Arrears Management

Monday: Breakout Session 2Workshop A

Time: 2:45 p.m. - 4:00 p.m.Location: Regency 1

ERICSA 47th Annual Training Conference & Exposition Lexington, Kentucky ‘10

ARREARS MANAGEMENT: ADDRESSING THE CRISIS OF PAST-DUE SUPPORT (CLE)

PAID Initiatives across the country are paving the way to increasing child support collections andpreventing accumulated debt for non-custodial parents. Join this workshop to learn about some excitingnew PAID practices that can help you increase collections and prevent debt while helping families worktogether. This workshop will examine the PAID Initiative – where and why it started, where we are today,and what we can do in the future, especially given the challenges that we face during the economicdownturn. Learn about several new PAID efforts that are currently under way in Ohio, Illinois, and NorthDakota.

Presenters: Kim Newsome BridgesExecutive DirectorOhio CSEA Directors’ Association (OCDA)Columbus, OH

James FlemingDeputy Director and Chief Legal Counsel North Dakota Child Support Enforcement ProgramBismarck, ND

Mary MorrowAssistant Deputy AdministratorCook County Administrative and Interstate OperationsIllinois Department of Healthcare and Family Services, Division of CSEChicago, IL

Moderator: Wendy GraySenior AssociateThe Center for the Support of Families (CSF)Washington, DC

My Notes....

1

PAID: Arrears ManagementERICSA 2010 Annual Conference

Mary MorrowAssistant Deputy Administrator, Illinois Dept. of Healthcare and Family Services

James Fleming Deputy Director/Chief Legal CounselNorth Dakota Child Support Enforcement

Kim Newsom BridgesExecutive DirectorOhio CSEA Directors’ Association

Managing Arrears

• Illinois has a three-pronged

approach to arrearage

management.

– Debt avoidance

– Debt collection

– Debt compromise

Debt Avoidance ThroughEarly Intervention

• In 2008 Illinois created an Early

Intervention - Delinquency

Prevention Unit

– Cook County cases with new orders

– Champaign County cases with new

orders

• Hired a vendor with automated

technology to assist in the process

ILLINOIS DelinquencyPrevention Unit

– Goal: Improve Family Life for All of the

Family

-Through delivery of an 85-day intensive “front-end”

delinquency prevention effort

-Making sure orders are fair

-Sharing information about child support obligations

-Working with non-custodial parents to remove

barriers to prompt payment

-Increasing percentage of cases on which current

support is being paid on time and in full4

Baseline Data

• At the onset the baseline data

showed collection on just 31.5% of

the cases

– 37.5% of judicial cases (combined)

– 52.6% of the administrative consent

orders

– 17% of the administrative default

cases

DPU Philosophy

• Communicate early and often with

NCP

• Work with NCP to remove payment

barriers

• Establish an expectation –

– Pay on time

– Pay in full

Delinquency Prevention Services

– Initial NCP/employer contact and weekly

NCP contacts

• Letter, outbound phone messages, live phone

calls, in-person meetings, email

• Tone of contact is supportive and informative,

working to establish a relationship, instill

accountability, and eliminate barriers to non-

payment

– Perform “locate” work as needed

– Refer cases requiring redetermination of

the current support amount

Past Due Early Intervention Services

– Methods of contact – letter, outbound

message, phone call, in-person meeting,

email

• Tone of contact remains supportive and

informative but escalates urgency and conveys

consequences of continued non-payment

– Contact Schedule

• 5 Days Past-Due

• 10 Days Past-Due

• 20 Days Past-Due

• 30 Days Past-Due

• 45 Days Past-Due

Customer Service

– Bilingual toll-free DPU number…866-99PREVENT

– Available Monday through Friday, 8:00 am - 5:00 pm

– Calls routed to assigned Delinquency Prevention

Specialist

– Reporting capability for inbound call volume, wait

time, talk time, etc.

– Customer feedback survey

– Monthly Steering Committee

Reporting & Measurements

– Database customized for DPU – tracking

contacts and setting alerts

– Measure/validate contact type and contact

time

– Track results by case type – consent,

default, never assistance, former

assistance, current assistance

AND THE RESULTS?...

