Wednesday, November 22, 2000

Part II

Department of the Treasury Department of Justice General Accounting Office

31 CFR Chapter IX and Parts 900, et aL 4 CFR Chapter II Federal Claims Collection Standards; Federal Claims Collection Standards, Removal of Obsolete Chapter; Final Rules 70390 Federal Register/Vol. 65, No. 226/Wednesday, November 22, 2000/Rules and Regulations policy requirements of their particular OF THE TREASURY Garnishment (63 FR 25136, May 6, DEPARTMENT 1998); Offset of Federal Benefit programs. requested DEPARTMENT OF JUSTICE Payments to Collect Past-Due, Legally Other commenters Enforceable Nontax Debt (63 FR 711204, clarification of the applicability of the debt collection 31 CFR Chapter IX and Parts 900, 901, Dec. 23, 1998); and Barring Delinquent FCCS rules regarding agency 902, 903, and 904 Debtors From Obtaining Federal Loans and compromise when specific or Loan Insurance or Guarantees (63 FR statutory or regulatory authorities [A.G. Order No. 2325-2000] 67754, Dec. 8, 1998). The Financial address those activities. As noted in RIN 1510-AA57 and 1105-AA31 Management Service (FMS) of the § 900.1 (Prescription of Standards) of Department of the Treasury (Treasury) the revised FCCS, the FCCS apply Federal Claims Collection Standards will publish other detailed rules unless agency-specific statutory or debt collection tools regulatory provisions specifically of the Treasury; governing AGENCIES: Department by the DCIA, including govern particular debt collection Department of Justice. authorized additional centralized administrative activities. Consequently, the FCCS ACTION: Final rule. offset rules, to be codified under 31 CFR govern when an agency has been given to The final rule revises the part 285. only general debt collection authority SUMMARY: arising under Claims Collection Standards The revised FCCS provide agencies manage debt obligations Federal See, e.g., 42 by the Department of Justice and with greater latitude to adopt agency its particular programs. issued 3211(4) (generally authorizing Accounting Office on March specific regulations, tailored to the legal U.S.C. the General to collect The revised Federal Claims and policy requirements applicable to the Secretary of Commerce 9, 1984. arising under the Economic Collection Standards clarify and the various types of Federal debt, to obligations Program; therefore, the simplify Federal debt collection maximize the effectiveness of Federal Opportunity procedures and reflect changes under debt collection procedures. FCCS apply). the Debt Collection Improvement Act of The Secretary of the Treasury has A few commenters recommended that 1996 and the General Accounting Office been added as a co-promulgator of the the FCCS be reconciled with specific Act of 1996. FCCS in accordance with section provisions of Treasury's "Report on This rule is effective December 31001 (g)(1)(C) of the DCIA. The Receivables Due from the Public." DATES: has 22, 2000. Comptroller General has been removed Treasury's "Report on Receivables" reasons, one of CONTACT: as a co-promulgator in accordance with been revised for several FOR FURTHER INFORMATION consistency with the Financial Program section 115(g) of the General which is to ensure Gerry Isenberg, DCIA. Information Services, Accounting Office Act of 1996, Public FCCS and the Specialist, Debt Management revised "Report on Service, Law 104-316, 110 Slat. 3826 (Oct. 19, concerning the Financial Management is available from FMS's of the Treasury, at (2021 1996). Treasury and DOJ are publishing Receivables" Department website at http://www.fins.treas.gov. 874-0540; Ronda Kent or Ellen the revised FCCS as a joint final rule 31, Code of Neubauer, Senior Attorneys, Financial under new chapter IX, Title Several of the commenters suggested Management Service, Department of the Federal Regulations. The revised FCCS technical revisions to the proposed rule; codified at Treasury, at (202) 874-6680; or John W. supersede the current FCCS pertinent or necessary technical Showalter, Assistant Director, 4 CFR parts 101-105. On December 31, suggestions were incorporated into the Commercial Litigation Branch, Civil 1997, Treasury and DO) requested final rule. A review of the substantive proposed revision Division, Department of Justice, at (202) public comment on a comments received in response to the document is available of the FCCS. This final rule is being FCCS NPRM is provided in the 307-0244. This of the for downloading from the Financial promulgated after consideration following "Comment Analysis," which Management Service website at: http:// comments received. A final rule includes a discussion of Treasury and www.fms.treas.gov/debt. removing the current FCCS from Title 4 DOJ's determination whether to of Federal Regulations is into the SUPPLEMENTARY INFORMATION: of the Code incorporate specific suggestions being published elsewhere in this issue final rule. The Comment Analysis is Background of the Federal Register. organized by reference to the paragraphs that were the subject of The Federal Claims Collection Discussion of Comments in the NPRM Standards (FCCS) provide Government public comment. In response to the Notice of Proposed wide debt collection procedures and Comment Analysis policies. This final rule revises the Rulemaking (NPRMI concerning (62 FR 68476, of FCCS issued by the Department of revisions to the FCCS NPRM § 900.1-Prescription and DO] Justice (DOJ) and the General Dec. 31, 1997), Treasury Standards Accounting Office on March 9, 1984. received comments from various Federal agencies, a private law firm, a One commenter recommended that The revised FCCS reflect legislative "Managing private collection agency, and a private Treasury publish an updated changes to Federal debt collection to citizen. Several agency commenters Federal Receivables," a supplement procedures enacted under the Debt to recommended changes pertinent to the the Treasury Financial Manual, Collection Improvement Act of 1996 ensure consistency with the FCCS and (DCIA), Public Law 104-134, 110 Stat. requirements of specific agency programs. Since the FCCS focus on the DCIA. NPRM § 900.1(a) references 1321, 1358 (Apr. 26, 1996), as part of the the "Managing Federal Receivables" and Government-wide debt collection Omnibus Consolidated Rescissions publication as a source for agencies to Appropriations Act of 1996. Detailed procedures and policy, suggested changes pertinent only to specific locate additional guidance on debt rules governing several of these new collection issues. Treasury will update have agencies were not incorporated into the DCIA debt collection procedures this publication consistent with the been published in the Federal Register. final rule. Nevertheless, the final rule provides sufficient flexibility for final rule and the DCIA. The guidance See, e.g., Transfer of Debts to Treasury in the current edition of"Managing 28, agencies to adopt agency-specific for Collection (64 FR 22906, Apr. Ied rill 'e0Uivables" applies lu ihu 1999); Administrative Wage regulations tailored to the legal ajid Federal Register/Vol. 65, No. 226/Wednesday, November 22, 2000/Rules and Regulations 70391 I extent that it is not inconsistent with the FCCS to debts involving fraud (whereby term "late charges" refers to interest, final rule and the DCIA. DOJ retains authority over such debts) penalties, and administrative costs. The final rule does not incorporate applies only to debts known to involve The final rule does not adopt one one commenter's suggestion to prescribe fraud at the time a debt is transferred to, commenter's suggestion to delete the a standard under the FCCS for the or processed by, a private collection requirement under NPRM § 901.2(d) "write-off" of debts (i.e., removal of the agency. No change has been made to the that agency demand letters discuss debt from the agency's accounting final rule to incorporate this comment alternative methods of payment. The records), consistent with "Managing since onlty DOJ has the authority to NPRM did not include such a Federal Receivables" guidance. The compromise, suspend, or terminate requirement. Contrary to the DCIA gives the Office of Management collection action on such claims. commenter's concern, NPRM § 901.2(d) and Budget (OMB) the responsibility to Accordingly,'DO] retains sole authority does not limit agency discretion; it review the standards and policies of under the final rule over activity on all merely provides that a demand letter Federal agencies regarding the "write debts involving fraud. Private collection should inform a debtor of the agency's off" of delinquent debts, which is an agencies that become aware of "willingness to consider" alternative accounting process. See 31 U.S.C. 3711 fraudulent activity on the part of the methods of payment to satisfy the debt. note. OMB Circular A-129, "Policies for debtor (or any third party) at any time Many debt collection tools require Federal Credit Programs and Nontax must cease collection activity and agencies to give debtors the opportunity Receivables," is being revised to promptly return the debt back to the to enter into a written agreement with incorporate new policy guidelines for referring agency for coordination with the head of an agency to repay the debt. writing off uncollectible Federal debt. DOJ. See, e.g., 31 U.S.C. 3716(a)(4) One commenter's recommendation to NPRM § 901.1--Aggressive Agency (administrative offset authority); 31 delete the reference in NPRM § 900.1(a) Collection Activity U.S.C. 3720A (tax refund offset); 31 to OMB Circular A-129 was not U.S.C. 3720D (wage garnishment); see adopted. OMB Circular A-129 Comments involving the provisions also NPRM § 901.9 (establishing continues to provide valuable guidance under NPRM § 901.1 related to the DCIA standards for the collection of and applies to the extent not requirement that agencies transfer to delinquent debts in installment inconsistent with the final rule and Treasury nontax debts that have been payments). days are DCIA requirements. OMB Circular A delinquent for more than 180 A related comment, recommending the FCCS. A final 129 is being revised to incorporate new outside the scope of that agencies be given the flexibility to policy guidelines consistent with the rule, published by Treasury (64 FR include only those provisions of provides final rule and the DCIA. 22906, Apr. 28, 1999), demand letters listed in NPRM guidance regarding the DClA transfer of § 901.2(d) "as appropriate to the NPRM § 900.2-Definitions and debt requirement. See also 31 U.S.C. Construction circumstances," has not been 3 711(g). incorporated into the final rule. Section Several commenters suggested that One commenter suggested that the final rule be amended to clarify whether 901.2(d), as proposed, does not restrict the definition of a "delinquent" debt an agency's discretion to tailor its use of is too vague and the 180-day delinquency period begins under NPRM § 900.2(b) particular debt collection tools in that the date of delinquency should be before or after the 30-day period within specific cases. NPRM § 901.2(d) more clearly defined. Under NPRM which a debtor may pay a debt without provides only that an agency should "if it has penalties or interest. See NPRM § 900.2(b), a debt is delinquent provide notice to a debtor in a demand not been paid by the date specified in § 901.10(g). No change has been made to letter of its willingness to discuss the agency's initial written demand for the final rule to incorporate this alternative methods of payment, the agreement or comment. The 180-day delinquency payment or applicable agency's remedies to enforce payment of instrument (including a post $eriod begins to run on the date a debt the debt, information concerning the agreement), becomes delinquent, that is, when the delinquency payment debts over 180 days debt is not paid on the date due or the requirement that unless other satisfactory payment delinquent be transferred to Treasury The arrangements have been made." oate as specified in accordance with involving NPRM § 901.1 to § 900.2(b) of the NPRM and final rule. (see discussion final rule has not been amended above), and applicable waiver The A debt is delinquent notwithstanding incorporate this comment. consideration information. Demand "delinquency" definition applies to all any statutory or regulatory grace period letters also must satisfy the other agency programs and obligations owed for the assessment or payment of requirements of NPRM § 901.2, to the United States. Agency-specific interest, administrative costs, or including, but not limited to, providing regulations may further clarify the penalties. notice to the debtor of the basis of the -definitionof "delinquency" as NPRM § 901.2-Denmnd for Payment indebtedness and the opportunity applicable to specific agency program available to the debtor for a review requirements and particular types of One commenter recommended that within the agency. debt. See Treasury's final rule, Barring " the final rule clarify that the provision Delinquent Debtors From Obtaining under NPRM § 901.2(a) providing that Another commenter suggested or Loan Insurance or "[glenerally, one demand letter should deleting the second reference to Federal Loans "-collection agencies" under NPRM Guarantees (63 FR 67754, Dec. 8, 1998), suffice" does not prohibit agencies from for an example of the term "delinquent" sending progressively stronger demand § 901.2(d) to avoid duplication. The amended to being defined for a specific, limited letters. No change is necessary to the final rule has not been incorporate this suggested technical purpose. final rule to incorporate this comment. NPRM § 901.2(a) does not prohibit amendment. The first reference to NPRM § 900.3-Antitrust, Fraud,and agencies from sending more than one "collection agencies" relates to an Tax and hiteragency Claims Excluded demand letter. agency's policy with regard to the use of One commenter suggested amending In accordance with one commenter's this debt collection tool. The second NPRM § 900.3(a) to provide that the suggestion, § 901.2[b}(3) of the final rule reference refers to the enforcement exclusion from the application of the has been amendod lo clrif%tlnt thr, nr~lioi tlhnt will lip takrm regnrdiro thn 70392 Federal