This question came in an email from retired Star-Bulletin editor, Chuck Frankel.
Kokua Line on Sept. 19 raised some interesting questions (which were not answered) about credit cards and real property taxes.
Why doesn’t the Honolulu real property tax bill say that the “conveniewwnce fee” is 2.49 percent?
What is the Official Payments Corp.? Local or mainland? Was this plan put out to bid? Do any the principals of this corporation or their spouses work for the present city administration, or the Mufi administration? If this 2.49 per cent what Zippy’s or other local businesses pay to Visa or other credit cards?
I would like to link to that Kokua Line column, but I can’t. One down side of the S-A’s digital edition is that it has been blocking some subscribers by mistake. I’m now one of those. Although they send me the daily e-edition via email, I can’t log on to read the online edition. It rejects my account, hence, no link.
Suffice it to say that answers given by the city were, well, unsatisfying. There is a 2.45% fee when using a credit card to pay real property taxes, although you can use the same credit card to pay your motor vehicle registration without any fee.
One part of the answer:
..while credit card payments for real property taxes are allowed for customer convenience, credit card payments for registering motor vehicles “was institute for efficiency and cost considerations.”
What a great dodge that was!
In any case, the credit card payment system was adopted in resonse to the City Council’s Resolution 08-176, which called for a report on progress towards implementing a credit card payment system.
That report was filed by the city’s Dept. of Budget and Fiscal Services on December 23, 2008.
The Budget and Fiscal Services Director believes there are more efficient and cost effective alternatives to the use of credit and debit cards for the payment of real property tax assessments. Most (if not all) financial institutions offer online and telephone bill payment services at no cost. Taxpayers would be afforded comparable convenience to paying their real property taxes by card on a City sponsored website free of charge and the City would save on administrative costs by avoiding the need to develop, implement and administer procedures for a new payment source. In contrast, the City would probably engage a third party service provider to administer payments by card. Such a provider would charge a convenience fee of, on average, 2.49%, not including any City administrative costs, of the payment amount. That convenience fee would either be passed on
to the taxpayer or absorbed by the City.
The electronic payment program was finally implemented in January 2010, according to a description filed with the council.
One way to avoid paying a percentage fee is to pay with “electronic check,” which has a flat fee of $3.30 for any amount up to $10,000. The same $10,000 payment by credit card would rack up a fee of $249.
Ah, and here’s an interesting nugget of information:
• The Program is coordinated with the City’s current credit card processing contract with
First Hawaiian Bank.• Official Payment Corporation (OPC), an authorized vendor of First Hawaiian Bank, will process the electronic payments.
OPC is described as “a leader in e-payment processing and collects payments for the IRS, TurboTax, 3,000 municipalities, and 27 states.”
According to the company web site:
Official Payments is a wholly owned subsidiary of Tier Technologies, of Reston, VA. Tier is a leading provider of transaction processing, business process outsourcing, and related solutions.
Tier Technologies is a publicly traded corporation (TIER). Here’s a list of its largest shareholders.
It isn’t clear how the payments are “coordinated” with the First Hawaiian Bank contract, or how much of the 2.49% fee ends up with First Hawaiian, if any.
Also still unanswered is the question of how the motor vehicle registration payments manage to be processed without charging a “convenience fee.”
Of course, credit card fees charged by banks have been controversial, as has federal legislation to regulate those fees. First Hawaiian Bank is a member of the Electronic Payments Coalition, set up to fight regulation.
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Activist First Hawaiian bank sure gets rewarded left and right.
The city knows there are many struggling islanders who have a hard time paying bill.
The city’s response is allow islanders to borrow from credit card.
and now HECO charges $1.95 to pay electronically.
I really don’t understand why it is that people insist that the only way to pay for something is with a credit or debit card.
Once or twice a year, we might charge something on the Sears card and will pay that one in cash as soon as it comes in.
We pay all of our bills – eight regular ones – in cash or by check: Two landline phone bills, one cable bill, one cell phone bill, one long distance service bill, one water bill, one electric bill, one car payment bill. We buy postal money orders to pay the rent.
It takes about an hour to walk to the Satellite City Hall (the water bill), HECO (electric bill), WaveCom (long distance bill), First Hawaiian(the car payment & the two phone bills).
Another trip to Ala Moana Center & Sears takes about half an hour to pay the cable bill and the cellphone bill and, if needed, a Sears bill.
We have no bank-based credit cards – and haven’t had any since 1997 – so if we need to pay something on line, one of our friends orders it for us and we pay him as soon as the product arrives and checks out okay.
Several months ago, we ordered a couple of debit cards from two local banks where we have our four account, but I put them away in a drawer so that we wouldn’t be tempted to spend money on STUFF. We’ve agreed that these cards would only be used in really serious emergencies as well as for plane tickets.
Paying in cash for restaurant meals, clothing, theatre tickets, etc., really does make us think twice about blowing away our limited funds.
@cwd You are in a good position to have cash in the bank for all your needs.
Many people do not. They live on credit and paycheck to paycheck.
Hawaii is a very expensive state to live in. Many people work two or more jobs to keep up with the cost of living.
It’s sad to see people working their butts off and seeing how corrupt the government is. They keep spending foolishly and raising the taxes, user fees, utilities, water, sewers.
