62188 Federal Register / Vol. 69, No. 205 / Monday, October 25, 2004 / Rules and Regulations 

(b) * * *

CFR part or section where 

identified and described 

Current 

OMB control 

No. 

* * * * * 

1.6050P–1 ................................ 1545–1419 

1.6050P–1T .............................. 1545–1419 

* * * * * 

Approved: October 18, 2004. 

Mark E. Matthews, 

Deputy Commissioner for Services and 

Enforcement. 

Gregory F. Jenner, 

Assistant Secretary of the Treasury.

[FR Doc. 04–23747 Filed 10–22–04; 8:45 am] 

BILLING CODE 4830–01–P

DEPARTMENT OF VETERANS 

AFFAIRS 

38 CFR Parts 1 and 2 

RIN 2900–AK10 

Standards for Collection, Compromise, 

Suspension, or Termination of 

Collection Effort, and Referral of Civil 

Claims for Money or Property; 

Regional Office Committees on 

Waivers and Compromises; Salary 

Offset Provisions; Delegations of 

Authority

AGENCY: Department of Veterans Affairs.

ACTION: Final rule.

SUMMARY: This final rule revises the 

Department of Veterans Affairs (VA) 

regulations concerning the collection, 

compromise, suspension, termination, 

and referral of debts owed to VA. The 

revision clarifies and simplifies debt 

collection standards and reflects 

changes to Federal debt collection 

procedures under the Debt Collection 

Improvement Act of 1996. VA is also 

amending regulations pertaining to the 

administration of regional office 

Committees on Waivers and 

Compromises, as well as provisions 

pertaining to debt collection and to the 

Chief Financial Officer in the 

delegations of authority regulations. 

Other nonsubstantive changes are made 

for purposes of clarification.

DATES: Effective Date: November 24, 

2004.

FOR FURTHER INFORMATION CONTACT:

Peter Mulhern, Cash and Debt 

Management Division (047GC1), 

Department of Veterans Affairs, 810 

Vermont Ave., NW., Washington, DC 

20420, (202) 273–5570.

SUPPLEMENTARY INFORMATION: On 

December 29, 2003, VA published in the 

Federal Register (68 FR 74893) a 

proposed rule to bring VA’s debt 

collection regulations into compliance 

with the provisions of the Debt 

Collection Improvement Act of 1996 

(DCIA), Public Law 104–134, 110 Stat. 

1321, 1358 (April 26, 1996), the 

subsequent revision of the Federal 

Claims Collection Standards (FCCS)(31 

CFR parts 900 through 904) by the 

Department of the Treasury (Treasury) 

and the Department of Justice in 2000, 

and with Treasury’s additional rules in 

31 CFR part 285. VA’s current debt 

collection regulations include tools such 

as offset of VA benefit payments, 

assessment of interest and late payment 

charges, use of consumer reporting and 

private collection agencies, and Federal 

salary offset. We proposed to add to 

VA’s debt collection regulations more 

collection tools now authorized by the 

DCIA and revised FCCS. These tools 

include centralized administrative offset 

through the use of the Treasury Offset 

Program (TOP), the transfer or referral of 

delinquent debt to Treasury for 

collection (cross-servicing), and 

administrative wage garnishment. We 

also proposed to amend our debt 

collection regulations by deleting 

provisions that are either obsolete or 

duplicative of Treasury and Treasury/

DOJ regulations, as well as to ensure 

that our regulations are consistent with 

statutory mandates and that they are 

clearly written. 

In addition, VA proposed to amend a 

regulation pertaining to the Committees 

on Waivers and Compromises to allow 

each station Director the authority to 

appoint the person responsible for the 

Committee’s administrative control. Our 

current regulation, which states that the 

station Fiscal Officer must have 

administrative control authority, does 

not allow the station Director any 

discretion in this matter. 

We further proposed to amend a 

regulation so that VA’s Chief Financial 

Officer (CFO) would have the ability to 

redelegate debt collection authority to 

administration heads and staff office 

directors as the CFO deems appropriate. 

We provided a 60-day comment 

period which ended on February 27, 

2004. We received two submissions in 

response to our invitation for comments 

on the proposed regulations. One, from 

an individual, discussed the 

individual’s experience with VA after 

VA informed him that an overpayment 

existed due to his son’s dropping out of 

college, and said that VA had withheld 

almost all of a monthly payment of 

benefits (which he asserted was without 

prior notice). He said that the VA 

employee he contacted had not been 

aware of an allegedly larger amount VA 

owed him due to an increase in the 

number of his children. He asserted that 

VA’s efficiency in the measures 

involved in collecting a debt are far 

ahead of those involved in paying 

veterans their benefits, and asked for 

help in putting ‘‘customer needs (benefit 

payments) first.’’ He did not say 

whether he thought rulemaking changes 

could provide the help he was 

requesting nor whether adoption of the 

proposed rule would itself help, and we 

see no need for changes in the proposed 

rule to be made based on this 

submission. The other submission, from 

the Disabled American Veterans (DAV), 

is discussed below. 

DAV states that our proposed new 

paragraph (c)(4) in 38 CFR 1.912a 

violates 38 U.S.C. 5314(b). This new 

paragraph states that VA will begin 

collection action from VA benefit 

payments after an initial adverse 

decision on a debtor’s request for waiver 

or the debtor’s informal dispute of the 

existence or amount of a benefit debt. 

DAV argues that there is no statutory 

change to section 5301(c) or section 

5314 justifying the addition of this 

provision, and that VA provides no 

explanation of this change in the 

preamble. DAV notes that the preamble 

cites the DCIA as the authority for most 

of the changes for our proposed 

rulemaking. DAV notes further that the 

DCIA’s principal amendments to 

strengthen debt collection authority 

included amendments to the 

administrative offset provisions of 31 

U.S.C. 3716. DAV correctly states that 

while collections under 38 U.S.C. 

5301(c) must be conducted in 

accordance with procedures prescribed 

in 31 U.S.C. 3716, collections under 38 

U.S.C. 5314 are not subject to the 

general provisions applicable to other 

claims collections as set forth in 31 

U.S.C. 3716. According to DAV, there is 

no statutory authority or other 

explanation for our proposed new 

paragraph (c)(4) in 38 CFR 1.912a.

The preamble to the proposed rule 

did contain an explanation that 

encompassed the proposed change to 

add paragraph (c)(4) to 38 CFR 1.912a, 

since it is one of the changes that was 

proposed to ensure that our debt 

collection regulations are consistent 

with statutory mandates and clearly 

written (68 FR 74893, 74894). DAV is 

correct that there is no statutory change 

to 38 U.S.C. 5301(c) or 5314 that 

pertains to the addition of this 

provision. However, we believe that 

DAV is incorrect in stating that our 

proposed new paragraph violates 

section 5314(b). 

Federal Register / Vol. 69, No. 205 / Monday, October 25, 2004 / Rules and Regulations 62189

Nothing in section 5314(b) requires 

VA to suspend administrative offset 

pending a final decision by the Board of 

Veterans’ Appeals (BVA). The 

requirements of 38 U.S.C. 5314(b) are to 

be met by ‘‘reasonable efforts to notify’’

the person in compliance with 

§ 5314(b)(1) and (b)(3) and by a 

determination described in section 

5314(b)(2). Under section 5314(b)(2), the 

Secretary is merely required to make ‘‘a 

determination’’ with respect to a dispute 

of the existence or amount of the debt 

or with respect to a request for waiver, 

or to determine that the time required to 

make such a determination before 

making deductions would jeopardize 

the Secretary’s ability to recover the full 

amount of such indebtedness through 

deduction from such payments. 

DAV states that there is no compelling 

basis to begin collection immediately 

after an initial adverse decision, except 

where there are ‘‘real reasons to 

determine that delay would jeopardize 

eventual collection of debt.’’ DAV’s 

language is different than the statutory 

standards in section 5314(b)(2). The 

necessary finding concerns whether 

delay would jeopardize the ability to 

recover the debt by deduction from 

payments of VA benefits. When VA is 

making a final payment or a one-time 

payment, and the debtor is not receiving 

a continuous benefit payment, VA does 

indeed have a basis for determining that 

delay would jeopardize its ability to use 

offset for collection of a debt. 

DAV argues further that 38 U.S.C. 

5314 makes no distinction between 

initial determinations and appellate 

determinations. DAV also believes a 

debtor’s right to appeal to BVA is as 

much a part of the ‘‘prescribed 

administrative process’’ referred to in 

section 5314(b)(1) as the initial 

determination. 

The requirement in 38 U.S.C. 

5314(b)(1) for VA to notify the debtor of 

the right to dispute the existence and 

amount of the debt, or the right to 

request waiver, through ‘‘prescribed 

administrative processes’’ does not, as 

DAV argues, apply to both an initial 

decision at the regional office level and 

an appellate decision by BVA. VA has 

consistently under section 5314 taken 

the position that collection action may 

begin after an initial adverse 

determination on the validity and 

amount of the debt or an initial adverse 

determination on the waiver request. A 

reading of the current regulations 

supports this position. For example, the 

last sentence in 38 CFR 1.911(c) states: 

‘‘Except as provided in § 1.912a 

(collection by offset), the exercise of any 

of these rights will not stay any 

collection proceeding.’’ Furthermore, 

§ 1.912a(c)(1) states that ‘‘* * * offset 

shall not commence until the dispute is 

reviewed as provided in § 1.911a(c)(1) 

[sic] [§ 1.911(c)(1); this final rule 

corrects the inadvertent failure to reflect 

the redesignation of § 1.911a as § 1.911 

(52 FR 42105)(November 3, 1987)] and 

unless the resolution is adverse to the 

debtor.’’ The procedure provided in 

§ 1.911(c)(1) is an informal dispute only. 

VA’s regulations further provide in 

§ 1.912a(c)(2) that ‘‘* * *offset shall not 

commence until the Department of 

Veterans Affairs has made an initial 

decision on waiver.’’ Thus, VA’s current 

regulations in 38 CFR 1.911 and 1.912a 

already authorize VA to begin collection 

from benefit payments after an adverse 

informal decision on the existence or 

amount of a benefit program debt or an 

initial adverse decision on a request for 

waiver of such debt. Similarly, we have 

consistently taken the position under 

section 5314(b)(2) that if VA finds that 

delay to make a determination on such 

a dispute or request would jeopardize 

collection by offset, VA is authorized to 

begin collection. Nothing in either the 

current § 1.911 or § 1.912a requires VA 

to suspend collection action until a final 

decision is rendered by BVA. VA’s 

regulations are also consistent with 

Treasury’s regulations for offset, which 

do not require the exhaustion of all 

administrative remedies prior to 

collection by offset (see 31 CFR 

901.3(b)(4) and 901.3(c)(2)(i)). New 

paragraph (c)(4) in § 1.912a is merely 

intended to clarify our regulations by 

reflecting an already existing practice. 

DAV argues that delay in collection 

would not cause adverse consequences 

to the Government comparable to the 

harm that collection of a contested debt 

can cause to an individual veteran. DAV 

also asks that VA revise the proposed 

rules ‘‘to make them more consistent 

with the pro-veteran nature of VA’s 

administrative processes.’’ We believe 

that this final rule accords with 

Congressional concern for the needs of 

veterans as well as of taxpayers in 

general. For example, the legislative 

history of 38 U.S.C. 5314 shows a 

legislative intent that VA aggressively 

pursue debt collection and a concern 

that failing to do so is a disservice to 

veterans, and is unfair to the veterans 

who do repay their overpayments. 

