Category Archives: Legal News

California Legislature Looks To Halt Child Support Debt Collections

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California lawmakers have advanced a budget proposal to stop collecting child support debt from some parents who are receiving cash assistance, but the proposed solutions are a far cry from what advocates for those debt-holders sought in January.

The Legislature’s budget proposal would reduce or expunge debt owed to the government – not the debt owed to families – for parents whose only source of income is from Supplemental Security Income or State Supplementary Payment, the Cash Assistance Program for Immigrants, a combination of SSI/SSP and Social Security Disability Insurance benefits, or Veterans Administration disability benefits.

The proposal could cut a break for a narrow subset of the larger population of Californians who owe child support debt to the government; the state did not release to CalMatters the exact number of people receiving those benefits who owe child support debt, and it’s unclear if the state has that number.

For context, the Senate Appropriations Committee found that removing all people in arrears from child support debt would cost the state hundreds of millions of dollars and save only $3.7 million in the general fund by letting go of 98 full-time Department of Child Support Services employees who work in child support debt collection.

The proposal still needs to be negotiated with the Newsom administration.

Push for more child support debt forgiveness

“We’re not intending for money owed to families to go away, but just the money owed to the state,” state Sen. Susan Eggman, a Stockton Democrat, said during a Senate budget subcommittee hearing on the proposal last month.

Still, advocates for the poor had asked the state to go farther by forgiving old, uncollectible debt. And the current proposal leaves the state’s 10% interest rate on child support debt, one of the highest interest rates of its kind in the country.

“That is something that is definitely within the control of the Legislature to change,” said Jhumpa Bhattacharya, vice-president of programs and strategies at the Oakland-based Insight Center, a nonprofit economic justice group. “They just have to get the will to do it.”

The theory behind child support is that a parent who doesn’t have custody of a child supports the child with monthly payments. But that’s not how it works in practice for parents who also receive cash assistance from the federal welfare-to-work Temporary Assistance to Needy Families program, known as CalWORKS in California.

As CalMatters and The Salinas Californian reported last month, California takes a piece of the child support payments owed to custodial parents, usually mothers, receiving these cash benefits. In some cases, that piece is more than half of the total payment. Meanwhile, if the noncustodial parent falls behind on child support payments, that debt piles up through an interest rate of 10%.

Held back by old debt

Rosalinda Garcia, a Fresno resident, was, for a brief time in 2003, one of those noncustodial parents. She still hasn’t been able to make good on her debt, despite paying thousands more than her original balance. And the man to whom she owes child support, her grandfather, Joe Garcia Montelongo, died in 2012.

California Department of Child Support Services Director David Kilgore

When she asked a DCSS representative where all her money had gone, they told her: the state.

It frustrates her to no end.

“I understand I have to pay my debts but at this time, right now, it’s not the time,” Garcia said. “My little ones shouldn’t have to suffer because of my old debts.”

Of the $13,000 Garcia was supposed to get in unemployment checks last year, less than $10,000 made it into her bank account. The rest, she said, was intercepted by the Department of Child Support Services, repayment to her grandfather for taking care of her two oldest for six months in 2003.

Originally she owed about $4,000, but for years, she couldn’t afford payments, so she skipped them. But the interest kept accruing. Seventeen years later, after more than $4,000 in payments last year alone, she still owes more than $2,000 in child support.

She said the state agency also intercepted her first federal stimulus check, her $4,000 tax return and the December stimulus supplements she was supposed to get to help feed and clothe the five kids still living at home.

Misconception about high-interest rates

The state itself, in a report commissioned by the child support services agency, has had academics saying since at least 2003 that much of that debt is uncollectible. If states don’t recover the money from parents, the state itself owes the federal government the debt. Some states have begun to pass through 100% of child support payments to families, and Colorado passed a law dictating that the state repay the federal government.

Most states are like California, which passes through $100 for families on public assistance with one child and $200 for families with two or more children. Last year, Gov. Gavin Newsom vetoed an Assembly measure that would have eliminated California’s 10% interest charges, saying the state needs the money.

Bhattacharya said a misconception persists that high-interest rates will get people to pay their debts faster, or at all.

