Banks Worrying About Role In Deadbeat-Parent Plans

States around the country are drafting legislation that will require banks to help collect child support from deadbeat parents.

In Indiana, for example, the state legislature is considering a bill that would require banks to identify assets held by parents who are behind on their child-support payments. Each quarter, state officials would cross- reference bank customer names and social security numbers with a list of targeted parents. Any matches would require the banks to freeze those accounts.

Beyond the administrative burden, bankers are concerned about the cost of modifying computer systems to handle the work and the potential for being sued if they freeze the wrong account by mistake.

"This bill scares me, and I'm fearless," said Tom Williams, director of government relations at the Indiana Bankers Association. "The quarterly match-up of names would be a daunting task."

States are required to set up these systems by the federal welfare reform law enacted last August.

The federal government gave states until July 1 to design systems to track and freeze the bank accounts of some 20 million parents who owe back child support.

A system developed by Massachusetts could prove to be a model for other states. In the Bay State, banks may either submit account information directly to the Massachusetts Department of Revenue, where it is matched against Child Support Division files; or banks may request the files and do the comparison themselves.

As an incentive to cooperate, the state pays banks $20 for each matching record.

Since 1994, Massachusetts has collected about $20 million in past-due child-support payments from 275,000 bank accounts, said Chris Kealey, a spokesman for the Massachusetts Revenue Department. Collections have improved 42% since 1991, from $177 million to $252.2 million last year.

And Massachusetts bankers say the system works well.

"I can't remember the last time I had a call from any bank complaining about the match-up system," said David Floreen, senior vice president at the Massachusetts Bankers Association.

Massachusetts set up its system so that errors are corrected quickly, usually within 48 hours after an account is frozen.

Though banking industry sources like Mr. Williams in Indiana are worried about lawsuits, the federal law does state that banks are protected from civil liability.

States are scrambling to craft legislation and get their systems up and running by the deadline. There is an exception for state legislatures that meet only every other year or that do not complete their sessions before July 1. These states have until the first day of the first quarter after the legislature concludes its first regular session.

The legislatures in all but four states will finish their business by July 1; Kentucky is the only state that will not be in session this year.

"This is a pretty fast track; states are reeling," said Cecelia Burke, special assistant for child support at the Texas attorney general's office.

The issue is being handled in broader welfare reform legislation in many states.

Virginia is the only state besides Massachusetts to enact this type of legislation so far. But the Virginia General Assembly in passing a bill Feb. 22 left it to the state's Department of Social Services to set up a system to match child support files with bank accounts.

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