DAV also has several questions and 

concerns about VA’s proposed new 

regulation (38 CFR 1.923) on 

administrative wage garnishment 

(AWG). This proposed regulation is 

based on Treasury’s AWG regulation (31 

CFR 285.11) and is authorized by 31 

U.S.C. 3720D and 38 U.S.C. 501. New 

§ 1.923 provides AWG procedures, 

including procedures for hearings. Since 

we have decided that only VA debts that 

have been referred to Treasury’s crossservicing program will be subject to 

AWG, our regulation describes certain 

responsibilities of both Treasury and VA 

for many of the AWG procedures. It 

should be noted that VA is not required 

to refer a debt to Treasury unless the 

debt is more than 180 days delinquent. 

Thus, any debt that eventually becomes 

subject to AWG will be more than 180 

days delinquent. 

DAV describes the authority delegated 

to Treasury by Congress (DCIA at 31 

U.S.C. 3720D) to promulgate regulations 

concerning AWG procedures and 

hearings as quasi-legislative authority 

and questions whether it can be 

subdelegated to another agency, such as 

VA. 

31 U.S.C. 3720D establishes authority 

for the use of AWG by ‘‘the head of an 

executive, judicial, or legislative 

agency.’’ At section 3720D(h), Congress 

mandates that the Secretary of Treasury 

shall issue regulations to implement 

section 3720D. In our view, Congress 

has already by statute given AWG 

authority directly to each agency head, 

and under that statute in combination 

with VA’s rulemaking authority in 38 

U.S.C. 501, VA has ample authority to 

issue regulations concerning its 

administration of its AWG authority. We 

do not agree with DAV that the grant of 

rulemaking authority to Treasury under 

31 U.S.C. 3720D is exclusive. The 

statute contains no language showing 

such an intent. In our view, it does not 

deprive agencies of other general 

rulemaking authority they have with 

respect to their statutory 

responsibilities. Thus, there is no need 

for VA to rely on any ‘‘subdelegation’’

from Treasury, which DAV asserts 

would be invalid. 

In addition, DAV also questions 

whether VA has authority to issue 

regulations governing actions by 

Treasury. VA’s AWG regulation does 

not dictate or govern actions by 

Treasury. Rather, VA’s regulation 

describes actions that Treasury is 

already required to perform on debts 

referred to its cross-servicing program.

DAV states that VA’s proposed 

regulation lacks the clarity of Treasury’s 

regulation. DAV finds that VA’s 

proposed regulation requires the reader 

to shift back and forth between our 

regulation and Treasury’s. DAV feels 

that VA debtors will probably not be 

familiar with Treasury’s regulation. 

While both statements may be true, it is 

not unusual for VA’s debt collection 

regulations to refer to Treasury’s 

regulations, which are intended as 

guidance for executive agencies to 

follow in developing agency-specific 

62190 Federal Register / Vol. 69, No. 205 / Monday, October 25, 2004 / Rules and Regulations 

regulations. For the reasons discussed 

below, we believe that the references 

serve a useful purpose and should be 

retained. 

At this point, VA intends to use AWG 

on debts that have been referred to the 

Treasury Cross-Servicing Program. Once 

a debt is referred to this collection 

program, Treasury will provide all of 

the notification to both debtor and 

employer. VA will only be responsible 

for conducting a hearing, if one is 

requested. However, in the future, it is 

possible that VA may decide to 

implement AWG without referral to 

Treasury. VA would then be responsible 

not only for the hearing, but all other 

aspects of the AWG process. 

Consequently, we referred to possible 

actions by both VA and Treasury, as 

well as to Treasury’s regulation, 

throughout the proposed regulation. 

Admittedly, this is somewhat 

cumbersome, but we feel it is necessary 

to do so in order to address all possible 

contingencies. 

DAV objects to the fact that proposed 

§ 1.923(b)(3) requires the debtor to be 

notified of the right to request a hearing, 

rather than notified simply of the right 

to a hearing. DAV believes that small 

differences in language, such as this, are 

not inconsequential and can lead to 

misunderstandings. We agree with 

DAV’s position and in this final rule we 

are making a change from proposed 

§ 1.923(b)(3) accordingly. 

Treasury’s regulation provides, at 31 

CFR 285.11(f)(3)(i), that ‘‘the agency 

shall provide the debtor with a 

reasonable opportunity for an oral 

hearing when the agency determines 

that the issue in dispute cannot be 

resolved by review of the documentary 

evidence, for example, when the 

validity of the claim turns on the issue 

of credibility or veracity.’’ DAV states 

that proposed § 1.923(c) appears to leave 

the decision of whether to afford an oral 

hearing more completely to the 

discretion of the hearing official than 

does the Treasury regulation. VA’s 

version provides, in DAV’s view, no 

guidance as to when an issue in dispute 

cannot be resolved by review of the 

documentary evidence and must be 

resolved by an oral hearing. 

In proposed § 1.923(c), we believe the 

reference to 31 CFR 285.11(f) provides 

sufficient guidance for the hearing 

official to determine whether an oral or 

paper hearing would be accorded the 

debtor. VA’s proposed language does 

not give more discretion to the hearing 

official in determining the type of 

hearing than as provided for in 

Treasury’s regulation. However, in order 

to provide more specific guidance on 

this issue, we are in this final rule 

adding the phrase ‘‘for example, when 

the validity of the claim turns on the 

issue of credibility or veracity’’ to the 

end of the second sentence of proposed 

§ 1.923(c)(1). This language is taken 

directly from 31 CFR 285.11(f)(3)(i). 

DAV next states that the specific 

hearing procedures prescribed in 

proposed § 1.923(c)(1) conflict with VA 

hearing procedures and the associated 

rights of VA claimants. Specifically, in 

VA’s administrative proceedings, a 

claimant has the right to request a 

hearing at any stage in the process, and 

according to DAV, the term ‘‘hearing’’

means an oral hearing. DAV argues that 

the right to an oral hearing is one of the 

basic elements of due process imposed 

by 38 CFR part 3. DAV asserts that the 

rules applicable to BVA also make it 

clear that the term ‘‘hearing’’ pertains to 

oral hearings. Notwithstanding the 

Treasury rule, DAV believes that it is 

fundamentally unfair that the decision 

on whether to afford an oral hearing is 

at the discretion of the hearing official. 

If VA has the latitude to make its own 

rules on these hearing procedures, DAV 

believes VA has the latitude to offer an 

oral hearing for all debtors that desire 

one. DAV also feels the oral hearing 

should be recorded and preferably 

transcribed, since any decision under 

§ 1.923 will be subject to appellate 

review where testimonial evidence will 

be pertinent. Our proposed § 1.923(c)(1) 

provides that the hearing official must 

maintain a summary record of the 

proceedings, but is not required to 

produce a transcript of the hearing. The 

Treasury regulation at 31 CFR 

285.11(f)(9) only requires a summary 

record and we believe this to be 

sufficient.

In publishing § 1.923, VA has no 

intention of depriving veterans and 

other VA benefit claimants of any rights 

they are entitled to under title 38 of the 

U.S. Code or under 38 CFR part 3. 

However, § 1.923 is intended to 

authorize AWG for all debts owed VA, 

not just those debts that are the result 

of participation in a benefits program 

under title 38. Our reference to 38 CFR 

1.911(c)(1) in § 1.923(c)(6) is intended to 

distinguish these rights (of veterans and 

other benefit claimants) from the rights 

of debtors whose debts are not resulting 

from participation in a VA benefit 

program. The intent is to recognize the 

right to dispute the existence and 

amount of a benefit debt in accordance 

with § 1.911(c)(1) and to allow any 

existing VA regional office or BVA 

decision to be incorporated by reference 

and become the basis of the hearing 

official’s decision. Thus, a veteran and 

any other claimant as defined in 38 

U.S.C. 5100 would retain any rights 

under VA statute and regulations if he 

or she disputed the existence and 

amount of a benefit debt that eventually 

became subject to AWG. The AWG 

regulations do not confer on veterans or 

other claimants an additional 

opportunity to challenge the debt or to 

request a waiver, as these rights were 

available to them at the initial 

notification of indebtedness. 

DAV states that § 1.923(c)(5), which is 

modeled on § 285.11(f)(8), violates 

existing law and cites 38 U.S.C. 5107 

and Gilbert v. Derwinski, 1 Vet. App. 49, 

54 (1990), as authority for their position. 

Section 1.923(c)(5) states that VA or 

Treasury shall have the burden of going 

forward to prove the existence or 

amount of the debt, after which the 

debtor must show, by a preponderance 

of the evidence, that no debt exists or 

the amount of the debt is incorrect. DAV 

cites the fact that a more liberal burden 

of proof applies to veterans and other 

claimants under VA law because a 

veteran need only demonstrate that 

there is an approximate balance of 

positive and negative evidence in order 

to prevail. 

As stated above, § 1.923 is intended to 

authorize AWG for all debts owed VA, 

not just those debts that are the result 

of participation in a benefits program 

under title 38 of the U.S. Code. The 

burden of proof described in 

§ 1.923(c)(5) is applicable to all debts 

owed VA. However, a debtor can 

dispute the existence and amount of a 

debt arising out of participation in a VA 

benefits program in accordance with 

§ 1.911(c)(1) and appeal any adverse 

decision under 38 CFR parts 19 and 20. 

Under such procedures, the debtor 

would be under the more liberal burden 

of proof. Prior decisions rendered under 

procedures set forth in 38 CFR 

applicable to the benefit would become 

the basis of the hearing official’s 

decision, as stated in our earlier 

discussion of § 1.923(c)(6). In all 

probability, by the time a debt reaches 

the AWG process, veterans and other 

claimants would have already had the 

opportunity to exercise any rights under 

the benefit debt process and the debt 

would be merely a debt owed to the 

Federal government. 

Finally, Treasury’s 31 CFR 285.11 

states that the hearing official’s decision 

will be the final agency action for the 

purposes of judicial review under the 

Administrative Procedure Act (APA). 

VA’s proposed § 1.923(c)(7) merely 

restates the same thing. DAV correctly 

points out that VA’s administrative 

adjudicative processes for VA benefits 

are not subject to the APA. DAV states 

that § 1.923(c)(7) needs to be revised; 

otherwise this proposed rule would 

Federal Register / Vol. 69, No. 205 / Monday, October 25, 2004 / Rules and Regulations 62191

remove BVA from the process, and in so 

doing, would preclude review by the 

U.S. Court of Appeals for Veterans 

Claims. 

Again, any decision concerning the 

existence or amount of a debt arising out 

of participation in a VA benefits 

program will be made in accordance 

with the procedures set forth in 38 CFR 

applicable to the benefit. Any such 

decision will be the basis of a hearing 

official’s AWG decision. As stated 

above, by the time a debt reaches the 

AWG process, veterans and other 

claimants have already had the 

opportunity to exercise any rights under 

the benefit debt process and the debt 

would be merely a debt owed to the 

Federal government. 

In addition to the changes discussed 

above as a result of comments we 

received, we are making in the final rule 

changes from the proposed rule by 

adding or revising authority citations; 

removing redundant language or 

unnecessary cross-references; in the 

instruction for § 1.919, redesignated as 

§ 1.915, correcting an inadvertent error 

by revising the amendments to 

paragraph (f)(2) to reflect that we are 

removing paragraph (f)(2) and its 

authority citation and reserving 

paragraph (f)(2); removing a reference in 

proposed new § 1.923 to a now-obsolete 

Treasury form number and referring 

instead to ‘‘a Treasury-approved’’ form; 

adding language to § 1.907, Definitions, 

to promote clarity in understanding the 

provisions of §§ 1.900 through 1.953; 

and making other nonsubstantive 

changes for purposes of clarity or of a 

technical nature. The Regulatory 

Flexibility Act paragraph in this 

preamble also reflects correcting 

changes. 

