April 16, 2014
Most people are aware that when we sign a contract for credit, we are in agreement to the terms and conditions related to that contract. We know that we are responsible for all costs associated with that contract such as interest and late fee penalties when the contract is not honored. But how many know about the interest that parents must pay when child support payments are late? According to the Consumer Financial Protection Bureau (2013), a debt collector may not collect any interest or fee not authorized by the agreement or law. People should wonder why the government can then charge interest on parents who, more than likely, did not agree to the terms of the child support order.
There are a large majority of child support orders which have been granted by default judgments which are usually the result of the nonresidential parent missing a court date. There are a great deal of parents that are responsible for imputed payments established based on imaginary income and possible future earning potential. When these payments are missed, 35 states attach interest to the debt. According to the National Conference of State Legislatures or NCSL (2013), states may look at interest on child support arrears as both an incentive to encourage payments as well as a penalty for those who do not make timely payments. The punishment of interest does little to collect payments when unemployment is the reason for the nonpayment of support. However, if there is no income, applying interest only guarantees more debt for the noncustodial parent and more potential revenues for the government.
Interest can be extremely expensive depending on what state hold the child support order. There are a couple of states that charge more moderate interest rates ranging from four and six percent. However, interest rates increase to 10 and 12 percent in states like California and Colorado. Although many studies have been conducted on the minimal benefit of charging interest on an uncollectible child support debt, California continues to charge their parents with no hesitations. There was a study conducted in which it was determined that the Sunshine State had an estimated $14.4 billion in child support arrears. According the Urban Institute (2003), in 2000 it was estimated that parent debtors would pay $843 million dollars towards arrears and interest, or 6% of the $14.4 billion in first year. This money will not be paid to the families that child support payment is supposed to help. Over 10 years, parent debtors would pay $3.8 billion, or 26% of the original $14.4 billion of arrears owed as of March 2000, (Urban Institute, 2003).
These startling statistics show that the state has not taken into consideration the damaging financial repercussions charging more money for debt can have on an already suffering population. In Oklahoma, its parents fare no better than the parents being charged interest on an imaginary contract. According to the Oklahoma Department of Human Services or OKDHS (2010), unpaid child support payments accruing under the Oklahoma order draw interest at the rate of 10% per year from the date they become delinquent. This means that if a parent loses their job, interest is charged as soon as the first payment is late. The interest shall be collected in the same manner as the payment upon which the interest accrues, (OKDHS, 2010) There is no consideration of past payment history when charging interest on child support debt. The State of Colorado provides for interest on missed payments, retroactive support, and adjudicated arrears, (Support Collectors, 2014). This is debt that will never be excused or eliminated and will always require payment from people who, in all likelihood cannot afford the payments or the debt.
Since cases are only mandated to be reviewed for modification every three years, the debt only grows when a parent is unemployed and cannot afford the payments. It should not, nor should it ever be, a crime to be poor in the United States. The current child support system has transformed a program designed to force men who abandon their wives and children into providing for them into a billion dollar a year collection agency. The interest that the government is charging is a large part of the arrears due that will ever reach a child's pocket if, and when, it is collected. Charging interest just reiterates the fact that the agencies are operating in order to keep citizens who happen to be parents indebted to the government for a lifetime.
Consumer Financial Protection Bureau (2013, December 11). Can a debt collector increase the interest rate on a debt I owe? > Consumer Financial Protection Bureau. Retrieved March 12, 2014, from http://www.consumerfinance.gov/askcfpb/1417/can-debt-collector-increase-interest-rate-debt-i-owe.html
National Conference of State Legislatures (2013, May). Interest on Child Support Arrears. Retrieved March 12, 2014, from http://www.ncsl.org/research/human-services/interest-on-child-support-arrears.aspx
Oklahoma Department of Human Services (2010, September 9). Form 03EN015E-Oklahoma department of human services. Retrieved March 12, 2014, from http://www.okdhs.org/NR/rdonlyres/5A680606-AE27-45FB-9D6C-830C16CB780F/0/03EN015E.pdf
Support Collectors (2014). Colorado child support | Colorado child support enforcement. Retrieved March 12, 2014, from http://www.supportcollectors.com/resources_colorado.php
The Urban Institutue (2003, March). Examining child support arrears in california: The Collectibility Study. Retrieved March 12, 2014, from http://www.urban.org/UploadedPDF/411838_california_child_support.pdf