BILL ANALYSIS
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|SENATE RULES COMMITTEE | SB 896|
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THIRD READING
Bill No: SB 896
Author: Runner (R)
Amended: 5/10/05
Vote: 21
SENATE JUDICIARY COMMITTEE : 4-0, 5/3/05
AYES: Dunn, Ackerman, Figueroa, Kuehl
NO VOTE RECORDED: Morrow, Cedillo, Escutia
SUBJECT : Private child support collection agencies:
consumer
protections
SOURCE : Supportkids, Inc.
DIGEST : This bill requires private child support
collectors (PCSCs), as defined, to comply with some basic
consumer protections to ensure that child support obligees
have clear information about the contract they are entering
into, have some basic rights to cancel the contract,
receive meaningful notice of collections made and the
amount of the collections kept by the private agency as its
fee, require PCSCs to follow the debt collection practices
that apply to collectors of other types of consumer debt,
and provide remedies when PCSCs do not comply with these
requirements.
ANALYSIS : Existing law governs the collection of child
support by local child support agencies. [Section 17000 et
seq. of the Family Code]
CONTINUED
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This bill requires a PCSC to meet some basic consumer
protections in its dealings with the support obligees in
contracting for the collection of past due child support.
Among other things, this bill:
1. Defines a PCSC 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.
2. Requires contracts to be in 10-point type and disclose
all of the following: (a) the fees imposed by the
contract and an example of how they are calculated, (b)
a statement that the amount of fees to be charged is set
by the agency and is not set by state law, (c) the
nature of services to be provided, (d) the expected
duration of the contract, (e) how the contract may be
canceled, (f) the address and other access information
for the PCSC, (g) that the PCSC is not a government
entity, and government child support agencies in
California provides services for no charge, (h) that the
PCSC may not take a fee from collections that are
primarily attributable to the actions of a government
entity or another and is required to, by law, refund any
fees improperly retained, and (i) that the obligee may
seek, or continue to use the services of a government
child support agency.
3. Requires the PCSC to include a notice of cancellation
with the contract to ensure obligees understand their
rights to cancel and have an easy form to accomplish
this task.
4. Provides, at a minimum, the right of an obligee to
cancel a contract within 15 business days of execution
of the contract, or receipt of the notice of
cancellation, whichever is later, or at any time if the
PCSC commits a material breach of any provision of the
contract or a material violation of any provision of the
statute.
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5. Requires the PCSC to issue a notice of collections to
the obligee, which shall include the amount of each
collection, and the date it was received by the PCSC and
sent by the PCSC to the obligee, how the payment is
allocated between the obligee and the PCSC's fees, and
the source of the payment (so the obligee can determine
if the PCSC's retaining a portion of the collection as
its fee was appropriate). If this information is
provided by telephone or internet access, it shall be
up-to-date. Written notices shall be sent at least
quarterly.
6. Requires the PCSC to retain records for the same length
of time that government child support entities are
required to retain records, and to allow access to
obligees and obligors of nonconfidential portions of
those records.
Debt Collection Practices
Existing law, the Rosenthal Fair Debt Collection Practices
Act (Act), prohibits debt collectors from engaging in a
variety of practices in collecting consumer debt. Among
the practices prohibited are the following:
1. Communicating with the debtor with such frequency as to
be unreasonable and to constitute harassment to the
debtor.
2. Communicating to any person any list of debtors which
discloses the nature or existence of a consumer debt,
commonly known as "deadbeat lists."
3. Communicating with the debtor by means of a written
communication that displays or conveys any information
about the consumer debt or the debtor which is intended
both to be seen by any other person and also to
embarrass the debtor.
4. Making a false representation that any person is an
attorney.
5. Representing that any debt collector is vouched for,
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bonded by, affiliated with, or is an instrumentality,
agent or official of the government.
6. Communicating directly with a debtor who is represented
by an attorney with respect to the consumer debt.
7. Sending a communication which simulates legal or
judicial process. [Section 1788.10-1788.16 of the Civil
Code]
Existing law defines its applicability to the collection
practices of consumer debt. Child support debt is not
included in that definition. [Section 1788.2 of the Civil
Code]
This bill prohibits a PCSC from engaging in any debt
collection practices that are prohibited by the Act.
This bill 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.
This bill 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.
This bill provides that a PCSC that improperly retains fees
from collections that are primarily attributable to the
actions of a government entity or to any other person shall
refund those fees to the obligee immediately upon discovery
or notice of the improper retention of fees.
Remedies
Existing law authorizes the following remedies for
violation of the Act:
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1. An action for actual damages.
2. A civil penalty of $100 to $1,000 if the debt collector
willfully and knowingly violates the provisions of the
Act.
3. Costs to the prevailing party and reasonable attorney's
fees to the prevailing debtor. Reasonable attorney's
fees may be awarded to a prevailing creditor upon a
finding the debtor's action was not in good faith.
(Civil Code Section 1788.30.)
This bill applies those same remedies to violations of the
provisions of this statute, as to the obligor or the
obligee.
Prior legislation . SB 339 (Alpert, 2004) regulated the
business of private child support collection agencies,
including capping fees that may be assessed.
Background
Last session, in response to the growth in the private
child support collection industry, and the growing number
of complaints being brought to her attention, Senator
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, were not taken advantage of on
account of that desperation. Among other things, the bill
sought to protect obligees and obligors in the following
manner: (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 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 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
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(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."
According to the sponsors of the current bill, Supportkids,
Inc., this bill is an attempt to respond to the Governor's
call in the veto message for some basic consumer
protections to ensure that oblige parents are not taken
advantage of.
FISCAL EFFECT : Appropriation: No Fiscal Com.: No
Local: No
SUPPORT : (Verified 5/10/05)
Supportkids, Inc. (source)
National Coalition for Child Support Options
San Luis Obispo County Board of Supervisors
ARGUMENTS IN SUPPORT : The author comments that "in
California and elsewhere, government collection of child
support debt is continually hampered by budget and
personnel constraints. As a result, a number of private
companies specializing in child support debt collection
have emerged around the country." However, these private
child support collectors are largely unregulated. This
bill, therefore, imposes some basic consumer protections to
ensure that support obligees better understand the services
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they are contracting for, get appropriate and meaningful
notice of the collections received, do not in fact receive
less support than they would have if they never entered
into such a contract, and have some ability to extract
themselves from these contracts.
The sponsor of this bill, Supportkids, Inc., one of the
largest providers of private child support collection
services in the nation, comments that "this bill will help
parents who need assistance collecting child support and
who have hired, or are considering hiring, a private child
support enforcement agency. Senate Bill 896 will establish
appropriate standards for private enforcement agencies that
offer their child support collection services in
California. It will, most importantly, afford custodial
parents with full disclosures to help them make an informed
choice about the private enforcement option." Supportkids
comments that "government child support programs will never
have the funding necessary to collect all, or even most, of
the child support that is due to parents. We believe that
custodial parents deserve to have other options, beyond
just the government, when seeking assistance in collecting
child support."
The National Coalition for Child Support Options concurs,
and notes that "Senate Bill 896 will help ensure that
reputable private agencies remain a viable option in
California for parents who have not had any luck getting
their support through their county child support office."
RJG:mel 5/11/05 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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