Increase the Use of Electronic Fund Transfers in Child Support Enforcement

Texas should increase its use of electronic fund transfers in child support enforcement to improve compliance in the program.


Background
Improved technology has allowed some state Child Support Enforcement (CSE) programs to use electronic fund processing to speed payment collection and distribution.

Electronic fund transfers (EFTs) shift funds between banking institutions via electronic signals. EFTs can expedite child support payments by allowing absent parents to make EFT payments from their own bank or credit card accounts directly into the account from which the payments are disbursed to custodial parents. In Texas CSE cases, this would be the Child Support Trust Fund, Fund 994, in the State Treasury. Counties can use EFTs to tran sfer child support collections from a local account to the CSE collections office or to the State Treasury for disbursement. EFTs also allow the state to deposit support payments directly into a recipient s bank account.

The United States Commission on Interstate Child Support recommends states use electronic payment processes and automation wherever possible to speed child support collection and distribution. 1 New Jersey allows child support payments to be made by credit card or EFT. Rhode Island s automated system allows for a 24-hour turnaround on child support payments. 2

The Texas CSE program uses EFTs on a limited basis. In Bexar, Tarrant and Dallas counties, county registries deposit the funds into a local bank and transfer the amount to the CSE collection office electronically. The CSE program plans to expand the practi ce to 14 other counties including Travis County. 3

In most counties, however, the county registry forwards each child support payment check to the central collection office. In case s involving cash payments and payments from employers reflecting withholdings from multiple employees, the county deposits the payments into a local bank and cuts a new check to the state for the entire amount of the deposit.

This process can be slow and cumbersome for employers, the county and the state, but it is especially burdensome for children who need their child support as quickly as possible. It is also frustrating for parents paying child support who find that a payme nt still hasn t arrived; it also increases the risk of lost checks.

CSE s new automated system, TEXCSES, will provide the additional capacity needed for increased automation in all child support activities, including collection and disbursement.

EFTs are an important part of customer service and are quickly becoming the standard that customers expect.


Recommendations
A. The Legislature should mandate electronic fund transfers (EFTs) in the state s Child Support Enforcement (CSE) program.

All payments should be made to the county in which an order is established. The county registry should deposit all payments on CSE cases into a State Treasury account in a local bank. These local accounts would all feed into the state s Fund 994, so the process of issuing checks to custodial parents would not be affected. A record of the deposit should be the only information needed for the state CSE office. This record should be sent electronically by the Treasury directly to th e TEXSCES automated system.

Child support payments should be disbursed from the Comptroller s office directly to custodial parents. Again, a record of each disbursement should be provided to the CSE automated system.

In most cases, a check for a custodial parent should be in the mail one day after the county registry receives the absent parent s check. The payment should be recorded in the case file that same day.

B. The state should offer persons paying child support the option of electronic payment, and custodial parents the option of electronic deposit of these payments.

When a person pays through EFT, the payment should go immediately into a local Treasury account, bypassing the county registry. The Treasury should issue receipts to the absent parent and the county registry.

When a custodial parent opts for direct deposit, the Treasury should notify the CSE program and the county registry that the check was deposited. The payment usually should be sent to the custodial parent s bank account on the day after a payment is made.

C. Local registries should accept credit cards for child support payments.

D. Parties to child support cases not currently in the state s CSE caseload should have access to the same EFT options as CSE clients.

The bank, as opposed to the Treasury, should be responsible for issuing receipts in non-CSE cases. All orders should stipulate that failure of the method of payment may not constitute an excuse for nonpayment.


Implications
EFT would speed the processing of child support payments and disbursements. Limiting use of the posta l service would lower the risk of lost and late payments through human error. EFTs would make paying support more convenient, and receiving it quicker and more secure.

Streamlining the collection process for child support enforcement will give counties and the state CSE office more time to concentrate on the aspects of order establishment and enforcement that cannot be automated, such as mediation and judicial proceeding s.

Streamlining collections would be possible because of the special capabilities of TEXCSES, particularly the new external interface features that will allow information transfers between TEXCSES and other state agencies data systems.

The use of credit cards for child support payments could help non-custodial parents facing cash flow problems and keep payments moving regularly to the children who need them.

Customer service is an important feature of the recommendations of the United States Commission on Interstate Child Support and will probably figure in federal legislation proposed du ring the next congressional session. Texas can serve as a model by enacting state legislation that demonstrates a clear commitment to customer service and efficiency.


Fiscal Impact
Potential savings from these uses of EFT cannot be estimated. However, streamlining collections through EFT should reduce administrative costs for the CSE program and the counties.
Extensive use of EFT could raise the State Treasury s and Comptroller s administrative expenses for processing payments, maintaining accounts in l ocal banks and issuing receipts or electronically transferring payment information to state and local registries. However, these increased costs should be minimal.

Employers should welcome the option of electronically transferring wage withholding funds directly to the Treasury rather than cutting checks for the counties. This could result in significant savings for employers with wage-assigned employees owing suppor t in multiple counties.



Endnotes
1 U.S. Commission on Interstate Child Support, Supporting Our Children: A Blueprint for Reform (Washington, D.C., October 1992). (Draft.)
2 Bee Moorhead, State Survey of Innovative Child Support Practices (The University of Texas at Austin, September 1992). (Draft.)
3 Interview with Tom Laramey, General Counsel, Office of the Attorney General, Child Support Enforcement Division, Austin, Texas,
November 3, 1992.