BILL ANALYSIS
AB 2781
Page 1
Date of Hearing: April 4, 2006
ASSEMBLY COMMITTEE ON JUDICIARY
Dave Jones, Chair
AB 2781 (Leno) - As Introduced: February 24, 2006
SUBJECT : Private Child Support Collection Agencies: Consumer
Protections
KEY ISSUES :
1)SHOULD THE PRIVATE CHILD SUPPORT COLLECTORS ACT BE ENACTED IN
ORDER TO PROVIDE NEW CONSUMER PROTECTIONS TO BETTER PROTECT
THE INTERESTS OF CHILDREN RECEIVING CHILD SUPPORT IN
CALIFORNIA?
2)SHOULD SUPPORT ORDERS REQUIRE THAT OBLIGOR PARENTS SHARE THE
COST OF COLLECTION OF SUPPORT IF, AS THE RESULT OF THE OBLIGOR
PARENT'S NONPAYMENT OF SUPPORT, A PRIVATE CHILD SUPPORT
COLLECTOR (PCSC) HAS TO COLLECT THE SUPPORT?
SYNOPSIS
The bill, sponsored by the Children's Advocacy Institute and the
National Center for Youth Law, seeks to protect children's
interest in child support by providing new consumer protections
regarding the collection of child support by private child
support collection agencies. Additionally, support orders
entered on or after July 1, 2007 will require that collection
fees, if any, be paid equally by obligor and obligee parents.
This bill is intended to protect individuals who contract with
private child support collection agencies to collect child
support they are owed. There have been increasing complaints
about these businesses from both obligor and obligee parents,
including charging excessive fees, using inappropriate
collection methods, using misleading advertising, and failing to
disclose important rights forfeited by child support obligees
when they assign these debts to private companies. This bill
seeks to prevent such problems by specifying what the collectors
may do and who must pay their fees.
This bill seeks to provide much, though not all, of the
comprehensive regulatory scheme for private child support
collectors envisioned by 2004's SB 339 (Alpert), which was
vetoed by the Governor. This bill does not include provisions
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that were specifically the subject of the Governor's veto
message for SB 339. This bill also provides significantly
greater protections for consumers than SB 896 (Runner), which
this Committee may consider later this year. Consumers Union,
writing in support, believes the bill will protect both obligor
and obligee parents and their children from unscrupulous
collection practices. Supportkids, a Texas-based PCSC, and the
Child Support Enforcement Council, an association of PCSCs
throughout the nation, oppose, contending that three provisions
in the bill arguably amount to fee caps, which they assert will
cause some PCSCs to stop providing services in California.
SUMMARY : Requires private child support collectors (PCSCs) to
comply with specified consumer protections. Specifically, this
bill :
1)Defines a "private child support collector" as a person,
corporation, attorney, or other nongovernmental entity who is
engaged by an obligee to collect court-ordered child support
for a fee or other consideration. A PCSC does not include
attorneys who deal with ongoing child support issues in the
course of representing a client in a family law matter, unless
their business is substantially comprised, as defined, of the
collection or enforcement of child support.
2)Requires a PCSC to meet some basic consumer protections in its
dealings with support obligees in contracting for the
collection of past due child support. Among other things,
this bill:
a) Requires contracts to provide specified information to
consumers.
b) Requires the PCSC to include a notice of cancellation
with the contract and provides, at a minimum, the right of
an obligee to cancel a contract within 15 business days of
execution of the contract, or if the PCSC commits a
material breach of any provision of the contract or a
material violation of any provision of the statute.
c) Terminates a PCSC contract with an obligee automatically
at the end of any 12-month period in which the total amount
collected is less than 50 percent of the amount scheduled
to be paid under a payment plan.
d) Prohibits a PCSC from collecting fees on (1) proceeds
from a withholding order on the obligor's employer that has
been in place for six months and has yielded six months'
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worth of withholding payments; and (2) current support
payments.
e) Regulates advertisements by private support collectors
as specified.
f) Requires the PCSC to issue a notice of collections to
the obligee by, at the option of the obligee, mail,
telephone or via secure internet access, as specified.
g) Requires the PCSC to retain records as specified.
h) Prohibits, on or after January 1, 2006, a PCSC from
requiring that an obligee waiver any right to file a civil
action as a condition of providing services. Any waiver of
the right to file a claim, including an agreement to
arbitrate, that is required as a condition of doing
business with the PCSC is deemed involuntary,
unconscionable, against public policy and unenforceable.