This final rule makes a 

nonsubstantive clarifying change to the 

second sentence of proposed 

§ 1.963a(b), which stated that, 

‘‘[g]enerally,’’ collection of an 

overpayment of employees’’ pay, 

expenses, and allowances will be 

‘‘against equity and good conscience’’ if 

the overpayment occurred through 

administrative error and that there is no 

indication of fraud, misrepresentation, 

fault, or lack of good faith on the part 

of the employee or other person having 

an interest in obtaining a waiver. The 

qualifying term ‘‘[g]enerally’’ reflects 

that VA Committees on Waivers and 

Compromises retain discretion to 

determine that collection would not be 

against equity and good conscience in 

some instances involving overpayments 

due to administrative error without fault 

on the part of the employee, such as in 

cases where the windfall to the 

employee or the burden to the 

government by reason of the 

overpayment would be inequitably large 

or where VA promptly advised the 

claimant of a potential overpayment and 

the possibility of collection. In this final 

rule, we have added the phrase ‘‘and 

waiver would not otherwise be 

inequitable’’ to the second sentence of 

§ 1.963a(b) in order to reiterate and 

clarify that the determination ultimately 

turns on the equities of each case, as 

provided in the preceding sentence. 

This change does not alter the meaning 

of the proposed rule.

Based on the rationale set forth in the 

preamble to the proposed rule and in 

this preamble, VA is adopting the 

provisions of the proposed rule as a 

final rule without change except as 

noted above. 

Paperwork Reduction Act 

This document contains no provisions 

constituting a collection of information 

under the Paperwork Reduction Act (44 

U.S.C. 3501–3521). 

Unfunded Mandates 

The Unfunded Mandates Reform Act 

requires, at 2 U.S.C. 1532, that agencies 

prepare an assessment of anticipated 

costs and benefits before developing any 

rule that may result in an expenditure 

by State, local, or tribal governments, in 

the aggregate, or by the private sector, of 

$100 million or more in any given year. 

This proposed amendment would have 

no such effect on State, local, or tribal 

governments, or the private sector. 

Regulatory Flexibility Act 

The Secretary hereby certifies that 

this rule will not have a significant 

economic impact on a substantial 

number of small entities as they are 

defined in the Regulatory Flexibility 

Act, 5 U.S.C. 601–612. This rule 

primarily affects individuals. It only 

occasionally affects a small entity, and 

its economic impact would not be a 

significant one on a substantial number 

of small entities. The economic impact 

on small entities would be solely related 

to the rule’s provisions for collection of 

an entity’s indebtedness to VA or 

garnishment of wages of an entity’s 

employee determined to be indebted to 

VA. Therefore, pursuant to 5 U.S.C. 

605(b), this rule is exempt from the 

initial and final regulatory flexibility 

analysis requirements of sections 603 

and 604. 

Catalog of Federal Domestic Assistance 

There is no applicable Catalog of 

Federal Domestic Assistance number.

List of Subjects 

38 CFR Part 1 

Claims, Administrative practice and 

procedure, Veterans. 

38 CFR Part 2 

Delegations of authority.

Approved: October 15, 2004. 

Anthony J. Principi, 

Secretary of Veterans Affairs.

■ For the reasons set forth in the 

preamble, 38 CFR parts 1 and 2 are 

amended as follows:

PART 1—GENERAL PROVISIONS

■ 1. The authority citation for part 1 is 

revised to read as follows:

Authority: 38 U.S.C. 501(a), and as noted 

in specific sections.

■ 2. The authority citation preceding 

§ 1.900 is revised to read as follows:

Authority: Sections 1.900 through 1.953 

are issued under the authority of 31 U.S.C. 

3711 through 3720E; 38 U.S.C. 501, and as 

noted in specific sections.

■ 3. Section 1.900 is revised to read as 

follows:

§ 1.900 Prescription of standards. 

(a) The standards contained in 

§§ 1.900 through 1.953 are issued 

pursuant to the Federal Claims 

Collection Standards, issued by the 

Department of the Treasury (Treasury) 

and the Department of Justice (DOJ) in 

parts 900 through 904 of 31 CFR, as well 

as other debt collection authority issued 

by Treasury in part 285 of 31 CFR, and 

apply to the collection, compromise, 

termination, and suspension of debts 

owed to VA, and the referral of such 

debts to Treasury (or other Federal 

agencies designated by Treasury) for 

offset and collection action and to DOJ 

for litigation, unless otherwise stated in 

this part or in other statutory or 

regulatory authority, or by contract.

(b) Standards and policies regarding 

the classification of debt for accounting 

purposes (for example, write-off of 

uncollectible debt) are contained in the 

Office of Management and Budget’s 

Circular A–129 (Revised), ‘‘Policies for 

Federal Credit Programs and Non-Tax 

Receivables.’’

(Authority: 31 U.S.C. 3711; 38 U.S.C. 501).

■ 4. Section 1.901 is revised to read as 

follows:

§ 1.901 No private rights created. 

Sections 1.900 through 1.953 do not 

create any right or benefit, substantive 

or procedural, enforceable at law or in 

equity by a party against the United 

States, its agencies, its officers, or any 

62192 Federal Register / Vol. 69, No. 205 / Monday, October 25, 2004 / Rules and Regulations 

other person, nor shall the failure of VA 

to comply with any of the provisions of 

§§ 1.900 through 1.953 be available to 

any debtor as a defense.

(Authority: 31 U.S.C. 3711; 38 U.S.C. 501).

■ 5. Section 1.902 is revised to read as 

follows:

§ 1.902 Antitrust, fraud, and tax and 

interagency claims. 

(a) The standards in §§ 1.900 through 

1.953 relating to compromise, 

suspension, and termination of 

collection activity do not apply to any 

debt based in whole or in part on 

conduct in violation of the antitrust 

laws or to any debt involving fraud, the 

presentation of a false claim, or 

misrepresentation on the part of the 

debtor or any party having an interest in 

the claim. Only the Department of 

Justice (DOJ) has the authority to 

compromise, suspend, or terminate 

collection activity on such claims. The 

standards in §§ 1.900 through 1.953 

relating to the administrative collection 

of claims do apply, but only to the 

extent authorized by DOJ in a particular 

case. Upon identification of a claim 

based in whole or in part on conduct in 

violation of the antitrust laws or any 

claim involving fraud, the presentation 

of a false claim, or misrepresentation on 

the part of the debtor or any party 

having an interest in the claim, VA shall 

promptly refer the case to DOJ. At its 

discretion, DOJ may return the claim to 

VA for further handling in accordance 

with the standards in §§ 1.900 through 

1.953. 

(b) Sections 1.900 through 1.953 do 

not apply to tax debts. 

(c) Sections 1.900 through 1.953 do 

not apply to claims between Federal 

agencies. 

(d) Federal agencies should attempt to 

resolve interagency claims by 

negotiation in accordance with 

Executive Order 12146 (3 CFR, 1980 

Comp., pp. 409–412).

(Authority: 31 U.S.C. 3711; 38 U.S.C. 501).

■ 6. Section 1.903 is revised to read as 

follows:

§ 1.903 Settlement, waiver, or compromise 

under other statutory or regulatory 

authority. 

Nothing in §§ 1.900 through 1.953 

precludes VA settlement, waiver, 

compromise, or other disposition of any 

claim under statutes and implementing 

regulations other than subchapter II of 

chapter 37 of Title 31 of the United 

States Code (Claims of the United States 

Government) and the standards in Title 

31 CFR parts 900 through 904. See, for 

example, the Federal Medical Care 

Recovery Act (42 U.S.C. 2651 et seq.) 

and applicable regulations, 28 CFR part 

43. In such cases, the laws and 

regulations that are specifically 

applicable to claims collection activities 

of VA generally take precedence over 31 

CFR parts 900 through 904.

(Authority: 31 U.S.C. 3711; 38 U.S.C. 501).

■ 7. Section 1.904 is revised to read as 

follows:

§ 1.904 Form of payment. 

Claims may be paid in the form of 

money or, when a contractual basis 

exists, VA may demand the return of 

specific property or the performance of 

specific services.

(Authority: 31 U.S.C. 3711; 38 U.S.C. 501).

■ 8. Section 1.905 is revised to read as 

follows:

§ 1.905 Subdivision of claims not 

authorized. 

Debts may not be subdivided to avoid 

the monetary ceiling established by 31 

U.S.C. 3711(a)(2). A debtor’s liability 

arising from a particular transaction or 

contract shall be considered as a single 

debt in determining whether the debt is 

one of less than $100,000 (excluding 

interest, penalties, and administrative 

costs) or such higher amount as the 

Attorney General shall from time to time 

prescribe for purposes of compromise, 

suspension, or termination of collection 

activity.

(Authority: 31 U.S.C. 3711; 38 U.S.C. 501).

■ 9. Section 1.906 is revised to read as 

follows:

§ 1.906 Required administrative 

proceedings. 

(a) In applying §§ 1.900 through 

1.953, VA is not required to omit, 

foreclose, or duplicate administrative 

proceedings required by contract or 

other laws or regulations. 

(b) Nothing contained in §§ 1.900 

through 1.953 is intended to foreclose 

the right of any debtor to an 

administrative proceeding, including 

appeals, waivers, and hearings provided 

by statute, contract, or VA regulation 

(see 38 U.S.C. 3720(a)(4) and 5302 and 

42 U.S.C. 2651–2653).

(Authority: 38 U.S.C. 501, 3720(a)(4), 5302; 

42 U.S.C. 2651 through 2653).

■ 10. Section 1.907 is revised to read as 

follows:

§ 1.907 Definitions. 

(a) The definitions and construction 

found in the Federal Claims Collection 

Standards in 31 CFR 900.2(a) through 

(d), and the definitions in the provisions 

on administrative wage garnishment in 

31 CFR 285.11(c) shall apply to §§ 1.900 

through 1.953, except as otherwise 

stated. 

(b) As used in §§ 1.900 through 1.953, 

referral for litigation means referral to 

the Department of Justice for 

appropriate legal actions, except in 

those specified instances where a case is 

referred to a VA Regional Counsel for 

legal action.

(c) As used in §§ 1.900 through 1.953, 

VA benefit program means medical care, 

home loan, and benefits payment 

programs administered by VA under 

Title 38 of the United States Code, 

except as otherwise stated. 

(d) As used in §§ 1.900 through 1.953, 

Treasury means the United States 

Department of the Treasury.

(Authority: 31 U.S.C. 3701, 3711; 38 U.S.C. 

501, 5316).

■ 11. The authority citation preceding 

§ 1.910 is removed.

■ 12. Section 1.910 is revised to read as 

follows:

§ 1.910 Aggressive collection action. 

(a) VA will take aggressive collection 

action on a timely basis, with effective 

follow-up, to collect all claims for 

money or property arising from its 

activities. 

(b) In accordance with 31 U.S.C. 

3711(g) and the procedures set forth at 

31 CFR 285.12, VA shall transfer to 

Treasury any non-tax debt or claim that 

has been delinquent for a period of 180 

days or more so that Treasury may take 

appropriate action to collect the debt or 

terminate collection action. This 

requirement does not apply to any debt 

that: 

(1) Is in litigation or foreclosure; 

(2) Will be disposed of under an 

approved asset sale program; 

(3) Has been referred to a private 

collection contractor for a period of time 

acceptable to the Secretary of the 

Treasury; 

(4) Is at a debt collection center for a 

period of time acceptable to the 

Secretary of the Treasury; 

(5) Will be collected under internal 

offset procedures within 3 years after 

the debt first became delinquent; or 

(6) Is exempt from this requirement 

based on a determination by the 

Secretary of the Treasury that 

exemption for a certain class of debt is 

in the best interest of the United States. 

VA may request that the Secretary of the 

Treasury exempt specific classes of 

debts. 

(c) In accordance with 31 U.S.C. 

3716(c)(6) and the procedures set forth 

in 31 CFR part 285, VA shall notify 

Treasury of all past due, legally 

enforceable non-tax debt that is over 180 

days delinquent for purposes of 

Federal Register / Vol. 69, No. 205 / Monday, October 25, 2004 / Rules and Regulations 62193

administrative offset, including tax 

refund offset and federal salary offset. 

