BILL ANALYSIS
SENATE JUDICIARY COMMITTEE
Senator Ellen M. Corbett, Chair
2009-2010 Regular Session
SB 578
Senator Wright
As Amended April 21, 2009
Hearing Date: April 28, 2009
Family Code
KB:jd
SUBJECT
Child support interest
DESCRIPTION
This bill would provide that interest accrual for child support
arrears that have been assigned to the state by recipients of
welfare cash assistance shall be suspended during those months
in which the obligor has paid the current month's court-ordered
payments of current support and arrears.
BACKGROUND
In 1986, Congress enacted legislation known as the Bradley
Amendment which mandated that child support arrears be
considered a judgment by operation of law. (42 U.S.C. Sec.
666(a)(9).) After the Bradley amendment was enacted, states
that require interest to be charged on money judgments,
including California, began to charge interest on child support
arrears.
In 1992, the California Department of Social Services issued
Family Support Division (FSD) Letter 92-15 which required child
support programs to calculate interest on all child support
cases at 10 percent back to 1983. This mandate was based on
Code of Civil Procedure Section 685.010 which sets the rate of
interest on all money judgments at 10 percent per year.
Counties were further instructed to apply collections on arrears
first to accrued interest and then to principal. Between 1992
and 2000, California's child support arrears balance increased
from $2.5. billion to $14.4 billion.
(more)
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In 2003, California contracted with the Urban Institute to
conduct a study on the arrears owed in California. At that
time, California's cumulative arrears balance was over $14
billion. Currently, it is excess of $20 billion. The Urban
Institute's study found that one of the two biggest contributors
to the state's high arrears balance was the state's policy of
charging substantial interest on arrears and then paying the
interest before principal when a collection is made. In
addition, the study found that: 75 percent of the debt was over
2.5 years old; 70 percent of arrears were held by individuals
with incomes below $10,000 per year; 70 percent of the arrears
were owed to the government under public assistance assignment;
27 percent of the debt was interest; and California could
realistically expect to collect 26 percent of the debt over a
10-year period.
Effective January 1, 2009, pursuant to AB 2669 (Garcia, Chapter
305, Statutes of 2004), collections will be applied to the
principal amount before interest. However, California continues
to charge substantial interest on arrears. This bill, sponsored
by the Department of Child Support Services (DCSS), seeks to
address this issue by suspending interest accrual on
state-assigned child support arrears during months in which an
obligor is current on support and arrears payments.
CHANGES TO EXISTING LAW
Existing law provides that in any action to enforce child
support obligations, interest does not accrue on an obligation
for current child, spousal, family, or medical support due in a
given month until the first day of the following month. (Fam.
Code Sec. 17433.5.)
Existing law provides that interest accrues at the rate of 10
percent per annum on the principal amount of a money judgment
remaining unsatisfied. (Code of Civ. Pro. Sec. 685.010.)
Existing law provides that the Legislature reserves the right to
change the rate of interest for the principle amount of a money
judgment at any time to a rate of less than 10 percent per
annum, regardless of the date of entry of the judgment or the
date any obligation upon which the judgment is based was
incurred. A change in the rate of interest may be made
applicable only to the interest that accrues after the operative
date of the statute that changes the rate. (Code of Civ. Pro.
Sec. 685.010.)
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Existing law generally governs the California Work Opportunity
and Responsibility to Kids (Cal-WORKS) program, which provides
temporary financial assistance and employment focused services
to families with minor children who have income and property
below State maximum limits for their family size. (Wel. & Inst.
Code Sec. 11200 et seq.)
Existing law provides that, for applications received before
October 1, 2009, as a condition of eligibility for Cal-WORKS
aid, each applicant shall assign to the county any rights to
child and spousal support. The assignment shall not exceed the
total amount of cash assistance provided to the family. An
assignment of support rights to the county shall also constitute
an assignment to the state. (Wel. & Inst. Code Sec. 11477.)
Existing law provides that, for applications received on or
after October 1, 2009, as a condition of eligibility for
Cal-WORKS aid, each applicant or recipient shall assign to the
county any rights to child and spousal support. The assignment
applies only to support that accrues during the period of time
that the applicant is receiving Cal-WORKS assistance, and shall
not exceed the total amount of cash assistance provided to the
family. An assignment of support rights to the county also
constitutes an assignment to the state. (Wel. & Inst. Code Sec.
11477.)
This bill would provide that interest accrual for child support
arrears that have been assigned to the State pursuant to Welfare
& Institutions Code Section 11477 shall be suspended during
those months in which the obligor has paid the current month's
court-ordered payments of current support and arrears.