3)Prohibits a PCSC from engaging in any debt collection
practices that are prohibited by the Rosenthal Fair Debt
Collection Practices Act.
4)Prohibits a PCSC from misstating the amount of the fee that
may be lawfully paid to the PCSC or the identity of the person
who is obligated to pay the fee.
5)Prohibits a PCSC from making a false representation of the
amount of child support to be collected, or ask any party
other than the obligor to pay the child support obligation,
unless that party is legally responsible for the debt or is
the legal representative of the obligor. The PCSC is not in
violation of this prohibition if it reasonably relies on
information provided by the government entity, a court order,
the obligee, or the obligor as to the amount of the obligation
due and owing.
6)Requires every child support order and every agreement for
support issued by a court on or after July 1, 2007 to require
the obligor to pay one-half of the fee charged by a PCSC, if
support is collected by a PCSC on behalf of an obligee, and
any other collection costs expressly permitted by the order.
The fee may be collected by any remedy available to collect
child support, but is not considered child support.
EXISTING LAW :
1)Governs the collection of child support by local child support
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agencies. (Family Code Section 17000 et seq .)
2)Prohibits, through the Rosenthal Fair Debt Collection
Practices Act, debt collectors from engaging in a variety of
practices in collecting consumer debt. Among the practices
prohibited are: (a) Communicating with the debtor with such
frequency as to be unreasonable and to constitute harassment
to the debtor; (b) making a false representation that any
person is an attorney; (c) sending a communication which
simulates legal or judicial process. (Civil Code Sections
1788.10 - 1788.16.)
3)Does not include child support debt within the collection
practices of consumer debt. (Civil Code Section 1788.2.)
FISCAL EFFECT : As currently in print, this bill is keyed
non-fiscal.
COMMENTS : In 2004, in response to the growth in the private
child support collection industry, and the growing number of
consumer complaints, former Senator Dede Alpert brought SB 339
before the Legislature. That bill sought to regulate the
private child support collection industry to ensure that support
obligees, who were desperate to collect even some portion of the
past due support they were owed to help their children, were not
taken advantage of based on that desperation. The bill was
vetoed by the Governor. Last year, Supportkids, the largest
private child support collections agency in the country based
out of state in Texas, sponsored SB 896 (Runner) to provide
some, but by no means all, of the consumer protections sought by
SB 339. That bill has not yet been heard by this Committee.
This bill - AB 2781 - while similar in many ways to SB 896,
provides significantly more protections to children and families
than that bill, while still not providing all of the
comprehensive protections sought earlier by SB 339.
In support of this bill, the author writes that "there is very
little state and federal oversight" of PCSCs today; and, as a
result, "more parents, both custodial and noncustodial, are
complaining about some of the business practices of these
companies." This bill is necessary, the author states, to
protect consumers against unfair business practices, while still
ensuring they have access to private collectors as an
alternative to government agencies or private attorneys for
collection assistance.
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Industry practices demonstrate the need for consumer
protections . In California and across the nation, significant
child support arrears exists, and state child support agencies
that collect support at little or no charge for obligee parents
often have budget constraints that limit their effectiveness.
As a result, a number of private companies specializing in child
support debt collection have emerged, promising faster and
better results than the state child support agencies can
provide. PCSCs contract with obligee parents to collect their
child support arrears in exchange for a percentage of the
support collected. PCSCs generally take one-third of all
collections as their fee, but their fee can be even higher.
