COVINGTON - The city of Covington has suspended its contract with check guarantor CheckCare out of Warner Robins, citing a potential breach of contract.
CheckCare was hired in April as the collecting agency and guarantor of payment for bad checks received by the city.
The terms of the contract indicate that CheckCare is to receive and process all checks for the city for a transaction fee, make payments to the city for bad checks and then act as collection agency to recoup the owed money.
However, those terms are not being met, Administrative Services Director Ronnie Cowan said.
It appears the city is only sending CheckCare bad checks, and CheckCare is now only making payments to the city on debt that has been collected.
"They are only returning what they collect, which is not the terms of the contract," Cowan said.
"Something's not working the way it's supposed to," he said.
Further, there are large discrepancies in city and CheckCare records. As of Jan. 7, the city had $59,000 in outstanding checks, of which CheckCare is holding $51,000.
CheckCare reports making payments on approximately $21,000, but the city has no record of that, Cowan said.
CheckCare is also reporting it has not received an additional $12,000 in checks sent by the city.
Also, CheckCare is withholding payment of approximately $17,000.
"They're basically throwing some things into a non-qualified category, which means they're not guaranteeing payment on those," Cowan said.
The city council agreed Monday night to terminate services with CheckCare and pursue any necessary legal action.
However, Cowan said Friday he plans to meet with CheckCare representatives and allow them to address the problems before taking legal action.
He said service has been suspended, with the city handling bad debt in-house temporarily.
"I think we can get it straightened out," he said.
Outstanding checks have increased dramatically year to year, particularly since CheckCare was hired, Cowan said.
From April to December 2006, the city reported about $5,600 in bad checks, and about $11,000 in 2007.
From April 2008, when CheckCare was hired, to December 2008, the amount rose to $76,000.
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