(Procedures for referral to Treasury for 

tax refund offset are found at 31 CFR 

285.2 and procedures for referral to 

Treasury for federal salary offset are 

found at 38 CFR 1.995 and 31 CFR 

285.7.)

(Authority: 31 U.S.C. 1311, 1316; 38 U.S.C. 

501, 5314; 31 CFR part 285).

■ 13. Section 1.911 is amended by:

■ A. Revising paragraphs (a), (b), (c)(3), 

(d)(4), (d)(5), (f)(1), and (f)(5), and the 

authority citation at the end of the 

section (f)(5).

■ B. Adding paragraphs (d)(6) and (d)(7).

The revisions and additions read as 

follows:

§ 1.911 Collection of debts owed by 

reason of participation in a benefits 

program. 

(a) Scope. This section applies to the 

collection of debts resulting from an 

individual’s participation in a VA 

benefit or home loan program. It does 

not apply to VA’s other debt collection 

activities. Standards for the demand for 

payment of all other debts owed to VA 

are set forth in § 1.911a. School liability 

debts are governed by § 21.4009 of this 

title. 

(b) Written demands. When VA has 

determined that a debt exists by reason 

of an administrative decision or by 

operation of law, VA shall promptly 

demand, in writing, payment of the 

debt. VA shall notify the debtor of his 

or her rights and remedies and the 

consequences of failure to cooperate 

with collection efforts. Generally, one 

demand letter is sufficient, but 

subsequent demand letters may be 

issued as needed. 

(c) * * *

* * * * *

(3) Appeal. In accordance with parts 

19 and 20 of this title, the debtor may 

appeal the decision underlying the debt. 

(d) * * *

* * * * *

(4) That collection may be made by 

offset from current or future VA benefit 

payments (see § 1.912a). In addition, the 

debtor shall be advised of any policies 

with respect to the use of credit bureaus, 

debt collection centers, and collection 

agencies; any other remedies to enforce 

payment of the debt, including 

administrative wage garnishment, 

Federal salary offset, tax refund offset, 

and litigation; and the requirement that 

any debt delinquent for more than 180 

days be transferred to Treasury for 

administrative offset or collection. 

(5) That interest and administrative 

costs may be assessed in accordance 

with § 1.915, as appropriate; 

(6) That the debtor shall have the 

opportunity to inspect and copy 

records; and 

(7) That the debtor shall have the 

opportunity to enter into a repayment 

agreement.

* * * * *

(f) * * * 

(1) Appellate rights, in parts 19 and 

20 of this title;

* * * * *

(5) The assessment of interest and 

administrative costs, in § 1.915.

(Authority: 38 U.S.C. 501, 5302, 5314).

■ 14. Section 1.911a is added to read as 

follows:

§ 1.911a Collection of non-benefit debts. 

(a) This section is written in 

accordance with 31 CFR 901.2 and 

applies to the demand for payment of all 

debts, except those debts arising out of 

participation in a VA benefit or home 

loan program. Procedures for the 

demand for payment of VA benefit or 

home loan program debts are set forth 

in § 1.911.

(b) Written demand as described in 

paragraph (c) of this section shall be 

made promptly upon a debtor of VA in 

terms that inform the debtor of the 

consequences of failing to cooperate 

with VA to resolve the debt. Generally, 

one demand letter is sufficient, but 

subsequent letters may be issued. In 

determining the timing of the demand 

letter, VA should give due regard to the 

need to refer debts promptly to the 

Department of Justice for litigation, in 

accordance with §§ 1.950 through 1.953. 

When necessary to protect VA’s interest 

(for example, to prevent the running of 

a statute of limitations), written demand 

may be preceded by other appropriate 

actions under 38 CFR 1.900 through 

1.953, including immediate referral for 

litigation. 

(c) The written demand letter shall 

inform the debtor of: 

(1) The basis for the indebtedness and 

any rights the debtor may have to seek 

review within VA, including the right to 

request waiver; 

(2) The applicable standards for 

imposing any interest or other late 

payment charges; 

(3) The date by which payment 

should be made to avoid interest and 

other late payment charges and enforced 

collection, which generally should not 

be more than 30 days from the date that 

the demand letter is mailed; 

(4) The name, address, and phone 

number of a contact person or office 

within the agency; 

(5) The opportunity to inspect and 

copy VA records related to the debt; and 

(6) The opportunity to make a written 

agreement to repay the debt. 

(d) In addition to the items listed in 

paragraph (c) of this section, VA should 

include in the demand letter VA’s 

willingness to discuss alternative 

methods of payment and its policies 

with respect to the use of credit bureaus, 

debt collection centers, and collection 

agencies. The letter should also indicate 

the agency’s remedies to enforce 

payment of the debt (including 

assessment of interest, administrative 

costs and penalties, administrative 

garnishment, Federal salary offset, tax 

refund offset, administrative offset, and 

litigation) and the requirement that any 

debt delinquent for more than 180 days 

be transferred to Treasury for collection. 

(e) VA should respond promptly to 

communications from debtors and 

should advise debtors who dispute 

debts, or request waiver, to furnish 

available evidence to support their 

contentions. 

(f) Prior to referring a debt for 

litigation, VA should advise each debtor 

determined to be liable for the debt that, 

unless the debt can be collected 

administratively, litigation may be 

initiated. This notification may be given 

as part of a demand letter under 

paragraph (c) of this section or in a 

separate letter. 

(g) When VA learns that a bankruptcy 

petition has been filed with respect to 

a debtor, before proceeding with further 

collection action, VA should 

immediately seek legal advice from 

either VA’s General Counsel or Regional 

Counsel concerning the impact of the 

Bankruptcy Code on any pending or 

contemplated collection activities. 

Unless VA determines that the 

automatic stay imposed at the time of 

filing pursuant to 11 U.S.C. 362 has 

been lifted or is no longer in effect, in 

most cases collection activity against the 

debtor should stop immediately. 

(1) After VA seeks legal advice, a 

proof of claim should be filed in most 

cases with the bankruptcy court or the 

Trustee. VA should refer to the 

provisions of 11 U.S.C. 106 relating to 

the consequences on sovereign 

immunity of filing a proof of claim. 

(2) If VA is a secured creditor, it may 

seek relief from the automatic stay 

regarding its security, subject to the 

provisions and requirements of 11 

U.S.C. 362. 

(3) Offset is prohibited in most cases 

by the automatic stay. However, VA 

should seek legal advice from VA’s 

General Counsel or Regional Counsel to 

determine whether payments to the 

debtor and payments of other agencies 

available for offset may be frozen by VA 

until relief from the automatic stay can 

62194 Federal Register / Vol. 69, No. 205 / Monday, October 25, 2004 / Rules and Regulations 

be obtained from the bankruptcy court. 

VA also should seek legal advice from 

VA’s General Counsel or Regional 

Counsel to determine whether 

recoupment is available.

(Authority: 31 U.S.C. 3711; 38 U.S.C. 501).

■ 15. Section 1.912 is amended by:

■ A. Revising paragraphs (a), (c)(2), 

(d)(1), (d)(2), and (f).

■ B. Adding paragraphs (d)(3), (d)(4), (g), 

(h), and (i). 

The revisions and additions read as 

follows:

§ 1.912 Collection by offset. 

(a) Authority and scope. In 

accordance with the procedures set 

forth in 31 CFR 901.3, as well as 31 CFR 

part 285, VA shall collect debts by 

administrative offset from payments 

made by VA to a debtor indebted to VA. 

Also in accordance with 31 CFR 

901.3(b), as well as 31 CFR part 285, VA 

shall refer past due, legally enforceable 

non-tax debts which are over 180 days 

delinquent to Treasury for collection by 

centralized administrative offset (further 

procedures are set forth in paragraph (g) 

of this section). This section does not 

pertain to offset from either VA benefit 

payments made under the authority of 

38 U.S.C. 5314 or from current salary, 

but does apply to offset from all other 

VA payments, including an employee’s 

final salary check and lump-sum leave 

payment. Procedures for offset from 

benefit payments are found in § 1.912a. 

Procedures for offset from current 

Federal salary are found in §§ 1.980 

through 1.995. NOTE: VA cannot offset, 

or refer for the purpose of offset, either 

under the authority of this section or 

under any other authority found in 

§§ 1.900 through 1.953 and §§ 1.980 

through 1.995, any VA home loan 

program debt described in 38 U.S.C. 

3726 unless the requirements set forth 

in that section have been met.

* * * * *

(c) * * * 

(2) If the debtor, within 30 days of the 

date of the required notification by VA, 

requests in writing the waiver of 

collection of the debt in accordance 

with § 1.963, § 1.963a, or § 1.964, offset 

shall not commence until VA has made 

an initial decision to deny the waiver 

request.

* * * * *

(d) * * * 

(1) Offset may commence prior to 

either resolution of a dispute or decision 

on a waiver request as discussed in 

paragraph (c) of this section, if 

collection of the debt would be 

jeopardized by deferral of offset (for 

example, if VA first learns of the debt 

when there is insufficient time before a 

final payment would be made to the 

debtor to allow for prior notice and 

opportunity for review or waiver 

consideration). In such a case, 

notification pursuant to paragraph (b) of 

this section shall be made at the time 

offset begins or as soon thereafter as 

possible. VA shall promptly refund any 

money that has been collected that is 

ultimately found not to have been owed 

to the Government. 

(2) If the United States has obtained 

a judgment against the debtor, offset 

may commence without the notification 

required by paragraph (b) of this section. 

However, a waiver request filed in 

accordance with the time limits and 

other requirements of § 1.963, § 1.963a, 

or § 1.964 will be considered, even if 

filed after a judgment has been obtained 

against the debtor. If waiver is granted, 

in whole or in part, refund of amounts 

already collected will be made in 

accordance with § 1.967. 

(3) The procedures set forth in 

paragraph (b) of this section may be 

omitted when the debt arises under a 

contract that provides for notice and 

other procedural protections.

(4) Offset may commence without the 

notification required by paragraph (b) of 

this section when the offset is in the 

nature of a recoupment. As defined in 

31 CFR 900.2(d), recoupment is a 

special method for adjusting debts 

arising under the same transaction or 

occurrence.

* * * * *

(f) Statutes of limitation; multiple 

debts. When collecting multiple debts 

by administrative offset, VA shall apply 

the recovered amounts to those debts in 

accordance with the best interests of the 

United States, as determined by the 

facts and circumstances of the particular 

case, paying special attention to 

applicable statutes of limitation. In 

accordance with 31 CFR 901.3(a)(4), VA 

may not initiate offset to collect a debt 

more than 10 years after VA’s right to 

collect the debt first accrued (with 

certain exceptions as specified in 31 

CFR 901.3(a)(4)). 

(g) Centralized administrative offset.

(1) When VA refers delinquent debts to 

Treasury for centralized administrative 

offset in accordance with 31 CFR part 

285, VA must certify that: 

(i) The debts are past due and legally 

enforceable; and 

(ii) VA has complied with all due 

process requirements under 31 U.S.C. 

3716(a) and paragraphs (b) and (c) of 

this section. 

(2) Payments that are prohibited by 

law from being offset are exempt from 

centralized administrative offset. 

(h) Computer Matching and Privacy 

Act waiver. In accordance with 31 

U.S.C. 3716(f), the Secretary of the 

Treasury may waive the provisions of 

the Computer Matching and Privacy 

Protection Act of 1988 concerning 

matching agreements and post-match 

notification and verification (5 U.S.C. 

