Once again, the combination of contingency fees and law enforcement spells trouble: an article by Tresa Baldas in the National Law Journal reports that controversy is mounting over the activities of private firms that go after noncustodial parents’ child support obligations in exchange for a percentage share of the bounty (“Suits collecting around child support collectors”, Sept. 17, no free link). “Critics of the industry — many of them lawyers — claim that private collectors of child support are engaging in predatory practices, such as charging excessive contingency fees as high as 50%, and using aggressive collection tactics that run afoul of federal laws.” The private agencies escape the scrutiny of federal debt collection laws and have been operating effectively without regulation, but state lawmakers are now moving to fill the gap, with 13 states having passed laws intended to protect the services’ clients (if not always their adversaries) by capping fees, prohibiting the agencies from collaring state-directed payments, and giving clients more leeway to withdraw from contracts.
The National Council of State Legislatures details a range of complaints made against some of the collectors:
* written and oral communications with obligees designed to look or sound like they are from the state child support agency or other government entity,
* repeated harassment of employers, family members and neighbors of obligors,
* keeping as payment for services 50% or more of support collected,
* intercepting current support payments from the state agency to apply to back support they contracted to collect for the obligee,
* charging a fee for collections made by the state agency,
* refusing to terminate contracts when requested by the obligee, and
* requesting income withholding from employers without proper authority.
In Florida the state attorney general took enforcement action against one firm: “Stuart C. Cole, operator of Child Support Services of Atlanta, Inc., was fined $250,000 for violating a 2006 injunction obtained by the Attorney General’s Office after the company was accused of taking child support payments and threatening those responsible for providing the funds.” More on collector regulation: National Center for Youth Law, National Women’s Law Center. A relatively early journalistic account of the industry was Tamar Lewin, “Collecting Child Support: Private Firms Help Single Parents Get What’s Due”, New York Times, May 21, 1994 (search at Times site). More on child support collection: Feb. 19, 2005, etc.