OPERATING STANDARDS AND PROCEDURES HANDBOOK

APPENDIX B. CREDIT REPORTING AND OMB CIRCULAR A-129 REVISED

[Section 1.0 Introduction]{.underline}

Office of Management and Budget (OMB) [Circular A-129 Revised "Policies
for Federal Credit Programs and Non-Tax
Receivables,](http://www.whitehouse.gov/omb/circulars/a129/a129rev.html)"
and Treasury's \"[Guide to the Federal Credit Bureau
Program](http://fms.treas.gov/fedreg/guidance/fedcreditbureauguide.pdf),\"
provide guidance to Federal agencies on referring debt information to
credit reporting bureaus. The use of credit reporting services is
expected to: 1) provide an incentive for delinquent debtors to repay
Government debts by making these debts part of their credit records, and
2) enable other agencies to improve the quality of their credit,
contract, and grant decisions by taking into account the financial
status and reliability of current and prospective contractors and
financial debtor applicants.

Departmental organization units are to provide certain information to
private sector credit bureaus on commercial and delinquent consumer
debts. To enter into a Memorandum of Understanding with a credit bureau
to provide credit information, the organization unit should refer to
Treasury's "[Guide to the Federal Credit Bureau
Program](http://fms.treas.gov/fedreg/guidance/fedcreditbureauguide.pdf)."

A listing of approved credit report contractors for obtaining credit
reports can be found in Treasury's "[Guide to the Federal Credit Bureau
Program](http://fms.treas.gov/fedreg/guidance/fedcreditbureauguide.pdf)."

# Section 2.0 Credit Bureau Reporting

[OMB Circular A-129
Revised](http://www.whitehouse.gov/omb/circulars/a129/a129rev.html)
requires that information presented in applications submitted by
financial assistance applicants be verified by comparison to credit
reports and by use of other verification procedures. The Circular also
provides general guidance to Federal agencies on the use of private
sector commercial and consumer credit reports.

This Appendix provides:

a.  Information on how private sector credit bureau reports can be
    obtained through Treasury's "[Guide to the Federal Credit Bureau
    Program](http://fms.treas.gov/fedreg/guidance/fedcreditbureauguide.pdf)"
    for such items and services;

b.  Guidance on when credit reports will be obtained throughout the
    credit/debt management cycle---from extending credit through debt
    collection and write-off;

c.  Information on supplemental services provided by credit bureaus, as
    well as other sources of information that are available to determine
    an applicant\'s financial status and ability to repay a debt owed
    the Federal Government; and

d.  Information on the Credit Alert Response System (CAIVRS) (See
    Exhibit A of this Appendix).

## Section 3.0 Background

The [Debt Collection Improvement Act of
1996](http://fms.treas.gov/debt/dmdcia.pdf) permits all Federal
departments and agencies to report all current non-tax commercial debts,
and requires that all delinquent non-tax consumer (individual) debts be
reported to private sector credit reporting bureaus. Government
originated credit, debt, and contracting information is now added by the
credit reporting bureaus to similar information which has been gathered
for some years in the private business community. As a result, any
Federal Government agency should now be able to obtain a complete credit
profile of a financial assistance applicant or contractor, not only in
terms of the financial or debt relationship that an applicant or
prospective contractor may have with private sector businesses and
financial entities, but also with other Federal agencies.

[Section 4.0 Policy]{.underline}

The services of credit bureaus will be employed to obtain credit
reports. Credit reports will be obtained and used by organization units:

a.  To help verify application data and determine the creditworthiness
    of all loan, loan guarantee, and grant applicants, and of potential
    contractors for contracts over \$25,000;

b.  To assist in establishing whether such applicants or contractors
    have any outstanding debts with another Federal Government agency;

c.  When a loan, loan guarantee, or audit disallowance in excess of
    \$10,000 is delinquent for thirty or more days; or

d.  If the organization unit must refer the delinquent debt to GAO for
    resolution and instructions prior to proceeding with collection
    action and/or referral to the Department of Justice for litigation.

Each organization unit must determine the relative importance to be
assigned credit reports. The importance given to credit reports by
organization units in providing financial assistance or contracts should
be based on such factors as the amount of the potential award, the risk
of default or nonpayment, the organization unit\'s prior experience with
the applicant or contractor, and the existence of other possible means
of evaluating the credit or financial reliability of the applicant or
prospective contractor.

