As the National Council of Child Support Directors (NCCSD) continues to explore opportunities to address root causes of the national problem of undistributed child support collections, we have identified a need for action by the federal government in an area that impacts state decisions on collection processing. That area relates to losses incurred by states in the distribution of child support where the proffered check lacked sufficient funds. As you know, some parents or employers submit child support checks with insufficient funds. In other cases, IRS or state adjustments to tax offset collections may also result in state child support program losses; most commonly, these unfunded adjustments arise from “Injured Spouse” claims. In these circumstances, the obligee is enriched by receiving an unfunded disbursement. Additionally, many states have noted that both custodial and non-custodial parents know how to game the system when distributions are made before the 180 hold period. With the PRWORA requirement “two business day” payment processing, this problem has increased for the states.

OCSE guidance permits recoupment of these losses from custodial parents in limited circumstances. In reality, this remedy is not reliable because even when they receive regular payments, custodial parents cannot re-pay the support that was received as the result of a bad check, as the support was already spent on the needs of their children. Dealing with custodial parents about this issue creates a significant customer service problem.

In 2000, NCCSD adopted a resolution advocating that the federal government participate in these losses with FFP. Given the requirements of the Social Security Act for expeditious processing of checks and tax refunds, it is appropriate for the federal government to participate with state governments in losses incurred in complying with these requirements. The resolution also recommended that OCSE permit states to recoup the full amount of any unfunded disbursements through interception of subsequent current and past due support payments received from the obligor or employer prior to distribution of any funds to the obligee.

Subsequent to the adoption of the NCCSD resolution in 2000, there was additional dialogue with OCSE, both Judge Ross and Lily Matheson. It resulted in a letter from Judge Ross to MaryAnn Wellbank, who was president of NCCSD at that time (copy attached). The substance of the letter was that OCSE’s position is that a regulatory change was not sufficient to resolve the issue, and that a statutory change would be required.

NCCSD urges OCSE to seek the necessary statutory changes for participation. As the collection of child support is a partnership between the states and OCSE, it is crucial that the cost of doing business, in this instance, the potential absorption of bad debt if it cannot be collected from either the CP or NCP, should be equally shared by both parties.

Please let me know if you need any additional information or would like to discuss the issue further with myself and the NCCSD Executive Committee.