The Center for Law and Social Policy (CLASP) has been tracking
PCSC complaints for several years and recently released a report
on the industry:
Over the last decade, an unregulated industry has
grown rapidly, primarily around the internet, to
aggressively and sometimes deceptively market child
support collection services to mostly low-income,
often Hispanic, single mothers who can not afford an
attorney. Private child support collection companies
often fail to deliver any genuine services. Instead,
they strip income from low and moderate-income
families that could have been spent on housing,
childcare, clothing and school expenses, or saved for
their children's education, and trap them in perpetual
contracts. These companies exploit the child support
indebtedness of low and moderate-income non-custodial
parents through the use of predatory and abusive
tactics that increase their debt levels and often
destroy their credit histories. The business
practices of many private child support collection
companies undermine parents' participation in the
mainstream economy, deepen family distress, and
undercut recent social policy reforms that promote
work and family.
(Vicki Turetsky, Private Child Support Collection Agencies ,
(CLASP, 2005).) CLASP reviewed approximately 400 state consumer
complaints and lawsuits and found that PCSCs often use
misleading tactics and unclear contract terms to convince
families to assign child support debts that, in many cases,
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government agencies are already pursuing. Complaints against
the PCSC include:
Promising help with back support, but instead pocketing
a fee from ongoing monthly support;
Taking a cut of support collected by state child support
agencies;
Demanding payments from grandparents; and
Coercing payments from noncustodial parents that are not
owed or authorized by state law.
Adds CLASP: "The complaints reflect an offensive and disturbing
picture of deceptive advertising, misleading contracts, fee
gouging, harassment and abuse, posing as the government, dunning
grandparents, inflating and fabricating debts, undermining
creditworthiness, and abusing legal process."
The National Conference of State Legislatures (NCSL) has done an
extensive review of the practices of PCSCs and state responses
to those practices. NCSL reports numerous complaints from both
custodial and noncustodial parents, similar to those reported by
CLASP, including:
Written and oral communications with obligee parents
designed to look like communication with a state child
support agency;
Repeated harassment of employers, family and neighbors
of obligor parents;
Keeping as much as 50 percent or more of support
collected;
Keeping fees on support collected by state child support
agencies, including fees on current support; and
Refusing to terminate contracts.
The General Accounting Office did an in-depth study of PCSCs in
2002 and discovered that the private companies do no better as a
whole than state child support agencies, although they are able
to hand-pick their cases for profitability. (GAO, Child Support
Enforcement: Clear Guidance Would Help Ensure Proper Access To
Information and Use of Wage Withholding by Private Firms
GAO-02-349 (2002).)
The National Women's Law Center has found that PCSCs typically
take 25-40 percent of all collections meant for families,
including current support payments and payments collected by
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state child support agencies. "Many for-profit child support
collection companies take unfair advantage of custodial parents
and their children and engage in abusive collection practices
with non-custodial parents."
In one instance reported by Time magazine (August 29, 2002), an
Arizona-based PCSC collected a total of $1,100 after five
months' work, took $885 in fees, and left the custodial parent
and her daughter with just $215. The Time article also reported
that Supportkids, sponsor of SB 896, directed noncustodial
parents' employers to redirect wage-garnishment payments to the
PCSC, even when the PCSC played no role in the garnishment.
Another troubling practice alluded to by CLASP in its report was
the subject of a lawsuit. The court decision in Reno v.
Supportkids, Inc. (2004) U.S. Dist. Lexis 6459, described a
practice where the obligee, in contracting with the PCSC,
indicated the amount of child support due and owing was $13,589.
The PCSC communicated to the obligor that he owed $120,000, and
filed a lien against his home in the amount of $122,474.
Although the court decision centered around the appropriate
remedies available, this underlying fact does not appear to have
been contested (and defendants acknowledged the evidence that
they filed a lien in an inflated amount). In fact, the court
noted that the defendants did not remove the lien until one and
one-half years after the complaint was filed.
Traditionally, there has been very little state and federal
oversight of PCSCs. Unlike collectors of consumer debt, PCSCs
are not covered under the federal Fair Debt Collections
Practices Act or the California Rosenthal Fair Debt Collection
Practices Act. In response to consumer complaints and the lack
of government oversight, seven states have passed laws
regulating PCSCs. While the statutes vary, many limit fees that
the PCSCs can charge and all regulate how the PCSCs can operate.