NCP/ Employer Outreach & Education

– NCP appeal rights and redetermination process

– NCP/Employer responsibilities and expectations

– Available resources for NCP “barriers to payment”

– General child support process information

– Income withholding process explanation

– Verify NCP employer and address – explain need to

contact agency as changes occur

Total

Qualified referrals received 10,442

Referrals with successful initial contact 8,894

Resources mailed to NCP 20,465

Live phone calls to/from NCP 11,642

Reminder messages to NCP 55,404

Educational meeting with NCP 57

NCP contact information updated 262

Customer surveys mailed to NCP 2,491

Employer contact information updated and/or

Order/Notice to Withhold faxed 1,471

Unemployment claim identified and offset 920

Locate work performed 2,081

Action Taken on DPU Cases

As of March 2010

Current Results Show . . .

Early intervention cases averaged

combined collections on 58.3 %

of all cases

63.8% of judicial cases

79.1% of the admin. consent orders

33% of the admin. default cases

Collections Multiply Exponentially

Total Payments Total Cumulative

Sep-08 $13,465.88 $13,465.88

Oct-08 $29,379.21 $42,845.09

Nov-08 $42,112.79 $84,957.88

Dec-08 $158,038.38 $242,996.26

Jan-09 $232,086.36 $475,082.62

Feb-09 $295,658.99 $770,741.61

Mar-09 $426,551.84 $1,197,293.45

Apr-09 $584,973.78 $1,782,267.23

May-09 $761,789.25 $2,544,056.48

Jun-09 $748,299.40 $3,292,355.88

Jul-09 $943,392.48 $4,235,748.36

Aug-09 $1,035,338.96 $5,271,087.32

Sep-09 $1,194,685.41 $6,465,772.73

Oct-09 $1,299,696.73 $7,765,469.46

Nov-09 $1,330,097.42 $9,095,566.88

Dec-09 $1,529,269.36 $10,624,836.24

Jan-10 $1,500,373.57 $12,125,209.81

Feb-10 $1,543,014.92 $13,668,224.73

As Does Cost Effectiveness

Total Monthly

Collections

DPU Program

Cost

DPU Cost

Effectiveness -

Actual

Payment

Sep-08 $13,465.88 $2,490.00 $5.41

Oct-08 $29,379.21 $18,094.05 $1.62

Nov-08 $42,112.79 $14,476.60 $2.91

Dec-08 $158,038.38 $33,379.84 $4.73

Jan-09 $232,086.36 $28,946.28 $8.02

Feb-09 $295,658.99 $29,873.11 $9.90

Mar-09 $426,551.84 $37,474.53 $11.38

Apr-09 $584,973.78 $33,386.85 $17.52

May-09 $761,789.25 $42,164.13 $18.07

Jun-09 $748,299.40 $83,622.93 $8.95

Jul-09 $943,392.48 $42,530.77 $22.18

Aug-09 $1,035,338.96 $40,068.36 $25.84

Sep-09 $1,194,685.41 $29,990.84 $39.84

Oct-09 $1,299,696.73 $29,793.30 $43.62

Nov-09 $1,330,097.42 $32,688.32 $40.69

Dec-09 $1,529,269.36 $27,307.14 $56.00

Jan-10 $1,500,373.57 $26,739.94 $56.11

Feb-10 $1,543,014.92 $18,778.86 $82.17

Overall

Totals $13,668,224.73 $571,805.85 $23.90

Exponential Collections Growth

$13,4

65.8

8

$29,3

79.2

1

$42,1

12.7

9

$158,0

38.3

8

$232,0

86.3

6

$295,6

58.9

9

$426,5

51.8

4

$584,9

73.7

8

$761,7

89.2

5

$748,2

99.4

0

$943,3

92.4

8

$1,0

35,3

38.9

6

$1,1

94,6

85.4

1

$1,2

99,6

96.7

3

$1,3

30,0

97.4

2

$1,5

29,2

69.3

6

$1,5

00,3

73.5

7

$1,5

43,0

14.9

2

$13,4

65.8

8

$42,8

45.0

9

$84,9

57.8

8

$242,9

96.2

6

$475,0

82.6

2

$770,7

41.6

1

$1,1

97,2

93.4

5

$1,7

82,2

67.2

3

$2,5

44,0

56.4

8

$3,2

92,3

55.8

8

$4,2

35,7

48.3

6

$5,2

71,0

87.3

2

$6,4

65,7

72.7

3

$7,7

65,4

69.4

6

$9,0

95,5

66.8

8

$10,6

24,8

36.2

4

$12,1

25,2

09.8

1

$13,6

68,2

24.7

3

$0.00

$2,000,000.00

$4,000,000.00

$6,000,000.00

$8,000,000.00

$10,000,000.00

$12,000,000.00

$14,000,000.00

$16,000,000.00

Sep-08 Oct-08Nov-08Dec-08Jan-09 Feb-09Mar-09 Apr-09 May-09

Jun-09 Jul-09 Aug-09

Sep-09 Oct-09Nov-09Dec-09Jan-10 Feb-10