Register/Vol. 65, No. 226/Wednesday, November 22, 2000/Rules and Regulations specific debt referenced in the demand it permits administrative offset only A second commenter suggested letter. after the debtor has been given written deleting the provision under NPRM One commenter suggested deleting notice of the type and amount of debt, § 901.3(a)(7)(i)(A) requiring an oral the requirement under NPRM § 901.2(g) the intent to collect the debt by offset, hearing under certain circumstances that agencies advise litigation counsel an opportunity to inspect and copy when a waiver statute authorizes or for the Government that a debtor has agency records pertaining to the debt, an requires an agency to consider waiver of been given notice that litigation may be opportunity for review of indebtedness, the indebtedness. This provision has initiated unless the debt can be and an opportunity to make a written been deleted from revised § 901.3 of the collected administratively. The repayment agreement. No change has final rule since oral hearing commenter incorrectly interprets this been made to the final rule to requirements involving waiver requests provision as requiring agencies to advise incorporate this comment. NPRM are governed by specific statutory and litigation counsel at the time the § 901.3(a)(5) and the final rule track the regulatory waiver authorities, rather agency's notice is given to the debtor, statutory due process requirements than the FCCS. rather than at the time the debt is under 31 U.S.C. 3716(a). One commenter suggested revising referred to DOJ for litigation. No change Another commenter noted that NPRM NPRM § 901.3(b)(1) to provide that the has been made to the final rule to § 901.3(a)(5) provides that agency administrative offset of a reimbursement incorporate this comment. regulations must specify that payment could substantially interfere administrative offset can be initiated with, or defeat the purposes of, the NPRM § 901.3-Collection by only after the debtor has "received" program giving rise to the payment. The Administrative Offset written notice of the due process final rule was not changed to The administrative offset section has requirements under 31 U.S.C. 3716(a). incorporate this comment. Under the been redrafted in the final rule to The commenter suggested that an DCIA, the Secretary of Treasury emphasize that disbursing official offset, agency would have no way of verifying determines whether a particular type of which is renamed as centralized that a debtor has actually received the payment should be exempt from administrative offset in the final rule, is notice required by NPRM § 901.3(a)(5). administrative offset. See 31 U.S.C. the primary administrative offset Revised § 901.3(b)(4)[ii) of the final rule 3716(c}(3)(B). Therefore, exemption is collection tool, consistent with the jjas been changed to clarify that the not addressed in this rule. DCIA. See 31 U.S.C. 3716(c)[6) ,,required due process notice must be One commenter suggested that NPRM (requiring Federal agencies to notify the ",.sent" to the debtor. This is consistent § 901.3(c)(5) be revised to clarify its Secretary of the Treasury of all debts with constitutional and statutory due application to non-Treasury disbursing over I10 d•y•'dellnquent for purposes process requirements, provided that officials, such as the Department of of conducting centralized administrative creditor agencies ensure that reasonable Agriculture's Commodity Credit offset). steps are taken to send the notice to the Corporation. No change to the final rule Consistent with this approach, the debtor's last known address. See, e.g., is necessary. The debtor/payee final rule provides that the non Setlech v. United States, 816 F. Supp. notification requirements under revised disbursing official administrative offset 161 (E.D.N.Y. 1993) (mailing of tax § 901.3(b)(3) of the final rule apply to process, which is renamed as non refund offset notice on behalf of both Treasury and non-Treasury centralized administrative offset in the Department of Education to debtor's last disbursing officials conducting final rule, is a backup procedure to be known address satisfied due process centralized administrative offsets. As used by creditor agencies on an ad hoc even though debtor did not receive required by the DCIA, Treasury case-by-case basis when centralized notice prior to offset; notice was disbursing officials and non-Treasury administrative offset is otherwise not reasonably calculated to apprise debtor disbursing officials, such as officials of available or appropriate. For example, of impending action); see also United the Department of Defense, United agencies should utilize the ad hoc non States v. 51 Pieces of Real Property,17 States Postal Service, any other centralized offset process to offset F.3d 1306, 1316 (10th Cir. 1996)(due Government corporation, or any payments that have not been .process does not require actual receipt Treasury-designated United States incorporated into the centralized of notice provided Government acts disbursing office, are required to administrative offset process. In any reasonably in selecting means likely to conduct administrative offsets. See 31 event, an agency's collection by the non infonn the persons affected). U.S.C. 3716(c)(1)(A). centralized administrative offset process Another cominenter suggested that all Another commenter recommended shall not provide the grounds to references under NPRM §§ 901.3(a) and adding a provision to NPRM invalidate any offset on the basis that 901.4(d) to pre-administrative offset § 901.3(c)(5) requiring disbursing centralized offset was not used. "oral hearings" be deleted since the officials to notify payment and creditor In addition, NPRM § 901.4 statutory authority for administrative agencies once an administrative offset of (authorizing creditor agencies to request offset under 31 U.S.C. 3716(a)(3) only a payment has been made. This the Office of Personnel Management provides the debtor with an comment is beyond the scope of the (OPM) to conduct administrative offsets) "opportunity for a review" within the final rule. Detailed regulations involving has been merged into revised § 901.3 of agency. No change has been made to various types of DCIA administrative the final rule since the procedure revised § 901.3(e) of the final rule to offset procedures are codified under 31 described in NPRM § 901.4 is a form of incorporate this comment because oral CFR part 285. be required in those non-centralized administrative offset. hearings may Offset instances where the determination of NPRM § 901.4-Administrative Revised § 901.3(d) of the final rule refers From Civil indebtedness cannot be made by a Against Amounts Payable to OPM offsets of Civil Service Service Retirement and DisabilityFund review of the written record. An oral Retirement and Disability Fund (Fund) and the Federal Employee Retirement The Fund includes payments hearing is not required when the payments. System made under the Federal Employee question of indebtedness can be Retirement System. resolved by a review of the written NPRM § 901.4 addresses ad hoc non One commenter suggested that NPRM record. See revised § 901.3(e) of the final centralized administrative offsets § 901.3(a)(5) is overly restrictive in that rule. rondticted hv OPM to satisfy debts that Federal Register/Vol. 65, No. 226/Wednesday, November 22, 2000/Rules and Regulations 70393

have not been referred for centralized Development's Credit Alert Interactive should contact the creditor agency administrative offset. Under the final Voice Response System (CAIVRS). before invoking any rights with respect rule, this provision has been merged Agencies are strongly encouraged to to the agency's debt. into § 901.3 since the procedure report to CAIVRS when feasible. One commenter suggested that NPRM described under NPRM § 901.4 is a type Reporting will assist agencies in § 901.6 be amended to clarify that of non-centralized administrative offset complying fully with the DCIA agencies are authorized to contract for that should be utilized when centralized provision, codified at 31 U.S.C. 3720B, debtor asset and income search reports. administrative offset is not available or barring delinquent debtors from Such reports could be used by DOJ appropriate. Accordingly, NPRM obtaining Federal financial assistance. litigation attorneys and other agencies to §§ 901.5, 901.6, 901.7, 901.8, 901.9, Agencies can utilize CAIVRS to detennine whether, and to what extent, 901.10, 901.11, 901.12, 901.13 have detennine whether a loan applicant is debtors have assets which could be been redesignated in the final rule as delinquent on obligations owed the pursued to satisfy delinquent §§ 901.4, 901.5, 901.6, 901.7, 901.8, United States. However, because obligations. Section 901.5(e) has been 901.9, 901.10, 901.11, 901.12, reporting to CAIVRS may not be feasible added to the final rule to incorporate respectively. This change properly in every case, reporting, while strongly this comment. emphasizes the requirement for encouraged, is not mandatory. The final rule also provides that debtor asset and income search report centralized administrative offset under NPRM § 901.6-Contractingfor Private the DCIA. See, e.g., 31 U.S.C. 3716(c)(6) contracts, private collection contractors Collection Contractorsand To Locate contracts, and contracts to locate and (mandating that Federal agencies notify and Recover Unclaimed Assets the Secretary of the Treasury of all debts recover unclaimed assets of the United over 180 days delinquent for purposes NPRM § 901.6(b) has been revised to States may be paid for out of amounts ..of centralized administrative offset). clarify that Federal agencies may refer collected, consistent with 31 U.S.C. debts to private collection contractors 3718(d), unless otherwise prohibited by NPRM § 901.5-Reporting Debts pursuant to a contract between the law. The final rule does not incorporate agency and the private collection The final rule does not incorporate one commenter's suggestion to delete contractor only if such debts are not one commenter's suggestion to amend the requirement under NPRM § 901.5(a) subject to the DCIA requirement to NPRM § 901.6 to limit the time a debt that agencies develop and implement transfer debts to Treasury for debt may remain with a private collection procedures for reporting delinquent collection services, e.g.. debts are less contractor to a 180-day period, after debts to credit bureaus. The commenter than 180 days delinquent. See 31 U.S.C. which the debt shouldbe referred to stated that this provision is not 3711(g); 31 CFR 285.12(e). Agencies also DOJ for enforced collection. The time necessary because Treasury and may refer debts to a private collection period that a debt is at a private Treasury-designated debt collection contractor listed on FMS's schedule of collection contractor is more centers, not creditor agencies, will be private collection contractors provided appropriately a matter of contract responsible for reporting debts that have they do so in accordance with between the private collection been transferred to Treasury or procedures established by FMS. contractor and the Federal agency; the Treasury-designated debt collection The final rule does not incorporate setting of a regulatory time limit would centers, as required by the DCIA and one commenter's recommendation that not further the goal of the FCCS to NPRM § 901.1(e). Creditor agencies are NPRM § 901.6(a)(1) be amended to provide agencies with greater flexibility. reminded that the DCIA mandates credit allow agencies to authorize private In addition, debts are referred to DOJ bureau reporting for delinquent debts collection contractors to compromise, after a private collection contractor has (see 31 U.S.C. 3711(e)), and that debts suspend, or terminate collection been unable to collect the debt, and only should be reported early in the debt activity, and refer for litigation debts when it is appropriate to do so. See part collection process. Nevertheless, less than a specific.threshold amount. 904 (Referrals to Department of justice). iwgencieg could develop procedures, Federal law requires agencies to retain *i'consistentwith this rule, to provide that the authority "to resolve a dispute, NPRM § 901.9-Collection by credit bureau reporting will be handled compromise a debt, end collection Installments by Treasury or Treasury-designated debt action, and refer a matter to the One commenter suggested amending collection centers for transferred debts. Attorney General to bring a civil NPRM § 901.9(a) to allow agencies to Another commenter suggested that action." 31 U.S.C. 3718(a)(1). Nothing in accept installment payments without the mandatory language of NPRM § 901.5(a)(1) of the final rule prohibits independent verification of the debtor's § 901.5(a) requiring agencies to develop agencies from establishing agency inability to pay. The commenter stated credit bureau reporting procedures specific compromise review procedures that the change would give agencies should not apply to an agency whose within the scope of 31 U.S.C. 3718(a)(1). more flexibility in cases involving very statutory authority provides that the For example, agencies could set small debts. The final rule does not agency "may," but is not required to, parameters within which private incorporate this suggestion because the report delinquent debts to credit collection contractors could FCCS only require such verification bureaus. No change is necessary to compromise debt. "whenever possible." address this concern because § 900.1 of Another commenter suggested that One commenter suggested amending the final rule specifically provides that the final rule clarify that private NPRM § 901.9 to clarify the application the FCCS govern an agency's debt collection contractors collecting debts of installment payments to satisfy collection activity "unless specific on behalf of creditor agencies are multiple debts as provided in the 1984 agency statutes or regulations apply to authorized to invoke certain agency FCCS (4 CFR 102.11(b)). The application such activities." rights, including cross-default on of installment payments under such Section 901.4(b) of the final rule has obligations, set-off, and certain circumstances varies depending on the not been amended to incorporate a Governmental defenses. No change has type of debt. Agencies may address this commenter's suggestion to mandate that been made to incorporate this comment issue in agency-specific regulations. In agencies report delinquent debts to the which is beyond the scope of the final addition, further guidance will be Department of Housing and Urban rule. Private collection crnir.1nrIorq iqsied in the Treasury Financial Manmal 70394 Federal Register/Vol. 65, No. 226/Wednesday, November 22, 2000/Rules and Regulations

