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Financial Institution Data Match Freeze and Seize Interstate Processing

Published: June 13, 2012
Information About:
Other Private Partners, Financial Institutions, State/Local Child Support Agencies
Topics:
Federal Systems, Financial Institution Data Match

The Personal Responsibility and Work Opportunity Reconciliation Act of 1996 (PRWORA) promises to change outdated interstate processing by giving child support agencies new authority to discover noncustodial parents' assets, and expanded tools for enforcing child support obligations across state lines on a mass scale, through automation and administrative remedies. Once the account is located, state child support agencies may attempt one of several methods - traditional two-state enforcement, AEI limited service request, and direct levy - to levy funds owed for child support.

Section 466(a)(4) of the Social Security Act requires that states enact laws under which liens arise from past-due child support by operation of law.  It also mandates states to provide full faith and credit to child support liens arising in another state, as long as the party seeking to enforce the lien complies with procedural rules regarding recording and service of liens in the state in which the real or personal property is located.  Section 466(c)(1) requires that a state IV-D agency assist another state in enforcing a lien that arises in the other state against property held in the IV-D agency's state.  States could enact laws that would give immediate force and effect to another state's direct liens and levies.

TWO-STATE ENFORCEMENT

When Used

A two-state enforcement action is taken when there is a traditional IV-D interstate case established or opened using the Uniform Interstate Family Support Act (UIFSA).  In this traditional IV-D interstate case, the initiating state case has been transferred to another state for all appropriate IV-D activities. The state that transferred the IV-D case is known as the "initiating state" and the state receiving the request is known as the "responding state."  In this traditional type arrangement it is important to avoid duplication of actions by both states on the same assets.  It is also important for both states to be informed of enforcement actions and their outcomes.  This is necessary since responsibility for taking all appropriate actions is being transferred between two states.

The responding state, upon learning of the existence or identification of an asset of which the noncustodial parent is the owner, takes the appropriate action to obtain the asset from the identified financial institution by whatever methods it uses in enforcing its local cases.  If on the other hand, the initiating state learns of an asset of which the noncustodial parent is the owner, it should be in contact with the responding state to avoid any duplication of effort by the responding state.

The financial institution will process a two-state enforcement action as it would any lien/levy action.  The financial institution will comply with all applicable laws and procedures of the state that issues the action. As a result the financial institution would communicate and coordinate its actions with the "responding state".

AEI - LIMITED SERVICE REQUEST

Overview

Another tool provided under PRWORA is Administrative Enforcement in Interstate Cases (AEI). This remedy allows a state to include requests from other states in its periodic interfacing with various State databases and to include debts received from other States in its periodic financial institution data match, conducted in accordance with section 466(a)(17) of the Social Security Act (42 U.S.C. § 666(a)(17)). The underlying IV-D case is not transferred, and the assisting state is not required to provide all appropriate IV-D services. The assisting state is required to provide are location and seizure of assets, thus it is known as a limited service request. The assisting State must maintain records of the number of requests for assistance, the number of cases for which the state collected support in response to such a request and the amount of collected support.

Legislative History

In August of 1996, PRWORA added section 466(a)(14) of the Social Security Act (42 U.S.C. § 666(a)(14)(B)) to create a new child support enforcement mechanism called Administrative Enforcement in Interstate Cases.  In recognition of the intent of the use of this section to facilitate high-volume automated location and seizure of assets in other states, the Child Support Performance and Incentive Act of 1998 amended subsection (B) as follows:

(B) HIGH-VOLUME AUTOMATED ADMINISTRATIVE ENFORCEMENT- In this part, the term 'high-volume automated administrative enforcement', in interstate cases, means, on request of another state, the identification by a state, through automated data matches with financial institutions and other entities where assets may be found, of assets owned by persons who owe child support in other states, and the seizure of such assets by the state, through levy or other appropriate processes.

Procedure

The state seeking asset information and/or seizure in another state is called the "requesting" state.  The state being asked to locate and/or seize assets within its borders is referred to as the "assisting" state.  The terminology is different than traditional interstate terminology ("Initiating"; "Responding") to be clear that the requests do not create a IV-D case in the assisting state.  The intent is a quick, automated search of state asset records, if necessary, and quick seizure and return of the collected asset to another state.  The automated search of state asset records may not be necessary when the requesting state has already received information through the MSFIDM process that the asset is in the assisting state.  In that situation, the requesting state remits the identifying account information to the assisting state with a request to seize.

  1. Requesting State Responsibilities:
    1. Determine which cases to submit to a particular state for matching and/or seizing of assets:
      1. received a hit in another state through MSFIDM information;
      2. specific indication that NCP’s assets may be in that other state; or
      3. the application of logical criteria to identify location of delinquent obligor’s assets, such as the NCP’s geographical proximity to assisting state, NCP’s known past association with the assisting state or EFPLS match.
    2. Certify the amount of support delinquency. 
    3. Certify that the state’s procedural due process requirements have been met.
    4. Provide sufficient information to enable the state to which the request is transmitted to compare the information about the cases to the information in the databases of the state.
  2. Assisting State’s Responsibilities:
    1. Process other state’s cases through assisting state’s intrastate levy criteria and procedure.
    2. Seize any identified assets that meet the State’s criteria.
    3. Maintain records of:
      1. the number of requests for assistance received;
      2. the number of cases for which the state collected support in response to such a request; and
      3. the amount of support collected.   (The assisting state receives incentive payments for collections made as an assisting state in the AEI process.  42 U.S.C. § 658(d); OCSE form 157, Section J.)
    4. Promptly report the results of the enforcement procedures to the requesting state.
    5. Send the collections to the requesting state.  The collection does not have to go through the assisting state’s SDU, as these cases are not considered transferred to the IV-D caseload of the assisting state.

Due Process Issues

  1. Requesting State.
    The requesting state must certify that all procedural due process requirements have been met in each specific case. 42  U.S.C. § 666(a)(14)(A)(ii)(II)(bb).  This means that a state must be able to certify that the required due process procedures were followed in establishing the order and any further notice requirements were followed once the case became delinquent.  Some states require that a notice be sent to obligors, upon establishment of the obligation order, listing all possible enforcement actions if they become delinquent in the future. Other states require a similar notice once the case becomes delinquent.
  2. Assisting State.
    As discussed above, past-due child support becomes a judgment by operation of law.  Thus, all arrears that are referred to the assisting state are judgments. A majority of federal courts have held that the minimum requirements for procedural due process for post judgment activities, such as restraining and seizing an asset are:
    1. Notice that the property is seized;
    2. Notice of the exemptions that can be claimed;
    3. Prompt opportunity to challenge the action.

Appeals

The Act is silent on the issue of how appeals are handled.  Since the assisting state is to treat the case as it does its intrastate cases and the assisting state is to seize the asset using its levy procedures, the law and/or procedure of the state of the asset, which will be the assisting state, will apply.  The requesting state is responsible for settling disputes regarding the amount of the debt and should be available to the assisting state if there is a contest.  In complicated cases, a two-state action should be initiated.

DIRECT LEVY

Federal OCSE PIQ-99-06, issued August 16, 1999, discusses the direct imposition of liens and levies across state lines.  The conclusion is that while states could enact laws that would give immediate force and effect to another state’s liens or levies, they are not required to.  The PIQ further notes that if a state allows direct liens and levies from another State, the sending State must be fully aware of the procedural rules of the receiving state.