CHAPTER 1. INTRODUCTION

1-1. PURPOSE.

a\. Overview. Debts to HUD may originate in several ways,

including debts arising from loans, contracts for

services, overpayments by HUD of grants and subsidies,

sustained audit findings, and fraud investigations. If

debts due HUD are not repaid on time, they become

delinquent. If delinquency is not resolved within 90 days,

the debts are established as formal claims.

The significance of promptly and efficiently collecting

debts cannot be overemphasized. Outstanding debts may

represent not only a breach of contract but a loss of

revenue to HUD as well. As such, it is imperative that HUD

collection personnel take any and all available measures

first to attempt to forestall delinquent debt, and then \--

if delinquency does arise \-- to resolve it promptly. The

policies and procedures set forth in this handbook present

a system for establishing debt collection measures and for

processing claims by HUD against debtors. The procedures

described herein are designed to ensure that HUD\'s

interests are protected in the settlement of claims against

debtors.

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While this Handbook is strongly oriented to field

use, nearly all of its provisions apply to

Headquarters offices and personnel as well.

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b\. Users. This Handbook is addressed to all HUD personnel

who deal with debts owed to the Department. Specific

emphasis is given to the following:

o The Action Official, who first establishes that a

debt exists and who performs initial collection;

o The Claims Collection Officer (CCO), who pursues

\"aggressive collection\" of the debt after initial

collection efforts have failed and the delinquent debt

has been placed in claim status;

o The Departmental Claims Officer (DCO), who exercises

overall authority on all HUD claims collection

activities and who takes final action on problem

claims or claims that exceed CCO authority; and

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o The Regional Accounting Division (RAD), which

monitors the debt/claim throughout the collection

process. For Headquarters-generated debts/claims,

this function is performed by the HUD Debt Collection

Project (DCP) in conjunction with the Office of

Finance and Accounting (OFA).

The Handbook also briefly discusses the roles of Office of

General Counsel (OGC) and Office of the Inspector General

(OIG) entities as they relate to the collection process.

Given the broad range of personnel involved in debt

collection, effective coordination and communication are

extremely important. Each office must be sure to advise

all other affected offices of changes in the status of

debts due HUD.

Coordination and communication are key to successful debt

collection, particularly given the broad range of involved

personnel. Each office must be sure to advise all other

affected offices on the status of costs due HUD.

1-2. SCOPE. The provisions of this Handbook apply to all

HUD entities, except as noted below.

a\. Program Authority. Four HUD program areas have the

authority to resolve claims through \$20,000 for:

o Title I loans;

o Section 312 rehabilitation loans;

o Tenants or former tenants of HUD-owned properties and

those properties where HUD is mortgagee-in-possession;

and

o Government National Mortgage Association(GNMA)

operational (nonadministrative) activities.

Within these program areas, Action Officials and CCOs may

establish their own collection procedures, subject to and

in accordance with the Debt Collection Act of 1982 and

applicable regulations. Such collection procedures cover

all claims within those program areas. However, where

termination of collection action (writeoff) or compromise

of claims of more than \$20,000 (exclusive of any interest

or penalties, and less any principal which has been

collected) is sought, the Action Official must submit the

proposed compromise or writeoff to the DCO, OFA,

Headquarters, for referral to the Department of Justice

(DOJ) or the General Accounting Office (GAO), as

appropriate. (See Appendix 1A for more information.)

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b\. Exceptions. The procedures in this Handbook do not apply

to claims that arise from the following conditions (for

handling these claims, refer to the appropriate

procedures):

o Shortages and discrepancies in the accounts of

disbursing officers and imprest fund cashiers.

o Debts secured by mortgages \-- e.g., mortgages under

single family and multifamily housing insurance

programs, Secretary-held, assigned and purchase money

mortgages, and junior liens resulting from such

programs as Section 203(k), Section 235 recapture, and

Title I home improvement loans secured by mortgages.

o Cases in which HUD has a discretionary right to act \--

i.e., when amounts are due grantee program accounts

and not HUD.

o See Appendix 1B, Special Provisions Applicable to

community Development Block Grants (CDBG) and Related

Programs.

c\. Offsets and Interest. Throughout the Handbook, reference

is made to offsets and interest charges as procedures for

implementing the Debt Collection Act of 1982. The offset

and interest provisions of the Act do not apply to local

governments; therefore, the offset and interest procedures

in this Handbook do not apply to certain types of debts

owed by State and local governments \--e.g., certain debts

arising under the Public and Indian Housing Program and

CDBG.