[Section 5.0 Source of Procurement]{.underline}

Organization units should refer to Treasury's "[Guide to the Federal
Credit Bureau
Program](http://fms.treas.gov/fedreg/guidance/fedcreditbureauguide.pdf)."
for obtaining credit report services.

[Section 6.0 Routine Credit Report Requirements]{.underline}

To ensure that credit reports are used when necessary and in the most
efficient and timely manner, organization units will:

a.  Identify the loan or loan guarantee activities for which credit
    reports will be used in accordance with the following guidelines.

    1.  When considering a new application from individuals or
        businesses for loans or loan guarantees;

    2.  When individuals or businesses are refinancing or rescheduling
        any type of debt payments;

    3.  When a debtor claims the financial inability to pay a debt in a
        lump sum, and verification is required of the debtor\'s
        financial status prior to entering into an installment
        arrangement;

    4.  When a loan or loan guarantee is delinquent or nonperforming for
        thirty or more days;

    5.  When a delinquent debt is referred to the Department of Justice
        for litigation or for recommended action in terms of validity of
        the claim or propriety of compromise, suspension, or termination
        of collection action;

    6.  To identify applicants in default on other Federal programs;

    7.  To identify other financial relationships that delinquent
        debtors may have with other Federal agencies in order to take
        advantage of opportunities for administrative offset;

    8.  To facilitate the organization unit\'s determination of the next
        collection step(s) to be pursued when a defaulted guaranteed
        loan is purchased from the lender under the guarantee agreement;
        and

    9.  When obtaining credit reports by telephone, mail, or online
        terminals.

b.  Provide guidance to bureau officials on how credit reports will be
    used/weighed in the decision-making process when awarding a loan, or
    loan guarantee.

[Section 6.0 Retention of Credit Reports]{.underline}

Credit reports will be made a part of the official award file; and
records maintained by organization units in performing risk analyses
required by [OMB Circular A-129
Revised](http://www.whitehouse.gov/omb/circulars/a129/a129rev.html). In
performing and updating such analyses, organization units will obtain
credit reports on loan and loan guarantee recipients at least
semiannually.

[Section 7.0 Outstanding Federal Debt]{.underline}s

Where a credit report discloses that an applicant is delinquent on a
Federal debt, has been debarred or suspended as a contractor by a
Federal agency, or has otherwise failed to meet debt obligations to the
Federal Government, no award shall be made without consulting the other
affected Federal agency(s). Where a credit report discloses that a
delinquent debtor is a current or prospective recipient of another
Federal loan, contract, or grant, the debt may be collected by
administrative offset against payments due to the individual or
business, using procedures set forth in the Federal Claims Collection
Standards, and the Department\'s regulations on offsets. The
Department\'s regulations on administrative offset, are published in [15
CFR 21]{.underline}, and are contained in Appendix E of this Handbook.

[Section 8.0 Identification of Offset Opportunity]{.underline}

If a debtor fails to make payment on any debt owed the
Department\--whether relating to a loan, loan guarantee, grant,
contract, or any other debt\--a credit report on the debtor will be
immediately obtained by the organization unit workout group(s) when the
debt is referred to the group to determine whether the opportunity
exists for the organization unit to execute an administrative or salary
offset in cooperation with another Federal agency against the amount
owed. Since the content of credit reports varies by credit bureau, with
some bureaus providing more detailed credit/debt information,
organization units may determine that obtaining one or more credit
reports is justified to ensure that any possible opportunity for offset
is identified.

[Section 9.0 The Privacy Act (P.L.) of 1974 Compliance]{.underline}

Organization units shall ensure that debt information on individuals is
managed and used in accordance with the [The Privacy Act of 1974, As
Amended (P.L. 93-579, 5 U.S.C.
552a)](http://www.usdoj.gov/foia/privstat.htm). Specifically, in regard
to financial transactions the Privacy Act states, in part, that:

> "No agency shall disclose any record which is contained in a system of
> records by any means of communication to any person, or to another
> agency, except pursuant to a written request by, or with the prior
> written consent of, the individual to whom the record pertains, unless
> disclosure of the record would be to those officers and employees of
> the agency which maintains the record who have a need for the record
> in the performance of their duties."