when a mutual release has not been supplement "Managing Federal NPRM § 902.t--Considerationof Tax Consequences to the Government executed. Specifically, unless Receivables." prohibited by law, when a debt is response to one commenter's NPRM § 901. 1 0-Interest,Penalties, an d In compromised but a mutual release has suggestion that NPRM § 902.6 be Administrative Costs not been executed, the debtor is deemed amended to require agencies to report to have waived any claims and causes One commenter suggested that the discharges of indebtedness to the of action against the Government or its final rule clarify whether NPRM Internal Revenue Service (IRS), new officials arising from the same § 901.10(a) applies to Social Security § 903.54Di~charge of indebtedness; transaction related to the compromised Administration debts. Section 204(f)(1) reporting requirements) has been added debt. of the Social Security Act (Act) governs to the final rule. Section 903.5(a) of the NPRM § 903.2-Suspension of the charging of interest, penalties, and final rule requires agencies to make a Collection Activity administrative costs for social security determination that further collection debts. The Act provides that the Social action is not warranted before making a The final rule does not incorporate Security Administration "may," but is determination to discharge a debt (also one commenter's suggestion that NPRM not required to, charge interest, referred to as "close out" for Federal § 903.2(c)(2) be amended to give penalties, and administrative costs. No government accounting purposes). agencies the flexibility to suspend rule change to the final rule is required since Specifically, § 903.5(a) of the final collection activity for groups or all the FCCS do not apply when specific requires an agency to take categories of debtors. NPRM or regulations govern particular appropriate steps to collect a debt in § 903.2(c)(2) addresses a request for statutes as agency debt collection activities. See accordance with 31 U.S.C. 3711(g), waiver or administrative review of a that NPRM § 900.1 (Prescription of appropriate. It also provides debt when a statute does not mandate discharge a debt until Standards). agencies may not suspension of collection activity during the requirements of 31 U.S.C. 3711(i) the pendency of such requests. The Several commenters suggested that (sale of debt) have been met. After a determination of whether to suspend the final rule provide a more precise debt has been reported to the IRS as collection activity in these cases should standard for the "date of delinquency" discharged, the Federal government may be reviewed on a case-by-case basis. A that triggers the charging of interest, not take any further legal action to case-by-case standard is appropriate penalties, and administrative costs '6flect such debt, including the filing or because it ensures that agencies review under NPRM § 901.10. One commenter continuation of judgment liens. The IRS individual cases to confirm that waiver recommended defining the "date of is responsible for the collection of taxes or indebtedness reconsideration delinquency" as the "day after the due due, if any, when the discharge is requests are not frivolous or made date contained in the initial demand reported as income to the debtor. primarily for the purpose of delaying letter." A second commenter suggested Before discharging a debt, agencies collection. Nothing in the FCCS prohibit retaining the current standard under 4 must terminate debt collection action. suspension of collection activity by the CFR 102.13(b) of the FCCS ("Interest The FCCS contain provisions related to agency for groups or categories of shall accrue from the date on which the termination of debt collection action debtors when appropriate. notice of the debt and the interest at § 903.3 of the final rule. Policies and of requirements is first mailed or hand with respect to write-off, an (NEW] § 903.5-Dischorge standards requirements delivered to the debtor."). The final rule accounting process outside the scope of Indebtedness; Reporting has not been changed to incorporate the FCCS, are found in OMB Circular See the discussion related to NPRM these comments. Consistent with the A-129, "Policies for Federal Credit § 902.6, above, for an analysis of new intent of the FCCS to provide Programs and Nontax Receivables," § 903.5 of the final rule (Discharge of Government-wide debt collection which is being revised to incorporate indebtedness; reporting requirements). standards, the NPRM § 900.2(b) general new write-off policy guidelines. NPRM § 904.I-PromptReferral definition of "delinquency" is broad Section 903.5(c) provides that enough to apply to all Federal agency agencies must report a discharge of One commenter suggested amending programs that give rise to delinquent indebtedness in accordance with the NPRM § 904.1 to provide that debts debts. Federal agencies should requirements of 26 U.S.C. 6050P and 26 arising from audit exceptions taken by promulgate debt collection regulations CFR 1.6050P-1. Discharge of the General Accounting Office (GAO) be tailored to specific agency program indebtedness is reported on IRS Form reviewed by GAO prior to referral to requirements. Nothing in the FCCS 1099-C. An agency may request DOJ. No change has been made to prohibits an agency from specifying Treasury or Treasury-designated debt incorporate this comment because the that, for purposes of a particular type of collection centers to file such a Comptroller General's role in the debt, "date of delinquency" is the date discharge report to the IRS on the Federal debt collection process has been on which notice of the debt and the agency's behalf. A cross reference to eliminated. Although the opinions and accrual of interest is first mailed or § 903.5 has been added to § 902.6 in the legal interpretations of the Comptroller hand-delivered to the debtor, or some final rule. General often provide helpful guidance other appropriate standard. on audit exception matters and related NPRM § 902.7-Mutual Releases of issues, they are not binding upon NPRM § 902.2-Bases for Compromise Debtor and the Government departments, agencies, or officers of the v. As suggested by one commenter, the In response to one commenter's executive branch. See e.g., Bowsher final rule amends NPRM § 902.2(g) to suggestion, NPRM § 902.7 has been Synar, 478 U.S. 714, 727-32 (1986). clarify that, when evaluating a revised to emphasize the mutuality of NPRM § 904.3-Preservationof compromise proposal, agencies need the debtor and Government releases. Evidence a current financial statement Additional language has been added in only obtain NPRM § 904.3 requires agencies to from a debtor to assess the merits of a the final rule to NPRM § 902.7 to clarify the impact of a compromise on potential provide original documents proposal that is based on the debtor's inim'mcd'nty ,ponj re'pmst by fllj. T1-' inability to pay. related clains against 7-.m'nm,' Federal Register/Vol. 65, No. 226/Wednesday, November 22, 2000/Rules and Regulations 70395

Unfunded Mandates Reform Act of 1995 900.1 Prescription of standards. final rule does not incorporate one 900.2 Definitions and construction. commenter's suggestion to amend This regulation will not result in the 900.3 Antitrust, fraud, and tax and NPRM § 904.3 to authorize agencies to expenditure by state, local and tribal interagency claims excluded. certify copies of essential documents governments, in the aggregate, or by the 900.4 Compromise, waiver, or disposition related to a debt referred to DOJ instead private sector, of $100 million or more under other statutes not precluded. documents in one year, and it will not 900.5 Form of payment. of providing original in any 900.6 Subdivision of claims not authorized. certain types of cases, such as in debts significantly or uniquely affect small 900.7 Required administrative proceedings. for fire suppression costs. The essential governments. Therefore, no actions were 900.8 No private rights created. purpose behind NPRM § 904.3 is to deemed necessary under the provisions Authority: 31 U.S.C. 3711. require agencies to "take care to of the Unfunded Mandates Reform Act preserve all files and records that may of 1995. §900.1 Prescription of standards. be needed by the Department of Justice" and Business Regulatory Enfoiremnent (a) The Secretary of the Treasury to prove debts in court. The amendment Small FairnessAct of 1996 the Attorney General of the United of § 904.3 to incorporate the States are issuing the regulations in commenter's concern would not further This rule is not a major rule as parts 900-904 of this chapter under the this intent. defined by section 251 of the Small authority contained in 31 U.S.C. Business Regulatory Enforcement Act. 5 in this NPRM §904.4-Minimum Amount of 3711(d)(2). The regulations U.S.C. 804. This rule will not result in standards for Federal Refenrals to the Departmentof Justice chapter prescribe an annual effect on the economy of $100 agency use in the administrative One commenter suggested reducing million or more; a major increase in collection, offset, compromise, and the the threshold amount of debts costs or prices; or significant adverse suspension or termination of collection (exclusive of interest, penalties, and effects on competition, employment, activity for civil claims for money, administrative costs) to be referred to investment, productivity, innovation, or funds, or property, as defined by 31 DOJ for litigation from $2, 61) to $1,500. on the ability of United States-based U.S.C. 3701(b), unless specific Federal No change has been made to the final companies to compete with foreign agency statutes or regulations apply to rule to incorporate this comment. The based companies in domestic or export such activities or, as provided for by DOJ may waive the minimum threshold markets. Title 11 of the United States Code, when amount in appropriate cases, including List of Subjects the claims involve bankruptcy. Federal cases which are referred by DOJ to agencies include agencies of the private counsel under 31 U.S.C. 3718. 31 CFR Part 900 executive, legislative, and judicial of the Government, including Regulatory Analysis Antitrust, Claims, Fraud. branches Government corporations. The Executive Order 12866 31 CFR Part 901 regulations in this chapter also prescribe debts to the The Department of the Treasury and Administrative practice and standards for referring of Justice have procedure, Claims, Federal employees, Department of Justice for litigation. the Department in the determined that this regulation is not a Penalties, Privacy. Additional guidance is contained regulatory action as defined Office of Management and Budget's significant 31 CFR Part 902 "Policies for in Executive Order 12866 and, Circular A-129 (Revised), Claims. Programs and Non-Tax accordingly, this regulation has not been Federal Credit the Department of the by the Office of Management 31 CFR Port 903 Receivables," reviewed "Managing Federal and Budget. Treasury's Claims. Receivables," and other publications Regulatory Flexibility Act 31 CFR Part 904 concerning debt collection and debt management. These publications are It is hereby certified that this Claims. a significant available from the Debt Management regulation will not have Management economic impact on a substantial Authority and Issuance Services, Financial Service, Department of the Treasury, number of small entities because the For the reasons set out in the 401 14th Street SW., Room 151, regulation either (1) results in greater preamble, chapter IX, consisting of parts agencies to Washington, DC 20227. flexibility for Federal 900 through 904, is established in title Additional rules governing their own debt collection (h) streamline 31 of the Code of Federal Regulations to centralized administrative offset and the or (2) reflects the statutory regulations, read as follows: transfer of delinquent debt to the language contained in the DCIA. CHAPTER IX-FEDERAL CLAIMS Department of the Treasury (Treasury) Accordingly, a Regulatory Flexibility or Treasury-designated debt collection Analysis is not required. COLLECTION STANDARDS (DEPARTMENT OF THE TREASURY-DEPARTMENT OF centers for collection (cross-servicing) Executive Order 13132 JUSTICE) under the Debt Collection Improvement Act of 1996, Public Law 104-134, 110 will not have a This regulation Stat. 1321, 1358 (April 26, 1996), are direct effect on the states, on Part substantial issued in separate regulations by between the national 900 Scope of standards the relationship Treasury. Rules governing the use of and the states, or on 901 Standards for the administrative government debt collection tools created of power and collection of claims certain distribution under the Debt Collection Improvement responsibilities among the various 902 Standards for the compromise of claims 903 Standards for suspending or Act of 1996, such as administrative of government. Therefore, in levels terminating collection activily wage garnishment, also are issued in accordance with Executive Order 13132, 904 Referrals to the Department of Justice by Treasury. See it is determined that this regulation does separate regulations generally 31 CFR part 285. not have sufficient federalism PART 900-SCOPE OF STANDARDS (c) Agencies are not limited to the preparation implications to warrant the remedies contained in parts 900-904 of of a Federalism Assessment. Sec. 70396 Federal Register/Vol. 65, No. 226/Wednesday, November 22, 2000/Rules and Regulations

