Private Collection Agencies and Redirection of Payments
DEAR COLLEAGUE LETTER
DATE: August 14, 2009
TO: STATE AND TRIBAL IV-D DIRECTORS
RE: Private Collection Agencies and Redirection of Payments
We have received several inquiries seeking clarification regarding redirection of payments and other issues relating to Private Collection Agencies (PCAs). In part, these inquiries are due to a transfer of cases from a large, for-profit collection agency to a law firm as a result of a loan default.
In light of this recent action, some States have closely assessed pertinent State law and have determined that they have no responsibility to redirect payments to a successor in interest to a PCA’s contracts. Other States have enacted consumer protection legislation that addresses consumer complaints about the practices of some companies, and some States do not permit the redirection of child support payments to anyone other than the custodial parent. Current Federal law and policy does not preclude States from limiting or disallowing redirection of custodial parent payments. Such practices are governed by State law. State IV-D agencies have a legitimate interest in ensuring that their cooperation with PCAs is consistent with their obligations under Title IV-D and in the best interest of their customers.
We have also been alerted to the fact that, apparently, some PCAs have instructed employers, through the use of an income withholding form with the appearance of an official document, to redirect child support payments away from a State Disbursement Unit (SDU). In accordance with section 454B of the Social Security Act, payments in all IV-D cases, and in non-IV-D cases in which the initial support order was issued on or after January 1, 1994, and in which the obligor's income is subject to wage withholding, must be paid through the SDU.
Please address questions concerning this issue to Linda Keely, Senior Advisor to the Commissioner, at (202) 401-5072.
Office of Child Support Enforcement
cc: ACF/OCSE Regional Program Managers