Child Support
Case: Harp v. Metcalf - Child Support Class Action Suit - 5% Fee OrderIN THE FIFTH CIRCUIT COURT FOR DAVIDSON COUNTY, TENNESSEE SHARON HARP, ET AL, )
MEMORANDUM AND ORDER This is a multi-faceted class action case involving the administration of the state-run child support collection system which went into effect in October, 1999. Presently before the Court for decision are cross motions for summary judgment related to the collection of a five percent processing fee ("5% fee") from each amount of child support collected by the defendant with its centralized collection system. The parties filed cross motions for summary judgment on the issues of due process notice, recoupment of bad check payments from current child support payments, and collection of the 5% fee. The parties agreed to focus the first hearing on April 27, 2001, on the due process notice issue. One reason the parties agreed is immediately before the April 27 hearing the defendant filed an affidavit which stated that the Department would voluntarily forego collection of the 5% fee from the collected child support after a period required to reprogram the Tennessee Child Support Enforcement System's ("TCSES") computer.(1) The Court then entered an extensive Memorandum and Order on the notice issue dated May 24, 2001, setting out the background and history of this case. This Memorandum and Order included a description of the federal legislation and the policy reasons that mandated the state take over the collection of child support and establish a central collections system with a State Disbursement Unit ("SDU"), a description of the categories of recipients receiving support from the central collections system, and a description of how the defendant distributes the support it collects to each category of recipients. The Court adopts and incorporates the background information in its previous Memorandum and Order. Following the April 27, 2001, hearing the plaintiffs filed a renewed motion for temporary injunction related to the issues of recoupment and collection of the 5% fee. The Court heard arguments on that motion on June 6, 2001. The Court declined to issue a temporary injunction as to the issue of recoupment. The defendant has ceased recouping money from current child support mistakenly sent to custodial parents or in reliance on bad checks without notice and consent from the custodial parent. However, the Court took under advisement the temporary injunction request related to the 5% fee. The issue as to whether the defendant can legally collect the processing fee under federal and state law is still before the Court. At the June 6, 2001, hearing the parties agreed to waive further oral argument on the cross motions for summary judgment related to the 5% fee. Obviously the best way to determine the 5% fee issue is to not deal with it by way of a ruling on the motion for temporary injunction, but to resolve the issue by ruling on the cross motions for summary judgment. Therefore the issue presently before the Court is whether the taking of the 5% fee from current support violates the plaintiffs' rights to distribution of child support under federal law. For reasons stated herein, the Court finds that the taking of the 5% fee from current support violates federal law. The taking of the fee from underpayments or arrange payments deprives recipients of child support payments and is unlawful. The defendant has programmed the TCSES computer to take 5% as a fee against every child support payment that comes through the Department's central collections system.(2) The 5% processing fee is an amount in addition to the court-ordered support. See T.C.A. § 8-21-403(a). For example, if a non-custodial parent was required to pay Five Hundred Dollars ($500.00) per month as child support an additional 5% or Twenty Five Dollars ($25.00) would be added to the total amount. Therefore, the non-custodial parent must pay a total of Five Hundred and Twenty Five Dollars ($525.00) per month. The TCSES computer takes the 5% from each payment that comes through the SDU even if there is current or past due support owing. Therefore, the amount is essentially taken "off the top" of every child support payment the defendant receives. Under the previous example, if the non-custodial parent makes a partial payment in a month of One Hundred and Twenty Five Dollars ($125.00) the defendant will take Six Dollars and Twenty Five Cents ($6.25) as a processing fee no matter if the custodial parent has received all current support he or she is presently owed or has arrearages due from the past underpayment of child support. The 5% fee is taken from all users of the central collections unit: custodial parents currently on Families First, custodial parents previously on Families First, custodial parents receiving IV-D services under the Social Security Act, and custodial parents who receive child support from court-ordered wage withholding. The Court finds that the taking of the fee from recipients is in violation of federal law and regulations. Under 42 U.S.C. § 657 and 45 C.F.R. § 302.51(3), a child support payment must first go to satisfy current support and then any arrears. Both the statute and the regulation require that if child support is owed the payment may only be used for child support. The Court recognizes that the defendant collects the fee pursuant to T.C.A. § 8-21-403(a) and T.C.A. § 36-5-116(a)(2), however, T.C.A. § 36-5-116(a)(2) states, "[t]he processing of such fees shall be conducted in such a manner as will not adversely affect compliance with federal law or regulations and will not adversely affect federal funding for the Title IV-A block grant program and the Title IV-D child support program." The defendant's present method of collecting the fee is inconsistent with federal law. There should be no misunderstanding by the defendant as she received a letter from Carlis Williams, Southeast Regional Hub Director of the U.S. Department of Health & Human Services dated March 8, 2001, stating: Your agency's response to this office concerning this letter stated, "The Department of Human Services