Prior Legislative Efforts : In 2004, Consumers Union sponsored
SB 339 which sought to protect both obligees and obligors by:
1)Capping the amount of child support collections PCSCs could
retain as their own fee;
2)Defining the type of collections from which fees could be
retained;
3)Requiring specified disclosures in advertisements and
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solicitations;
4)Setting forth provisions that must be included in contracts;
5)Defining the opportunities for obligees to cancel a contract;
6)Subjecting PCSCs to the Rosenthal Fair Debt Collection
Practices Act;
7)Ensuring that PCSCs could not take a percentage of collections
attributable to actions of the government child support
entity;
8)Requiring PCSCs to send specified notices to the support
obligee, obligor and the local child support agency; and
9)Prohibiting the PCSC from misrepresenting itself, its rights
or the responsibilities of the obligor or others to pay past
due child support.
SB 339 was vetoed by the Governor. The veto message stated, in
pertinent part:
While I support ensuring parents are not taken
advantage of in securing child support payments, this
bill will have the effect of severely limiting a
consumer's choice to go to a private collection agency
when government efforts to collect the owed child
support falter. . . . I welcome many of the provisions
in this bill that would ensure families are protected
when they choose to contract with a private agency;
however the provisions such as capping the amount a
collection agency can charge and prohibiting a person
from contracting with a private collection agency when
they have received partial payment in the last six
months are particularly onerous to the industry and to
parents seeking choices.
In 2005, Supportkids, the nation's largest PCSC, brought SB 896
(Runner) to provide limited customer protections for obligors
and obligees. That bill was set to be heard last year by this
Committee, but was pulled at the request of the author and is
still in possession of this Committee. SB 896 would remedy some
of the complaints levied against PCSCs, but many other
complaints would not be resolved. It would help obligees to
make informed decisions when entering into a contract with a
PCSC and keep them informed of collections throughout the
contract. Although that bill would not limit the fees that
PCSCs can take, it requires disclosure so that obligees are more
likely to be able to determine if they are willing to pay that
much of their support collections to the PCSC. SB 896 would
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also seek to ensure a fairer playing field for obligor parents
by requiring PCSCs to comply with the fair debt collection
practices. However, many of the consumer protections provided
for in SB 339, well beyond those specifically mentioned as the
reason for the veto, are not included in SB 896.
This bill provides far more consumer protections than SB 896,
while still avoiding provisions that are likely to be vetoed .
This bill strives to remedy most, but still not all, of the
complaints levied against PCSCs. First and foremost, this bill
seeks to help obligees to make informed decisions when entering
into a contract with a PCSC. By ensuring that the contract
explains all of the fees that will be taken by the PCSC,
notifying obligees that government agencies provide similar
services free of charge, informing obligees of their right to
keep their cases open with government child support agencies,
limiting the authority of PCSCs to take as their fee a share of
collections that are almost completely attributable to the work
of others, and giving obligees the right to get out of the
contract if the PCSC breaches the contract or violates this
statute, this bill gives obligees more information to arm
themselves with when dealing with a PCSC. This bill also
requires disclosure so that obligees are more likely to be able
to determine if they are willing to pay that much of their
support collections to the PCSC or risk that they will get less
if they do not engage the services of the PCSC.
The notices to the obligee describing the collections made are
also a piece of the puzzle. Absent clear information describing
the collections made, and the fees retained, obligees were in a
position of guessing why they were receiving the money they did.
Common complaints about PCSCs revolve around the agency taking
fees from collections attributable to the actions of another.
By requiring the PCSC to notify the obligee of every collection
received, the allocation of the collection between the obligee
and the PCSC's fees, and the source of that payment, the obligee
hopefully will no longer be playing as much of a guessing game.
By making the PCSC affirmatively detail the actions it took that
resulted in a collection, hopefully the practice of taking a fee
from collections attributable to government agencies will be
lessened. These provisions are similar to provisions in SB 896.
