back Image Cash Letter (ICL) – image check front & back to send to bank electronically; may be referred to as to send to bank electronically; may be referred to as Check 21Check 21

• A combination or hybrid system – ARC & ICLA combination or hybrid system – ARC & ICL

Electronic Check DepositsElectronic Check Deposits

• You are going to need a scanner(s)You are going to need a scanner(s)• Verifying data is criticalVerifying data is critical• Statement must provide noticeStatement must provide notice• Scan check and dataScan check and data• Store paper checksStore paper checks• Destroy paper checksDestroy paper checks• Manage check images for office useManage check images for office use

Hybrid SolutionHybrid Solution

• ARC & ICL CombinedARC & ICL Combined– Image of check (front & back) is createdImage of check (front & back) is created– Check data obtained from checkCheck data obtained from check

• Both files sent to bankBoth files sent to bank

• Bank determines if check can be sent as image or Bank determines if check can be sent as image or data file data file

ACH – Where did it start?ACH – Where did it start?

ACHACH - Automated Clearing House - Automated Clearing House- Electronic transfer of funds and information- Electronic transfer of funds and information- Idea started in early 1970s in California- Idea started in early 1970s in California

NACHANACHA - National Automated Clearing House - National Automated Clearing House Association, began in 1974Association, began in 1974- Oversee the ACH movement nationwide- Oversee the ACH movement nationwide- Regional Payment Associations oversee the ACH - Regional Payment Associations oversee the ACH

movement in their area (SWACHA)movement in their area (SWACHA)

Check 21 and September 11, 2001Check 21 and September 11, 2001

• September 11, 2001, changed everythingSeptember 11, 2001, changed everything

• On October 28, 2004, the Check Clearing for the On October 28, 2004, the Check Clearing for the 21st Century Act, more commonly known as 21st Century Act, more commonly known as Check 21, became lawCheck 21, became law

• Creates a legal equivalence of the original check Creates a legal equivalence of the original check and a substitute checkand a substitute check

• The Federal Reserve’s objectives:The Federal Reserve’s objectives:– Facilitate check truncation and promote the use of Facilitate check truncation and promote the use of

electronicselectronics– Foster innovation without mandating receipt of imagesFoster innovation without mandating receipt of images– Improve overall efficiency of the nation’s payments Improve overall efficiency of the nation’s payments

systemssystems

Check 21-ICL (Image Cash Letter)Check 21-ICL (Image Cash Letter)

• Check processing & electronic transmission to collect Check processing & electronic transmission to collect instead of sending paper checks (cash letter) to the instead of sending paper checks (cash letter) to the Fed or Clearing HouseFed or Clearing House

• Checks are imaged; thus, checks are not returned to Checks are imaged; thus, checks are not returned to the customer from bankthe customer from bank

• If cancelled check is needed, bank can provide an If cancelled check is needed, bank can provide an image of the checkimage of the check

• Check 21 is the check world, NOT to be confused Check 21 is the check world, NOT to be confused with ACHwith ACH

Conversion

Truncation

ACH: ARC/POP/RCK

Image Exchange: Substitute Checks

Check conversion and check truncation — partners for the future

• Check Check conversionconversion transforms a check to electronic settlement - NACHA transforms a check to electronic settlement - NACHA worldworld

• Check Check truncationtruncation transforms a check to an image-enabled electronic transforms a check to an image-enabled electronic transaction for settlement - Check worldtransaction for settlement - Check world

ACH - CHECK 21ACH - CHECK 21

Substitute Check OverviewSubstitute Check Overview

• A substitute check is the legal equivalent of the original A substitute check is the legal equivalent of the original check for all purposescheck for all purposes- Contains legible image of front and back of check- Contains legible image of front and back of check- Conforms to industry standards (MICR, physical characteristics of - Conforms to industry standards (MICR, physical characteristics of

check)check)- Includes all endorsements- Includes all endorsements

RequirementsRequirements

• Notice must be provided prior to consumer Notice must be provided prior to consumer writing checkwriting check

• Must provide opt-out optionMust provide opt-out option• Must be machine-readMust be machine-read• Source document must be destroyed within 14 Source document must be destroyed within 14

daysdays• Retain copy of front of source document for two Retain copy of front of source document for two

years years

BenefitsBenefits

• Improved collectionsImproved collections• Additional re-presentmentsAdditional re-presentments• Faster notification of returnsFaster notification of returns• Timing of payment can be selectedTiming of payment can be selected• Reduction in costsReduction in costs

- Transport fees, lockbox locations, processing fees- Transport fees, lockbox locations, processing fees- Image of check readily available - Image of check readily available

What Checks can be Converted?What Checks can be Converted?