(e) For purposes of the standards in agency generally take precedence over this chapter and are encouraged to use parts 900-904 of this chapter. all authorized remedies, including this chapter, unless otherwise stated, alternative dispute resolution and "Secretary" means the Secretary of the §900.5 Form of payment. civil claims, to the Treasury or the Secretary's delegate. arbitration, to collect be paid in the form of are not Claims may extent that such remedies §900.3 Antitrust, fraud, and tax and a contractual basis Claims money or, when inconsistent with the Federal interagency claims excluded. may demand the Public Law exists, the Government Collection Act, as amended, of specific property or the 1966), the (a) The standards in parts 900-904 of return 89-508, 80 Stat. 308 (July 19, performance of specific services. Debt Collection Act of 1982, Public Law this chapter relating to compromise, and termination of 97-365, 96 Stat. 1749 (October 25, suspension, of claims not not apply to any §900.6 Subdivision the Debt Collection Improvement collection activity do authorized. 1982), in part on or other relevant statutes. debt based in whole or Act of 1996, not be subdivided to avoid The regulations in this chapter are not conduct in violation of the antitrust Debts may fraud, the monetary ceiling established by 31 intended to impair agencies' common laws or to any debt involving the claim, or U.S.C. 3711(a)(2). A debtor's liability law rights to collect debts. presentation of a false on the part of the arising from a particular transaction or policies regarding misrepresentation (d) Standards and having an interest in contract shall be considered a single of debt for accounting debtor or any party the classification the Department of debt in determining whether the debt is write off of the claim. Only purposes (for example, the authority to compromise, one of less than $100,000 (excluding are contained in the Justice has uncollectible debt) or terminate collection activity interest, penalties, and administrative and Budget's suspend, Office of Management such claims. The standards in parts costs) or such higher amount as the A-129 (Revised), "Policies for on Circular 900-904 of this chapter relating to the Attorney General shall from time to time Credit Programs and Non-Tax Federal administrative collection of claims do prescribe for purposes of compromise or Receivables." apply, but only to the extent authorized suspension or termination of collection §900.2 Definitions and construction. by the Department of Justice in a activity. of a (a) For the purposes of the standards particular case. Upon identification or in part on § 900.7 Required administrative in this chapter, the terms "claim" and claim based in whole proceedings. "debt" are synonymous and conduct in violation of the antitrust to omit, interchangeable. They refer to an laws or any claim involving fraud, the Agencies are not required or or duplicate administrative amount of money, funds, or property presentation of a false claim, foreclose, the by contract or determined by an agency misrepresentation on the part of proceedings required that has been in official to be due the United States from debtor or any party having an interest other laws or regulations. the claim, agencies shall promptly refer any person, organization, or entity, §900.8 No private rights created. except another Federal agency. For the the case to the Department of Justice for Department purposes of administrative offset under action. At its discretion, the The standards in this chapter do not to the 31 U.S.C. 3716, the terms "claim" and of Justice may return the claim create any right or benefit, substantive further handling "debt" include an amount of money, forwarding agency for or procedural, enforceable at law or in funds, or property owed by a person to in accordance with the standards in equity by a party against the United a State (including past-due support parts 900-904 of this chapter. States, its agencies, its officers, or any being enforced by a State), the District (b) Parts 900-904 of this chapter do other person, nor shall the failure of an of Columbia, American Samoa, Guam, not apply to tax debts. agency to comply with any of the 900-904 of this the United States Virgin Islands, the (c) Parts 900-904 of this chapter do provisions of parts to any debtor as a Commonwealth of the Northern Mariana not apply to claims between Federal chapter be available Islands, or the Commonwealth of Puerto agencies. Federal agencies should defense. Rico. attempt to resolve interagency claims by FOR THE if it has not PART 901-STANDARDS (b) A debt is "delinquent" negotiation in accordance with COLLECTION OF in the 1980 ADMINISTRATIVE been paid by the date specified Executive Order 12146 (3 CFR, CLAIMS agency's initial written demand for Comp., pp. 409-412). payment or applicable agreement or Sec. instrument (including a post § 900.4 Compromise, waiver, or 901.1 Aggressive agency collection activity. payment agreement), disposition under other statutes not q01.2 Demand for payment. delinquency precluded. unless other satisfactory payment 901.3 Collection by administrative offset. arrangements have been made. Nothing in parts 900-904 of this 901.4 Reporting debts. with private collection (c) In parts 900-904 of this chapter, chapter precludes agency disposition of 901.5 Contracting any claim under statutes and contractors and with entities that locate words in the plural form shall include assets. implementing regulations other than and recover unclaimed the singular and vice versa, and words 901.6 Suspension or revocation of signifying the masculine gender shall subchapter Ii of chapter 37 of Title 31 eligibility for loans and loan guaranties, include the feminine and vice versa. of the United States Code (Claims of the licenses, permits, or privileges. The terms "includes" and "including" United States Government) and the 901.7 Liquidation of collateral. do not exclude matters not listed but do standards in this chapter. See. e.g., the 901.8 Collection in installments. include matters that are in the same Federal Medical Care Recovery Act, 901.9 Interest, penalties, and administrative general class. Public Law 87-693, 76 Stat. 593 costs. of costs. Recoupment is a special method (September 25, 1962) (codified at 42 001.10 Analysis (d) 901.11 Use and disclosure of mailing for adjusting debts arising under the U.S.C. 2651 el seq.), and applicable part 43. In such addresses. same transaction or occurrence. For regulations, 28 CFR 901.12 Exemptions. the cases, the laws and regulations that are example, obligations arising under 3716, to specifically applicable to claims Authority: 31 U.S.C. 3701, 3711, same contract generally are subject 3717. 3718. and 3720B. recoupment. collection activities of n particiilar Federal Register/Vol. 65, No. 226/Wednesday, November 22, 2000/Rules and Regulations 70397

§901.1 Aggressive agency collection (6) Is exempt from this requirement the debt can be resolved activity. based on a detemnination by the administratively or must be referred for (a) Federal agencies shall aggressively Secretary that exemption for a certain litigation. collect all debts arising out of activities class of debt is in the best interest of the (d) Agencies should include in of, or referred or transferred for United States. Agencies may request demand letters such items as the collection services to, that agency. that the Secretary exempt specific agency's willingness to discuss Collection activities shall be undertaken classes of debts. alternative methods of payment; its promptly with follow-up action taken as (f) Agencies operating Treasury policies with respect to the use of credit necessary. Nothing contained in parts designated debt collection centers are bureaus, debt collection centers, and 900-904 of this chapter requires the authorized to charge a fee for services collection agencies; the agency's Department of Justice, Treasury, or other rendered regarding referred or remedies to enforce payment of the debt Treasury-designated debt collection transferred debts. The fee may be paid (including assessment of interest, centers, to duplicate collection activities out of amounts collected and may be administrative costs and penalties, previously undertaken by other agencies added to the debt as an administrative administrative garnishment, the use of or to perform collection activities that cost (see § 901.10). collection agencies, Federal salary should have undertaken. offset, tax refund offset, administrative other agencies §901.2 Demand for payment. or transferred to offset, and litigation); the requirement (b) Debts referred (a) Written demand as described in Treasury, or Treasury-designated debt that any debt delinquent for more than (b) of this section shall be to the collection centers under the authority of paragraph 180 days be transferred 31 U.S.C. 3711(g), shall be serviced, made promptly upon a debtor of the Department of the Treasury for United States in terms that inform the collection; and, depending on or compromised, or the collected, debtor of the consequences of failing to applicable statutory authority, the collection action will be suspended or cooperate with the agency to resolve the debtor's entitlement to consideration of in accordance with the terminated, debt. The specific content, timing, and a waiver. statutory requirements and authorities letters shall depend (e) Agencies should respond promptly to the collection of such number of demand applicable upon the type and amount of the debt to communications from debtors, within debts. and the debtor's response, if any, to the 30 days whenever feasible, and should (c) Agencies shall cooperate with one agency's letters or telephone calls. advise debtors who dispute debts to their debt collection another in Generally, one demand letter should furnish available evidence to support activities. suffice. In determining the timing of the their contentions. (d) Agencies should consider referring demand letter(s), agencies should give (f) Prior to the initiation of the debts that are less than 180 days due regard to the need to refer debts demand process or at any time during delinquent to Treasury or to Treasury or after completion of the demand "debt collection centers" to promptly to the Department of Justice designated for litigation, in accordance with § 904.1 process, if an agency determines to accomplish efficient, cost effective debt pursue, or is required to pursue, offset, is a debt collection of this chapter or otherwise. When collection. Treasury necessary to protect the Government's the procedures applicable to offset center, is authorized to designate other interest (for example, to prevent the should be followed (see § 901.3). The Federal agencies as debt collection running of a statute of limitations), availability of funds or money for debt centers based on their performance in written demand may be preceded by satisfaction by offset and the agency's collecting delinquent debts, and may other appropriate actions under parts determination to pursue collection by such designations. Referrals withdraw 900-904 of this chapter, including offset shall release the agency from the centers shall be at the to debt collection immediate referral for litigation. necessity of further compliance with discretion of, and for a time period (b) Demand letters shall inform the paragraphs (a), (b), (c), and (d) of this acceptable to, the Secretary. Referrals debtor of: section. may be for servicing, collection, (1) The basis for the indebtedness and (g) Prior to referring a debt for compromise, suspension, or termination the rights, if any, the debtor may have litigation, agencies should advise each of collection action. to seek review within the agency; person determined to be liable for the (e) fgencibs shall transfer to the (2) The applicable standards for debt that, unless the debt can be Secretary any debt that has been imposing any interest, penalties, or collected administratively, litigation delinquent for a period of 180 days or administrative costs; may be initiated. This notification more so that the Secretary may take (3) The date by which payment should comply with Executive Order appropriate action to collect the debt or should be made to avoid late charges 12988 (3 CFR, 1996 Comp., pp. 157 terminate collection action. See 31 CFR (i.e. interest, penalties, and 163) and may be given as part of a 285.12 (Transfer of Debts to Treasury for administrative costs) and enforced demand letter under paragraph (b) of Collection). This requirement does not collection, which generally should not this section or in a separate document. apply to any debt that: be more than 30 days from the date that Litigation counsel for the Government (1) Is in litigation or foreclosure; the demand letter is mailed or hand should be advised that this notice has (2) Will be disposed of under an delivered; and been given. approved asset sale program; (4) The name, address, and phone (h) When an agency learns that a (3) Has been referred to a private number of a contact person or office bankruptcy petition has been filed with collection contractor for a period of time within the agency. respect to a debtor, before proceeding acceptable to the Secretary; ((c) Agencies should exercise care to with further collection action, the (4) Is at a debt collection center for a ensure that demand letters are mailed or agency should immediately seek legal period of time acceptable to the hand-delivered on the same day that advice from its agency counsel Secretary (see paragraph (d) of this they are dated. There is no prescribed concerning the impact of the section); format for demand letters. Agencies Bankruptcy Code on any pending or (5) Will be collected under internal should utilize demand letters and contemplated collection activities. offset procedures within three years procedures that will lead to the earliest Unless the agency determines that the after the debt first became delinquent; or practicable determ inal ion of whother automatic stay imposed at the time of November 22, 2000/ Rules and Regulations 70398 Federal Register/Vol. 65, No. 226/Wednesday, (4) Unless otherwise provided by law, (ii} Such regulations shall provide U.S.C. 362 has that offsets may be initiated only after filing pursuant to 11 administrative offset of payments under been lifted or is no longer in effect, in to collect the debtor: the authority of 31 