The question of whether or not a Public Housing Agency or

Indian Housing Authority is considered an agency of a State

or local government \-- or is considered a special purpose

government and thus is susceptible to the \"local

government\" classification \-- must be decided by legal

counsel in consultation with the appropriate Headquarters

program office, on a case-by-case basis.

1-3. ORGANIZATION. This Handbook is divided into two major parts.

The first of these (Chapters 2 through 4) discusses the process

of debt collection; the second (Chapters 5 through 7) summarizes

the specific functions of individual collection personnel. In

this way, the user can understand how his/her particular

functions relate to the whole process. Additionally, a special

chapter on offsets is included for users\' convenience (Chapter

8).

Chapters 2, 3, and 4 trace the debt from its origins through

final collection/resolution. Chapters 5, 6, and 7 discuss

personnel functions. Chapter 8 describes the process and

policies of offsetting. A glossary of frequently used acronyms

and terms appears in the front of this Handbook for convenient

reference.

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The appendices to the Handbook consist of various materials to

be used in your debt collection activities. These have been

filled out, where possible, for your convenience and reference.

1-4. STATUTES AND REGULATIONS. The following statutes and

regulations are the basis for the policies and procedures in

this Handbook:

o Federal Claims Collection Act of 1966 (repealed);

o Contract Disputes Act of 1978;

o Debt Collection Act of 1982: 31 USC 3701, 3711, 3716-3718;

o GAO/DOJ Regulations 4 CFR 101 through 105;

o HUD Regulations on Administrative Claims 24 [CFR
17](http://www.gpoaccess.gov/cfr/index.html);

o Office of Personnel Management Regulations 5 CFR 550;

o Debarment Regulations, [24 CFR Part
24](http://www.gpoaccess.gov/cfr/index.html);

o Federal Acquisition Regulations Subpart 32.6; and

o Statute of Limitations on Claims: 28 USC 2415 and 31 USC

3716(c).

1-5. STATUTE OF LIMITATIONS ON CLAIMS.

a\. Legal Authority. 28 USC 2415 provides that, with certain

exceptions, every action to recover money damages brought

by the U.S., or an officer or agency thereof, which is

founded upon any contract \-- expressed or implied \-- in law

or fact, shall be barred unless the complaint is filed

within six years after the right of action accrues or

within one year after final decisions have been rendered

in applicable administrative proceedings required by

contract or by law (whichever is later). Accrual of action

may vary according to the type of debt. In the event of

later partial payment or written acknowledgment of the

debt, the right of action is deemed to accrue again at the

time of each such payment or acknowledgment (i.e., the

statute of limitations is restarted).

In addition, the statute provides that, with certain

exceptions, every action for money damages brought by the

U.S., or an officer or agency thereof, which is founded

upon a tort shall be barred unless the complaint is filed

within three years after the right of action first accrues.

b\. Limitations for Administrative Offset. Although 28 USC

2415 provides that the statute of limitations for

collection is normally 6 years, 31 USC 3716(c) provides

that the limitations period for collection by

administrative offset is 10 years from the original date of

the debt.

c\. HUD Responsibilities. Under the statute of limitations,

HUD personnel are responsible for the following:

\(1\) All Regional Claims Collection Officers (RCCOs) and

CCOs should be familiar with the provisions of the

statute of limitations, including the exceptions and

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exclusions to the general definition. Guidance is

available from the OGC, Regional Counsel, or Field

Counsel, as appropriate.

\(2\) Care should be exercised during claims processing to

prevent the statute\'s expiration. Cases should be

considered for litigation prior to the earliest

barring date that might apply. Any case in which the

statute of limitations has expired or will expire

before it can be sent to DOJ should be examined for an

alternative basis on which to proceed. This will

leave sufficient time for DOJ to take appropriate

action. Other statutory authority should be

considered (as well as finding a reasonable basis for

using a later date or using one or more of the

exclusions covered in 28 USC 2415). Cases in which

there is doubt as to the statute of limitations should

be sent to the OGC, Regional Counsel, or Field Counsel

for determination.