552a(o) and (p)) for centralized 

administrative offset upon receipt of a 

certification from a creditor agency that 

the due process requirements 

enumerated in 31 U.S.C. 3716(a) and 

paragraphs (b) and (c) of this section 

have been met. The certification of a 

debt in accordance with paragraph (g) of 

this section will satisfy this 

requirement. If such a waiver is granted, 

only the Data Integrity Board of the 

Department of the Treasury is required 

to oversee any matching activities, in 

accordance with 31 U.S.C. 3716(g). 

(i) Requests by creditor agencies for 

offset. Unless the offset would not be in 

VA’s best interest, or would otherwise 

be contrary to law, VA will comply with 

requests by creditor agencies to offset 

VA payments (except for current salary 

or benefit payments) made to a person 

indebted to the creditor agency. 

However, before VA may initiate offset, 

the creditor agency must certify in 

writing to VA that the debtor has been 

provided: 

(1) Written notice of the type and 

amount of the debt and the intent of the 

creditor agency to use administrative 

offset to collect the debt; 

(2) The opportunity to inspect and 

copy agency records related to the debt; 

(3) The opportunity for review within 

the agency of the determination of the 

indebtedness; and 

(4) The opportunity to make a written 

agreement to repay the debt.

(Authority: 31 U.S.C. 3711; 38 U.S.C. 501).

■ 16. Section 1.912a is amended by:

■ A. In paragraph (b), removing 

‘‘§ 1.911a(c) and (d)’’ and adding, in its 

place, ‘‘§ 1.911(c) and (d)’’.

■ B. In paragraph (c)(1), removing 

‘‘§ 1.911a(c)(1)’’ and adding, in its place, 

‘‘§ 1.911(c)(1)’’.

■ C. In paragraph (d), removing 

‘‘§ 1.911a(d)’’ and adding, in its place, 

‘‘§ 1.911(d)’’.

■ D. Adding paragraph (c)(4) to read as 

follows:

§ 1.912a Collection by offset—from VA 

benefit payments.

* * * * *

(c) * * * 

(4) VA will pursue collection action 

once an adverse initial decision is 

reached on the debtor’s request for 

waiver and/or the debtor’s informal 

dispute (as described in § 1.911(c)(1)) 

concerning the existence or amount of 

the debt, even if the debtor subsequently 

Federal Register / Vol. 69, No. 205 / Monday, October 25, 2004 / Rules and Regulations 62195

pursues appellate relief in accordance 

with parts 19 and 20 of this title.

* * * * *

§§ 1.913, 1.914, and 1.915 [Removed]

■ 17. Sections 1.913, 1.914, and 1.915 are 

removed.

§ 1.916 [Redesignated as § 1.913]

■ 18. Section 1.916 is redesignated as 

new § 1.913 and is revised to read as 

follows:

§ 1.913 Liquidation of collateral. 

(a) VA should liquidate security or 

collateral through the exercise of a 

power of sale in the security instrument 

or a nonjudicial foreclosure, and apply 

the proceeds to the applicable debt, if 

the debtor fails to pay the debt within 

180 days after demand and if such 

action is in the best interest of the 

United States. Collection from other 

sources, including liquidation of 

security or collateral, is not a 

prerequisite to requiring payment by a 

surety, insurer, or guarantor, unless 

such action is expressly required by 

statute or contract. 

(b) When VA learns that a bankruptcy 

petition has been filed with respect to 

a debtor, VA should seek legal advice 

from VA’s General Counsel or Regional 

Counsel concerning the impact of the 

Bankruptcy Code, including, but not 

limited to, 11 U.S.C. 362, to determine 

the applicability of the automatic stay 

and the procedures for obtaining relief 

from such stay prior to proceeding 

under paragraph (a) of this section.

(Authority: 31 U.S.C. 3711; 38 U.S.C. 501).

§ 1.917 [Redesignated as § 1.914]

■ 19. Section 1.917 is redesignated as 

new § 1.914 and is revised to read as 

follows:

§ 1.914 Collection in installments.

(a) Whenever feasible, VA shall 

collect the total amount of a debt in one 

lump sum. If a debtor is financially 

unable to pay a debt in one lump sum, 

VA may accept payment in regular 

installments. VA should obtain financial 

statements from debtors who represent 

that they are unable to pay in one lump 

sum and independently verify such 

representations whenever possible. If 

VA agrees to accept payments in regular 

installments, VA should obtain a legally 

enforceable written agreement from the 

debtor that specifies all of the terms of 

the arrangement and contains a 

provision accelerating the debt in the 

event of default. 

(b) The size and frequency of 

installment payments should bear a 

reasonable relation to the size of the 

debt and the debtor’s ability to pay. If 

possible, the installment payments 

should be sufficient in size and 

frequency to liquidate the debt in 3 

years or less. 

(c) Security for deferred payments 

should be obtained in appropriate cases. 

However, VA may accept installment 

payments if the debtor refuses to 

execute a written agreement or to give 

security.

(Authority: 31 U.S.C. 3711; 38 U.S.C. 501).

§ 1.918 [Removed]

■ 20. Section 1.918 is removed.

§ 1.919 [Redesignated as § 1.915]

■ 21. Section 1.919 is redesignated as 

new § 1.915 and is amended by:

■ A. Revising paragraphs (a) and (c).

■ B. In paragraph (d), removing 

‘‘§ 1.919’’ and adding, in its place, ‘‘this 

section’’.

■ C. Removing paragraph (f)(2) and its 

authority citation, and reserving 

paragraph (f)(2).

■ D. Revising paragraph (g).

The revisions read as follows:

§ 1.915 Interest, administrative costs, and 

penalties. 

(a) Except as otherwise provided by 

statute, contract, or other regulation to 

the contrary, and subject to 38 U.S.C. 

3485(e) and 5302, VA shall assess: 

(1) Interest on all indebtedness to the 

United States arising out of 

participation in a VA benefit, medical 

care, or home loan program under 

authority of Title 38, U.S. Code. 

(2) Interest and administrative costs of 

collection on such debts described in 

paragraph (a)(1) of this section where 

repayment has become delinquent (as 

defined in 31 CFR 900.2(b)), and 

(3) Interest, administrative costs, and 

penalties in accordance with 31 CFR 

901.9 on all debts other than those 

described in paragraph (a)(1) of this 

section.

* * * * *

(c) The rate of interest charged by VA 

shall be based on the rate established 

annually by the Secretary of the 

Treasury in accordance with 31 U.S.C. 

3717 and shall be adjusted annually by 

VA on the first day of the calendar year. 

Once the rate of interest has been 

determined for a particular debt, the rate 

shall remain in effect throughout the 

duration of repayment of that debt. 

When a debtor defaults on a repayment 

agreement and seeks to enter into a new 

agreement, VA may require payment of 

interest at a new rate that reflects the 

current value of funds to the Treasury 

at the time the new agreement is 

executed. Interest shall not be 

compounded, that is, interest shall not 

be charged on accrued interest and 

administrative costs required by this 

section. If, however, a debtor defaults on 

a previous repayment agreement, 

interest and administrative costs that 

accrued but were not collected under 

the defaulted agreement shall be added 

to the principal under the new 

agreement.

* * * * *

(g) Administrative costs assessed 

under this section shall be the average 

costs of collection of similar debts, or 

actual collection costs as may be 

accurately determined in the particular 

case. No administrative costs of 

collection will be assessed under this 

section in any cases where the 

indebtedness is paid in full prior to the 

30-day period specified in paragraph (e) 

of this section, or in any case where a 

repayment plan is proposed by the 

debtor and accepted by VA within that 

30-day period, unless such repayment 

agreement becomes delinquent (as 

defined in 31 CFR 900.2(b)).

(Authority: 31 U.S.C. 3717; 38 U.S.C. 501, 

5302, 5315).

§ 1.920 [Removed]

■ 22. Section 1.920 is removed.

§ 1.921 [Removed]

■ 23. Section 1.921 is removed.

§ 1.922 [Redesignated as § 1.916]

■ 24. Section 1.922 is redesignated as 

new § 1.916 and is amended by:

■ A. Revising paragraph (d)(2)(i).

■ B. Revising the authority citation at the 

end of the section. 

The revisions read as follows:

§ 1.916 Disclosure of debt information to 

consumer reporting agencies (CRA).

* * * * *

(d) * * * 

(2)(i) In accordance with § 1.911 and 

§ 1.911a, VA shall notify each 

individual of the right to dispute the 

existence and amount of the debt and to 

request a waiver of the debt, if 

applicable.

* * * * *

(Authority: 31 U.S.C. 3711(e); 38 U.S.C. 501, 

5701(g) and (i)).

§ 1.923 [Redesignated as § 1.917]

■ 25. Section 1.923 is redesignated as 

new § 1.917 and is amended by:

■ A. Revising paragraph (b) introductory 

text.

■ B. Adding paragraphs (c) through (e).

The revision and additions read as 

follows:

§ 1.917 Contracting for collection services.

* * * * *

(b) In accordance with 31 U.S.C. 

3718(d), or as otherwise permitted by 

62196 Federal Register / Vol. 69, No. 205 / Monday, October 25, 2004 / Rules and Regulations 

law, collection service contracts may be 

funded in the following manner:

* * * * *

(c) VA shall use government-wide 

debt collection contracts to obtain debt 

collection services provided by private 

collection contractors. However, VA 

may refer debts to private collection 

contractors pursuant to a contract 

between VA and a private collection 

contractor only if such debts are not 

subject to the requirement to transfer 

debts to Treasury for debt collection. 

See 31 U.S.C. 3711(g), 31 CFR 285.12(e), 

and 38 CFR 1.910. 

(d) VA may enter into contracts for 

locating and recovering assets of the 

United States, such as unclaimed assets. 

(e) VA may enter into contracts for 

debtor asset and income search reports. 

In accordance with 31 U.S.C. 3718(d), 

such contracts may provide that the fee 

a contractor charges the agency for such 

services may be payable from the 

amounts recovered, unless otherwise 

prohibited by statute.

(Authority: 31 U.S.C. 3718; 38 U.S.C. 501).

■ 26. Section 1.924 is redesignated as 

§ 1.918 and is amended by revising 

paragraphs (a) and (b) and the authority 

citation at the end of the section to read 

as follows:

§ 1.918 Use and disclosure of mailing 

addresses. 

(a) When attempting to locate a debtor 

in order to compromise or collect a debt 

in accordance with §§ 1.900 through 

1.953, VA may send a request to the 

Secretary of the Treasury, or his/her 

designee, in order to obtain the debtor’s 

most current mailing address from the 

records of the Internal Revenue Service. 

(b) VA is authorized to use mailing 

addresses obtained under paragraph (a) 

of this section to enforce collection of a 

delinquent debt and may disclose such 

mailing addresses to other agencies and 

to collection agencies for collection 

purposes.

* * * * *

(Authority: 31 U.S.C. 3711; 38 U.S.C. 501).

■ 27. Section 1.925 is redesignated as 

§ 1.919 and is amended by revising 

paragraphs (a) and (b)(3) and the 

authority citation at the end of the 

section to read as follows:

§ 1.919 Administrative offset against 

amounts payable from Civil Service 

Retirement and Disability Fund, Federal 

Employees Retirement System (FERS), final 

salary check, and lump sum leave 

payments. 

(a) Unless otherwise prohibited by 

law or regulation, and in accordance 

with 31 CFR 901.3(d), VA may request 

that money which is due and payable to 

a debtor from either the Civil Service 

Retirement and Disability Fund or FERS 

be administratively offset in reasonable 

amounts in order to collect, in one full 

payment or a minimal number of 

payments, debts that are owed to VA by 

the debtor. Such requests shall be made 

to the appropriate officials at the Office 

of Personnel Management (OPM) in 

accordance with such regulations 

prescribed by the Director of OPM. (See 

5 CFR 831.1801 through 831.1808). In 

addition, VA may also offset against a 

Federal employee’s final salary check 

and lump sum leave payment. See 

§ 1.912 for procedures for offset against 

a final salary check and lump sum leave 

payment. 