[Section 10.0 The Fair Credit Reporting Act (FCRA), As Amended (Public
Law 91-508) Compliance]{.underline}

Organization unit officials must ensure that credit reports on
individuals are in compliance with [The Fair Credit Reporting Act
(FCRA), As Amended](http://www.ftc.gov/os/statutes/fcra.htm) (Public Law
91-508), and are only obtained and used for the following reasons:

a.  For the purpose of evaluating a credit transaction or reviewing or
    collecting an outstanding debt; or

b.  For the purpose of determining an applicant\'s financial
    responsibility or status.

Organization unit officials must be aware that under FCRA any user of
credit report information who fails to comply with the privacy
requirements of FCRA is subject to civil liability for willful or
negligent noncompliance with the requirements of FCRA. Further, any
person who knowingly and willfully obtains information on an individual
from a consumer reporting agency under false pretense, and/or who is not
authorized to obtain such information, is subject to fine and/or
imprisonment.

[Section 11.0 Currency of Credit Data]{.underline}

There may be occasions when credit reports obtained by organization
units are not current or appear incomplete. The credit bureaus preparing
these reports are required to make every effort to provide the most
up-to-date credit information available on individuals and businesses,
as well as nonprofit entities. However, organization units should be
aware that credit bureau procedures are such that inquiries from the
using public, as well as financial transactions of the credit recipient,
by and large control the continuous updating of individual accounts.
These updating procedures vary among credit bureaus. Consequently, if
inquires are not made over a period of time, or transactions do not
occur, individual files become \"stale.\" Therefore, if a credit report
does not appear current, or if an organization unit wants to ensure the
most current information is available, direct contact with the credit
bureau should be made and an assurance check should be requested from
these companies.

[**Credit Alert Interactive Voice Response System
(CAIVRS)**](http://www.hud.gov/offices/hsg/sfh/sys/caivrs/caivrs.cfm)

According to the guideline established under [OMB Circular A-129
Revised](http://www.whitehouse.gov/omb/circulars/a129/a129rev.html),
organization units should use Department of Housing and Urban
Development's Credit Alert Interactive Voice Response System
([CAIVRS](http://www.hud.gov/offices/hsg/sfh/sys/caivrs/caivrs.cfm)) for
loan screening to ensure applicants are not delinquent on Federal Debt.
CAIVRS offers direct on-line access for delinquent debt from other major
credit programs.

**[What is it?]{.underline}**

The [CAIVRS](http://www.hud.gov/offices/hsg/sfh/sys/caivrs/caivrs.cfm)
is a Federal government interagency shared database, which is used to
alert participating Federal lending agencies when an applicant for
benefits has a Federal loan which is currently in default or
foreclosure, or has had a claim paid by the reporting agency.

**[What does it do?]{.underline}**

The [CAIVRS](http://www.hud.gov/offices/hsg/sfh/sys/caivrs/caivrs.cfm)
allows authorized employees of participating Federal agencies to access
a shared inter-Departmental database of delinquent Federal borrowers for
the purpose of pre-screening direct loan applicants for credit
worthiness, and permits authorized primary lenders acting on the
Government's behalf to access the delinquent borrower database for the
purpose of prescreening the credit worthiness of applicants for
Federally guaranteed loans.

**[How does it work?]{.underline}**

Although there are several ways to access the system, the most common
usage is by telephone. Authorized users, via a touch tone telephone will
dial **301-344-4000** and be prompted to enter their
[CAIVRS](http://www.hud.gov/offices/hsg/sfh/sys/caivrs/caivrs.cfm)
Access code (an Agency assigned identification number or lender ID). The
system will verify the authorization number and then prompt the caller
to enter the Social Security Number (SSN) of the applicant. If the
applicant's SSN is not in the database, the caller will receive a clear
confirmation code. If there is a record of default for the borrower
whose SSN was entered, the caller will be given the name of the Agency
reporting the default, the case number of the defaulted loan, the type
of record (default, claim, foreclosure, or lien judgment) and a
telephone number to call for further information or assistance.
[CAIVRS](http://www.hud.gov/offices/hsg/sfh/sys/caivrs/caivrs.cfm) is
also accessible via "Telemail" utilizing secure data mailboxes, FTP/IP
(Internet), Batch file transfer and via the HUD LAN and WAN.