\(3\) Cases that are to be forwarded to GAO should be

submitted to the DCO at least one year before the

statute of limitations expires. Only the DCO may

forward cases to GAO.

\(4\) Cases to be forwarded to DOJ should be submitted at

least one year before the statute of limitations

expires. The DCO and RCCO/CCO through the OGC and

Regional Counsel, respectively, may forward cases to

DOJ. RCCOs and CCOs should allow time for full

compliance with the procedures and policies prescribed

in this handbook. Any omission of these requirements

will be limited to those cases in which the date is

imminent on which the suit will be barred.

\(5\) The Action Official or the DCO/RCCO/CCO should

coordinate administrative/civil recovery prospects

with the Office of Inspector General (OIG) before the

expiration of the statute of limitations with respect

to audit-related and investigative claims where

criminal actions are possible.

1-6. TREATMENT OF FRAUD, FALSE CLAIMS, AND MISREPRESENTATION CASES.

a\. Policy.

\(1\) GAO/DOJ Regulations 4 CFR 101.3 state:

\"The standards set forth do not apply to the handling

of any claim as to which there is an indication of

fraud, the presentation of a false claim, or

misrepresentation on the part of the debtor or any

other party having an interest

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in the claim, or to any claim based in whole or in

part on conduct in violation of the antitrust laws.

Only DOJ has authority to compromise or terminate

collection action on such claims. However, matters

submitted to the DOJ for consideration without

compliance with the regulations because there is an

indication of fraud, the presentation of a false

claim, or misrepresentation on the part of the debtor

or any other party having an interest in the claim,

may be returned to the agency forwarding them for

further handling in accordance with the regulations if

it is determined that action based upon the alleged

fraud, false claim, or misrepresentation is not

warranted.\"

\(2\) HUD Regulations [24 CFR
17.64](http://www.gpoaccess.gov/cfr/index.html) state:

\"There shall be no compromise or terminated

collection action with respect to any claim: (1) as to

which there is an indication of fraud, the

presentation of a false claim, or misrepresentation on

the part of the debtor or any other party having an

interest in the claim; (2) such claims shall be

promptly referred to the DOJ or GAO, as appropriate.\"

b\. Procedure.

\(1\) Each HUD official who handles debt/claim cases will

examine each case for indication of fraud, false

claim, and misrepresentation. When such indications

are present, the case shall be immediately reported to

the OIG in accordance with HUD Handbook 2000.3, Office

of Inspector General Activities. While with the OIG

for criminal determination, the case shall be carried

by the RCCO/CCO as an on-hand case and reported to the

DCO as such. A debt of this type may not be

compromised or terminated while an open case with the

OIG, OGC, Regional or Field Counsel, and/or DOJ.

\(2\) When the OIG, OGC, Regional/Field Counsel, and/or DOJ

notifies the DCO/RCCO/CCO that the case will not be

criminally prosecuted, the DCO/RCCO/CCO shall begin

collection action on the claim.

\(3\) The DCO/RCCO/CCO shall consult with the OIG or

OGC/Regional or Field Counsel to determine whether

collection efforts would interfere with any criminal

proceedings if the OIG, OGC/Regional or Field Counsel,

and/or DOJ have not notified the DCO/RCCO/CCO of the

status of the case when:

o It has been 12 months since the DCO/RCCO/CCO

reported the case; or

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o The statute of limitations will expire within 24

months.

If collection is permissible, but the CCO\'s efforts

are unsuccessful the CCO shall request the Regional

Counsel to present the case to the U.S. Attorney for

suit. If the U.S. Attorney declines to sue, the

Regional Counsel may request the U.S. Attorney to

authorize HUD counsel to sue the debtor. If, in the

Regional Counsel\'s opinion, the case does not have

merit, the debt should be terminated unless the

criminal proceeding is still pending. (See paragraphs

6-3 and 6-4.)

\(4\) A fraud, false claim, or misrepresentation case shall

not be transferred to the DCO while still an open case

with the OIG and/or DOJ.