People are so busy trying to feed mouths; they don’t have time and energy to fight back and hold corrupt politicians accountable.
That’s the real life out there.
I approved this comment but have to take immediate issue with the idea that government is “corrupt” because costs are rising.
Does Poor Mouse think that paying for sewer service, water service, roads and other services is “spending foolishly”?
Government spending has been cut back over several years, which is why many services are so poor, and we’re stuck with emergency upgrades needed for sewers, water, etc. That’s not corruption. It’s the state of the world economy.
Let’s not confuse “corruption” with all the things we’re unhappy with.
If I recall correctly, the City’s Customer Services department (which also handles vehicle registration) has a standing contract with a vendor to process online credit card payments for motor vehicle registrations.
It probably makes sense for CSD to have a standing contract is because of the high volume of transactions.
Most people on Oahu have mortgages on their properties and their property taxes are paid by their servicer therefore it’s very likely that there are relatively few online transactions for RPT payments. If the Treasury were to enter into a contract and pay for the transaction fee it would ultimately increase the department’s cost – which would have to be offset by cuts elsewhere or a tax increase (albeit a minuscule one).
Why would a contract for credit card processing have to be split up by department? Couldn’t they be combined as a city-wide contract?
I’m using my card as a debit,so the money is immediately (within 24 hours) transferred directly from my account. So what is the charge for ? No human is involved.
My opinion:
Use of debit cards is costly and dangerous, credit cards are OK if they charge no up-front fees or interest.
I always pay government for taxes, licenses or fines by personal check so I have a record of payment and I walk payment into the office if return is out of state as Hawaii County now does real property taxes that are mailed to Seattle.
Does the fee paid by the property owner match up to the actual costs of the transaction?
Hahahahaha.
Look at Ian’s example of the $10k prop tax and $249 fee. Does it cost more to pay a $10k prop tax compared to a $2k prop tax?
Obviously not.
Here’s a concept: fees should be levied to cover actually costs.
Ian – You raise a good point. I think the reason for the various contracts is due to the fact that each department’s implementation of its respective on-line payment system has occurred sporadically. Perhaps it is time to consider a unified City system. Of course that would take away from the autonomy of the interested departments – which is unlikely to go without protest..
As far as the other comment regarding the fee structure: that’s how the credit card processors all work – % of transaction value. Part of the reason most small stores have a minimum amount to use credit/debit cards.
I picked up on your lack of access to the SA’s digital edition — I cannot login either! It’s been that way for a few weeks — I thought it was just me, but now it appears to be something else. Guess I need to call them or something.
Re: charging for credit cards or online payments — I really, really dislike this practice. It’s easier for all involved to take direct payments via electronic means than to process a check. And yet they charge me for ease, rather than charge me for the laborious paper method. I don’t get it.
I believe that the practice of applying surcharges or convenience fees is generally expressly prohibited by both the MasterCard and Visa merchant agreements.
Generally, they do not allow surcharges or convenience fees that are not equally applied to other forms of payment.
Visa’s rules further stipulates that it must be a flat or fixed fee, and it must be processed as a separate transaction.
I’d like to know if there is something I’ve missed in the governing merchant agreements, or overriding legislation that exempts them from compliance.
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MasterCard Rules
5. Merchant Sales and Transactions
5.11 Prohibited Practices
5.11.2 Charges to Cardholders
A Merchant must not directly or indirectly require any Cardholder to pay a surcharge or any part of any Merchant discount or any contemporaneous finance charge in connection with a Transaction. A Merchant may provide a discount to its customers for cash payments. A Merchant is permitted to charge a fee (such as a bona fide commission, postage, expedited service or convenience fees, and the like) if the fee is imposed on all like transactions regardless of the form of payment used, or as the Corporation has expressly permitted in writing. For purposes of this Rule:
1. A surcharge is any fee charged in connection with a Transaction that is not charged if another payment method is used.
2. The Merchant discount fee is any fee a Merchant pays to an Acquirer so that the Acquirer will acquire the Transactions of the Merchant.
MasterCard Rules 2011
Visa International Operating Regulations
6. Payment Acceptance
Card Acceptance Prohibitions
Surcharges 5.1.C (Updated)
A Merchant must not add any surcharges to Transactions, unless local law expressly requires that a Merchant be permitted to impose a surcharge. Any surcharge amount, if allowed, must be included in the Transaction amount and not collected separately.
A variance applies in the U.S. Region for the Visa Tax Payment Program.
6. Payment Acceptance
Tax and Other Government Payments
Tax Payment Program Merchant Convenience Fee Requirements – U.S. Region 5.2.E
In the U.S. Region, a Tax Payment Program Merchant may charge a Convenience Fee for processing a Tax Payment Transaction if the Convenience Fee:
• Is a fixed or flat amount regardless of the value of the tax payment
• Charged for a Visa Transaction is not greater than any fixed or flat fee charged for a transaction with any other payment card
• Is clearly disclosed before the completion of the Transaction and the Cardholder is given the opportunity to cancel
Tax Payment Program Fee Processing Requirements – U.S. Region 5.2.E
In the U.S. Region, a Tax Payment Program Merchant that charges a Convenience Fee must process the Convenience Fee amount as a separate Transaction.
Visa International Operating Regulations 2011