As to its dealings with obligors, this bill also seeks to ensure
a fairer playing field. Among other things, a PCSC hopefully
could no longer engage in the behavior described in the Reno
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case, above. This bill would prohibit a PCSC from making a
false representation of the amount of child support to be
collected. In that case, the PCSC had information from the
obligee that the maximum amount of support owed was just over
$13,000. This bill would prohibit the PCSC from telling the
obligor that he owed more than that, and would prohibit the PCSC
from filing a lien against his house for $122,000. The bill
would also require PCSCs to comply with the fair debt collection
practices that other consumer debt collectors are subject to,
protecting obligors from overzealous PCSCs that call them in the
middle of the night, contact their relatives in an attempt to
extract payment from them, call their employers repeatedly,
simulate legal process to scare employers into redirecting
payments to the PCSC or otherwise seek to harass obligors and
others around them into paying the child support obligation.
Again, these provisions are also similarly included in SB 896.
However, this bill goes far beyond the protections provided in
SB 896 by also including the following additional, and very
important, consumer protections:
1. Terminates a contract if after one year the PCSC fails to
collect at least half of what was promised . Among the more
common complaints received about PCSCs is the virtual inability
to terminate a contract once executed. In addition to this
bill's right to cancellation within 15 business days of
executing the contract, this bill also requires that contract be
terminated after any 12-month period where collections are less
than 50 percent of what was due under a payment plan.
2. Limits fees that PCSCs may take on collections through wage
garnishment . While the veto message on SB 339 specifically
criticized an overall cap on PCSC fees, it did not criticize a
time-based limit on fees from wage garnishment collections. All
child support orders are required to have wage garnishments.
This is the easiest and most effective method of collecting
child support and can last for 18 years or even longer. While
effort is required to establish a wage garnishment, mostly
through location of the obligor's employer, once the garnishment
is put in place and paid upon, no further collection effort is
required as long as the parent continues the job and the
employer properly honors the garnishment. This bill
appropriately limits the ability of PCSCs to continue to take a
percentage of collections of recurring payments made pursuant to
wage garnishments to six months provided the wage garnishment
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has been in place with the same employer for that time and has
yielded six months' worth of payments. Such a provision should
reasonably compensate a PCSC for its efforts, without unduly
depriving a family of needed support.
3. Limits PCSCs to collecting past due support . This bill also
appropriately clarifies that PCSCs are only contracting to
collect past due support, and therefore are prohibited from
taking a percentage of any collection that is, in fact, current
support. This provision is the result of an increasingly common
complaint that the PCSC do not collect any more support than the
local agency is already collecting, but merely tap in to the
stream of ongoing support that is already being collected, and
take a percentage of that. Limiting fees to past due support
only hopefully will help ensure that PCSCs are not able to take
money that would, without their efforts, be going directly to
children.
4. Requires certain disclosures in advertisements and
solicitations . In response to complaints that PCSCs are
selecting names that confuse obligees into thinking they are
government agencies, this bill also appropriately requires all
advertisements and solicitations to indicate the PCSC is not a
government entity and charges a fee for its services. This bill
also requires specified disclosures in advertisements or
solicitations that should better inform parents of the type of
organization that is soliciting their business.
5. Requires the obligor to share in the PCSC's fee . Very
importantly, this bill will also, like Senator Alpert's earlier
reform proposal, require court orders to include a provision
making obligors responsible for one-half the fees if an obligee
needs to use the services of PCSC to collect past due support.
The bill also requires a notice be sent to the obligor
describing the amount of arrears, how the collections are
apportioned between arrears and fees, and notifying the obligor
of the right to file a motion to contest the collection of fees
and costs. Requiring the obligor to share in such fees fairly
divides the burden of the fee between the obligee and children
on one side, and the obligor on the other. This seems
particularly reasonable since it is the failure of the obligor
parent to pay support that has caused the obligee to seek
collection help from the PCSC.
