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Private child support collection companies typically take 25-40 percent of all collections meant for families, including current support payments and payments collected by state agencies. Custodial parents who thought they would get additional help collecting past-due support have complained: "They have only managed to help themselves and pay themselves for their services with money I would have gotten without their help... I am worse off financially now with their so-called help." Moreover, many of the contracts used in the industry restrict the ability of custodial parents to terminate the contract.
Title III would make these problems worse. Giving for-profit collection companies access to enforcement tools such as the tax refund intercept would only increase their ability to take a large cut of child support payments actually collected by state agencies for children.
Noncustodial and custodial parents, employers, and state child support agency employees all have complained about the collection practices of some private child support collection companies. Complaints include deception (e.g., falsely representing oneself as a state child support agency employee or law enforcement officer, threatening arrest without authority, making up or altering wage withholding orders and presenting them as court orders); harassment of the alleged obligor, his family and/or employer; demands that noncustodial parents or employers send money directly to the collection company, despite court orders or statutes requiring that payments be made to a court or state agency; and erroneous demands for payment that cannot be resolved because company representatives cannot be reached.
Title III would allow states to give for-profit collection companies access to enforcement tools now limited to government agencies, including intercepting federal tax refunds, unemployment compensation withholding, and passport sanctions. With these tools available, the potential harm from erroneous actions would be increased. Even states that choose not to adopt the options still will have to deal with the consequences, including potential complaints from their citizens about harassment by companies from other states, unjustified interception of a resident's tax refund because of an erroneous action by a company based in another state, and increased difficulty in tracking payments, especially in interstate cases.
H.R. 4469 would give states the option of providing private collection companies -- indeed, any individual seeking to establish or collect child support -- access to information in the State Directory of New Hires, through data matches in the Federal Parent Locator Service, and bank account information from private financial institutions across the country.
Under Title III, responsibility for adopting and implementing privacy protections would be left to individual states. Just verifying that an individual, company, or agency is seeking the information for child support purposes will be difficult or impossible, as will ensuring that companies do not use the information for other purposes. States that choose not to allow private companies access to information will not be able to protect the privacy of their citizens, since companies will be able to request information from these national databases through a more lenient state.
Recent child support reforms have given state child support programs increased access to information and new enforcement tools, subject to strict confidentiality and due process requirements. These tools are starting to make a difference; collection rates in non-welfare cases with support orders (the type of case handled by most for-profit companies) are between 70 and 80 percent in the top performing states. Title III would weaken the federal/state child support program at a time when single mothers struggling to achieve or maintain self-sufficiency need it more than ever.
- The proposals would increase the burdens on employers, whose cooperation with child support enforcement is critical. Recent reforms have standardized and centralized the child support enforcement system, making it easier for employers to verify and comply with wage withholding. Encouraging the growth of multiple private companies will re-fragment the system and increase the risk of abuse, discouraging employer cooperation.
- Allowing for-profit companies access to confidential information in government data bases is likely to result in a privacy backlash and the possible elimination of those data bases for public as well as private child support enforcement work.
- Title III would divert the resources of state child support agencies from their core mission -- helping families collect all of the child support they are due -- to assisting and regulating for-profit collection companies. Services for the families remaining in the public system, who are likely to be among the poorest, may deteriorate, making it harder for agencies -- and families -- to secure the resources they need.
June 2000
