As child support enforcement agencies shift their commitments to a service model centralized around supporting whole families, a clear focus will fall on data and tools that enable agency personnel to strengthen households’ financial stability. With pandemic-related federal relief programs ending this year, families are facing uncertain economic times. The strong job market has boosted incomes, but persistent inflation has put pressure on monthly budgets for food, fuel and housing. Child support agencies seeking to modernize their approaches to serving families will need to apply more predictive techniques for prioritizing outreach. They also need to respond more quickly to non-custodial parents who miss a payment to keep them from going more deeply into arrears.
By and large, consumers share major financial concerns and hurdles like inflation, a potential recession and increased housing prices (rent or mortgage), according to a recent survey by TransUnion. Notably, the survey found nearly half (45%) of consumers reported their incomes did not keep up with the rate of inflation.
More than a third (40%) of consumers reported finances were worse than planned, the highest percentage this year. As some consumers struggled, they indicated they’ll adjust their debt management. While more than half (54%) planned to cut back on discretionary spending, 29% stated they may be unable to pay a current bill or loan in full. Of those who said they’ll be unable to pay fully, 41% reported planning to pay a partial amount.
The good news is consumer optimism about future household finances held steady at 56%–57% the last three quarters — its highest point since Q4 2021 (65%). Despite household financial headwinds, Americans appeared to feel good about their prospects, driven principally by expectations for higher incomes in the coming year. Roughly half (51%) expected their incomes to rise in the next 12 months. This was highest among Millennials (69%); Baby Boomers (27%) came in at the other end of the spectrum.
Current economic conditions are making it even harder for child support service workers to get support to families waiting for it. When an overdue child support account goes unpaid, it will remain outstanding for a significant period. In fact, a recent TransUnion analysis found 95% of parents with six consecutive months of missing child support payments will continue that trend. An additional analysis by TransUnion revealed overdue balances are growing and the proportion of custodial parents intended to receive support but not actually receiving it continues to increase. During these uncertain economic times, this growing problem may critically threaten some families’ financial stability.
Amid broader optimism however, child support agencies have an opportunity to better meet the needs of and improve outcomes for children and families by modernizing processes with two key operational changes.
One of the most important goals of any agency’s efforts is efficient use of resources, especially if they’re limited or constrained. The current child support climate adds stress to that effort; TransUnion data indicates recovery prospects have significantly deteriorated since 2020. This observed decline coincides with higher costs for everyday staples, rising interest rates and dwindling cash savings, all of which may be tightening conservators’ finances.
To collect what’s owed and drive cost efficiencies in line with federal performance metrics, collections activities should be prioritized according to a conservator’s ability and willingness to pay. Using advanced trended credit data recovery models, along with prioritization solutions to understand capacity and payment behaviors can help identify the “willing and able,” which case managers can then prioritize for targeted outreach and intervention.
Preemptive action and early intervention are essential for families dependent on child support payments. If a parent misses a payment, case managers need to act quickly to ensure one missed payment doesn’t become the first of many. The odds of recovery decrease with each month of arrears. A proactive, data-driven approach to identifying and engaging parents showing signs of stress can materially increase the strength and productivity of your agency.
Moving quickly when contacting a parent who has missed a payment is critical to ensure the account doesn’t fall permanently into arrears. In especially challenging scenarios, data and technology can be critical to help search for and locate people, assets and businesses. Without robust profile data like names, aliases, addresses, assets, criminal histories and more, it can be difficult to find parents and assets to initiate, maintain and reinforce support strategies.
For case workers to be successful in their location and engagement efforts, they need access to actionable data, including:
In addition to increasing operational efficiencies, data-driven strategies may also promote more consistent and sustained support services. Improving and enriching relationships with families, for example, requires taking preventative measures where possible, using data-informed recovery strategies, and leveraging authoritative contact identity data and behavioral insights. To learn more about modern practices and solutions to augment your approach, processes and protocols for strengthening family financial stability, get the Playbook for Child Support Enforcement.