Part I: A Study of Interest Usage on Child Support Arrears, State of Colorado

Table of Contents

1 Introduction

1.1 Federal Regulations

1.2 Colorado Law, Policy and Practices

1.3 County Interest Usage

1.4 Report Organization

2 Experiences of Other States

2.1 Prior Studies of State Practices

2.2 Survey Design

2.3 Why Charge Interest?

2.4 Statutory Provisions

2.5 Statewide Automation Capability and Costs

2.6 Moral Issues

2.7 Effects of Interest on Payments

2.8 Relevant Findings from IRS Study

2.9 Empirical Evidence

2.10 Factors Contributing to Effective Interest Usage

2.11 Planning and Development

2.12 Automation

2.13 Information and Notification

2.14 Worker Impact

2.15 Policy Variations

2.16 Challenges of Charging Interest

2.17 Lawsuits

2.18 PRWORA Distribution Requirements

2.19 Adding Interest to an Automated System

2.20 Summary and Recommendations

3 Collections from Interest

3.1 Data, Methodology and Limitations

3.2 Colorado-Specific Data

3.3 Data from Other States

3.4 Methodology

3.5 County Usage of Interest

3.6 Q.1 Will Interest Inflate Accounts Receivable?

3.7 Q.2 What Proportion of Interest Arrears is Likely to be Collected?

3.8 Q.3 Does Interest Encourage Timely Payment of Current Support?

3.9 Q.4 Is Interest an Effective Negotiation Tool?

3.10 Will Interest Assessment Cause Excess Burden on Some Obligors?

3.11 Q.6 Does notification of interest increase collections?

4 Costs of Interest

4.1 Development of Business Rules

4.2 Automating Interest

4.3 Programming

4.4 Other Automation Costs

4.5 Total Estimated Automation Costs

4.6 Adding Interest to Automating Systems

4.7 Training

4.8 Notification

4.9 Customer Service

4.10 Conclusion

5 Conclusions and Recommendations

5.1 Lessons Learned from Other States

5.2 The Effect of Interest on Child Support Collections

5.3 Costs of Statewide Interest Assessment

5.4 Other Issues

5.5 Recommendations