Current Support Collections on DPU Caseload

Total Payments Total Cumulative

Future of the Project

• Final year of a vendor contract

• Pursue in house technological

solutions– Automated voice/text messaging

– Automated mailings

– Automated payment notification

– Automated case tracking

– Live customer support

18

Arrears Management

Arrears Management is NOT just about

Debt Management

19

Arrears Management

“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).

20

Arrears Management

TOTAL ARREARS

MOTIVATIONPREVENTION

COLLECTIBILITY

21

Arrears Management

22

Three Step Approach

• Prevention – Build a habit of paying current support

• Motivation/Collection – Collect arrears in sustainable amounts

• “Don’t shoot your milk cow!”

• Collectibility – Stop wasting time trying to collect the uncollectible

• If you are banging your head against the wall – BACK UP!

23

Practical Approach

• How important is arrears management?

• How much SHOULD an obligor be expected to pay each month?• Have faith in the child support guidelines

• The ideal is to rise and fall with the obligor’s monthly income

• Collect the amount due for purposes of income withholding

• What if the obligor now has custody?

• “How am I going to do this in all my cases?”

24

Arrears Management

31%

1%

17%

5%

16%

10%

21%28%

15%

56%

$1-$2,000 $2,001 - $5,000 $5001-$10,000 $10,001-$25,000 $25,000+

Debtors Arrears

25

Arrears: Prevention

• Strategies for improved collection of current support• Default judgments – Getting accurate income

information

• Imputation• Incarcerated obligors

• Retroactive orders

• “I’m from Child Support and I’m here to help”• “No really, I am” – the value of a positive

experience

• Advocacy versus fairness

• Employer compliance – New Hire Reporting and Income Withholding

26

Arrears: Prevention

• Strategies for improved collection

of current support (continued)

• Review and adjustment – Exceptions

to 36-month review cycle

• Economic downturn

• Conditional accruals – pros and cons

• What if Mom and Dad reconcile or

remarry?

• Early intervention – arrears registry

Debt Collection Through Central and Automated

Collections

28

Arrears Prevention

• Right sizing of orders

– Administrative establishment

– Administrative review & adjustment• O.R.C. 3119.60

– Imputing income to parties policy changes

– Practically what can the obligor pay vs. guidelines calculations & creating a routine of payment for minimal dollars

29

Arrears Prevention

• Early intervention techniques

• Fatherhood program participation

• Take advantage of the first face-to-

face contact

– How do child support staff react to

customer contact

Changing Laws to Increase Collections

• October 2007, Illinois

Senate Bill 1035 became law

– Severance pay defined as income for

IWO

– Authorized driver’s license suspension

– Authorized work with communities for

the purpose of immobilizing vehicles

Driver’s License Revocation

• Start-up 01/2008

– First two fiscal years

$48.3 million collected

– First seven months of SFY10 the

Illinois Administrative Driver’s

License Project has collected $41

million

– TOTAL collected - $89.4 million

Hunting and Fishing License Denial

• Point of Sale system for DNR

• in Fall 2007

• $651,488.08 in collections

since inception 2008

Passport Denial

• Illinois began Passport Denial in 2001

• Passport denial is automatic when the

Notice of Intent to Pursue Collections is

produced with an amount equal to or

greater than $2500.