• Consumer size checksConsumer size checks• $25,000 or less$25,000 or less• Business size checks that do not have the auxiliary Business size checks that do not have the auxiliary

on-us field in MICR lineon-us field in MICR line• Contain a pre-printed serial or check numberContain a pre-printed serial or check number• Completed and signed by the customerCompleted and signed by the customer• Bank can be a big part of managing thisBank can be a big part of managing this

Opt-Out RequirementsOpt-Out Requirements

• Consumer must have the ability to opt outConsumer must have the ability to opt out

• Consumer must tell company each time check is Consumer must tell company each time check is presented that they do not want their check presented that they do not want their check convertedconverted

• Company is not obligated to accept the check, can Company is not obligated to accept the check, can suggest alternative payment methodsuggest alternative payment method

• Opt out is good for one time onlyOpt out is good for one time only

Copy/Retention of CheckCopy/Retention of Check

• Company is required to retain a legible image or Company is required to retain a legible image or copy of the front of the check for two yearscopy of the front of the check for two years

• Company must use commercially reasonable Company must use commercially reasonable methods to securely storemethods to securely store- All checks until destruction- All checks until destruction- All related banking information- All related banking information

• Note: there is no destruction requirement unlike the Note: there is no destruction requirement unlike the 14 days for ACH 14 days for ACH

How Will This Affect Customers?How Will This Affect Customers?

• Customers will see notices of check conversion at Customers will see notices of check conversion at the point of salethe point of sale

• Funds may be debited from the check writer’s Funds may be debited from the check writer’s account more quickly than through a paper check account more quickly than through a paper check clearing processclearing process

• Your customers will see a description of the Your customers will see a description of the transaction on their bank statement indicating:transaction on their bank statement indicating:

- Your business’ name, check number, settlement - Your business’ name, check number, settlement date, amountdate, amount

• Customers will no longer receive a cancelled check Customers will no longer receive a cancelled check back from their financial institutionback from their financial institution

Face to Face Debit/Credit CardsFace to Face Debit/Credit Cards

• Transaction posted to databaseTransaction posted to database• Check secured in cash drawerCheck secured in cash drawer• Check is imaged & verified in back officeCheck is imaged & verified in back office• Transactions sent downtown to verifyTransactions sent downtown to verify• Deposits sent to bankDeposits sent to bank

SavingsSavings

• Bank charges reducedBank charges reduced• Deposit (float) earnings increasedDeposit (float) earnings increased• Taxpayers checks processed quickerTaxpayers checks processed quicker• Entities get their money fasterEntities get their money faster• More personnel involved with error correctionsMore personnel involved with error corrections• New equipment used by multiple departmentsNew equipment used by multiple departments

Selected ResultsSelected Results

Any Office Can Do ThisAny Office Can Do This

• Even small – mid size tax officeEven small – mid size tax office• Limited or no IT support can be resolvedLimited or no IT support can be resolved• Do your homework: analyze costs & benefits Do your homework: analyze costs & benefits • Evaluate alternate solutions Evaluate alternate solutions • Good partners are essentialGood partners are essential• Look to your bank for helpLook to your bank for help• Make a plan to implement in logical stepsMake a plan to implement in logical steps• Involve commissioners, budget, auditorsInvolve commissioners, budget, auditors

Rear View MirrorRear View Mirror

• Next Generation expects it Next Generation expects it • Savings are significantSavings are significant• Security is greatly increased Security is greatly increased • Banking partner may demand itBanking partner may demand it• Do you like your job? Do you like your job?

Lessons LearnedLessons Learned

• Not for faint of heartNot for faint of heart• Business processes changedBusiness processes changed• Quality vendor partners essentialQuality vendor partners essential• Involve all stake holders earlyInvolve all stake holders early• Never enough testingNever enough testing• Happy hour is goodHappy hour is good

Two QuotesTwo Quotes

• Only two things in life are certain, death and taxes, Only two things in life are certain, death and taxes, and death never gets worse.and death never gets worse.

• INTAXICATION – Euphoria at getting a tax refund, INTAXICATION – Euphoria at getting a tax refund, which lasts until your realize it was your money to which lasts until your realize it was your money to start with.start with.