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Thanks to everyone who has responded so far!

Several people have suggested checking the item in and then deleting it.  
Unfortunately, that would reduce the bill to the amount of the fine.  We
have "Check-in of billed item" set to use the fine because we do not have
a billing fee.  Even if we chose to use the billing fee, there does not
seem to be any way to charge the actual cost of the item.  In fact, using
"Mark lost items" fixes that part of the problem -- it checks in the item,
changes its status to Lost, and charges the patron the cost of the item.  
However, it does not remove the replacement charge that was generated by
the overdue bill, so the patron is getting charged twice.  Maybe the best
solution is to put in an enhancement request for changing (or giving
libraries the option to change) how "Mark lost items" works.

We are discussing using a collection agency, which would theoretically
reduce the number of items that would need to be set to lost.  I doubt
that this problem will go away completely, however.

Thanks again,
  Fran Juergensmeyer
  Waukegan (IL) Public Library
  fjuergen@xxxxxxxxxx