U.S.C. 3716 sent written notice of the most cases collection activity against the more than (A) Has been a debt may not be conducted amount of the debt, the debtor should stop immediately. right to type and a proof 10 years after the Government's intention of the agency to use (1) After seeking legal advice, the debt first accrued, unless most cases collect administrative offset to collect the debt, of claim should be filed in to the Government's right court or the facts material and an explanation of the debtor's rights with the bankruptcy to collect the debt were not known and Trustee. Agencies should refer to the under 31 U.S.C. 3716; and could not reasonably have been known debtor has been given: provisions of 11 U.S.C. 106 relating to of the (B) The by the official or officials (1) The opportunity to inspect and the consequences on sovereign with the Government who were charged copy agency records related to the debt; immunity of filing a proof of claim. to discover and collect creditor, responsibility (2) The opportunity for a review (2] If the agency is a secured debts. This limitation does not the automatic such within the agency of the determination it may seek relief from apply to debts reduced to a judgment. security, subject to the of indebtedness; and stay regarding its (5] In bankruptcy cases, agencies a written and requirements of 11 (3) The opportunity to make provisions should seek legal advice from their debt. 362. agreement to repay the U.S.C. agency counsel concerning the impact may provide is stayed in most cases by (iii) Agency regulations (3) Offset of the Bankruptcy Code, particularly 11 of the procedures set stay. However, agencies for the omission the automatic U.S.C. 106, 362, and 553, on pending or in paragraph (a)(4)(ii) of this should seek legal advice from their forth contemplated collections by offset. when: counsel to determine whether section agency (b) Mandatory centralized (A] The offset is in the nature of a their payments to the debtor and administrativeoffset. (1) Creditor agencies available for due, recoupment; payments of other agencies are required to refer past debt arises under a contract as by the agency until (B) The offset may be frozen legally enforceable nonlax debts which in Cecile Industries, Inc. v. stay can be set forth relief from the automatic are over 180 days delinquent to the 995 F.2d 1052 (Fed. Cir. 1993] the bankruptcy court. Cheney, obtained from Secretary for collection by centralized and other procedural protections seek legal advice which are (notice Agencies also should administrative offset. Debts in 31 U.S.C. 3716(a) do not their agency counsel to determine also may set forth from less than 180 days delinquent or restrict established whether recoupment is available. for this supplant be referred to the Secretary procedures for contractual offsets purpose. See § 901.3(b)(5) for debt §901.3 Collection by administrative offset. accommodated by the Contracts certification requirements. Disputes Act); or (a) Scope. (1) The term (2) The names and taxpayer ",administrative offset" has the meaning (C) In the case of non-centralized identifying numbers (TINs) of debtors offsets conducted under provided in 31 U.S.C. 3701(a)(1). to the Secretary administrative who owe debts referred (c) of this section, the agency (2) This section does not apply to: (b)(1) of this paragraph as described in paragraph existence of the (i) Debts arising under the Social to the names first learns of the section shall be compared owed by the debtor when there Security Act, except as provided in 42 be made by amount and TINs on payments to time before payment U.S.C. 404; officials. Federal is insufficient Federal disbursing be made to the debtor/payee to (ii) Payments made under the Social include disbursing would disbursing officials for prior notice and an Security Act, except as provided for in Department of allow officials of Treasury, the for review. When prior 31 U.S.C. 3716(c) (see 31 CFR 285.4, the United States Postal opportunity Defense, notice and an opportunity for review are Federal Benefit Offset); other Government corporations, or payments Service, omitted, the agency shall give the debtor (iii) Debts arising under, disbursing officials of the LInited Code and an opportunity for made under, the Internal Revenue designated by the Secretary. such notice and Refund Offset) States as soon as practicable and shall (see 31 CFR 285.2, Tax When the name and TIN of a debtor review United States; promptly refund any money ultimately or the tariff laws of the the name and TIN of a payee and against Federal salaries to match found not to have been owed to the (iv) Offsets all other requirements for offset have the extent these standards are be offset to Government. been met, the payment will an agency previously has inconsistent with regulations published debt. (iv) When 5 satisfy the any of the required notice to implement such offsets under Federal disbursing officials will given a debtor 3716 (see 5 (3) with respect U.S.C. 5514 and 31 U.S.C. debtor/payee in writing that and review opportunities notify the debt (see, e.g., § 901.2], CFR part 550, subpart K, and 31 CFR has occurred to satisfy, in part to a particular an offset need not duplicate such 285.7, Federal Salary Offset]; due, legally enforceable the agency 3728 or in full, a past review opportunities before (v) Offsets under 31 U.S.C. debt. The notice shall notice and by a debtor delinquent offset may be initiated. against a judgment obtained a description of the type and administrative include Agencies referring delinquent against the United States; of the payment from which the (5) or recoupments under amount debts to the Secretary must certify, in a (vi) Offsets offset was taken, the amount of offset law, State law, or Federal form acceptable to the Secretary, that: common that was taken, the identity of the statutes specifically prohibiting offsets 0i) The debt(s) is (are) past due and creditor agency requesting the offset, and or recoupments of particular types of creditor legally enforceable; and a contact point within the (ii) The agency has complied with all debts; or respond to questions of judicial agency who will due process requirements under 31 (vii) Offsets in the course the offset. including bankruptcy. regarding U.S.C. 3716(a) and the agency's proceedings, (4)(i) Before referring a delinquent (3) Unless otherwise provided for by regulations. debt to the Secretary for administrative that are prohibited by contract or law, debts or payments that prescribed (6] Payments offset, agencies must have from being offset are exempt from are not subject to administrative offset offset regulations law be collected administrative centralized administrative offset. The under 31 U.S.C. 3716 may this section or have under the consistent with Secretary shall exempt payments under by administrative offset this section without change by applicable adopted means-tested programs from centralized common law or other cross-reference. statutory authority. .ules and Regulations 70399 22, 2000 / F No. 6 / Wednesday, November the validity of the debt Federal Register / Vol. 65, 2 2 ple, when on an issue of credibility or ties must adoptsuch offsetsregulations may occur examnturns offset when requested in agen' iding that verac ity. administrative Unless otherwise required by law, head of the payment prov after: due (2) not writing by the only The debtor has been provided al hearing under this section is or authorizing agency. Also, (b)(4) an or certifying (i) ess as set forth in paragraph to be a formal evidentiary Secretary may exempt other classes requ ired should the offset proc is section; and heariing, although the agency of payments from centralized authorizing agency the head of of th ) The payment carel fully document all significant upon the written request of (ii written certification from or authorizing received matt ers discussed at the hearing. the payment certifying has agency that the debtor owes creditor section does not require an agency. the the past due, legally enforceable I This payments made under stated, (3 with respect to debt (7) Benefit 301 et the nquent debt in the amount hearing Social Security Act (42 U.S.C. has fully oral systems in which a Benefits deli that the creditor agency action part B of the Black Lung coll rmination of indebtedness rarely seq.), and any law and nplied with its regulations or veracity Act (30 U.S.C. 921 et seq.), offset. dete elves issues of credibility Retirement coin Corning administrative invc that administered by the Railroad authorizing agencies the agency has determined tier 2 benefits), may con 3) Payment and Board (other than I with offset requests by ew of the written record is accordance with 11comply revi uieans to correct be offset only in sha agencies to collect debts owed inarily an adequate regulations, issued in ditor offset ord Treasury cre he United States, unless the with the Social Security interests of the pri or mistakes. consultation tot uld not be in the best In those cases when an oral the Railroad Retirement respect to the 4) Administration, wo ited States with is not required by this section, and the Office of Management authorizing hea rning Board, Un ogram of the payment shall accord the debtor a Budget. See 31 CFR 285.4. otherwise be contrary agency and with 31 U.S.C. pr(ency, or would aper hearing," that is, a determination (8) In accordance use should be made an based may waive the ag law. Appropriate P the request for reconsideration 3716(f), the Secretary to efforts of other record. of the Computer Matching the cooperative on a review of the written provisions of by of Protection Act of 1988 encies in effecting collection up and Privacy and ag ministrative offset. matching agreements multiple debts by § 901.4 Reporting debts. concerning ad (4) When collecting and post-match notification and verification administrative offset, (a) Agencies shall develop for centralized mn-centralized for reporting A (5 U.S.C. 552a(o) and (p)) n should apply the recovered aplement procedures upon receipt of a gencies in to credit bureaus and administrative offset ag to those debts in accordance •linquent debts from a creditor agency that nounts de databases. Agencies certification a ith the best interests of the United her automated requirements facts and ot procedures to report the due process have wtates, as determined by the so may develop in 31 U.S.C. 3716(a) case, al debts to credit bureaus. enumerated a debt in S ircumstances of the particular on-delinquent met. The certification of of n1 been ciarticularly the applicable statute ee 31 U.S.C. 3711(e. with paragraph (b)(5) of this S accordance If P mitations. (1) In developing procedures for section will satisfy this requirement. to OPM to offset a only the Data li (d) Requests debts to credit bureaus, such a waiver is granted, anticipatedor future benefit ?porting of the drebtor's gencies shall comply with the Integrity Board of the Department under the Civil Sezvice the privacy Act of to oversee any ayrnents ,ankruptcy Code and Treasury is required Fund. Upon as amended. The in accordance with Pletirem ent and Disability that B974, 5 U.S.C. 552a, matching activities, OPM written certification Act do not This waiver authority )roviding 1provisions of the Privacy 31 U.S.C. 3716(g). Ia debtor has been afforded the to credit bureaus. apply to offsets conducted (b)(4) P.pply does not procedures provided in paragraph reporting paragraphs (c) and (d) of this agencies may a (2) Agency procedures for under of this section, creditor to credit section. to offset a debtor's lelinquent consumer debts administrative request OPM with the due (c) Non-centralized or future benefit payments )ureaus shall be consistent non-centralized anticipated I offset. (1) Generally, Service Retirement and process and other requirements offsets are ad hoc case under the Civil 3711(e). When an administrative Fund (Fund) in accordance contained in 31 U.S.C. offsets that an agency conducts, Disability 5 CFR a debtor any of the by-case or with regulations codified at agency has given the agency's discretion, internally receipt of at 831.1801-831.1808. Upon required notice and review in cooperation with the agency will identify and to a payments to such a request, OPM opportunities with respect certifying or authorizing account in anticipation debt, the agency need not otherwise prohibited "flag" a debtor's particular the debtor. Unless when the debtor requests, or such notice and review centralized administrative of the time duplicate that by law, when eligible to receive, payments opportunities before reporting not available or appropriate, becomes credit offset is Fund. This will satisfy any delinquent consumer debt to legally enforceable nontax from the past due, that offset be initiated prior debts may be collected requirement delinquent the expiration of the tine limitations bureaus. should report delinquent through non-centralized administrative to of this (b) Agencies agency in paragraph (a)(4) of Housing and offset. In these cases, a creditor referenced debts to the Department directly to a section. Development's Credit Alert may make a request z.quhieflients. (1) For Urban agency to offset a (e) Review Voice Response System payment authorizing of this section, whenever an Interactive about the a debtor to collect a purposes a (CAIVRS). For information payment due required to afford a debtor should For example, it may be agency is CAIVRS program, agencies delinquent debt. within the agency, the agency for a creditor agency to review a the Director of Information appropriate shall provide the debtor with contact Policy and request that the Office of Personnel for an oral Resources Management a Federal reasonable opportunity Office of Management (OPM) offset debtor requests Management Division, payment upon hearing when the Department of employee's lump sum of the debt and the Information Technology, 4 5 1 service to satisfy an reconsideration Development, leaving Government that the question of Housing and Urban agency determines Washington, DC 20410. unpaid advance. cannot be resolved by 7th Street, SW., (2) Before requesting a payment the indebtedness for non of the documentary evidence, authorizing agency to conduct a review centralized administrative offset, November 22, 2000/Rules and Regulations 70400 Federal Register/Vol. 65, No. 226/Wednesday,