(b) * * * 

(3) VA has complied with §§ 1.911, 

1.911a, 1.912, 1.912a, and 31 CFR 901.3, 

to the extent applicable, including any 

required hearing or review.

* * * * *

(Authority: 5 U.S.C. 8461; 31 U.S.C. 3711, 

3716; 38 U.S.C. 501).

■ 28. Section 1.926 is redesignated as 

§ 1.920 and amended by revising 

paragraphs (a), (c)(6), and (e), and the 

authority citation at the end of the 

section, to read as follows:

§ 1.920 Referral of VA debts. 

(a) When authorized, VA may refer an 

uncollectible debt to another Federal or 

State agency for the purpose of 

collection action. Collection action may 

include the offsetting of the debt from 

any current or future payment, except 

salary (see paragraph (e) of this section), 

made by such Federal or State agency to 

the person indebted to VA.

* * * * *

(c) * * * 

(6) Other applicable notices required 

by §§ 1.911, 1.911a, 1.912, and 1.912a.

* * * * *

(e) The referral by VA of a VA debt 

to another agency for the purpose of 

salary offset shall be done in accordance 

with 38 CFR 1.980 through 1.995 and 

regulations prescribed by the Director of 

the Office of Personnel Management 

(OPM) in 5 CFR part 550, subpart K.

(Authority: 31 U.S.C. 3711; 38 U.S.C. 501).

■ 29. Section 1.927 is redesignated as 

new § 1.921 and is revised to read as 

follows:

§ 1.921 Analysis of costs. 

VA collection procedures should 

provide for periodic comparison of costs 

incurred and amounts collected. Data on 

costs and corresponding recovery rates 

for debts of different types and in 

various dollar ranges should be used to 

compare the cost effectiveness of 

alternative collection techniques, 

establish guidelines with respect to 

points at which costs of further 

collection efforts are likely to exceed 

recoveries, assist in evaluating offers in 

compromise, and establish minimum 

debt amounts below which collection 

efforts need not be taken.

(Authority: 31 U.S.C. 3711–3719; 38 U.S.C. 

501).

■ 30. Section 1.928 is redesignated as 

new § 1.922 and is revised to read as 

follows:

§ 1.922 Exemptions. 

(a) Sections 1.900 through 1.953, to 

the extent they reflect remedies or 

procedures prescribed by the Debt 

Collection Act of 1982 and the Debt 

Collection Improvement Act of 1996, 

such as administrative offset, use of 

credit bureaus, contracting for collection 

agencies, and interest and related 

charges, do not apply to debts arising 

under, or payments made under, the 

Internal Revenue Code of 1986, as 

amended (26 U.S.C. 1 et seq.); the Social 

Security Act (42 U.S.C. 301 et seq.), 

except to the extent provided under 42 

U.S.C. 404 and 31 U.S.C. 3716(c); or the 

tariff laws of the United States. These 

remedies and procedures, however, may 

be authorized with respect to debts that 

are exempt from the Debt Collection Act 

of 1982 and the DCIA of 1996, to the 

extent that they are authorized under 

some other statute or the common law. 

(b) This section should not be 

construed as prohibiting the use of 

§§ 1.900 through 1.953 when collecting 

debts owed by persons employed by 

agencies administering the laws cited in 

paragraph (a) of this section unless the 

debt arose under those laws.

(Authority: 31 U.S.C. 3711; 38 U.S.C. 501).

■ 31. New § 1.923 is added to read as 

follows:

§ 1.923 Administrative wage garnishment. 

(a) In accordance with the procedures 

set forth in 31 U.S.C. 3720D and 31 CFR 

285.11, VA or Treasury may request that 

a non-Federal employer garnish the 

disposable pay of an individual to 

collect delinquent non-tax debt owed to 

VA. VA may pursue wage garnishment 

independently in accordance with this 

section or VA or Treasury may pursue 

garnishment after VA refers a debt to 

Treasury in accordance with § 1.910 of 

this part and 31 CFR 285.12. For the 

purposes of this section, any reference 

to Treasury also includes any private 

collection agency under contract to 

Treasury. 

(b) At least 30 days prior to the 

initiation of garnishment proceedings, 

Federal Register / Vol. 69, No. 205 / Monday, October 25, 2004 / Rules and Regulations 62197

VA or Treasury shall send a written 

notice, as described in 31 CFR 285.11(e), 

by first class mail to the debtor’s last 

known address. This notice shall inform 

the debtor of: 

(1) The nature and amount of the 

debt; 

(2) The intention of VA or Treasury to 

initiate proceedings to collect the debt 

through deductions from the debtor’s 

pay until the debt and all accumulated 

interest, and other late payment charges, 

are paid in full, and; 

(3) An explanation of the debtor’s 

rights, including the opportunity: 

(i) To inspect and copy VA records 

pertaining to the debt; 

(ii) To enter into a written repayment 

agreement with VA or Treasury under 

terms agreeable to VA or Treasury, and; 

(iii) To a hearing in accordance with 

31 CFR 285.11(f) and paragraph (c) of 

this section concerning the existence or 

amount of the debt or the terms of the 

proposed repayment schedule under the 

garnishment order. However, the debtor 

is not entitled to a hearing concerning 

the terms of the proposed repayment 

schedule if these terms have been 

established by written agreement under 

paragraph (b)(3)(ii) of this section. 

(c) Any hearing conducted as part of 

the administrative wage garnishment 

process shall be conducted by the 

designated hearing official in 

accordance with the procedures set 

forth in 31 CFR 285.11(f). This hearing 

official may be any VA Board of 

Contract Appeals Administrative Judge 

or Hearing Examiner, or any other VA 

hearing official. This hearing official 

may also conduct administrative wage 

garnishment hearings for other Federal 

agencies. 

(1) The hearing may be oral or written 

as determined by the designated hearing 

official. The hearing official shall 

provide the debtor with a reasonable 

opportunity for an oral hearing when 

the hearing official determines that the 

issue in dispute cannot be resolved by 

review of documentary evidence, for 

example, when the validity of the claim 

turns on the issue of credibility or 

veracity. The hearing official shall 

establish the time and place of any oral 

hearing. At the debtor’s option, an oral 

hearing may be conducted either in 

person or by telephone conference call. 

A hearing is not required to be a formal, 

evidentiary-type hearing, but witnesses 

who testify in oral hearings must do so 

under oath or affirmation. While it is 

not necessary to produce a transcript of 

the hearing, the hearing official must 

maintain a summary record of the 

proceedings. All travel expenses 

incurred by the debtor in connection 

with an in-person hearing shall be borne 

by the debtor. VA or Treasury shall be 

responsible for all telephone expenses. 

In the absence of good cause shown, a 

debtor who fails to appear at a hearing 

will be deemed as not having timely 

filed a request for a hearing.

(2) If the hearing official determines 

that an oral hearing is not necessary, 

then he/she shall afford the debtor a 

‘‘paper hearing.’’ In a ‘‘paper hearing,’’

the hearing official will decide the 

issues in dispute based upon a review 

of the written record. 

(3) If the debtor’s written request for 

a hearing is received by either VA or 

Treasury within 15 business days 

following the mailing of the notice 

described in paragraph (b) of this 

section, then VA or Treasury shall not 

issue a withholding order as described 

in paragraph (d) of this section until the 

debtor is afforded the requested hearing 

and a decision rendered. If the debtor’s 

written request for a hearing is not 

received within 15 business days 

following the mailing of the notice 

described in paragraph (b) of this 

section, then the hearing official shall 

provide a hearing to the debtor, but will 

not delay issuance of a withholding 

order as described in paragraph (d) of 

this section, unless the hearing official 

determines that the delay in filing was 

caused by factors beyond the debtor’s 

control. 

(4) The hearing official shall notify 

the debtor of: 

(i) The date and time of a telephone 

conference hearing; 

(ii) The date, time, and location of an 

in-person oral hearing, or; 

(iii) The deadline for the submission 

of evidence for a written hearing. 

(5) Except as provided in paragraph 

(c)(6)of this section, VA or Treasury 

shall have the burden of going forward 

to prove the existence or amount of the 

debt, after which the debtor must show, 

by a preponderance of the evidence, that 

no debt exists or that the amount of the 

debt is incorrect. In general, this means 

that the debtor must show that it is more 

likely than not that a debt does not exist 

or that the amount of the debt is 

incorrect. The debtor may also present 

evidence that terms of the repayment 

agreement are unlawful, would cause a 

financial hardship, or that collection of 

the debt may not be pursued due to 

operation of law. 

(6) If the debtor has previously 

contested the existence and/or amount 

of the debt in accordance with 

§ 1.911(c)(1) or § 1.911a(c)(1) and VA 

subsequently rendered a decision 

upholding the existence or amount of 

the debt, then such decision shall be 

incorporated by reference and become 

the basis of the hearing official’s 

decision on such matters. 

(7) The hearing official shall issue a 

written decision as soon as practicable, 

but not later than 60 days after the date 

on which the request for such hearing 

was received by VA or Treasury. The 

decision will be the final action for the 

purposes of judicial review under the 

Administrative Procedure Act (5 U.S.C. 

701 et seq.). The decision shall include: 

(i) A summary of the facts presented; 

(ii) The hearing official’s findings, 

analysis, and conclusions, and; 

(iii) The terms of the repayment 

schedule, if applicable. 

(d) In accordance with 31 CFR 

285.11(g) and (h), VA or Treasury shall 

send a Treasury-approved withholding 

order and certification form by first 

class mail to the debtor’s employer 

within 30 days after the debtor fails to 

make a timely request for a hearing. If 

a timely request for a hearing has been 

filed by the debtor, then VA or Treasury 

shall send a withholding order and 

certification form by first class mail to 

the debtor’s employer within 30 days 

after a final decision is made to proceed 

with the garnishment. The employer 

shall complete and return the 

certification form as described in 31 

CFR 285.11(h). 

(e) After receipt of the garnishment 

order, the employer shall withhold the 

amount of garnishment as described in 

31 CFR 285.11(i) from all disposable pay 

payable to the applicable debtor during 

each pay period. 

(f) A debtor whose wages are subject 

to a wage withholding order under 31 

CFR 285.11 may request a review, under 

the procedures set forth in 31 CFR 

285.11(k), of the amount garnished. A 

request for review shall only be 

considered after garnishment has been 

initiated. The request must be based on 

materially changed circumstances such 

as disability, divorce, or catastrophic 

illness which result in financial 

hardship that limit the debtor’s ability 

to provide food, housing, clothing, 

transportation, and medical care for 

himself/herself and his/her dependents.

(Authority: 31 U.S.C. 3720D; 38 U.S.C. 501; 

31 CFR 285.11).

■ 32. New § 1.924 is added to read as 

follows:

§ 1.924 Suspension or revocation of 

eligibility for federal loans, loan insurance, 

loan guarantees, licenses, permits, or 

privileges. 

(a) In accordance with 31 U.S.C. 

3720B and the procedures set forth in 31 

CFR 285.13 and § 901.6, a person owing 

an outstanding non-tax debt that is in 

delinquent status shall not be eligible 

for Federal financial assistance unless 

62198 Federal Register / Vol. 69, No. 205 / Monday, October 25, 2004 / Rules and Regulations 

exempted under paragraph (d) of this 

section or waived under paragraph (e) of 

this section. 

(b) Federal financial assistance or 

financial assistance means any Federal 

loan (other than a disaster loan), loan 

insurance, or loan guarantee. 

(c) For the purposes of this section 

only, a debt is in a delinquent status if 

the debt has not been paid within 90 

days of the payment due date or by the 

end of any grace period provided by 

statute, regulation, contract, or 

agreement. The payment due date is the 

date specified in the initial written 

demand for payment. Further guidance 

concerning the delinquent status of a 

debt may be found at 31 CFR 285.13(d). 