• To date collections

are $8.1 million

Bank liens – Workman’s Comp, Lawsuits, Real Property

• Illinois CARU Lien work began in

2001.

• Now averaging $1.2 million/month

Credit Reporting Agencies

• Illinois works with major CRAs• Equifax

• Experian

• Trans Union

• Prior to reporting the debt, NCP

has an opportunity to enter into

payment agreement

• So far this year, those agreements

represent $131,789 in payments.

Private Collection Agencies

• 1999 - Illinois reinstituted practice

of using private collection agencies

to help collect child support debt

• PCAs receive percentage of money

they collect for child support based on

complex re-payment scheme

FY2005 - PCAs collected over $15 million

dollars.

• Today’s collections for SFY10 - $731,946

U S AttorneyFelony Prosecution

• Child Support Recovery Act of 1992

(CSRA) allows the Department of

Justice to work with Healthcare and

Family Services and the US Attorney’s

offices to prosecute NCPs for failure to

pay large amounts of past-due child

support

• CSRA makes willful non-payment of

child support a federal crime

• In SFY 10 Illinois has collected

$130,666.85

Deadbeat Parent Website

• Website was launched in 2003

• Illinois published up to 90

names and photos of hard-

core non payers with:

– Balance over $5000

– No family violence

– Illinois order (not default)

– No voluntary payments in

last 90 days

•

Avoiding Publication on Website

• Non-custodial parents may avoid having

their names published on list if they:

– pay balance owed within 60 days of

date of notice, or

– enter into acceptable written

agreement with HFS for payment of

balance due

• Collections to date - $130,912

Offsets –State Fiscal Year 2010

• Administrative $1,031,065

• Federal $4,745,921

• State $ 231,734

41

Arrears: Motivation/Collection

• Arrears registry – 2 months or $2,000, whichever is less

• Pick the right tool at the right time

• Show me the money! – You can’t collect what you can’t find

• Class action proceeds

• Utility cooperative dividends

• Royalty payments

• Insurance matching

42

Arrears: Motivation/Collection

• PRIDE – Parental Employment

Project – a positive solution for a

negative situation

• Lien registry

43

Arrears: Motivation/Collection

• Payment plans – license suspension

• Down payments

• Monthly installments – consistent with

income withholding and ability to pay

• Interest suppression during compliance

• Interest waiver after 1 year of compliance

• Maximum 10-year duration of plan

• Amnesty program

• Use of economic stimulus money?

44

Arrears: Motivation/Collection

• Interest: To charge or not to charge? That is the question.

• Good payer – reward good behavior• Inadvertent missed payments

• Payment plans – incentive to change payment pattern and keep it that way

• Uncollectible – time for a reality check• Applies to assigned AND unassigned arrears

• Why negotiate unassigned arrears?• Unrealistic expectations

• Prerogative of independent third party

45

Arrears: Motivation/Collection

• The motivation/collection dilemma for “good” payers: Do I take an action or not rock the boat?

• Due on arrears for purposes of income withholding• Increased collections

• Reflects current ability to pay

• Negotiated settlements – subtract negotiable interest and get 95% of principal

46

Arrears: Motivation/Collection

• Make the SDU work for you

• Nontraditional payments

• Direct transfers of property

• Offsets of assigned arrears

• Payment diversion

• Waivers

• Deceased custodians – obligor has

custody

47

Arrears motivation/collection

• Automatic withholding

• Administrative default O.R.C. 3123.02

– Triggers many enforcement remedies

• 20% payment on arrears

• Lump sums

• Driver license suspensions

• Professional license suspensions

• FIDM

• Etc.

• Criminal Non Support Diversion

Project Clean SlateDebt Compromise

Effective January 1, 2007

Illinois Public Act 94-0971

Allowed for past due state

assigned obligations to be reduced

in exchange for regular child

support payments to support the

family.

