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CHAPTER 17. DEBT COLLECTION

SECTION I - POLICY

17-1 Prompt and effective debt collection is made in accordance with

regulations and established debt collection procedures described in

24 CFR 17, in the Delinquent Debt Collection Handbook, HUD Handbook

1900.25, REV-3, and in the Federal Acquisition Regulations (FAR).

17-2 All available measures are taken to forestall delinquent debt. If

delinquency arises, it is promptly resolved pursuant to regulations

and procedures summarized in this chapter.

SECTION II - INTERNAL CONTROL OBJECTIVES

17-3 Debt collection procedures are established and documented.

17-4 Potentially uncollectible debt accounts are promptly identified,

evaluated, and serviced in accordance with HUD debt collection

guidelines.

17-5 Known uncollectible accounts are recommended for close-out or

termination/write-off with proper authorization, in accordance with

HUD guidelines.

SECTION III - DEBT COLLECTION AUTHORITY AND DEFINITIONS

17-6 General. A debt is money owed HUD by virtue of a legal agreement or

obligation. A debt becomes delinquent when it has not been repaid

by the specified due date. The CPO, as Action Official, must

initiate debt collection for debts incurred in the normal course of

business and for the delinquent rent of tenants or former tenants.

Debt as the result of a contract dispute must be referred to the

Contracting Officer. Liquidated damages are assessed or disallowed

pursuant to the terms of the contract (see paragraph 17-8).

17-7 Authorities. The provisions of the Delinquent Debt Collection

Handbook, HUD Handbook 1900.25 REV-3 for collection of debt incurred

in the normal course of business or FAR Subpart 32.6 and 33.2 for

debt as the result of a contract dispute are applicable whenever

questions arise concerning the authority or responsibility of the

CPO or Property Disposition staff for initial or delinquent debt

collection activities.

A. Debts Incurred in the Normal Course of Business. Program

participants may at any time in the course of their interaction

with HUD incur a debt. Debt incurred in the normal course of

business includes mortgagee claims for preservation and

protection which have been disallowed because the claimed

services were either not completed or not properly completed;

mortgagee tax penalties and/or interest due; or lessee failure

to reimburse HUD for property taxes paid by HUD. Other types

of debt collected are shown in the exhibit in Chapter 15:

Collections for Single Family Acquired Properties. Procedures

for collect of debts incurred in the normal course of business

are contained in this chapter.

B. Debt as the Result of Delinquent Rent of Tenants or Former

Tenants. Single Family Property Disposition is exempt from the

debt collection procedures established by the Delinquent Debt

Collection Handbook, HUD Handbook 1900.25 REV-3 for the

collection of debt incurred by tenants or former tenants of

HUD-owned properties. Because of this exemption, separate

procedures have been established for rent collection and

monitoring and for collection of delinquent former tenant debt.

Rent collection procedures are shown in Chapter 7.

C. Contract Debt. A debt owed HUD by a contractor, including

REAMs and closing agents, as the result of a dispute of the

debt or the amount of the debt is treated differently than debt

collection as a normal course of business. Debts incurred by a

contractor must be

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referred to the Contracting Officer for resolution pursuant to

the provisions of Federal Acquisition Regulations (FAR)

Subparts 32.6 and 33.2.

17-8 Liquidated Damages. Liquidated damages are not to be treated as

debts. They are deductions from contract payments for deficient

performance. Contract terms and conditions define the circumstances

under which the Contracting Officer and/or the CPO will disallow

disbursements or assess liquidated damages. Liquidated damages

applicable to the national appraisal contact must be reported to the

Government Technical Representative in the Single Family Property

Disposition Division at Headquarters if collection issues cannot be

resolved locally. See paragraph 11-9 for liquidated damages

applicable to closing agent contracts.

17-9 Definitions. The following definitions are used in the debt

collection process and are summarized herein for prompt reference.

Please see HUD Handbook 1900.25, REV-3, Delinquent Debt Collection

Handbook, for a detailed list of terms and definitions used in the

debt collection process.

A. Action Official: The official who has direct or delegated

responsibility for managing a project, program, grant,

contract, loan, or other activity; and is responsible for

taking initial debt collection action or ensuring that action

is taken to recover debt due HUD. Unless determined otherwise

by the Field Office Manager, the Action Official responsible

for collection of debt, including rent and delinquent rent, for

all Single Family Property Disposition programs, is the CPO.

To ensure an appropriate segregation of duties beyond

responsibility as the Action Official for initial debt

collection, the CPO or any employee with direct involvement in

maintaining the accounting records for debts/claims receivable

must not be designated the duties of the Claims Collection

Officer.

B. Billing: A demand for payment that specifies the basis for the

demand and the payment terms; an invoice.

C. Claim: An amount of money or property which has been

determined by an appropriate Federal official to be owed to the

U.S. from any person, organization, or entity, arising from an

administrative action.

D. Claims Collection Officer (CCO). The official responsible for

collecting and reporting claims that have proven to be

uncollectible by CPOs and RADs. The primary function of a CCO

is to collect, compromise, suspend, terminate, or transfer

claims, except the Field Office Manager has this authority for

claims up to \$100,000 for tenants or former tenants of

HUD-owned properties. In some areas, the Regional Claims

Collection Officer (RCCO) is presently performing the duties of

the CCO.

E. Close-out. An accounting action to transfer a receivable from

an asset account to an expense or allowance-for-loss account.