(d) Upon the written request and 

recommendation of the Secretary of 

Veterans Affairs, the Secretary of the 

Treasury may grant exemptions from the 

provisions of this section. The standards 

for exemptions granted for classes of 

debts are set forth in 31 CFR 285.13(f). 

(e)(1) VA’s Chief Financial Officer or 

Deputy Chief Financial Officer may 

waive the provisions of paragraph (a) of 

this section only on a person-by-person 

basis. 

(2) The Chief Financial Officer or 

Deputy Chief Financial Officer should 

balance the following factors when 

deciding whether to grant a waiver: 

(i) Whether the denial of the financial 

assistance to the person would tend to 

interfere substantially with or defeat the 

purposes of the financial assistance 

program or otherwise would not be in 

the best interests of the Federal 

government; and

(ii) Whether the granting of the 

financial assistance to the person is 

contrary to the government’s goal of 

reducing losses by requiring proper 

screening of potential borrowers. 

(3) When balancing the factors 

described in paragraph (e)(2)(i) and 

(e)(2)(ii) of this section, the Chief 

Financial Officer or Deputy Chief 

Financial Officer should consider: 

(i) The age, amount, and cause(s) of 

the delinquency and the likelihood that 

the person will resolve the delinquent 

debt; and 

(ii) The amount of the total debt, 

delinquent or otherwise, owed by the 

person and the person’s credit history 

with respect to repayment of debt. 

(4) A centralized record shall be 

retained of the number and type of 

waivers granted under this section. 

(f) In non-bankruptcy cases, in 

seeking the collection of statutory 

penalties, forfeitures, or other similar 

types of claims, VA may suspend or 

revoke any license, permit, or other 

privilege granted a debtor when the 

debtor inexcusably or willfully fails to 

pay such a debt. The debtor should be 

advised in VA’s written demand for 

payment of VA’s ability to suspend or 

revoke licenses, permits, or privileges. 

VA may suspend or disqualify any 

lender, contractor, or broker who is 

engaged in making, guaranteeing, 

insuring, acquiring, or participating in 

loans from doing further business with 

VA or engaging in programs sponsored 

by VA if such lender, contractor, or 

broker fails to pay its debts to the 

Government within a reasonable time, 

or if such lender, contractor, or broker 

has been suspended, debarred, or 

disqualified from participation in a 

program or activity by another Federal 

agency. The failure of any surety to 

honor its obligations in accordance with 

31 U.S.C. 9305 should be reported to 

Treasury. 

(g) In bankruptcy cases, before 

advising the debtor of the intention to 

suspend or revoke licenses, permits, or 

privileges, VA should seek legal advice 

from VA’s General Counsel or Regional 

Counsel concerning the impact of the 

Bankruptcy Code, particularly 11 U.S.C. 

362 and 525, which may restrict such 

action.

(Authority: 31 U.S.C. 3720B; 38 U.S.C. 501).

■ 33. The authority citation preceding 

§ 1.930 is removed.

■ 34. Sections 1.930 through 1.936 are 

revised to read as follows:

§ 1.930 Scope and application. 

(a) The standards set forth in §§ 1.930 

through 1.936 of this part apply to the 

compromise of debts pursuant to 31 

U.S.C. 3711. VA may exercise such 

compromise authority when the amount 

of the debt due, exclusive of interest, 

penalties, and administrative costs, does 

not exceed $100,000 or any higher 

amount authorized by the Attorney 

General. 

(b) Unless otherwise provided by law, 

when the principal balance of a debt, 

exclusive of interest, penalties, and 

administrative costs, exceeds $100,000 

or any higher amount authorized by the 

Attorney General, the authority to 

accept the compromise rests with the 

Department of Justice (DOJ). If VA 

receives an offer to compromise any 

debt in excess of $100,000, VA should 

evaluate the compromise offer using the 

same factors as set forth in § 1.931 of 

this part. If VA believes the offer has 

merit, it shall refer the debt to the Civil 

Division or other appropriate division in 

DOJ using a Claims Collection Litigation 

Report (CCLR). The referral shall 

include appropriate financial 

information and a recommendation for 

the acceptance of the compromise offer. 

DOJ approval is not required if VA 

decides to reject a compromise offer. 

(c) The $100,000 limit in paragraph 

(b) of this section does not apply to 

debts that arise out of participation in a 

VA loan program under Chapter 37 of 

Title 38 of the U.S. Code. VA has 

unlimited authority to compromise 

debts arising out of participation in a 

Chapter 37 loan program, regardless of 

the amount of the debt.

(Authority: 31 U.S.C. 3711; 38 U.S.C 501, 

3720).

§ 1.931 Bases for compromise. 

(a) VA may compromise a debt if it 

cannot collect the full amount because: 

(1) The debtor is unable to pay the full 

amount in a reasonable time, as verified 

through credit reports or other financial 

information; 

(2) VA is unable to collect the debt in 

full within a reasonable time by 

enforced collection proceedings; 

(3) The cost of collecting the debt 

does not justify the enforced collection 

of the full amount; or 

(4) There is significant doubt 

concerning VA’s ability to prove its case 

in court. 

(b) In determining the debtor’s 

inability to pay, VA will consider 

relevant factors such as the following: 

(1) Age and health of the debtor; 

(2) Present and potential income; 

(3) Inheritance prospects; 

(4) The possibility that assets have 

been concealed or improperly 

transferred by the debtor; and 

(5) The availability of assets or 

income that may be realized by enforced 

collection proceedings. 

(c) VA will verify the debtor’s claim 

of inability to pay by using a credit 

report and other financial information 

as provided in paragraph (g) of this 

section. VA should consider the 

applicable exemptions available to the 

debtor under State and Federal law in 

determining the ability to enforce 

collection. VA also may consider 

uncertainty as to the price that collateral 

or other property will bring at a forced 

sale in determining the ability to enforce 

collection. A compromise effected 

under this section should be for an 

amount that bears a reasonable relation 

to the amount that can be recovered by 

enforced collection procedures, with 

regard to the exemptions available to the 

debtor and the time that collection will 

take. 

(d) If there is significant doubt 

concerning VA’s ability to prove its case 

in court for the full amount claimed, 

either because of the legal issues 

involved or because of a bona fide 

dispute as to the facts, then the amount 

accepted in compromise of such cases 

Federal Register / Vol. 69, No. 205 / Monday, October 25, 2004 / Rules and Regulations 62199

should fairly reflect the probabilities of 

successful prosecution to judgment, 

with due regard given to the availability 

of witnesses and other evidentiary 

support for VA’s claim. In determining 

the risks involved in litigation, VA will 

consider the probable amount of court 

costs and attorney fees pursuant to the 

Equal Access to Justice Act, 28 U.S.C. 

2412, that may be imposed against the 

Government if it is unsuccessful in 

litigation. 

(e) VA may compromise a debt if the 

cost of collecting the debt does not 

justify the enforced collection of the full 

amount. The amount accepted in 

compromise in such cases may reflect 

an appropriate discount for the 

administrative and litigative costs of 

collection, with consideration given to 

the time it will take to effect collection. 

Collection costs may be a substantial 

factor in the settlement of small debts. 

In determining whether the cost of 

collecting justifies enforced collection of 

the full amount, VA will consider 

whether continued collection of the 

debt, regardless of cost, is necessary to 

further an enforcement principle. 

(f) VA generally will not accept 

compromises payable in installments. If, 

however, payment of a compromise in 

installments is necessary, VA will 

obtain a legally enforceable written 

agreement providing that, in the event 

of default, the full original principal 

balance of the debt prior to compromise, 

less sums paid thereon, is reinstated. 

Whenever possible, VA will also obtain 

security for repayment.

(g) To assess the merits of a 

compromise offer based in whole or in 

part on the debtor’s inability to pay the 

full amount of a debt within a 

reasonable time, VA will obtain a 

current financial statement from the 

debtor showing the debtor’s assets, 

liabilities, income, and expenses. 

Agencies also may obtain credit reports 

or other financial information to assess 

compromise offers.

(Authority: 31 U.S.C. 3711; 38 U.S.C. 501, 

3720).

§ 1.932 Enforcement policy. 

VA may compromise statutory 

penalties, forfeitures, or claims 

established as an aid to enforcement and 

to compel compliance, if VA’s 

enforcement policy in terms of 

deterrence and securing compliance, 

present and future, will be adequately 

served by VA’s acceptance of the sum to 

be agreed upon.

(Authority: 31 U.S.C. 3711; 38 U.S.C. 501, 

3720).

§ 1.933 Joint and several liability. 

(a) When two or more debtors are 

jointly and severally liable, VA will 

pursue collection activity against all 

debtors, as appropriate. VA will not 

attempt to allocate the burden of 

payment between the debtors but 

should proceed to liquidate the 

indebtedness as quickly as possible. 

(b) VA will ensure that a compromise 

agreement with one debtor does not 

release VA’s claim against the remaining 

debtors. The amount of a compromise 

with one debtor shall not be considered 

a precedent or binding in determining 

the amount that will be required from 

other debtors jointly and severally liable 

on the claim.

(Authority: 31 U.S.C. 3711; 38 U.S.C. 501, 

3720).

§ 1.934 Further review of compromise 

offers. 

If VA is uncertain whether to accept 

a firm, written, substantive compromise 

offer on a debt that is within its 

delegated compromise authority, it may 

refer the offer to VA General Counsel or 

Regional Counsel or to the Civil 

Division or other appropriate division in 

the Department of Justice (DOJ), using a 

Claims Collection Litigation Report 

(CCLR) accompanied by supporting data 

and particulars concerning the debt. 

DOJ may act upon such an offer or 

return it to the agency with instructions 

or advice.

(Authority: 31 U.S.C. 3711; 38 U.S.C. 501, 

3720).

§ 1.935 Consideration of tax 

consequences to the Government. 

In negotiating a compromise, VA will 

consider the tax consequences to the 

Government. In particular, VA will 

consider requiring a waiver of tax-losscarry-forward and tax-loss-carry-back 

rights of the debtor.

(Authority: 31 U.S.C. 3711; 38 U.S.C. 501, 

3720).

§ 1.936 Mutual releases of the debtor and 

VA. 

In all appropriate instances, a 

compromise that is accepted by VA 

shall be implemented by means of a 

mutual release, in which the debtor is 

released from further non-tax liability 

on the compromised debt in 

consideration of payment in full of the 

compromise amount, and VA and its 

officials, past and present, are released 

and discharged from any and all claims 

and causes of action that the debtor may 

have arising from the same transaction. 

In the event a mutual release is not 

executed when a debt is compromised, 

unless prohibited by law, the debtor is 

still deemed to have waived any and all 

claims and causes of action against VA 

and its officials related to the 

transaction giving rise to the 

compromised debt.

(Authority: 31 U.S.C. 3711; 38 U.S.C. 501, 

3720).

§§ 1.937 and 1.938 [Removed]

■ 35. Sections 1.937 and 1.938 are 

removed.

■ 36. Sections 1.940 and 1.941 are 

revised to read as follows:

§ 1.940 Scope and application. 

(a) The standards set forth in §§ 1.940 

through 1.944 apply to the suspension 

or termination of collection activity 

pursuant to 31 U.S.C. 3711 on debts that 

do not exceed $100,000, or such other 

amount as the Attorney General may 

direct, exclusive of interest, penalties, 

and administrative costs, after 

deducting the amount of partial 

payments or collections, if any. Prior to 

referring a debt to the Department of 

Justice (DOJ) for litigation, VA may 

suspend or terminate collection under 

this part with respect to the debt. 

