We received a notice of lien from the Illinois Department of Healthcare and Family Services (HFS) indicating that we should put a hold on the checking account of a customer who owes unpaid child support. The amount of the unpaid child support is approximately twice the funds in the account. Should we freeze the entire account or only the funds currently in the account?

We recommend freezing the entire account up to the amount indicated in the notice of lien.

The Illinois Public Aid Code authorizes HFS to serve notice of liens for past-due child support to financial institutions where the responsible payor has an account for “encumbrance or surrender” of the account by the financial institution. If HFS directs your bank to surrender the funds, you will be required to debit the responsible payor’s account “only if or to the extent . . . there are finally collected funds in the account” and the account is not subject to any preexisting offsetting claims your bank may have.

Consequently, we believe you should freeze the funds currently in the account as well as any additional funds that may be deposited at a later date, up to the full lien amount.

Also, note that while the account is frozen, you still may charge and collect normally scheduled account activity fees, and if HFS takes any action to enforce the lien, you may charge a fee of up to $50 that can be deducted from the account before remitting any funds to HFS.

For resources related to our guidance, please see:

Illinois Public Aid Code, 305 ILCS 5/10-25.5(c) (“When enforcing a lien under subsection (a) of this Section, the Illinois Department shall have the authority to execute notices of administrative liens and levies, which shall contain the name and address of the responsible relative or payor, a description of the property to be levied, the fact that a lien is being claimed for past-due child support, and such other information as the Illinois Department may by rule prescribe. The Illinois Department may serve the notice of lien or levy upon any financial institution where the accounts as defined in Section 10-24 of the responsible relative may be held, for encumbrance or surrender of the accounts as defined in Section 10-24 by the financial institution.”)

Illinois Public Aid Code, 305 ILCS 5/10-24 (“‘Account means a demand deposit account, checking or negotiable withdrawal order account, savings account, time deposit account, or money market mutual fund account.”)

Illinois Public Aid Code, 305 ILCS 5/10-16.7(b) (“The Department of Public Aid (now Healthcare and Family Services) shall adopt a child support enforcement debit authorization form that, upon being signed by an obligor, authorizes a financial institution holding an account on the obligor's behalf to debit the obligor's account periodically in an amount equal to the amount of child support that the obligor is required to pay periodically and transfer that amount to the State Disbursement Unit. The form shall include instructions to the financial institution concerning the debiting of accounts held on behalf of obligors and the transfer of the debited amounts to the State Disbursement Unit.”)

Illinois Public Aid Code, 305 ILCS 5/10-16.7(e) (“A financial institution is obligated to debit the account of an obligor pursuant to this Section only if or to the extent:

(1) the financial institution reasonably believes the debit authorization form is a true and authentic original document;

(2) there are finally collected funds in the account; and

(3) the account is not subject to offsetting claims of the financial institution, whether due at the time of receipt of the debit authorization form or thereafter to become due and whether liquidated or unliquidated.

To the extent the account of the obligor is pledged or held by the financial institution as security for a loan or other obligation, or that the financial institution has any other claim or lien against the account, the financial institution is entitled to retain the account.”)
Illinois Public Aid Code, 305 ILCS 5/10-25.5(h) (“A lien created under this Section is subordinate to any prior lien of the financial institution or any prior lien holder or any prior right of set-off that the financial institution may have against the assets, or in the case of an insurance company or benefit association only in the accounts as defined in Section 10-24.”)
Illinois Public Aid Code, 305 ILCS 5/10-24.40(a) (“If the Illinois Department requests a financial institution to hold or encumber assets in an account as defined in Section 10-24, the financial institution at which the account as defined in Section 10-24 is maintained may charge and collect its normally scheduled account activity fees to maintain the account during the period of time the account assets are held or encumbered.”)

Illinois Public Aid Code, 305 ILCS 5/10-24.40(b) (“If the Illinois Department takes any action to enforce a lien or levy imposed on an account, as defined in Section 10-24, under Section 10-25.5, the financial institution at which the account is maintained may charge to the account a fee of up to $50 and shall deduct the amount of the fee from the account before remitting any moneys from the account to the Illinois Department.”)