extend financial assistance in the form )rivilegesdebts to to debtors the Federal who Government.fail to pay § 901.5 Contracting with private collection or loan t heir that locate and of a loan, loan guarantee, (d) In bankruptcy cases, before contractors and with entities delinquent on unclaimed assets. insurance to any person advising the debtor of an agency's recover to a Federal agency. of a nontax debt owed ntention to suspend or revoke licenses, (a) Subject to the provisions to Federal This prohibition does not apply permits, or privileges, agencies should paragraph (bMof this section, to waive with private disaster loans. The authority seek legal advice from their agency agencies may contract section may be as defined in 31 the application of this counsel concerning the impact of the collection contractors, Financial Officer to recover delinquent delegated to the Chief Bankruptcy Code, particularly 11 U.S.C. U.S.C. 3701(f), to the Deputy that: and redelegated only 362 and 525, which may restrict such debts provided of the agency. (1) Agencies retain the authority to Chief Financial Officer action. after the resolve disputes, compromise debts, Agencies may extend credit The of collateral. or terminate collection activity, delinquency has been resolved. § 901.7 Liquidation suspend debts refer debts for litigation; Secretary may exempt classes of (a) Agencies should liquidate security and of a (2) The private collection contractor is from this prohibition and has prescribed or collateral through the exercise not allowed to offer the debtor, as an standards defining when a power of sale in the security instrument incentive for payment, the opportunity "delinquency" is "resolved" for or a nonjudicial foreclosure, and apply to pay the debt less the private purposes of this prohibition. See 31 CFR the proceeds to the applicable debt(s), if collection contractor's fee unless the 285.13 (Barring Delinquent Debtors the debtor fails to pay the debt(s) within agency has granted such authority prior From Obtaining Federal Loans or Loan a reasonable time after demand and if to the offer; Insurance or Guarantees). such action is in the best interest of the (3) The contract provides that the (b) In non-bankruptcy cases, agencies United States. Collection from other private collection contractor is subject seeking the collection of statutory sources, including liquidation of. to the Privacy Act of 1974 to the extent penalties, forfeitures, or other types of security or collateral, is not a specified in 5 U.S.C. 552a(m), and to claims should consider the suspension prerequisite to requiring payment by a applicable Federal and state laws and or revocation of licenses, permits, or surety, insurer, or guarantor unless such regulations pertaining to debt collection other privileges for any inexcusable or action is expressly required by statute or practices, including but not limited to willful failure of a debtor to pay such a contract. the Fair Debt Collection Practices Act, debt in accordance with the agency's (b) When an agency learns that a 15 U.S.C. 1692; and regulations or governing procedures. bankruptcy petition has been filed with (4) The private collection contractor is The debtor should be advised in the respect to a debtor, the agency should required to account for all amounts agency's written demand for payment of seek legal advice from its agency collected. the agency's ability to suspend or revoke counsel concerning the impact of the (b) Agencies shall use government licenses, permits, or privileges. Any Bankruptcy Code, including, but not to obtain wide debt collection contracts making, guaranteeing, insuring, limited to, 11 U.S.C. 362, to determine by agency debt collection services provided acquiring, or participating in, loans the applicability of the automatic stay private collection contractors. However, consider suspending or and the procedures for obtaining relief to private should agencies may refer debts disqualifying any lender, contractor, or from such stay prior to proceeding pursuant to a collection contractors broker from doing further business with under paragraph (a) of this section. contract between the agency and the engaging in programs only if the agency or Collection In Installments. private collection contractor by the agency if such lender, §901.8 to the sponsored feasible, agencies shall such debts are not subject or broker fails to pay its (a) Whenever debts to contractor, of a debt in one requirement to transfer the Government within a collect the total amount 31 debts to is financially Treasury for debt collection. See or if such lender, lump sum. If a debtor reasonable time one lump sum, U.S.C. 3711(g); 31 CFR 285.12(e). or broker has been unable to pay a debt in may fund private contractor, payment in regular (c) Agencies debarred, or disqualified agencies may accept contractor contracts in suspended, Agencies should obtain collection from participation in a program or installments. accordance with 31 U.S.C. 3718(d), or a! statements from debtors who another Federal agency. The financial otherwise permitted by law. activity by that they are unable to pay in failure of any surety to honor its represent (d) Agencies may enter into contracts one lump sum and independently verify of the obligations in accordance with 31 U.S.C. for locating and recovering assets be reported to the Treasury. such representations whenever possible assets 9305 should United States, such as unclaimed t The Treasury will forward to all (see § 902.2(g) of this chapter). Agencies Agencies must establish procedures tha in regular notification that a that agree to accept payments are acceptable to the Secretary before interested agencies of authority to do installments should obtain a legally entering into contracts to recover assets surety's certificate from the Government has been enforceable written agreement of the United States held by a state business with the of the terms of the Treasury. debtor that specifies all government or a financial institution. revoked by that contains a revocation of the arrangement and (e) Agencies may enter into contracts (c) The suspension or debt in the also provision accelerating the for debtor asset and income search licenses, permits, or privileges of default. Federal programs or event reports. In accordance with 31 U.S.C. should extend to (b) The size and frequency of are administered by the 3718(d), such contracts may provide activities that installment payments should bear a the on behalf of the Federal that the fee a contractor charges states reasonable relation to the size of the agency for such services may be payabl e Government, to the extent that they ability to pay. If ability debt and the debtor's from the amounts recovered, unless affect the Federal Government's the installment payments by statute. owed by possible, otherwise prohibited to collect money or funds sufficient in size and that manage should be debtors. Therefore, states to liquidate the debt in three §901.6 Suspension or revocation of pursuant to approval frequency and loan guaranties, Federal activities, years or less. eligibility for loans should ensure that licenses, permits, or privileges. from the agencies, (c) Security for deferred payments steps are taken to safeguard waived by the head of the appropriate should be obtained in appropriate cases. (a) Unless against issuing licenses, permits, or agency, agencies are not permitted to of costs. An aleSiS Fe ena IA

Analvsis of costs- incurred or uponthe estimated assessing costsagency. as nn4 10 comparison of costs determined by a provideAgency for collection periodic procedures shouldon Agencies may accept installment otherwise est abl ishied in and amounts collected. Data the refusal of (d) Unless or by incurred rates payments notwithstanding repayment agreement, and corresponding recovery to execute a written contract, penalty, costs in the debtor agencies shall charge a for debts of different types and or to give security, at the statute, not to be used to agreement pursuant to 31 U.S.C. 3717(e)(2), various dollar ranges should agency's option. the amount of exceed six percent a year on compare the cost effectiveness delinquent for §901.9 Interest, penalties, and due on a debt that is alternative collection techniques, days. This charge shall with respect to administrative costs. more than 90 establish guidelines from the date of delinquency. points at which costs of further (a) Except as provided in paragraphs accrue increase an to exceed agencies (e) Agencies may efforts are likely (g), (h), and Mi)of this section, by the cost of collection offers in and "*administrative debt" recoveries, assist in evaluating charge interest, penalties, of charging shall owed to living adjustment in lieu compromise, and establish minimum administrative costs on debts under this collection U.S.C. interest and penalties debt amounts below which the United States pursuant to 31 debt" includes, shall mail or hand section. "Administrative efforts need not be taken. 3717. An agency limited to, a debt based on notice to the debtor, at but is not but of mailing deliver a written penalties, and overpayments, §901.11 Use and disclosure most recent address fines, on the the debtor's does not include a debt based available to the agency, explaining the credit, such as addresses. a debtor these extension of Government (a) When attempting to locate requirements concerning loans and loan a debt agency's those arising from order to collect or compromise except where these living adjustmenl in or charges a guaranties. The cost of parts 900-904 of this chapter requirements are included in by which the under send a is the percentage other authority, agencies may or repayment agreement. Index for the month of designee) to contractual to accrue Consumer Price to the Secretary (or These charges shall continue year preceding the request address from in full or June of the calendar obtain a debtor's mailing until the debt is paid exceeds the Consumer Price Revenue through adjustment of the the records of the Internal otherwise resolved Index for the month of )une termination, or waiver of debt was compromise, calendar year in which the o Service. to use the charges. t, (b) Agencies are authorized on or last adjusted. Increases obtained under Agencies shall charge interest determined debts shall be computed mailing addresses (b) s administrative section to enforce owed the United States as follow: should use this paragraph (a) of this debts dat annually. Agencies a delinquent debt and may (1) Interest shall accrue from the when there is a n collection of alternative only addresses to other of delinquency, or as otherwise reason to do so, such as whe disclose such mailing legitimate to collection agencies for by law. interest and penalties on a agencies and provided in a calculating Unless otherwise established debt would be extremely difficult (2) or by the debt. collection purposes. contract, repayment agreement, because of the age of charged sha in partial or §901.12 Exemptions. statute, the rate of interest (f) When a debt is paid ad part, annually by the amounts receivi preceding sections of this be the rate established "installmentpayments, (a) The or 31 U.S.C be applied first to extent they reflect remedies Secretary in accordance with by the agency shall to the by the Debt U.S.C. 3717, an penalties, second to 3t, procedures prescribed 3717. Pursuant to 31 outstanding third to interem the Debt a higher rate of at administrative charges, Collection Act of 1982 and agency may charge principal. Act of 1996, reasonably determines thea and last to ota Collection Improvement interest if it use of is necessary to protect th Agencies shall waive the collecti such as administrative offset, a higher rate y (g) charges contracting for collection the United States. The agenc interest and administrative he credit bureaus, rights of of section on t] document the reason(s) for its imposed pursuant to this and related should paid within agencies, and interest to debts arising that the higher rate is portion of the debt that is St charges, do not apply determination on which interc made under, the necessary. 