BILL ANALYSIS
AB 2781
Page 1
ASSEMBLY THIRD READING
AB 2781 (Leno)
As Amended April 18, 2006
Majority vote
JUDICIARY 6-3
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|Ayes:|Jones, Evans, Laird, | | |
| |Levine, Lieber, Monta?ez | | |
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|-----+--------------------------+-----+--------------------------|
|Nays:|Harman, Haynes, Leslie | | |
| | | | |
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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. Specifies which
rules apply for attorneys who also qualify as PCSCs.
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 a PCSC to include a notice of cancellation with
the contract and provides, at a minimum, the right of an
obligee to cancel a contract, as specified;
c) Permits an obligee to cancel a contract with a PCSC at
the end of any 12-month period with minimal collections, as
specified;
d) Limits a PCSC from collecting certain fees on wage
withholding payments, as specified, and current support
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payments;
e) Regulates advertisements by private support collectors
as specified;
f) Requires a 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 a PCSC to retain records as specified; and,
h) Prohibits, on or after January 1, 2007, a PCSC from
requiring that an obligee waive any right to file a civil
action, or agree to choice of forum or law outside of
California as a condition of providing services.
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 a PCSC or the identity of the person
who is obligated to pay the fee. 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. A 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.
5)Requires every child support order and every agreement for
support issued by a court on or after January 1, 2008, 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.
FISCAL EFFECT : None
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
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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. SB 339 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), pending in the
Assembly, to provide some, but by no means all, of the consumer
protections sought by SB 339. 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 California and across the nation, significant child support
arrears exist, 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
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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.
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, government agencies are
already pursuing. [Vicki Turetsky, Private Child Support
Collection Agencies , (CLASP, 2005).] Complaints against the
PCSC include:
1)Promising help with back support, but instead pocketing a fee
from ongoing monthly support.
2)Taking a cut of support collected by state child support
agencies.
3)Demanding payments from grandparents.
4)Coercing payments from noncustodial parents that are not owed
or authorized by state law.
The General Accounting Office (GAO) 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).]
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
PCSCs can charge and all regulate how PCSCs can operate.
Analysis Prepared by : Leora Gershenzon / JUD. / (916)
AB 2781
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319-2334
FN: 0013988