Mother's Little Helpers

They're supposed to help parents collect overdue child support. But all too often, this new breed of bounty hunter winds up pocketing much of the money — while locking up clients in contracts that would make a used-car salesman blush.

By Chris Taylor
July 16, 2002

I HOPE THEY get him good. I really do."

The emotions are still raw for Susan Johnson. Even now, 15 years after the divorce, bitterness weaves through her words whenever the subject of her ex-husband comes up.

It's hard to blame her. For years the Cleveland mom struggled to make ends meet for her and her son, Maximillian, who suffers from ADD and required medication and special schooling. But, she says, her ex rarely paid child support.

Now her son is 21, and the bill for overdue support is up to $15,000. State collection agencies got her nothing during all those hard years. So this April she started surfing the Net looking for a lawyer to take up her case and stumbled on a flurry of private child-support collection agencies. Attracted by the promise of no upfront fee, she wound up signing a contract with National Child Support, essentially firing the state from her case and letting the private firm — a sort of deadbeat dad bounty hunter — take over.

Calling late at night, phoning neighbors and relatives — the methods some collection firms use would be considered illegal in other industries.


A month later, over at National's headquarters in Cincinnati, Steve Sanders is on the case. After a morning of detective work, combing through credit bureau reports, property databases and motor-vehicle records online, he's tracked down pretty much everything there is to know about Johnson's ex: where he lives (a penthouse near the Chicago waterfront), what car he drives (a Porsche 911), the businesses he owns, even what he's charging on his credit cards.

Now Sanders's phone is ringing. It's a man identifying himself as Johnson's ex, and he's not happy one bit about the five phone messages Sanders has left for him.

"You don't have a clue who the f— you're dealing with," he barks at Sanders. "I don't owe you anything!"

"I have a court record of what you owe," Sanders calmly replies.

"Go ahead and send it then," the man responds, before cutting the call short.

Sanders quickly shoots off a fax of the court order, and the legal wrangling begins. The heated "talk-off," as they call it in the office, doesn't bother Sanders in the least. The russet-goateed collector knows he has a number of ways at his disposal to drop the hammer on the ex: wage withholding, revocation of driver's or business license, property liens, the threat of jail, even calling neighbors and relatives to shame him into paying up.

It's all in a day's work at National, one of the largest and oldest players in this suddenly growing field. The federal government recently identified 38 private firms — up from a handful a decade ago — that are actively trolling for a mother lode of back child support. As of the end of 2000, past-due amounts had spiraled to $89 billion, almost double the 1996 figure, representing some 17 million cases.

These private collection agencies don't operate just in the social milieus you might expect. "It's more of a middle- and upper-middle-class clientele," says National's founder, Jim Durham. "We've pursued professional baseball players, doctors, lawyers," adds Gary Katz, president of Phoenix's Child Support Network, another of the industry's major players. "Every kind of dad, we get."

In the 10 years that National has been chasing deadbeat dads, Durham has come to learn that you have to play hardball to get results. "I'm not big on letters," he says in his syrupy Kentucky accent. "We send out two: The first one says what can happen to you if you don't pay. The second one says you should've listened to the first letter. Because watch out — here it comes."

WHILE ON THE SURFACE it may seem as if justice is being served in Johnson's case and others like it, the question is, at what price? You see, National takes a whopping 34% of any money that comes in. That's not just of collections it has a hand in. It's of any child support the parent forks out until the back sum is paid.

Such terms are pretty typical in this industry. On average, private child-support collection firms keep nearly 30% of the bounty for themselves. And in many cases — though not with National — the bill creeps even higher once other charges such as application and administration fees are tacked on.

That all adds up to too much when you're dealing with single moms struggling to make ends meet, contends Geraldine Jensen, president of the Association for Children for Enforcement of Support, a Toledo, Ohio-based national organization that lobbies for custodial parents. These firms, she says, "are preying on people's desperation." Adds Dianna Thompson, executive director of the American Coalition for Fathers and Children, a noncustodial parents' rights group in Washington, D.C.: "To take 30% of a child's money, it's just horrible."