30 days after the date under, or payments Agencies may extenc of 1986, as (3) The rate of interest, as initially began to accrue. internal Revenue Code1 et seq.); the Social the period on a caso-by-case ,e amended (26 U.S.C. ch-trged, shall remain fixed for a this 30-day seq.), When agencies may waiv Security Act (42 U.S.C. 301 et duration of the indebtedness. basis. In addition, e repayment penalties, and administrativ under 42 debtor defaults on a Lew interest, in except to the extent provided3716(c); or the seeks to enter into a n costs charged under this section, leU.S.C. 404 and 31 U.S.C. agreement and part, without regard to ti States. These the agency may require tt whole or in tariff laws of the United agreement, either under the however, may at a new rate tha the amount of the debt, 3r remedies and procedures, payment of interest these standards fi to debts that value of funds to ent criteria set forth in be authorized with respect reflects the current or if the the Debt Collection Act the new agreemerbe the compromise of debts, o are exempt from Treasuryexecuted. at theInterest time shall not that collection of Collection is not agency determines •ed of 1982 and the Debt equity and g Act of 1996, to the extent compounded, that is, interest shall these charges is against rest Improvement or not in the best inter authorized under some be charged on interest, penalties, s conscience or is that they are thi of the United States. statute or the common law. administrative costs required by lts on r other defaul shall set forth in thei section. If, however, a debtor (h) Agencies This section should not be the circumstances unde rwill (b) use of these a previous repayment agreement, regulations construed as prohibiting the were not interest and related charges' when charges that accrued but ment which during authorities or requirements the defaulted agree not be imposed for periods collected under er collecting debts owed by persons to the principal und collection activity has been administering the shall be added which review. employed by agencies agreement. suspended pending agency pose (a) of this the new repayment to im' ts not laws cited in paragraph shall assess (i) Agencies are auliorized debt arose under (c) Agencies charges on dab lance section unless the costs incurred for it interest and related administrative 3717, in accorc those laws. and handling delinquenrative subject to 31 U.S.C. processing the common lw. debts. The calculation of administr sts with costs should be based on actual co November 22, 2000/Rules and Regulations 70402 Federal Register/Vol. 65, No. 226/Wednesday, The cost of collecting the debt Ciollection the costs settlement may be ofa substantialsmall debts. THE (3) factor in PART 902-STANDARDS FOR does not justify the enforced collection detennining whether the cost of COMPROMISE OF CLAIMS of the full amount; or In enforced collection of ccollecting justifies (4) There is significant doubt full amount, agencies should Sec. ability to tlhie concerning the Government's onsider whether continued collection 902.1 Scope and application. c for compromise prove its case in court. f the debt, regardless of cost, is 902.2 Bases debtor's o 902.3 Enforcement policy. (b) In determining the ecessary to further an enforcement agencies should n 902.4 joint and several liability. inability to pay, rinciple, such as the Government's offers. such as the p 902.5 Further review of compromise consider relevant factors pursue aggressively to villingness to 902.6 Consideration of tax consequences following: and uncooperative debtors. Government. of the debtor; d efaulting the (1) Age and health (f) Agencies generatly should not 902.7 Mutual releases of the debtor and the (2) Present and potential income; a ccept compromises payable in Government. (3) Inheritance prospects; not an that assets have i nstallments. This is Authority: 31 U.S.C. 3711. (4) The possibility of compromise in or improperly a dvantageous form been concealed and administrative 902.1 Scope and application. and t arms of time § transferred by the debtor; payment of a set forth in this part (5) The availability of assets or e xpense. If, however, (a) The standards in installments is the compromise of debts by enforced ompromise apply to income that may be realized agencies should obtain a pursuant to 31 U.S.C. 3711. An agency collection proceedings. necessary, s written agreement may exercise such compromise (c) Agencies should verify the debtor's egally enforceable out of claim of inability to pay by using a nroviding that, in the event of default, authority for debts arising of the or referred or transferred credit report and other financial he full original principal balance activities of, less sums to, that agency as provided in paragraph (g) tdebt prior to compromise, for collection services information Whenever debt then due, of this section. Agencies should paid thereon, is reinstated. when the amount of the obtain penalties, and consider the applicable exemptions possible, agencies also should exclusive of interest, manner set does not exceed available to the debtor under state and security for repayment in the administrative costs, this chapter. or any higher amount Federal law in determining the forth in part 901 of $100,000 To assess the merits ofa by the Attorney General. Government's ability to enforce (g) authorized offer based in whole or in heads may designate officials collection. Agencies also may consider compromise Agency on the debtor's inability to pay the within their respective agencies to uncertainty as to the price that collateral part a forced full amount of a debt within a exercise the authorities in this section. or other property will bring at by law, the Government's reasonable time, agencies should obtain (b) Unless otherwise provided sale in determining the of a debt, collection. A a current financial statement from when the principal balance ability to enforce of penalties, and effected under this section debtor, executed under penalty exclusive of interest, compromise debtor's assets, costs, exceeds $100,000 should be for an amount that bears a perjury, showing the administrative income and expenses. or any higher amount authorized by the reasonable relation to the amount that liabilities, to enforced collection Agencies also may obtain credit reports Attorney General, the authority can be recovered by to assess rests with the procedures, with regard to the or other financial information accept the compromise Agencies may use of Justice. The agency available to the debtor and compromise offers. Department exemptions information form or evaluate the compromise offer, the time that collection will take. their own financial should forms from the using the factors set forth in this part. (d) If there is significant doubt may request suitable of Justice or the local offer to compromise any debt in concerning the Government's ability to Department If an States Attorney's Office. excess of $100,000 is acceptable to the prove its case in court for the full United because of the agency, the agency shall refer the debt amount claimed, either §902.3 Enforcement policy. because of a to the Civil Division or other legal issues involved or this part, agencies may the facts, then Pursuant to appropriate litigating division in the bona fide dispute as to statutory penalties, accepted in compromise of compromise Department of justice using a Claims the amount or claims established as an (CCLR). should fairly reflect the forfeitures, Collection Litigation Report such cases to enforcement and to compel from the aid Agencies may obtain the CCLR probabilities of successful prosecution if the agency's enforcement Centra with due regard given to compliance, Department of Justice's National to judgment, policy in terms of deterrence and shall availability of witnesses and other Intake Facility. The referral the securing compliance, present and include appropriate financial evidentiary support for the by the the future, will be adequately served information and a recommendation for Government's claim. In determining of the sum to be agencies agency's acceptance the acceptance of the compromise offer litigative risks involved, agreed upon. Justice Department approval is not should consider the probable amount of to required if the agency rejects a court costs and attorney fees pursuant §902.4 Joint and several liability. Act, 28 compromise offer. the Equal Access to Justice (a) When two or more debtors are U.S.C. 2412, that may be imposed jointly and severally liable, agencies § 902.2 Bases for compromise. against the Government if it is collection activity against a debt should pursue (a) Agencies may compromise Ll unsuccessful in litigation. debtors, as appropriate. Agencies the fu a debt all if the Government cannot collect (e) Agencies may compromise should not attempt to allocate the amount because: if the cost of collecting the debt does not between the debtors to pay the ftull burden of payment (1) The debtor is unable justify the enforced collection of the full to liquidate the as verifie d but should proceed amount in a reasonable time, al amount. The amount accepted in quickly as possible. or other financia indebtedness as through credit reports compromise in such cases may reflect (b) Agencies should ensure that a information; the an appropriate discount for compromise agreement with one debtor (2) The Government is unable to and litigative costs of claim a administrative does not release the agency's collect the debt in full within with consideration given to debtors. The collection collection, against the remaining reasonable time by enforced the time it will take to effect collection. proceedings; Federal Register /Vol. 65, No. 226 / Wednesday, November 22, 2000 / Rules and Regulations 70403 amount of a compromise with one Authority: 31 U.S.C. 3711. (3) The debtor agrees to pay interest shall not be considered a on the amount of the debt on which debtor §903.1 Scope and application. precedent or binding in determining the collection will be suspended, and such amount that will be required from other (a) The standards set forth in this part suspension is likely to enhance the debtors jointly and severally liable on apply to the suspension or termination debtor's ability to pay the full amount of collection activity pursuant to 31 the claim. of the principal of the debt with interest U.S.C. 3711 on debts that do not exceed §902.5 Further review of compromise at a later date. $100,000, or such other amount as the (c)(1) Agencies shall suspend offers. Attorney General may direct, exclusive collection activity during the time If an agency is uncertain whether to of interest, penalties, and administrative required for consideration of the accept a firm, written, substantive costs, after deducting the amount of debtor's request for waiver or compromise offer on a debt that is partial payments or collections, if any. administrative review of the debt if the within the agency's delegated Prior to referring a debt to the statute under which the request is compromise authority, it may refer the Department of Justice for litigation, sought prohibits the agency from offer to the Civil Division or other agencies may suspend or terminate collecting the debt during that time. appropriate litigating division in the collection under this part with respect (2) If the statute under which the Department of Justice, using a CCLR to debts arising out of activities of, or request is sought does not prohibit accompanied by supporting data and referred or transferred for collection collection activity pending particulars concerning the debt. The services to, that agency. consideration of the request, agencies Department of Justice may act upon (b) If, after deducting the amount of may use discretion, on a case-by-case such an offer or return it to the agency any partial payments or collections, the basis, to suspend collection. Further, an with instructions or advice. principal amount of a debt exceeds agency ordinarily should suspend §902.6 Consideration of tax $100,000, or such other amount as the collection action upon a request for Attorney General may direct, exclusive consequences to the Government waiver or review if the agency is of interest, penalties, and administrative prohibited by statute or regulation from In negotiating a compromise, agencies costs, the authority to suspend or issuing a refund of amounts collected should consider the tax consequences to terminate rests solely with the prior to agency consideration of the the Government. In particular, agencies Department of Justice. If the agency debtor's request. However, an agency should consider requiring a waiver of believes that suspension or termination should not suspend collection when the tax-loss-carry-forward and tax-loss of any debt in excess of $100,000 may agency determines that the request for carry-back rights of the debtor. For be appropriate, the agency shall refer waiver or review is frivolous or was information on discharge of the debt to the Civil Division or other made primarily to delay collection. indebtedness reporting requirements see appropriate litigating division in the (d) When an agency learns that a § 903.5 of this chapter. Department of Justice, using the CCLR. bankruptcy petition has been filed with The referral should specify the reasons respect to a debtor, in most cases the § 902.7 Mutual releases of the debtor and for the agency's recommendation. If, the Government. collection activity on a debt must be prior to referral to the Department of suspended, pursuant to the provisions In all appropriate instances, a Justice, an agency determines that a debt of 11 L.S.C. 362, 1201, and 1301, unless compromise that is accepted by an is plainly erroneous or clearly without the agency can clearly establish that the agency should be implemented by legal merit, the agency may terminate automatic stay has been lifted or is no means of a mutual release, in which the collection activity regardless of the longer in effect. Agencies should seek debtor is released from further non-tax amount involved without obtaining legal advice immediately from their liability on the compromised debt in Department of Justice concurrence. agency counsel and, if legally permitted, consideration of payment in full of the take the necessary legal steps to ensure §903.2 Suspension of collection activity. compromise amount and the that no funds or money are paid by the Government and its officials, past and (a) Agencies may suspend collection agency to the debtor until relief from the present, are released and discharged activity on a debt when: automatic stay is obtained. from any and all claims and causes of (1) The agency cannot locate the action arising from the same transaction debtor; §903.3 Termination of collection activity. that the debtor may have. In the event (2) The debtor's financial condition is (a) Agencies may terminate collection a mutual release is not executed when expected to improve; or activity when: a debt is compromised, unless (3) The debtor has requested a waiver (1) The agency is unable to collect any prohibited by law, the debtor is still or review of the debt. substantial amount through its own deemed to have waived any and all (b) Based on the current financial efforts or through the efforts of others; claims and causes of action against the condition of the debtor, agencies may (2) The agency is unable to locate the Government and its officials related to suspend collection activity on a debt debtor; the transaction giving rise to the when the debtor's future prospects (3) Costs of collection are anticipated compromised debt. justify retention of the debt for periodic to exceed the amount recoverable; review and collection activity and: (4) The debt is legally without merit PART 903-STANDARDS FOR (1) The applicable statute of or enforcement of the debt is barred by SUSPENDING OR TERMINATING limitations has not expired; or any applicable statute of limitations; COLLECTION ACTIVITY (2) Future collection can be effected (5) The debt cannot be substantiated; by administrative offset, or Sec. 903.1 Scope and application. notwithstanding the expiration of the (6) The debt against the debtor has 903.2 Suspension of collection activity. applicable statute of limitations for been discharged in bankruptcy. 