Only the Departmental Claims Officer (DCO) and the Regional

Claims Collection Officer (RCCO) have the authority to notify

the appropriate accounting office to write-off claims. The DCO

and RCCO/CCOs can write off claims through \$100,000 and \$2,500,

respectively. Only the DCO, with the approval of the

Department of Justice, can advise the appropriate accounting

office to write off claims of more than \$100,000.

Exception: Field Office Managers and Deputy Field Office

Managers have the authority to write off claims up to \$100,000

for tenants or former tenants of HUD-owned properties.

F. Compromise. To accept less than the full amount of the debt

owed from the debtor in satisfaction of the debt. When a debt

is compromised, the difference between the amount accepted for

repayment and the amount of the debt that existed before

compromise must be written off at the time that the Department

makes the compromise.

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G. Credit Reporting Agency (CRA): A nongovernmental agency

assembling or evaluating consumer (individual) credit

information to provide consumer reports to third parties or

which accepts reports of delinquent nontax claims, including

delinquent tenant debt.

H. Debt: Money owed HUD by virtue of a legal agreement or

obligation.

I. Delinquent Debt: A debt that has not been paid by the due date

specified in the initial notification, lease, or installment

repayment arrangements.

J. Departmental Claims Officer (DCO): The DCO establishes and

maintains policies and procedures for collection of debts and

claims and coordinates collection activities in all Department

Offices (at the field level and at Headquarters.) The DCO is

appointed by the Assistant Secretary for Administration.

K. Penalty. An amount, expressed in dollars or as a percent,

levied on a debtor for failure to make a payment, either in

full or as an installment payment, within 90 days of the due

date or, in the case of monthly rent for tenants, within 11

days of the monthly rent due date.

L. Regional Accounting Division (RAD). RAD is responsible for

advising the Action Official on establishing and maintaining

debt files and otherwise providing administrative support in

maintenance of fiscal data. Refer to the Delinquent Debt

Collection Handbook, HUD Handbook 1900.25, REV-3, for a

complete description of the duties of RAD.

M. Regional Claims Collection Officer (RCCO): Responsible for

identifying personnel needing debt/claims collection training

and for coordinating collection activities in their respective

regions. The RCCO is responsible for reporting new debtors or

any change in status of previously reported accounts.

N. Suspension of Collection Activity. Temporary discontinuance of

collection activity when the debtor cannot be located or when

the debtor owns no equity.

O. Termination/Write-off. When the DCO, RCCO, or CCO discontinues

collection of a claim and closes HUD\'s claim file. The Action

Official can recommend that the DCO/RCCO/CCO terminate a claim

for one or more of the following reasons: (1) No substantial

amount can be collected by HUD from the debtor; (2) the cost

will exceed recovery; (3) the claim is without legal merit; (4)

the claim cannot be substantiated by evidence; or (5) the

debtor cannot be located. The DCO and RCCOs/CCOs can terminate

claims through \$100,000 and \$2,500, respectively. The DCO must

refer claims of more than \$100,000 to the DOJ for termination

authorization. Termination does not forgive a claim since it

may later be re-established.

Exception: Once a debt for rent is written off, it is not

collectible nor enforceable. When a claim is terminated, the

DCO or the RCCO/CCO must notify the appropriate accounting

office to write-off the claim.

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SECTION IV - DEBT COLLECTION PROCEDURES

17-10 Formal Notification to Debtor. A debt becomes delinquent when it

has not been paid by the due date specified in the initial

notification, lease, or installment repayment arrangements. As the

Action Official, the CPO initiates collection of delinquent debt

incurred in the normal course of business by sending a letter

requesting payment of the debt.

A. Initial Letter. The initial letter is to be mailed or hand

delivered to the debtor. The debtor should be instructed to

pay the amount due by check or money order made payable to the

Department of Housing and Urban Development and remitted to the

Field Office. Examples of the initial demand letter requesting

payment of the debt are included in the Delinquent Debt

Collection Handbook.

If the debtor refuses to pay, or fails to respond within the

30-day limit provided in the initial demand letter or by the

past due date of an established payment schedule, the debt is

now delinquent. Refer the debt, along with supporting

documentation as shown in the Delinquent Debt Collection

Handbook, to the CCO. If debt collection is not successful,

the CCO will refer the debt to the RCCO. If the debt is still

uncollected, the RCCO will refer the debt to the DCO in

Headquarters.

The Field Office may not report debts referred to the CCO to

credit reporting bureaus. Any credit reporting necessary will

be performed by the DCO in Headquarters.

B. Referral. The complexity of debt collection statutes,

regulations and government policies makes it important that, if

routine debt collection fails (payment has not been made

following the initial debt collection letter), the debt be

promptly referred for further collection action to the CCO.

The CPO may also recommend close-out, compromise, suspension,

or termination/write-off.

The program or staff outside Single Family Property Disposition

to whom the debt is referred after the failure of routine

collection must take the next action to collect. Referral of

the debt provides not only the appropriate segregation of

duties but ensures that the debt is tracked by staff with the

requisite debt collection knowledge of applicable statutes,

regulations and government policies.

17-11 Documentation. Field Offices must take proper measures to see that

debt collection activities are fully documented and complete.

Ensure that exact dates, dollar amounts, and correct signatures are

available. Include Taxpayer Identification Numbers (TIN) or Social

Security Numbers. Since proper documentation is essential to the

debt collection effort, Field Offices must closely monitor REAM debt

collection activities and, where appropriate, include debt

collection as a service item in REAM contracts.

17-12 Credit Reporting. The Field Office may not send a 60-Day Notice

(Appendix 73) or report delinquent debtors to Credit Reporting

Agencies, except as shown for tenants or former tenants in Chapter

7, Credit Reporting.

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