6. Limits the ability of PCSCs to force consumers out of court .
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It appears that at least some PCSCs require that consumers, as
a condition of receiving services from the PCSCs, must waive
their right to pursue actions in court and must instead agree to
mandatory arbitration. Most of these provisions are buried in
long, standard forms written in small print, and the consumer is
unaware of the provision at the time of contracting. Moreover,
the consumer has no opportunity to negotiate the terms of the
provision, and, essentially, the purchaser can either accept the
mandatory arbitration clause, or not contract with the PCSC.
This bill would hold that no PCSC may require that an obligee
waive his or her rights to file a lawsuit as a condition of
receiving services.
Recommended author's amendments will provide even greater
consumer protections and ensure compliance with the Governor's
veto message . The following suggested amendments should not
only provide greater protections to obligee and obligor parents,
but should also help ensure adherence to the Governor's SB 339
veto message:
1. Avoid conflicts between the laws governing PCSCs and the
laws governing attorneys . While most attorneys are specifically
exempted from the definition of PCSCs, attorneys who have 50
percent or more of their business comprised of the collection or
enforcement of child support are specifically included within
the definition of a PCSC. Basically, these attorneys are acting
as PCSCs. As a result, there may be conflicts between this bill
and the rules governing attorney conduct. In order to avoid
such conflicts, and any unnecessary litigation that might
result, it is recommended that where the two conflict, the law
that affords the greatest consumer protection shall control.
That should ensure that parents and their children are given the
broadest protections available.
2. Replace automatic contract termination provision with
optional one . The bill proposes to automatically terminate a
contract, after any 12-month period, if the PCSC collect less
than half of the collections due under a payment plan. The
Governor's veto message, while mentioning only an automatic
six-month cancellation provision in SB 339, found issue with
"prohibiting a person from contracting with a private collection
agency when they have received partial payment." In order to
ensure compliance with the Governor's veto message and to allow
obligee parents to make appropriate decisions for themselves, it
is recommended that this cancellation provision be made
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optional, on the part of the obligee, and not automatic.
3. Limit the ability of PCSCs to force California consumers out
of California courts . It has been discovered that some PCSCs
require obligee parents contracting with them to agree to sue
the PCSC in only selected jurisdictions and be subject to the
laws of those jurisdictions. For example, the Supportkids
contract specifically requires parents, including California
residents, to bring any action against Supportkids in Travis
County, Texas only and requires the parents to be governed by
Texas law. These provisions are often buried in long, standard
forms written in small print, and the parent may be unaware of
the provisions at the time he or she signs the contract.
Moreover, the parent generally has no opportunity to negotiate
the terms of the provisions, and, essentially, can either accept
the forum and law selection clauses, or not engage the services
of the PCSC. If this is a standard of the industry, parents
must either accept the provisions or are prevented from using
PCSCs to help them collect support.
For parents on limited budgets, or seeking to bring relatively
small claims, the hardships imposed by forum and law selection
clauses will likely have the ultimate result of preventing them
from ever asserting their claims. The clauses therefore
effectively deny parents access to the courts, and therefore due
process. By contrast, the company that imposes such selection
clauses bears none of these burdens and would benefit greatly
from the burdens it seeks to impose on parents who would
otherwise consider suing it. That the clauses have such results
and disparate impact establishes their unconscionability. It is
therefore recommended such forum and law selection clauses be
deemed unenforceable in PCSC contracts.
4. Clarify standard for determining when collection is
attributable to PCSC . This bill proposes a standard for
determining who should collect fees when both the PCSC and the
government child support agency have assisted in the support
collection that is likely too high to be reasonable. It is
suggested that instead of the "almost completely" attributable
standard set forth on page 3, lines 24-25 and page 5, lines
28-29, the standard be changed to "primarily." This should
ensure that PCSCs will only be paid for their services if they
are primarily responsible for the collection.
5. Correct technical error in bill . Page 7, line 30 of the
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bill refers to the date January 1, 2006. That reference should
be changed to January 1, 2007.
With these amendments, this bill recognizes the importance of
putting in place strong - although without a cap on fees, not
comprehensive - consumer protections to ensure that support
obligees and obligors are treated more fairly when they exercise
their choice to contract with a private child support collection
agency in lieu of - or in addition to - using the service of
California's local child support agencies and that more support
gets to those who deserve it the most - the children.