Implementation of the Clean Slate Pilot

• Target area – City of Chicago

• Target group – 500 NCPs

• Duration – 7 months

Pilot Results

-Distrust

-Disconnect

-Disbelief

What we learned

• Most participating NCPs did not have

income enough to pay their child

support

• Many targeted NCPs did not trust us

• Many non-participating NCPs below the

poverty level owed so much money they

did not even consider paying and did

not bother participating

What we did

Reached out to the community

Created an expedited modification review

process

Loosened the guidelines for inclusion – current

obligation no longer required

Introduced “Project Clean Slate” statewide to

NCPs of all cultural and socio-economic

backgrounds

Criteria for Inclusion

• Signed application

• Proof of current income

• Proof past due support owed to the state

accrued as a result of

-Unemployment -Incarceration

-Serious Illness -Reason beyond NCPs

control

• Signed payment agreement

Upon Approval . . .

• State’s entire portion of past due

support will be conditionally

removed from NCP’s balance

• Notes are added to case to account

for balance reduction adjustment

Payment monitoring

• Payments must be made according to

agreement on time and in full for six months

• Upon successful completion of six-month

payment agreement, past due support owed

state is PERMANENTLY removed from NCP’s

balance

• Failure to make required payments will cause

unpaid balance due to state to be reposted to

the account and NCP will be barred from

participation in the future

Suspension of Agreement

• During six month period, NCP may

request a suspension of the

agreement

• If suspension is warranted, it will

be granted for up to one year.

• NCP will be allowed to resume

agreement without penalty

Assessment of Clean Slate

RESULTS:

• 1178 NCPs have applied for the

program

• $1,212,411 in TANF debt forgiven

0

5

10

15

20

25

30

35TANF Debt Forgiven by Range

Next Steps

• Revise communication component

• Move project out of Community

Relations and into Collections

So Where Does Big Money Come From?

Broad-based program using

combination of:

• -Early intervention techniques

$12,125,210 – 16 months

• -Centralized collections

$57,948.235 – 7 months

60

Arrears: Collectability

• Case Management

• Stratification – PAID Workgroup

• Aging of arrears

• Lack of jurisdiction status – If it belongs

there, put it there

• Case closure

• Does unenforceable = uncollectible?

• New closure authority for uncollectible arrears-

only?

• Create category of “dormant” IV-D cases?

61

Arrears: Collectability

• Debt Management – Interest• “The child support agency may suspend or waive

judgment interest on an arrearage amnesty program, as an incentive for satisfying a child support obligation or complying with a payment plan, or if the child support agency determines that the judgment interest is not collectible through commercially reasonable efforts. This subsection applies to judgment interest accruing before July 1, 2005, only if the arrearage is assigned to the child support agency under section 50-09-06.1 or 50-24.1-02.1 or if the obligee provides written consent. Any judgment interest that is suspended or waived under this subsection may be reinstated by a court at any time or by the child support agency if the obligor has failed to comply with a payment plan.”

62

Arrears: Collectability

• Debt management – assigned arrears

• Write off $500 in assigned arrears per year

in locate function or open to IV-D with no

payment

• Increases to $1,000 per year after 4 years

• Permitted only if case is eligible for closure

after write off

• See PAID Update # 29

• Removal of nominal balances under $5

63

Arrears Waiver & Compromise

• Use Federal Regs to close cases

• Administrative Code Rule for Waiver &

Compromise

• Waive arrears under appropriate

circumstances

• Compromise ~ reward positive behavior

• Risks

• Prisoner population (currently incarcerated

and formerly incarcerated)

Presenter’s Contact Information

Mary Morrow

Assistant Deputy Administrator

Illinois Dept. of Healthcare and

Family Services

630.844.8935

Mary.Morrow@Illinois.gov

65

Presenter’s Contact Information

James Fleming

Deputy Director/Chief Legal Counsel

hild Support Enforcement Program

North Dakota Department of Human

Services

PO Box 7190

Bismarck, ND 58507-7190

jfleming@nd.gov

66

Presenter’s Contact Information

Kim Newsom Bridges, Esq.