This bill would provide that interest accrual will be suspended
on the first day of the month following the current payment.
This bill would provide that interest accrual will resume on the
first day of the month following the month in which a
court-ordered payment of support and arrears is not received.
This bill would require the Department of Child Support Services
to implement that provision by letters or similar instructions.
This bill would become operative on January 1, 2011.
COMMENT
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1.Stated need for the bill
The author states:
To encourage consistent and timely support payments as well as
improve arrears management and reduction, this legislative
proposal will suspend the accrual and assessment of interest
on both government-owed and non-government owed arrears for
noncustodial parents who meet their full monthly obligation
towards current child, medical, and spousal support. The
suspension of interest would apply until a payment is missed
and/or the full monthly obligation is not met. Interest would
accrue and be assessed prospectively from the point a payment
is missed but would not be charged retroactively as a result
of non-compliance.
2. Interest accrual on arrears would only be suspended for
arrears that have been assigned to the State
In response to federal welfare reform legislation, the
Legislature created the California Work Opportunity and
Responsibility to Kids (CalWORKs) program, enacted by Chapter
270, Statutes of 1997 (AB 1542, Ducheny, Ashburn, Thompson, and
Maddy). Like its predecessor, Aid to Families with Dependent
Children (AFDC), the new program provides cash grants and
welfare-to-work services to families whose incomes are not
adequate to meet their basic needs.
A CalWORKs child support case is opened when a custodial parent
applies for and receives CalWORKs benefits. The California
Department of Social Services informs the DCSS when CalWORKs
benefits are granted, and a child support case is opened by the
DCSS. As a condition of receiving CalWORKs benefits, the
custodial party automatically assigns all rights to child,
spousal, and medical support to the county up to the amount of
aid paid. This includes all current and past-due support and
continues as long as a family is receiving aid. Any current
child support payments which exceed the amount of aid paid will
be sent to the custodial party.
Currently, interest on non-welfare arrears is not suspended or
waived unless the custodial parent to whom the arrears are owed
has provided written consent to do so. As introduced, this bill
would have applied to all arrears, including those cases where
families are not recipients of CalWORKS. However, concerns were
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expressed that interest accrued on support arrears are
essentially the custodial parent's private property, and that
automatic suspension of interest accrual via statute in
non-welfare cases would interfere with this property right.
Accordingly, this bill was amended to only suspend interest
accrual on arrears that have been assigned to the state in cases
where the family is receiving CalWORKS benefits. Once a family
discontinues public assistance, the only arrearage type eligible
for interest suspension would be the arrears that accrued during
the period of time the family received cash aid.
3. California's Child Support Automation System would
automatically track and calculate accrual and suspension of
interest
In 2008, DCSS completed the statewide transition of California's
52 county and regional child support agencies to the new single
statewide child support automation system.
The California Child Support Automation System (CCSAS) combines
statewide case management capabilities with centralized child
support collection and payment processing through the State
Disbursement Unit (SDU). According to DCSS, a minor system
modification to CCSAS will provide the functionality to
automatically suspend and resume interest per case when
appropriate. The enhanced system functionality will recognize
when interest should or should not be assessed based on the
obligor's payment record for the prior month. The system will
also recognize when a family is no longer receiving cash
assistance from the state, and stop the suspension of interest
on arrears that have not been permanently assigned to the state.
4.DCSS would be required to implement bill's provisions via
child support services letters
This bill would provide that DCSS shall implement the bill's
provisions by means of child support services (CSS) letters or
similar instructions, without taking any further regulatory
action. Thereafter, DCSS would be authorized to adopt
regulations, as necessary to implement this section in
accordance with state law governing administrative regulations
and rulemaking. DCSS currently utilizes CSS letters to, among
other things, inform local child support agencies, IV-Directors,
County Administrative Officers, and Boards of Supervisors of new
policies imposed by new statutes, or changes in existing
policies. CSS letters are posted on DCSS' Web site and are
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available for public view.
Support : None Known
Opposition :None Known
HISTORY
Source : Department of Child Support Services
Related Pending Legislation :None Known
Prior Legislation :
AB 2669 (Garcia, Chapter 305, Statutes of 2004) requires that
effective January 1, 2009, after the date of full implementation
of the California Child Support Automation System, money
collected to satisfy a child support judgment shall be credited
first to the amount due for the current month, then to the
principal amount of the judgment that remains unsatisfied, and
third to outstanding accrued interest.
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