903.3 Termination of collection activity. litigation of claims, with due regard to (b) Before terminating collection 903.4 Exception to termination. the 10-year limitation for administrative activity, the agency should have 903.5 Discharge of indebtedness- reporting offset prescribed by 31 U.S.C. pursued all appropriate means of requirements, 3716)(e)(1); or collection and determined, based upon and Regulations 70404 Federal Register/Vol. 65, No. 226/Wednesday, November 22, 2000/Rules Washington, D.C. Debts for which the activity, that is suspended or terminated, the debt or less, the results of the collection further principal amount is $1,000,000, of remains delinquent and as the Attorney the debt is uncollectible. Termination may be pursued at a or such other amount ceases active collection action exclusive of interest collection activity accordance with the General may direct, termination later date in shall be referred to the collection of the debt. The forth in this chapter. or penalties, preclude standards set Nationwide of collection activity does not discharges a debt in Department of Justice's of the When an agency as required by the agency from retaining a record further collection action Central Intake Facility full or in part, Debts should be account for purposes of: Therefore, agencies the CCLR instructions. if the Secretary is prohibited. as possible, consistent (1) Selling the debt, the determination that referred as early in the best should make collection determines that such sale is is no longer warranted with aggressive agency collection action observance of the interests of the United States; a debt. Before activity and the (2) Pursuing collection at a before discharging parts 900-904 of a debt, agencies must standards contained in date in the event there is a discharging and, in any event, well subsequent debt collection action. this chapter, debtor's status or a new terminate the period for initiating timely change in the (b) Section 3711(i), title 31, LUnited within becomes available; debtors. Agencies collection tool States Code, requires agencies to sell a lawsuits against the (3) Offsetting against future income or shall make every effort to refer delinquent nontax debt upon of assets not available at the time of of collection action if the delinquent debts to the Department or termination within one year of termination of collection activity; Secretary determines such a sale is in Justice for litigation applicants for debts last became (4) Screening future the best interests of the United States. the date such the case of guaranteed or prior indebtedness. Since the discharge of a debt precludes delinquent. In (c) Generally, agencies shall terminate action (including insured loans, agencies should make that has any further collection delinquent collection activity on a debt of a delinquent debt), agencies every effort to refer these the sale of Justice for been discharged in bankruptcy, discharge a debt until the debts to the Department may may not regardless of the amount. Agencies of 31 U.S.C. 3711 (i) have litigation within one year from the date however, requirements to the agency for continue collection activity, been met. the loan was presented subject to the provisions of the (c) Upon discharge of an payment or re-insurance. (b) The Department of Justice has Bankruptcy Code, for any payments indebtedness, agencies must report the provided under a plan of reorganization. to the IRS in accordance with exclusive jurisdiction over the debts discharge to this section. Offset and recoupment rights may the requirements of 26 U.S.C. 6050P and referred to it pursuant shall immediately survive the discharge of the debtor in 26 CFR 1.6050P-1. An agency mnay The referring agency bankruptcy and, under some Treasury or Treasury-designated terminate the use of any administrative request a debt at circumstances, claims also may survive collection centers to file such a collection activities to collect debt debt to the the discharge. For example, the claims discharge report to the IRS on the the time of the referral of that of an agency that it is a known creditor agency's behalf. Department of Justice. The agency of a debtor may survive a discharge if . (d) When discharging a debt, agencies should advise the Department of Justice the agency did not receive formal notice must request that litigation counsel of the collection activities which have of the proceedings. Agencies should release any liens of record securing the been utilized to date, and their result. seek legal advice from their agency debt. The referring agency shall refrain from counsel if they believe they have claims having any contact with the debtor and or offsets that may survive the discharge PART 904-REFERRALS TO THE shall direct all debtor inquiries of a debtor. DEPARTMENT OF JUSTICE concerning the debt to the Department of Justice. The referring agency shall §903.4 Exception to termination. Sec. immediately notify the Department of 904.1 Prompt ruferral. When a significant enforcement Justice of any payments credited by the a 904.2 Claims Collection L.itigation Report. policy is involved, or recovery of of evidieoce. agency to the debtor's account after the 904.3 Preservation judgment is a prerequisite to 904.4 Minimum amount of referrals to the referral of a debt under this section. The imposition of administrative sanctions, Department of lustice. Department of Justice shall notify the debts for litigation of agencies may refer Authority: 31 U.S.C. 3711. referring agency, in a timely manner, even though termination of collection any payments it receives from the activity may otherwise be appropriate. §904.1 Prompt referral. debtor. to Discharge of indebtedness; (a) Agencies shall promptly refer §903.5 for litigation §904.2 Claims Collection Litigation reporting requirements. the Department of Justice Report aggressive collection (a) Before discharging a delinquent debts on which excepted by the been taken in accordance (a) Unless (also referred to as a close out of activity has shall debt of this chapter and that Department of Justice, agencies shall take all with part 901 § 902.1(b) of the debt), agencies compromised, or on which complete the CCLR (see steps to collect the debt in cannot be by a signed appropriate activity cannot be suspended this chapter], accompanied accordance with 31 U.S.C. 3711(g), collection to refer all in accordance with parts Certificate of Indebtedness, administrative or terminated, claims to including, as applicable, this chapter. Agencies administratively uncollectible offset, Federal salary 902 and 903 of for litigation. offset, tax refund debts arising out of the Department of Justice referral to Treasury, Treasury may refer those all of offset, referred or transferred Referring agencies shall complete debt collection centers or activities of, or to designated to, that agency. the sections of the CCLR appropriate contractors, credit for collection services private collection amount is each claim as required by the CCLR reporting, wage garnishment, Debts for which the principal such other bureau or such other amount instructions and furnish and foreclosure. Discharge of over $1,000,000, be required in litigation, Attorney General may direct, information as may indebtedness is distinct from as the of interest and penalties, shall specific cases. or suspension of collection exclusive (b) Agencies shall indicate clearly on termination the Civil Division or other activity under part 9o3 of this title and be referred to the CCLR the actions they wish the responsible for litigating such is governed by the Internal Revenue division Department of Justice to take with debts at the Department of Justice. Code. When collection action on a debt Federal Register/Vol. 65, No. 226/Wednesday, November 22, 2000/Rules and Regulations 70405 respect to the referred claim. The CCLR Dated: November 6, 2000. Regulatory Analysis permits the agency to indicate Lawrence H. Summers, Administrative ProcedureAct specifically any of a number of litigative Secretary of the Treasury. (5 U.S.C. 553) activities which the Department of Dated: September 21, 2000, This rule is a rule of agency enforced Justice may pursue, including Janet Reno, organization and is therefore exempt renew collection, judgment lien only, Attorney General of tihe United States. from the notice requirement of 5 U.S.C. judgment lien only, renew judgment 8:45 amnl 553(b), and is made effective upon lien and enforce collection, program [FR Doc. 01-29284 Filed 11-21-00: 4410-26-P issuance. enforcement, foreclosure only, and SILUNG CODE 4810-35--P foreclosure and deficiency judgment. Regulatory Flexibility Act (c) Agencies also shall use the CCLR GENERAL ACCOUNTING OFFICE It is hereby certified that this to refer claims to the Department of regulation will not have a significant Justice to obtain approval of any DEPARTMENT OF JUSTICE economic impact on a substantial proposals to compromise the claims or number of small entities. Accordingly, a to suspend or terminate agency 4 CFR Chapter II Regulatory Flexibility Analysis is not collection activity. [A.G. Order No. 2326-2000] required. § 904.3 Preservation of evidence. Executive Order 13132 Federal Claims Collection Standards; care to Referring agencies must take Removal of Obsolete Chapter This regulation will not have a preserve all files and records that may substantial direct effect on the states, on be needed by the Department of Justice AGENCIES: General Accounting Office; the relationship between the national to prove their claims in court. Agencies Department of Justice. government and the states, or on ordinarily should include certified ACTION: Final rule. distribution of power and copies of the documents that form the responsibilities among the various rule removes from basis for the claim in the packages SUMMARY: This final Therefore, in the Code of Federal levels of government. referring their claims to the Department Title 4 of accordance with Executive Order 13132, the Federal Claims of Justice for litigation. Agencies shall Regulations it is determined that this regulation does provide originals of such documents Collection Standards (FCCS), which of not have sufficient federalism immediately upon request by the were issued jointly by the Department implications to warrant the preparation Department of Justice. Justice and the General Accounting of a Federalism Assessment. Office (GAO). The GAO no longer has § 904.4 Minimum amount of referrals to the the statutory authority to issue or Unfunded Mandates Reform Act of 1995 Department of Justice. maintain the FeCS. This regulation will not result in the (a) Agencies shall not refer for DATES: This rule is effective December expenditure by state, local, and tribal litigation claims of less than $2,500, 22, 2000. governments, in the aggregate, or by the exclusive of interest, penalties, and FOR FURTHER INFORMATION CONTACT: Tom private sector, of $100 million or more administrative costs, or such other Armstrong, General Accounting Office, in any one year, and it will not amount as the Attorney General shall (202) 512-8257; or Kathleen A. significantly or uniquely affect small from time to time prescribe. The Haggerty, Department of justice, (202) governments. Therefore, no actions were Department of Justice shall promptly 514-5343. deemed necessary under the provisions notify referring agencies if the Attorney SUPPLEMENTARY INFORMATION: The FCCS of the Unfunded Mandates Reform Act General changes this minimum amount. were promulgated jointly by the of 1995. (b) Agencies shall not refer claims of GAO on Department of Justice and Small Business Regulatory Enforcement less than the minimum amount unless: 8889. The March 0, 1984. 49 FR of 1996 (1) Litigation to collect such smaller Comptroller General was removed as a FairnessAct claims is important to ensure co.promulgator of the FCCS by section This rule is not a major rule as compliance with the agency's policies 115(g) of the General Accounting Office defined by section 251 of the Small or programs; Act of 1996, Public Law 104-316,110 Business Regulatory Enforcement Act. 5 (2) The claim is being referred solely Stat. 3826 (Oct. 19, 1996). Consequently, U.S.C. 804. This rule will not result in for the purpose of securing a judgment the FCCS are being removed from Title an annual effect on the economy of $100 against the debtor, which will be filed 4 of the Code of Federal Regulations. million or more; a major increase in as a lien against the debtor's property The Secretary of the Treasury was costs or prices; or significant adverse pursuant to 28 U.S.C. 3201 and returned added as a co-promulgator of the FCCS effects on competition, employment, to the referring agency for enforcement; with the Department of Justice under investment, productivity, innovation, or or section 31001(g)(1)(C) of the Debt on the ability of United States-based (3) The debtor has the clear ability to Collection Improvement Act of 1996, companies to compete with foreign pay the claim and the Government Public Law 104-134, 110 Stat. 1321, based companies in domestic or export effectively can enforce payment, with 1321-358 (Apr. 26, 1996), as part of the markets. due regard for the exemptions available Omnibus Consolidated Rescissions and Executive Order 12866 to the debtor under state and Federal Appropriations Act of 1996. The revised law and the judicial remedies available FeCS, to be published in Title 31 of the This action has been drafted and to the Government. Code of Federal Regulations, will be reviewed in accordance with Executive (c) Agencies should consult with the administered jointly by the Department Order 12866, "Regulatory Planning and Financial Litigation Staff of the of justice and the Department of the Review," section 1(b), Principles of Executive Office for United States Treasury. A final rule establishing a Regulation. This rule is limited to Attorneys in the Department of Justice revised FCCS is being published agency organization and management as prior to referring claims valued at less elsewhere in this issue of the Federal described by Executive Order 12866 than the minimum amount. Register. section 3(d)(3) and, therefore, is not a