**[Under what legal authority is]{.underline}
[CAIVRS](http://www.hud.gov/offices/hsg/sfh/sys/caivrs/caivrs.cfm)
[implemented?]{.underline}**

The [CAIVRS](http://www.hud.gov/offices/hsg/sfh/sys/caivrs/caivrs.cfm)
authority derives from Public Law 100-503, "The Computer Matching and
Privacy Protection Act of 1988," as amended; [OMB Circular A-129
Revised](http://www.whitehouse.gov/omb/circulars/a129/a129rev.html) and
the Budget and Accounting Acts of 1921 and 1950, as amended; the Debt
Collection Act of 1982, as amended; the Deficit Reduction Act of 1984,
as amended, and the [Debt Collection Improvement Act of 1996, as
amended.](http://fms.treas.gov/debt/dmdcia.pdf)

**[How many records are in]{.underline}
[CAIVRS](http://www.hud.gov/offices/hsg/sfh/sys/caivrs/caivrs.cfm)[?]{.underline}**

The [CAIVRS](http://www.hud.gov/offices/hsg/sfh/sys/caivrs/caivrs.cfm)
has over 2.4 million delinquent borrower records and over 61 thousand
authorized user IDs from HUD, USDA, VA, SBA, FDIC, and the Departments
of Justice and Education.

**[How does]{.underline}
[CAIVRS](http://www.hud.gov/offices/hsg/sfh/sys/caivrs/caivrs.cfm)
[relate to Government Financial Management?]{.underline}**

Title 31, United States Code, Section 3720B bars delinquent Federal
debtors from obtaining Federal loans or loan insurance guarantees. The
[CAIVRS](../CAIVRS) provides a single repository of delinquent Federal
debtor records with easy access through a variety of media for
pre-screening applicants for Federal benefits. Most credit bureau
reports do not identify insured debts as being delinquent Federal debts.
By participating in [CAIVRS](../CAIVRS), Federal lending agencies have
ready access to an interdepartmental database of delinquent Federal
debts which provide Federal financial managers with the information
necessary to comply with the U.S. Code requirements.

**[How has]{.underline}
[CAIVRS](http://www.hud.gov/offices/hsg/sfh/sys/caivrs/caivrs.cfm)
[benefited the participating Agencies?]{.underline}**

Since 1987, over 24 million borrowers have been pre-screened through
CAIVRS. As a direct result of participating in
[CAIVRS](http://www.hud.gov/offices/hsg/sfh/sys/caivrs/caivrs.cfm), HUD
has avoided over \$12 billion in potential claims and over \$4 billion
in potential losses. USDA and VA have also realized significant claim
and loss avoidance benefits. Additionally, participating Agencies have
realized cash collections of delinquent debts on an annual average in
excess of \$2.9 million.

**[What does it cost to participate in]{.underline}
[CAIVRS](http://www.hud.gov/offices/hsg/sfh/sys/caivrs/caivrs.cfm)[?]{.underline}**

The cost to participate in
[CAIVRS](http://www.hud.gov/offices/hsg/sfh/sys/caivrs/caivrs.cfm) is
predicated upon the number of records a given agency has in the database
and the volume of transactions made by or for that Agency. Relative to
the benefits outlined above, the cost of
[CAIVRS](http://www.hud.gov/offices/hsg/sfh/sys/caivrs/caivrs.cfm)
participation is nominal.

**[What is required for participation in]{.underline}
[CAIVRS](http://www.hud.gov/offices/hsg/sfh/sys/caivrs/caivrs.cfm)[?]{.underline}**

In order to participate in
[CAIVRS](http://www.hud.gov/offices/hsg/sfh/sys/caivrs/caivrs.cfm), a
Federal government agency must identify target program(s), publish
System of Records Notice in the Federal Register amending appropriate
Privacy Act Systems of Records, and work with HUD to enter into an
Interagency Agreement and a Computer Matching Agreement.