Ohio CSEA Directors’ Association

614.228.5551

kim@ocda.us

Update: #29

MANAGING EXISTING ARREARS

State: North Dakota Practice: Automated Identification of Debt Compromise Cases and Monitoring North Dakota has an interest compromise/write off program with three goals: motivate obligors to comply with long-term payment plans; provide incentives for continuing to make full, timely payments; and eliminate uncollectible assigned arrears. The program is unique because it uses system data to create annual ad-hoc reports for cases eligible for write off and/or case closure and determines when obligors are no longer eligible for “good payer” interest suppression. The State also uses the automated system to monitor each obligor’s compliance with payment plans. Arrears: North Dakota has identified categories of cases with assigned arrears that cannot be considered collectible through reasonable collection efforts. These categories are linked to Federal case closure criteria and data captured on the automated system. Case workers receive annual ad-hoc reports using data extracted from the automated system, which often leads to removal of uncollectible debt followed by case closure. Interest: Through a combination of ad-hoc reports, automated worker alerts and system support, North Dakota compromises interest in four areas. First, when negotiating a lump-sum settlement of all existing arrears, the interest on assigned arrears and the interest that accrued on unassigned arrears after a certain date (identified in State law) is negotiable. Compromise of assigned arrears is permitted if an offer is received for at least 95 percent of the outstanding arrears balance after subtracting all negotiable interest, or 90 percent with IV-D director approval (assuming that the amount of assigned debt is equal to or greater than the amount that is compromised). Second, when an obligor enters into a payment plan to avoid license suspension or other enforcement activities, the monthly payment due under the plan is entered on the automated system. Compliance with the plan is automatically tracked on the system. Interest on the arrears does not accrue as long as the obligor is paying regularly as required in the payment plan. However, if a payment is missed, the system alerts the worker to take appropriate action, which can include immediate suspension of the obligor’s licenses and reinstatement of interest. Third, if an obligor with arrears has been making payments on a regular basis for the last 9 or 12 months (depending on whether the obligor is subject to income withholding), the worker can identify the obligor as a “good payer” whose interest should be suppressed. The worker contacts the obligor and explains that interest is not being charged as long as payments continue to be made regularly. This option is appropriate

PAIDPAIDPAIDPAID

when the worker wants to motivate the obligor to continue making those payments, and does not want to initiate a license suspension action and negotiate a payment plan just to continue the existing pattern of good payments. If the obligor does not continue to pay regularly, interest can be reinstated. One year after the date an obligor signs a payment plan, or is identified as a “good payer” and has made all required payments, any unpaid interest that had accrued before that date can be compromised. Finally, if interest is considered uncollectible for certain pre-approved reasons (such as a deceased obligor, obligor receiving SSI benefits, total arrears exceeds $50,000 and the like), the worker may prevent interest from accruing on the case in future months. The worker can request an adjustment to the payment records for any unpaid uncollectible interest that accrued. Time Frame: The debt write-off policy was issued in April 2005. The interest compromise project was implemented on a case-specific basis after the implementing legislation became effective in July 2005, and a final policy was issued in November 2006. The ad-hoc reports for “good payer” suppression started in January 2006, and full system support for payment plan suppression was activated in June 2006. Results: In 2005, the first year of the write-off project, 1,568 court cases were affected and $4.4 million in uncollectible assigned arrears was removed. In 2006, $1.2 million in principal and $1.4 million in interest was removed, with the accrual of an additional undefined amount of interest being suppressed. In 2007, $1.3 million in principal and $2.4 million in interest was removed, and in 2008, $1.4 million in principal and almost $3.9 million in interest was removed. The adjustments in 2008 involved 2,199 court files, plus an undetermined number of good payers whose interest was suppressed. Costs: The debt write-off policy was implemented using existing system data and support, so the only cost involved in addition to worker time was computer processing for the data extract, which is less than $1,000 per year. Interest suppression for payment plans was implemented as part of the system development for suspending licenses by administrative order. “Good payer” suppression and uncollectible suppression/waiver were each implemented primarily through existing system support and data, with only a nominal cost for extracting the data needed to prepare the ad-hoc reports. Contact: James Fleming jfleming@nd.gov 701-328-7502 For further information on the Project to Avoid Increasing Delinquencies (PAID), please contact your Regional Program Specialist or PAID@acf.hhs.gov.