“But the reality is, this is a debt that people simply cannot afford to pay,” she said. “This is a debt that’s being charged to low-income mostly Black and brown folks, being asked to basically reimburse the government for their safety net.

“These are poor people, and they can’t afford to pay in the first place, and now you’re charging 10% interest on top of that. And it just compounds.”

California collects high portion of child support debt

Last week, the governor’s office told CalMatters that “given the revenue impact” of ending collections on child support debt, Newsom “sought to have this issue addressed through the budget process” when he vetoed the Assembly measure.

It seems that day has arrived.

Federal data shows California is keeping an unusually high portion of the child support payments — more than 3½ times the national average. That has a knock-on effect for the parents responsible for that debt: They have a harder time getting and keeping jobs, their drivers’ licenses are subject to revocation and the children and noncustodial parents receive less.

“I know that can create a (financial) hole for the state,” Eggman said, “but at the same time, we know there’s going to be some money right now. So why don’t we use it to care for families and not be worried about interest that’s been accrued on past things?”

This story is part of The California Divide, a CalMatters project. Kate Cimini is a journalist for The Californian. Share your story at (831) 776-5137 or email kcimini@thecalifornian.com.Subscribe to support local journalism.

Pennsylvania Legislature Passes Bill To Let Courts Hire Collection Agencies For Fines

HARRISBURG — Common pleas and magisterial district judges would be allowed to hire private collection agencies to pursue overdue court fines and costs under a bill approved Friday by the Pennsylvania Legislature.

The bill that passed the House by a 109-92 vote would apply after a defendant fails to appear for a court hearing on the status of restitution and other court-related financial costs.

Collection agencies would be allowed to retain up to 25% of the amount they recover. A Senate analysis projects it could bring in a few million dollars in the short term and hundreds of millions a year after that.

Backers say much of the unpaid costs are traffic fines from people who live in other counties and therefore have a reduced motivation to pay what they owe.

State court officials say there are about 65,000 cases that owe money, a total of some $16.3 million. The overdue costs and fines are growing by about $1.6 million a year, according to the Administrative Office of Pennsylvania Courts.

AG office’s Consumer Protection Section has recovered $403M since 2014

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The Office of Attorney General’s Consumer Protection Section has recovered more than $403 million in relief for consumers and payments for violators since the beginning of Mark Herring’s first term in 2014.

“My Consumer Protection Section continues to do incredible work to help return the hundreds of millions of dollars Virginians have lost to predatory lenders, shady debt collectors, and other bad actors and shady businesses who try to skirt the law,” Attorney General Mark Herring said. “One of my top priorities as attorney general will always be to make sure that Virginia consumers are protected and to provide them with the information and tools that they need to make good decisions and protect themselves and their families.”

Below is a breakdown of the $403 million:

  • $73,989,438 in civil penalties and attorneys’ fees recovered
  • $69,941,796 in restitution recovered
  • $259,272,521 in collection forbearance or debt forgiveness

The Virginia attorney general has significant consumer responsibilities as the primary investigator and enforcer of the Virginia Consumer Protection Act. In 2016, Herring completed a major restructuring and expansion of his Consumer Protection Section to ensure it aggressively enforces Virginia’s consumer protection laws, provides exceptional customer service in resolving complaints and disputes, and provides robust consumer education to keep Virginians from being victimized by fraud, scams, or illegal or abusive business practices.

Virginians who have a question, concern, or complaint about a consumer matter should contact the Consumer Protection Section:

The Consumer Protection Section is organized into five units and an investigative team that work collaboratively to protect the interests of Virginia consumers:

  • Dispute Resolution Unit, which offers dispute resolution services to individual consumers and businesses to assist them in resolving consumer complaints. The Dispute Resolution Unit can serve as a neutral facilitator and point of contact between consumers and businesses as all parties voluntarily work towards a mutually agreeable outcome. Since 2014, the Dispute Resolution Unit and Section investigators have resolved or closed approximately 25,000 consumer complaints and recovered over $7 million for consumers.
  • Counseling, Intake, and Referral Unit, which serves as the central clearinghouse in Virginia for the receipt, evaluation, and referral of consumer complaints, and operates the state’s consumer protection hotline. Since 2014, the Counseling, Intake, and Referral Unit has received more than 195,500 calls through the consumer complaint hotline and received approximately 30,500 written consumer complaints and approximately 22,900 emails and letters.
  • Predatory Lending Unit, which is a first-of-its-kind unit to investigate and prosecute suspected violations of state and federal consumer lending statutes, including laws concerning payday loans, title loans, consumer finance loans, student loans, mortgage loans, and more.
  • Charitable Solicitations and Deceptive Conduct Unit, which investigates and prosecutes suspected violations of the Virginia Consumer Protection Act, the Virginia Solicitation of Contributions law, and other state and federal consumer protection laws.
  • Antitrust Unit, which investigates and prosecutes suspected violations of state and federal antitrust laws, including large mergers that could hurt consumers through reduced competition and choice.

The reorganization also included the creation of a user-friendly website and a more useful consumer complaint database that allows users to vet businesses by searching company name, industry, or complaint topic within a specified geographic area.

Search results now include the date of the filed complaint, the nature of the complaint, and a description of the resolution, if available.

New Law Blocks Debt Collectors From Stimulus Funds

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A new state law approved Thursday by Gov. Andrew Cuomo will bar debt collectors from accessing stimulus funds in bank accounts, a measure that had been sought by consumer groups.

The law would cover the federal stimulus approved in 2020 and earlier this year, barring debt collectors from taking that money in summary judgments, debt collection and other forms of asset seizure.

“New Yorkers in every corner of the State felt the effects of the COVID pandemic, many losing jobs due to no fault of their own and struggling to support themselves and their families,” Cuomo said. “This critical legislation will help ensure relief payments made to New Yorkers are protected from unscrupulous debt collectors so that the money can be used as it was intended – to help make individuals and families whole as they continue to recover from the economic impacts of the pandemic.”

At issue for lawmakers who had pushed for the bill in New York had been inconsistent language in federal law for protecting stimulus funds when sent to individuals.

“Federal relief payments were intended as a lifeline to help families and individuals that are struggling to make ends meet during these exceptionally challenging times,” said Sen. Kevin Thomas, a Democrat who sponsored the bill and a candidate for New York City comptroller this year.

The new law also includes a carve-out provision to ensure funds being collected would pay for child and spousal support, as well as to collect payments when fraud is involved.

Congress last year approved thousands of dollars in direct payments to Americans amid the economic shutdown due to the COVID-19 pandemic as millions of jobs were shed by businesses and tax revenue dried up for local and state governments. Subsequent stimulus measures sent more money to Americans in a bid to jumpstart an economic recovery.

“Federal relief payments were intended to help families that are struggling to make ends meet during this unprecedented time,” said Assemblywoman Helene Weinstein, the bill’s Assembly sponsor. “This legislation ensures families are able to use this safety-net funding as it was originally intended, to provide for families basic needs and away from the hands of debt collectors.”

House Passes Debt Collection Bill

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The House Thursday passed legislation making a series of reforms to debt collection requirements. While NAFCU supports efforts to stop abusive debt collection practices, the association had raised concerns about language contained in the bill that would expand the definition of a “debt collector” and increase risks to lenders.

The bill, the Comprehensive Debt Collection Improvement Act, passed the House by a vote of 215-207. It now heads to the Senate for consideration.

Earlier this week, NAFCU joined with other financial services industry trades flagged concerns about the legislation overturning a Supreme Court ruling that determined “entities enforcing a security interest without also seeking repayment or deficiency judgment generally do not qualify as debt collectors under the Fair Debt Collection Practices Act (FDCPA).” The decision also clarified that businesses engaged in non-judicial foreclosure proceedings are not debt collectors under the FDCPA.

The trades noted that a majority of states have structured their legal systems to allow for non-judicial foreclosures, “which maintain significant state and federal procedural protections for borrowers while streamlining the foreclosure process.” This reduces potential costs and delays associated with litigation, while balancing the needs of borrowers and benefits to communities.

Should this legislation be enacted, the trades argued that it “would disrupt the choices states have made in structuring their foreclosure regimes, imposing unnecessary costs and delay to the enforcement of real property interests and subsequently increasing the cost of credit.”

NAFCU will continue to advocate against proposals that would hamper legitimate debt collection efforts and increase costs for all parties involved.