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Laundry Giant Soaks Clients for “Administrative Fee”

Bill Morris in Bricks & Bucks on July 26, 2017

New York City

Laundry Fee
July 26, 2017

David Baron, the president of Queens-based Metro Management, could not believe what he was reading. In a letter dated May 17, 2017, Mark Hjelle, the chief executive officer of CSC ServiceWorks, a conglomerate that provides laundry service to many New York City co-ops and condos, made a surprise announcement.

“Beginning this month,” Hjelle wrote, “you will see an Administrative Fee of 9.75 percent (or approximately 10 cents per day, per machine) deducted from your gross collections. This deduction will help to offset costs related to taxes, vandalism and applicable administrative and other costs.”

Baron was stunned. At some of the co-ops and condos he manages, the deductions in CSC ServiceWork’s monthly payments were more than $600. Baron’s first reaction was to review all of Metro Management’s contracts with CSC ServiceWorks to see if there was a clause that allowed the vendor to shave its agreed-upon monthly payments.

“I didn’t find any provision that gives them this authority,” Baron says. “Frankly, I can’t picture anybody entering into a contract that contains such a clause. The bottom line is that they’ve underpaid what’s in the contract. This is a money grab.”

Baron spoke with his CSC ServiceWorks sales representative, who, according to Baron, agreed with him that the power to deduct the fee is not in the contract. “We’re going to wait till next month to see if they’ve put the money back in,” Baron says.

CSC ServiceWorks, which bills itself as “the largest laundry equipment service provider in the United States,” did not respond to a request for a comment about Hjelle’s letter and the new fee. But the company’s website has a link that breaks down the 9.75 percent fee into three constituent parts:

Administrative Costs and Fees. These include “processes of billing, refund processing, website maintenance, clothing claim possession and commission check processing.”

Taxes. These include “taxes and processing of 1099 IRS forms, purchase taxes, sales taxes, VAT taxes, etc.”

Vandalism Fee. This covers “the administration and processing of vandalism cases and related external security costs and measures.” The website adds: “The Administrative Fee allows us to recover a portion of these costs in order to achieve an acceptable operating margin.”

CSC ServiceWork’s new fee has not gone unnoticed in the world of laundry service providers, whose contracts usually specify that a co-op or condo will receive a percentage of the gross receipts of the laundry room, or a flat monthly amount. “It’s a small industry and I’ve seen a copy of that letter,” says Denise Savino-Erichsen, president of Automatic Industries, a laundry provider that was begun by her parents 45 years ago and has grown into a significant player in the industry. “We have to get across to our customers that we don’t do this with added fees. You have to honor what you agreed to pay in the contract. This sounds like a way to burn a bridge.”

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