is specifically authorized by State law found at Tennessee Code Annotated (TCA) 8-21-403(a) and 36-5-116(a)(2) to receive a 5% fee for the collection of child support. Under TCA 8-21-403(a), the non-custodial parent's obligation is the court ordered amount of child support plus the amount of the statutory fee. Pursuant to TCA 8-21-403(a), the fee is a separate obligation of the non-custodial parent in addition to the child support obligation . . . ." In a meeting on November 28, 2000, State representatives indicated that regardless of the amount collected for child support payments, a 5% fee is taken from any and all amounts received through the State disbursement unit (SDU). This office does not take issue with the collection of fees or with collecting fees after current support and arrearages have been satisfied. No fee, however, should be taken from child support payments. Please refer to the January 16, 1998, letter of Judge David Ross, former Commissioner of the Office of Child Support Enforcement (OCSE), to Ms. Joyce McClaren, former State Child Support Director. That letter (copy enclosed) stated OCSE's policy concerning fees in response to your agency's question concerning whether the statutory fee could be collected but not included in the distribution methodology directed by statute. Any monies received by the SDU, not specifically identified by the payor as a fee, must be distributed first as child support in accordance with Section 457 of the Social Security Act and OCSE Action Transmittal 97-13, dated September 15, 1997, and only applied to fees after all current and past due support is satisfied. The Court has considered the plaintiffs' contention that principles of statutory construction mandate that T.C.A. § 8-21-403(a) should be interpreted as not allowing the fees to be collected from current support. The plaintiffs' argument is convoluted and not consistent with the wording of the statute. While the Court rejects the plaintiffs' interpretation of T.C.A. § 8-21-403(a), it obviously accepts plaintiffs' other argument that the collection of the fees directly violate federal law and, therefore, also violate the incorporation provision of T.C.A. § 36-5-116(a)(2). The Court is aware that the recipients who receive service because they receive support through wage withholding may not be within the requirements of 42 U.S.C. § 657. The defendant does not address the distinction between the IV-D and non IV-D recipients in her briefs or in her affidavit promising to discontinue the collection of the 5% fee. Therefore, the Court has not addressed this distinction between recipients on the assumption that the defendant does not wish to draw such a distinction. The Court is of the opinion that the controversy in this action surrounding collection of the 5% fee is not moot. While the affidavit from the defendant promises future discontinuance of the fee collection, the defendant also indicated that it will take approximately six (6) months to reprogram the computer and the Department will continue to collect the fee during that period. During the time the TCSES computer is reprogrammed, the defendant will collect large amounts of fees that could potentially belong to child support recipients.(4) This situation is different from that involving recoupment of bad checks where it is clear that the defendant no longer recoups the checks from current support. The Court gives some credit to defendant's position that it will take some time to complete the reprogramming of the TCSES computer. However, because the 5% fee will continue to be collected for a period of time the Court has a matter before it involving "[a] genuine and existing controversy requiring the adjudication of present rights." Ford Consumer Finance Co., Inc. v. Clay, 984 S.W.2d 615, 616 (Tenn. App. 1998). The need for possible meaningful relief still remains. See McIntyre v. Traughber, 884 S.W.2d 134, 137 (Tenn. App. 1994). Based upon the record before it and the cross motions for partial summary judgment on the 5% fee issue, the Court finds as follows: 1. The Commissioner's statement, through its director, that she will no longer collect the 5% fee does not render the issue moot. The same affidavit and others before the Court indicate that the fee will continue to be collected for approximately six (6) months while the TCSES computer is reprogrammed. The possible need for relief remains. 2. It violates federal law for the defendant to collect the fee from partial payments or past arrearages owed. No fees may be collected until all current and past due support is satisfied. 3. The Court grants the plaintiffs' motion for partial summary judgment and denies the defendant's motion for partial summary judgment. 4. The parties shall address the remedy for enforcement of this decision at 1:15 p.m. on June 21, 2001. This the 12 day of June, 2001. _________ss/________________ xc: Brian Paddock Stuart F. Wilson-Patton 1. The affidavit in paragraph 4 states, "Pursuant to a recent clarification of federal policy by officials of the Bush Administration, the Department has decided to discontinue the collection of the 5% processing fee on child support payments processed by the State's central collection and processing unit. In making this change, the Department is proceeding with all possible haste. Although the change is expected to take six months to complete, every reasonable effort will be made to complete the change ahead of schedule." (Affidavit of Natasha K. Metcalf, April 25, 2001) 2. The defendant does not take a fee when a fee has been taken by the SDU in another state. 3. "[A]mounts collected . . . shall be treated first as payment on the required support obligation for the month in which the support was collected and if any amounts are collected which are in excess of such amounts, these excess amounts shall be treated as amounts which represent payment on the required support obligation for previous months." 45 C.F.R. § 302.51. 4. The record before the Court indicates that the fees collected during the reprogramming period could possibly amount to many thousands of dollars. |