Even so, it's no mystery why these bounty hunters are in demand: Understaffed and overworked county and state agencies are often ineffective at tracking down deadbeats. "People criticize us that we're taking the mom's money. But we created money they didn't have," points out National Child Support's Durham. "Do we take part of what's collected? You bet we do. And we earn every dime."

It's a compelling argument, but not always as clean as the industry would make it seem. Talk to parents and advocacy groups and it isn't long before you come across tales of people locked into contracts they didn't understand. Of private agencies taking a cut of money they hadn't helped collect, such as wages garnished by the government. Of firms harassing noncustodial parents with questionable tactics.

Patricia Morris was won over by a private agency's pitch, but like many custodial parents, she soon found herself regretting the decision. A news reporter in San Antonio for McGraw-Hill, Morris divorced in 1992. By 1996 her past-due child support had mushroomed to $10,000. Struggling to support three kids, Morris hired Child Support Enforcement, an Austin, Tex., agency that now goes by the name Supportkids. "Emotions were running high at the time because it was so hard to put food on the table," says Morris. "I didn't realize what I was getting into."

To its credit, the agency did get the dad to pay up. But when Morris started getting checks, she was shocked at how little trickled to her. One time the firm collected $118; she got $59. Another time it was $461; she got $232. "I tried to discuss it with them, but I could never reach anybody on the phone," she remembers. "Meanwhile, I had to max out my credit cards just to get groceries. A lot of times I just broke down and cried."

Realizing she had gotten in over her head, not having fully understood the contract, Morris tried to get out. No dice, the company told her. "It took me writing to all the senators, all the state representatives and the state attorney general before they did anything about it," she says. Supportkids finally released her from the contract, but not before Morris had spent two years battling a firm that was supposed to be on her side.

Though Supportkids CEO Casey Hoffman won't comment on particular cases, he does point out that, at the time Morris was a client, his company would charge an extra $375 on successful cases-a fee it has since dropped. "But that was in the contracts, in black and white," he says. "I can't imagine how someone wouldn't be clear about it."

In addition to being surprised by the size of the company's cut, moms often don't realize how pervasive that cut is going to be. "The contracts I've seen didn't at all make it clear that the company was going to take a third of all collections," says Vicki Turetsky, senior staff attorney for Washington's Center for Law and Social Policy, a lobbying group for low-income families. "Regardless of whether the company collected them or the state did, regardless of whether the parents were paying on time or back support. Literally any dollar that walks in the door, a third of it goes to them."

One Wisconsin mom, Patricia Zipperer, felt so deceived that she recently sued Supportkids in a Manitowoc, Wis., state court. Owed about $8,500 in back support for her son, the 34-year-old cashier hired the firm in July 2001. But she says it was the state agency, not Supportkids, that found her ex's place of business and started garnishing his wages. Still, Supportkids took its chunk — "low four figures," says Zipperer's lawyer, Charles Barr, of the Milwaukee firm Croen & Barr. "It's unconscionable."

Without getting into the specifics of the ongoing lawsuit, Hoffman says, "It's our policy to refund money to clients if it was a result of a government collection. But if it was as a result of our efforts at finding someone that a wage withholding order was produced, we would take a fee." National Child Support CEO Mike Higgins adds that private agencies have to protect themselves with contracts giving them a cut of all collections. Otherwise, a dad they've hunted down could cut a side deal with the mom to squeeze them out.

WITH COMPLAINTS POURING IN from moms, some states are mulling over putting hard caps on the amount private firms can collect. In fact, three have already established ceilings: Connecticut, at 25%; Oregon, 20% (if the state has been involved in the case); and West Virginia, 10%. "Our legislators felt something needed to be done to protect the interests of parents," explains Garrett Jacobs, deputy commissioner of West Virginia's Bureau for Child Support Enforcement.