ARGUMENTS IN SUPPORT : The Children's Advocacy Institute,
recognizing the importance of child support in providing
economic stability for children, believes that this bill will
"create a framework to protect families from unscrupulous
collections practices and will protect children."
Also in support, the National Center for Youth Law believes that
children and custodial parents suffer when they get "pulled into
perpetual contracts that end up resulting in more of any
collections going to the collectors than the children. We have
had parents report that they have entered into agreements with
PCSCs that upon promises of collecting child support arrears,
fees are ultimately taken from ongoing monthly support payments
. . . . This bill imposes nothing more on collection practices
than is necessary to ensure consumers have clear information and
protections in their agreements. Ultimately, this will mean
more child support collections get to the children who deserve
it."
Consumers Union writes in support of the bill:
The ultimate beneficiaries of AB 2781 will be
California's children for whom child support is owed.
This bill will also protect their parents. Parents
who need child support will be protected from losing a
portion of funds recovered through the efforts of a
government agency, from getting stuck in a long term
collection contract with a collector when payments are
not coming in as expected, and from being unable to
get accounting of payments from the collector.
Parents who owe child support payments will be
protected from harassing debt collection practices.
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ARGUMENTS IN OPPOSITION : The Child Support Enforcement Council
(CSEC), an association of PCSCs throughout the nation, states
that while they support many of the provisions of the bill, they
oppose provisions requiring automatic contract termination after
12 months with less than 50 percent collections, and preventing
collection of fees on current support and on the proceeds of
wage assignments after six months. CSEC argues that these
provisions are in essence subtle fee caps, because they restrict
the types of cases for which PCSCs may collect fees and limit
the duration of the contracts. As a result, CSEC suggests that
were this bill to become law "most private child support
enforcement agencies would rather not offer their services at
all than to lower their present high standards and high levels
of enforcement performance."
Supportkids opposes the bill for the same three reasons as CSEC.
Supportkids believes that as a result of the bill's provisions,
PCSCs "may no longer offer their services in this state, which
only hurts one group of people - those parents who so
desperately need their help." They argue that this is
particularly concerning because new federal budget cuts will
reduce federal funding for state child support programs and, as
a result, could result in reduced collections from state
agencies.
Two points are worth noting. First, this analysis recommends
making the automatic 12-month contract termination provision
optional and not mandatory, thus, assuming the proposed
amendment is taken by the Committee, addressing one of the
opponents concerns. Second, the author counters, the
limitations on when fees can be taken do not amount to a fee cap
at all, but simply protect obligee parents and their children
from being taken advantage of by unscrupulous PCSCs. Under this
bill, PCSCs may charge whatever fees they choose, but only on
support collected due to actual efforts by the PCSC. Finally,
as was noted above, the GAO reports that PCSCs perform no better
than government agencies which offer their services at little or
no charge.
One individual opposes the requirement that PCSC fees be split
between the obligor and obligee, arguing that, without a fee
cap, this requirement could result in higher overall fees, as
well as more fees and support being "siphoned away from
struggling families."
AB 2781
Page 16
Prior Legislation : SB 896 (Runner), currently in this
Committee, would provide limited consumer protections against
PCSCs.
SB 339 (Alpert), vetoed by the Governor in 2004, would have
regulated the business of PCSCs, including capping fees that may
be assessed.
AB 656 (Corbett), Chapter 319, Statutes of 2004, would have
required court orders to provide that costs for enforcement of
unpaid support obligations shall be borne by the support
obligor; provisions incorporated into SB 339; gut and amend in
the Senate.
AB 1630 (Sweeney, 1998), would have required private child
support collection agencies to make various disclosures in
brochures and advertisements; gut and amend in the Assembly.
Vetoed.
REGISTERED SUPPORT / OPPOSITION :
Support
Children's Advocacy Institute (sponsor)
National Center for Youth Law (sponsor)
California NOW
Consumers Union
Opposition
Child Support Enforcement Council
Supportkids
One individual
Analysis Prepared by : Leora Gershenzon / JUD. / (916)
319-2334