\(5\) Regardless of whether there has been a criminal

prosecution, if a debt grounded upon fraudulent

conduct can be well documented, it should be

considered as a possible action under the False

Claims Act, 31 USC 3729, et seq. This type of debt

should be brought to legal counsel\'s attention as

soon as possible, because the limitations period \--

though six years long \-- is measured from the date the

violation is committed.

1-7. REPORTING THE STATUS OF DEBTS. HUD must report to the U.S.

Treasury and Office of Management and Budget on the status of

all debts \-- whether current, delinquent, or seriously

delinquent due HUD. The OFA Reports Control and Analysis

Staff, Headquarters, prepares this report based on input from

the Regional Accounting Divisions and OFA operating divisions.

1-8. CONSEQUENCES OF UNCOLLECTIBLE CLAIMS. The consequences to the

debtor of not repaying a claim are significant and include

several administrative sanctions. These are discussed in the

following paragraphs.

a\. Debarment. HUD may debar the debtor, excluding him/her

from participation in HUD programs for a reasonable

specified period commensurate with the seriousness of the

causes or as determined by the Assistant Secretary.

b\. Suspension. HUD may temporarily suspend the debtor from

participation in HUD programs because of suspected

improper conduct. Normally, suspension may not exceed 12

months; during this period, investigations and

administrative and/or legal proceedings take place. The

suspended party may request to be heard and to be

represented by counsel.

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c\. Temporary Denial of Participation. A Field Office can

place a contractor or grantee in ineligibility status by

issuing an order denying participation. This order is

called a Temporary Denial of Participation (TDP) and is

limited to the program under which the offense occurred.

It is for a temporary period pending the completion of an

investigation.

d\. Conditional Participation. This is an exclusion of a

contractor or grantee from participation in one HUD

program, generally pending corrective action by the

contractor or grantee. This exclusion is limited to the

jurisdiction of the office imposing the condition and the

specific program under which action is taken.

e\. Credit Reporting. HUD may decide to refer the debtor to

credit reporting agencies (CRAs). The debtor receives 60

days advance notice of the intention to refer the claim

information to a CRA. Once HUD refers the information to a

CRA, it becomes part of the debtor\'s credit record.

HUD reports all non-tax commercial claims, all delinquent

non-tax commercial claims, and all delinquent non-tax

consumer claims of more than \$100 to CRAs. Foreign debts,

and debts of State and local governments, Indian tribal

governments, public housing authorities and Indian housing

authorities, and other public institutions need not be

referred to CRAs.

The RCCO, on a monthly basis, will report new debtors or

any change in status of previously reported accounts, to

the CRA or DCO, as instructed. The RCCO will use the

instructions issued by the CRA/DCO to report this

information.

e\. Reporting Taxable Income to the Internal Revenue Service

(IRS). Taxable income arises when an obligation is

satisfied or forgiven at less than its face value. The

RCCO or DCO will report to IRS any defaulted debt which

meets the following criteria:

\(1\) The amount of the defaulted debt, not in dispute,

accrues to a total of \$600 or more for the year;

\(2\) The claim has not been discharged in a bankruptcy

proceeding; and

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\(3\) The claim is no longer collectible because:

o The time limit in the applicable statute for

enforcing collection expired during the tax

year; or

o Some form of formal compromise agreement was

reached during the year in which the debtor was

legally discharged of all or a portion of the

obligation (in this case the portion discharged

is reportable).

Compromises are reported in the year of discharge. The

discharge of indebtedness with respect to terminations are

reported when the statute of limitations expires (normally

six years). Form 1099-G is used to report compromises to

IRS. (See Appendix 15.)

1-9. DEBT/CLAIM FILE STORAGE, SECURITY, AND RETENTION. Because of

sensitive personal information, all debt/claim files will be

stored in locked file cabinets (fireproof when required) and

handled according to applicable Privacy Act and security

regulations. File information will be disclosed only to those

with a need to know in order to perform their duties. The CCOs,

RCCOs, and DCO or designate will be responsible for the

safekeeping of the files and the sensitive information contained

therein.

Debt/claim files will be retained for a period of 11 years

after the date of debt origination or 1 year after the statue of

limitations runs out, whichever is longer.

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