Even some insiders are taking the industry to task for being overly aggressive in fees. Like maverick collector Michael "Doc" McCoy, who runs Child Support Intervention in Fort Worth, Tex. A former bail bondsman and longtime bounty hunter, he's an outspoken critic of many of his fellow collectors. The fees they charge are "excessive," he says. He voluntarily changed his own rate structure, reducing his cut from 30 to 20% after the first year, and allows himself a maximum of three years on a case once payments begin so he doesn't keep milking moms. His epiphany came three years ago, when he realized his firm was siphoning off 30% on a case in which it had found the guy years ago. "One day I looked at it and said, 'Why are we still taking money when we're not doing anything?'"

The debate over deadbeat dad hunters isn't just about exorbitant fees. There is a litany of other complaints, too. Ceceilia Rivera's gripe is that the firm she hired didn't go after her ex's money as aggressively as it had promised. Owed $10,000 in back support for her high school son, the New Jersey legal secretary hired National Child Support, the same agency Susan Johnson is using. "They said they'd do whatever was necessary to get my child support, up to and including legal action," she recalls.

Rivera was initially thrilled when her ex made a $1,000 payment a couple of months later. But then the checks dropped to $200 a month — just $132 after the agency's cut. When she called National to complain, she found out that the firm had essentially set up a payment plan with her ex, though she's convinced he makes more than he let on. "They made an agreement and never asked if I was amicable with it. I was like, 'What are you, nuts? Around $100 a month? My son will be 50 by the time it's paid off!'"

She asked to be let out of her contract. Tough luck. If she wanted out, she'd have to pay up herself, to the tune of 10% of the amount owed. "What can I do?" laments Rivera, having given up. "I can't afford to buy my way out." Responds National's CEO, Higgins: "Everyone always wants a little more. But we're trying to strike a delicate balance to keep them paying. Ask for too much and you force them to go undercover."

IF CUSTODIAL PARENTS have a bone to pick with collection agencies, noncustodial parents have an even bigger one — for obvious reasons. They're the ones being tracked down. And bounty hunters are none too delicate about the chase. "We've heard of grandmothers being harassed because their grandson isn't paying support," says custodial-parents advocate Jensen. "We've had cases where they call the noncustodial parent's house and pump the children for information. This is all considered business-as-usual tactics."

The collection methods that some firms have adopted would be considered illegal in other industries. The reason they have this latitude: The federal Fair Debt Collection Practices Act, which governs most types of collection and outlaws overly aggressive tactics such as calling at night or contacting relatives or neighbors, doesn't extend to child-support collection firms, though four states — Connecticut, West Virginia, Texas and Oregon — have put in their own similar restrictions. "At this point, child-support collection companies are largely unregulated," says family-advocate attorney Turetsky.

Insiders acknowledge that such tactics give them a leg up on government agencies, which have to play nicer. "It's the game we play. We make those calls knowing he's going to feel harassed," says National's Steve Sanders. "There's an embarrassment factor involved."

But here's an added wrinkle, one that'll send chills down the financial spine of divorced men everywhere. You could find a deadbeat dad hunter knocking on your door even if you're paid up on child support. It happened to Otto Tidwell. The host of a home-improvement radio show (Mr. Fix-It) in Denver, Tidwell was surprised when he got a call in 1999 from a private agency saying he owed around $200,000, dating to his divorce in 1974.

"The collector was very aggressive and threatening, calling me a deadbeat dad, saying they were going to get me one way or another, that there are remedies for people like me," says Tidwell, 60. "There were threats of court action; they were going to attach my wages and do all sorts of things. They even called my wife and threatened her to get to me."

True, Tidwell had once fallen behind in his support payments by $672, but that was back in 1981, and he had long since caught up. He tried to explain that to the collection agent but didn't make much headway. "She didn't care," he recalls.

