Testimony Before The Senate Human Services Committee
Judy Lee, Chairman
HB 1173: Creating new subsections - collection of child support
February 28, 2005
Chairman Lee, members of the Senate Human Services Committee, I am James Fleming, Deputy Director and General Counsel of the State Child Support Enforcement Division of the Department of Human Services. I am here to ask for your favorable consideration of Engrossed House Bill 1173. Attached to my testimony are some technical amendments to correct internal references in the bill.
This bill is about collecting child support arrears, which have grown to over $200 million statewide. Over half this amount is assigned to the State of North Dakota. Before explaining the sections of the bill, I’d like to begin by emphasizing two common themes of the legislation. First, the statewide data regarding people who owe child support in North Dakota shows that once a person owes more than a couple thousand dollars in child support arrears, the person is much less likely to make regular payments or get caught up. The key to slowing the growth in unpaid arrears and promoting regular payments of child support is to get involved proactively in a case before an obligor gets too far behind. The federal Office of Child Support Enforcement has said it quite plainly:
The best way to reduce the total national child support debt is to avoid accumulating arrears in the first place. The best ways to avoid the accumulation of arrears are to set appropriate orders initially, modify orders via simple procedures promptly when family circumstances change, and immediately intervene when current support is not paid.
Office of Child Support Enforcement, The Story Behind the Numbers – Who Owes the Child Support Debt? (July 2004).
For some collection tools that are well suited to collecting child support arrears, such as liens and executions, we currently have to wait until an obligor is six months behind before using those tools. By that time, the obligor may be so far behind that a payment plan is no longer a realistic option and we may have to seize or sell property the obligor needs such as a vehicle or tools. Earlier intervention would have sent the message to the obligor that failure to comply with a child support order leads to unpleasant consequences before it became too late for an obligor to see the error of his or her ways.
The second common theme of the legislation is to use our arrears collection tools in a more consistent and efficient manner. Liens, executions, license suspension, intercepting lump sum payments, and public disclosure all have different “triggers” in the law. Some happen right away, like income withholding. Some are available after three months, others after six months. Some are based on how many months behind a person is, others are based on a simple dollar amount of arrears. In the end, these different triggers make it difficult for child support caseworkers to use the right tool at the right time for a particular obligor.
For example, an avid hunter will pay attention when he or she receives a license suspension notice after falling three months behind. A car enthusiast may not care much about losing his or her hunting license, but will care a lot when a lien is placed on the title to the classic Corvette or Mustang sitting in the garage. Unfortunately, the caseworker has to wait another three months after the person is eligible for license suspension to place the lien on the vehicle, which is enough time to transfer a clean title to the vehicle to someone else. Likewise, an obligor may be required to pay $100 per month under income withholding to pay down an arrearage, but gets to keep a lump sum payment in full as long as the payment is under $1,000. The different triggers make the job of the child support caseworker much harder, reduce efficiency, and don't allow us to respond as quickly as we need to in order to prevent the arrears balance from getting bigger.
In addition, for some of our collection tools, such as administrative executions, there are steps required under current law, such as docketing with the clerk of court and personal service by a sheriff, that add delay and expense to the process, not to mention consuming the time of other public officials. This is particularly true in the area of bank accounts, and we lag well behind our sister states in collecting child support through the financial institution data match (FIDM).
The legislation before you addresses these themes by streamlining the tools we have today, adding an innovative process for bank accounts, consolidating the “triggers” for many of our enforcement tools, and setting the consolidated “trigger” at a level that is low enough for us to prevent obligors from getting so far behind that they can never get caught up.
This section establishes an arrears registry of all obligors who owe more than two month's worth of support or $2,000, whichever is less. We propose this threshold because we see a significant change in compliance at the $2,500 level.
This section adds a new definition to incorporate the arrears registry concept. A definition of “monthly support obligation” is also added to codify an Attorney General's opinion that income withholding orders are based on the obligor's monthly obligation rather than a different amount the obligor may be required to pay to avoid being held in contempt of court. The definition clarifies the amount that is due for purposes of income withholding when a portion of the obligation has been ordered to accrue as an arrearage. If an amount of arrears has been ordered as one lump sum rather than determined on a monthly basis, the default monthly obligation is $168, which is the amount currently owed under the child support guidelines for a minimum wage obligor for one child. For clarity, the definitions of “child support agency” and “public authority” are combined and the obsolete definition of “system implementation date” is repealed.
The trigger for intercepting a lump sum payment to an obligor is reduced from $1,000 to $500. Current law limiting the amount intercepted to one-half of the payments would not be changed.
This section streamlines the existing process for administrative executions by incorporating the arrears registry concept and removing the requirement that the judgment be docketed. It also anticipates a possible federal process for executing on accounts in multistate cases.
This section adds several definitions to the chapter of the North Dakota Century Code regarding child support liens to incorporate the arrears registry concept and the new definition of “monthly support obligation.”
This section incorporates the arrears registry concept for liens and extends the liens to include any after-accrued arrears.
This section clarifies current law and reiterates that the effect of a child support lien on an account is to freeze subsequent withdrawals from the account.
This section clarifies current law by expressly authorizing the child support agency to release a lien.
This section amends current law to reflect other changes in the bill and to ensure that a third party who complies with a lien or execution for child support is protected from any liability for complying with state law.
This section clarifies how a lien may be enforced and incorporates other changes in the bill.
This section incorporates the arrears registry concept for purposes of administrative license suspension.
This section incorporates the arrears registry concept for purposes of public disclosure of obligors and allows us to use public disclosure to locate alleged parents.
This section creates a new enforcement tool specifically designed for accounts and payers of lump sums to obligors. This new tool, called a financial institution deduction order or FIDO, combines the effectiveness of an execution with the speed and automation of income withholding. By sending a FIDO via certified mail, the child support enforcement program can require a financial institution or income payer to turn over the funds. As with any income payer who withholds funds under an income withholding order, the financial institution or income payer is allowed to withhold up to $3 per deduction to cover its expenses. This is not a fee that financial institutions are currently allowed to charge in response to an execution. A financial institution or income payer that complies with a FIDO is given the same immunity as other income payers who comply with an income withholding order.
This concludes my testimony. I would be happy to answer any questions the committee may have.