Tidwell called the courts to get proof he was paid up. Then he called in his lawyer, who fired off a letter to the firm slamming its "intimidation and coercion" and "unsupported harassment." The firm eventually backed off, but not before Tidwell had the pants scared off him. "If I hadn't kept every bit of documentation with me, they might be hounding me to this day. Or I might have even been suckered into paying something I didn't owe."

BOUNTY HUNTERS ARE used to confrontation. It's part and parcel of the job. But these days private collection agencies are also fighting a second front of hostility: state child-support enforcement agencies. Both may be after the same thing — overdue support payments — but the animosity between the two camps is palpable.

"The big problem we state agencies have with them is that they want to get paid for the work we do," responds Marilyn Ray Smith, deputy commissioner of Massachusetts's Child Support Enforcement program. "We intercept a tax refund, and then they take 40% of it."

Another issue that irks state agencies is that some private firms use names eerily similar to their own. Washington's Center for Law and Social Policy collects stacks of complaints against bounty hunters, and the pile is rife with tales of noncustodial parents who thought they were talking to public child-support agents. It was amid such complaints that Child Support Enforcement changed its name to Supportkids in 1999. Hoffman, the CEO, says the firm did so because the Web site URL under the old name was not available, though he says that the change "did help clarify any confusion." But many similarities — and mix-ups — remain. Consider the names of these private firms: Bureau of Child Support Enforcement, Child Support Network, Central Child Support Enforcement Agency.

Now the tension is coming to a head. With a pro-privatization administration in the White House, this is the most promising time deadbeat dad hunters have had to gain legitimacy. As a result, some firms are fighting fiercely to get access to government resources such as the Federal Parent Locator Service and the National Directory of New Hires. That has plenty of people worried. "If private collection agencies have open access to personal information, there's no way we can monitor how the information is used after that," warns Massachusetts's Smith. She worries, for instance, that these firms might turn around and sell the data.

The squabble is getting so heated that in April bounty hunters, public agencies and parents' groups were all summoned by the Federal Office of Child Support Enforcement to Washington, D.C., to find out how public and private players can get along. It was like representatives of the Five Families coming face-to-face for a sit-down. Commissioner Sherri Z. Heller's recommendations could mean drastic changes for the industry — whether she comes out in favor of stronger regulations or, conversely, pushes for farming out more work to private firms. "In a world where only 42% of cases get collected, it doesn't make sense for me to start cutting off parents' options," she says. "Clearly, there's a need for some consumer protections, but if the nature of those protections has the effect of taking away parents' options and restricting what private firms are doing so effectively, it doesn't make sense to me."

Perhaps the best way to keep deadbeat dad hunters in check is for state agencies simply to do a better job themselves. Even moms who've been burned by private firms have choice words for the government's tracking efforts. Evette Miller, a Westmoreland, Tenn., mom, once got a peek at her file after seven years during which the state was supposedly trying to find her ex-husband. Inside was a single sheet of paper: the original form she had filled out. "I said, 'You've got to be kidding me,'" she recalls. "The new caseworker just shook her head."

Because of such nightmarish scenarios, there have been continuing efforts to retool how states do business. In fact, improvements have already been made, thanks to new tracking tools, such as the new-hires records. And government databases are now matched with many financial institutions', allowing states to better determine the parent's assets. As a result, collections have jumped 65% in five years, and thepercentage of cases in which the state is successful at collecting has more than doubled. But, adds Heller, "that still means more than half of the people aren't getting any money."

As long as swamped state collectors struggle to play catch-up, desperate moms will continue to sign on the dotted line at private firms. Just ask Susan Johnson. By the time she turned to a bounty hunter, she felt boxed in, with no other choice. "If the state had done its job, I could've kept that 34%. I could've had that money for me and my son," she says wistfully. "I just hope I didn't miss the small print." © 2002 SmartMoney