(b) If, after deducting the amount of 

any partial payments or collections, the 

principal amount of a debt exceeds 

$100,000, or such other amount as the 

Attorney General may direct, exclusive 

of interest, penalties, and administrative 

costs, the authority to suspend or 

terminate rests solely with DOJ. If VA 

believes that suspension or termination 

of any debt in excess of $100,000 may 

be appropriate, it shall refer the debt to 

the Civil Division or other appropriate 

division in DOJ, using the Claims 

Collection Litigation Report (CCLR). The 

referral should specify the reasons for 

VA’s recommendation. If, prior to 

referral to DOJ, VA determines that a 

debt is plainly erroneous or clearly 

without legal merit, VA may terminate 

collection activity regardless of the 

amount involved without obtaining DOJ 

concurrence.

(Authority: 31 U.S.C. 3711; 38 U.S.C. 501).

§ 1.941 Suspension of collection activity. 

(a) VA may suspend collection 

activity on a debt when: 

(1) It cannot locate the debtor; 

(2) The debtor’s financial condition is 

expected to improve; or 

(3) The debtor has requested a waiver 

or review of the debt. 

(b) Based on the current financial 

condition of the debtor, VA may 

suspend collection activity on a debt 

when the debtor’s future prospects 

justify retention of the debt for periodic 

review and collection activity and: 

(1) The applicable statute of 

limitations has not expired; or

62200 Federal Register / Vol. 69, No. 205 / Monday, October 25, 2004 / Rules and Regulations 

(2) Future collection can be effected 

by administrative offset, 

notwithstanding the expiration of the 

applicable statute of limitations for 

litigation of claims, and with due regard 

to the 10-year limitation for 

administrative offset prescribed by 31 

U.S.C. 3716(e)(1); or 

(3) The debtor agrees to pay interest 

on the amount of the debt on which 

collection will be suspended, and such 

suspension is likely to enhance the 

debtor’s ability to pay the full amount 

of the principal of the debt with interest 

at a later date. 

(c) Collection action may also be 

suspended, in accordance with §§ 1.911, 

1.911a, 1.912, and 1.912a, pending VA 

action on requests for administrative 

review of the existence or amount of the 

debt or a request for waiver of collection 

of the debt. However, collection action 

will be resumed once VA issues an 

initial decision on the administrative 

review or waiver request. 

(d) When VA learns that a bankruptcy 

petition has been filed with respect to 

a debtor, in most cases the collection 

activity on a debt must be suspended, 

pursuant to the provisions of 11 U.S.C. 

362, 1201, and 1301, unless VA can 

clearly establish that the automatic stay 

does not apply, has been lifted, or is no 

longer in effect. VA shall seek legal 

advice immediately from either the VA 

General Counsel or Regional Counsel 

and, if legally permitted, take the 

necessary steps to ensure that no funds 

or money are paid by VA to the debtor 

until relief from the automatic stay is 

obtained.

(Authority: 31 U.S.C. 3711; 38 U.S.C. 501).

■ 37. Section 1.942 is amended by 

adding paragraphs (g) and (h) to read as 

follows:

§ 1.942 Termination of collection activity.

* * * * *

(g) Discharge in bankruptcy.

Generally, VA shall terminate collection 

activity on a debt that has been 

discharged in bankruptcy, regardless of 

the amount. VA may continue collection 

activity, subject to the provisions of the 

Bankruptcy Code, for any payments 

provided under a plan of reorganization. 

Offset and recoupment rights may 

survive the discharge of the debtor in 

bankruptcy and, under some 

circumstances, claims also may survive 

the discharge. 

(h) Before terminating collection 

activity, VA should have pursued all 

appropriate means of collection and 

determined, based upon the results of 

the collection activity, that the debt is 

uncollectible. Termination of collection 

activity ceases active collection of the 

debt. The termination of collection 

activity does not preclude VA from 

retaining a record of the account for 

purposes of: 

(1) Selling the debt, if the Secretary of 

the Treasury determines that such sale 

is in the best interests of the United 

States; 

(2) Pursuing collection at a 

subsequent date in the event there is a 

change in the debtor’s status or a new 

collection tool becomes available; 

(3) Offsetting against future income or 

assets not available at the time of 

termination of collection activity; or 

(4) Screening future applicants for 

prior indebtedness.

(Authority: 31 U.S.C. 3711; 38 U.S.C. 501).

■ 38. Section 1.943 is revised and § 1.944 

is added to read as follows:

§ 1.943 Exception to termination. 

When a significant enforcement 

policy is involved, or recovery of a 

judgment is a prerequisite to the 

imposition of administrative sanctions, 

VA may refer debts for litigation even 

though termination of collection activity 

may otherwise be appropriate.

(Authority: 31 U.S.C. 3711; 38 U.S.C. 501).

§ 1.944 Discharge of indebtedness; 

reporting requirements. 

(a) Before discharging a delinquent 

debt (also referred to as a close out of 

the debt), VA shall take all appropriate 

steps to collect the debt in accordance 

with 31 U.S.C. 3711(g), including, as 

applicable, administrative offset, tax 

refund offset, Federal salary offset, 

referral to Treasury or Treasurydesignated debt collection centers or 

private collection contractors, credit 

bureau reporting, wage garnishment, 

litigation, and foreclosure. Discharge of 

indebtedness is distinct from 

termination or suspension of collection 

activity under §§ 1.940 through 1.943 

and is governed by the Internal Revenue 

Code (see 26 U.S.C. 6050P). When 

collection action on a debt is suspended 

or terminated, the debt remains 

delinquent and further collection action 

may be pursued at a later date in 

accordance with the standards set forth 

in §§ 1.900 through 1.953. When VA 

discharges a debt in full or in part, 

further collection action is prohibited. 

Therefore, VA should make the 

determination that collection action is 

no longer warranted before discharging 

a debt. Before discharging a debt, VA 

must terminate debt collection action. 

(b) Upon discharge of an 

indebtedness, VA must report the 

discharge to the Internal Revenue 

Service (IRS) in accordance with the 

requirements of 26 U.S.C. 6050P and 26 

CFR 1.6050P–1. VA may request 

Treasury or Treasury-designated debt 

collection centers to file such a 

discharge report to the IRS on VA’s 

behalf. 

(c) When discharging a debt, VA must 

request that any liens of record securing 

the debt be released. 

(d) 31 U.S.C. 3711(i)(2) requires 

agencies to sell a delinquent nontax 

debt upon termination of collection 

action if the Secretary of the Treasury 

determines such a sale is in the best 

interests of the United States. Since the 

discharge of a debt precludes any 

further collection action (including the 

sale of a delinquent debt), VA may not 

discharge a debt until the requirements 

of § 3711(i)(2) have been met.

(Authority: 31 U.S.C. 3711; 38 U.S.C. 501).

§ 1.950 Authority citation preceding 

[Removed]

■ 39. The authority citation preceding 

§ 1.950 is removed.

■ 40. Sections 1.950 through 1.953 are 

revised to read as follows:

§ 1.950 Prompt referral.

(a) VA shall promptly refer debts to 

Department of Justice (DOJ) for litigation 

where aggressive collection activity has 

been taken in accordance with §§ 1.900 

through 1.953, and such debts cannot be 

compromised, or on which collection 

activity cannot be suspended or 

terminated, in accordance with §§ 1.930 

through 1.936 and §§ 1.940 through 

1.944. Debts for which the principal 

amount is over $1,000,000, or such 

other amount as the Attorney General 

may direct, exclusive of interest and 

other late payment charges, shall be 

referred to the Civil Division or other 

division responsible for litigating such 

debts at DOJ. Debts for which the 

principal amount is $1,000,000, or less, 

or such other amount as the Attorney 

General may direct, exclusive of interest 

or penalties, shall be referred to DOJ’s 

Nationwide Central Intake Facility as 

required by the Claims Collection 

Litigation Report (CCLR) instructions. 

Debts should be referred as early as 

possible, consistent with aggressive 

agency collection activity and the 

observance of the standards contained 

in §§ 1.900 through 1.953, and, in any 

event, well within the period for 

initiating timely lawsuits against the 

debtors. VA shall make every effort to 

refer delinquent debts to DOJ for 

litigation within 1 year of the date such 

debts last became delinquent. In the 

case of guaranteed or insured loans, VA 

should make every effort to refer these 

delinquent debts to DOJ for litigation 

within 1 year from the date the loan was

Federal Register / Vol. 69, No. 205 / Monday, October 25, 2004 / Rules and Regulations 62201

presented to VA for payment or 

reinsurance. 

(b) DOJ has exclusive jurisdiction over 

the debts referred to it pursuant to this 

section. VA shall immediately terminate 

the use of any administrative collection 

activities to collect a debt at the time of 

the referral of that debt to DOJ. VA 

should advise DOJ of the collection 

activities that have been utilized to date, 

and their result. VA shall refrain from 

having any contact with the debtor and 

shall direct all debtor inquiries 

concerning the debt to DOJ. VA shall 

immediately notify DOJ of any 

payments credited to the debtor’s 

account after referral of a debt under 

this section. DOJ shall notify VA, in a 

timely manner, of any payments it 

receives from the debtor.

(Authority: 31 U.S.C. 3711; 38 U.S.C. 501).

§ 1.951 Claims Collection Litigation Report 

(CCLR). 

(a) Unless excepted by the 

Department of Justice (DOJ), VA shall 

complete the CCLR, accompanied by a 

signed Certificate of Indebtedness, to 

refer all administratively uncollectible 

claims to DOJ for litigation. VA shall 

complete all of the sections of the CCLR 

appropriate to each claim as required by 

the CCLR instructions and furnish such 

other information as may be required in 

specific cases. 

(b) VA shall indicate clearly on the 

CCLR the actions it wishes DOJ to take 

with respect to the referred claim. 

(c) VA shall also use the CCLR to refer 

claims to DOJ to obtain approval of any 

proposals to compromise the claims or 

to suspend or terminate agency 

collection activity.

(Authority: 31 U.S.C. 3711; 38 U.S.C. 501).

§ 1.952 Preservation of evidence. 

VA must take care to preserve all files 

and records that may be needed by the 

Department of Justice (DOJ) to prove its 

claims in court. VA ordinarily should 

include certified copies of the 

documents that form the basis for the 

claim when referring such claims to DOJ 

for litigation. VA shall provide originals 

of such documents immediately upon 

request by DOJ.

(Authority: 31 U.S.C. 3711; 38 U.S.C. 501).

§ 1.953 Minimum amount of referrals to the 

Department of Justice. 

(a) Except as otherwise provided in 

paragraphs (b) and (c) of this section, 

VA shall not refer for litigation claims 

of less than $2,500, exclusive of interest, 

penalties, and administrative costs, or 

such other minimum amount as the 

Attorney General shall from time to time 

prescribe. The Department of Justice 

(DOJ) shall promptly notify referring 

agencies if the Attorney General changes 

this minimum amount. 

(b) VA shall not refer claims of less 

than the minimum amount prescribed 

by the Attorney General unless: 

(1) Litigation to collect such smaller 

claims is important to ensure 

compliance with VA’s policies or 

programs; 

(2) The claim is being referred solely 

for the purpose of securing a judgment 

against the debtor, which will be filed 

as a lien against the debtor’s property 

pursuant to 28 U.S.C. 3201 and returned 

to VA for enforcement; or 

(3) The debtor has the clear ability to 

pay the claim and the Government 

effectively can enforce payment, with 

due regard for the exemptions available 

to the debtor under State and Federal 

law and the judicial remedies available 

to the Government. 

(c) VA should consult with the 

Financial Litigation Staff of the 

Executive Office for United States 

Attorneys, in DOJ, prior to referring 

claims valued at less than the minimum 

amount.

(Authority: 31 U.S.C. 3711; 38 U.S.C. 501).

§ 1.954 [Removed]

■ 41. Section 1.954 is removed.

■ 42. Section 1.955 is amended by 

revising paragraphs (b) through (d) to 

read as follows:

§ 1.955 Regional Office Committees on 

Waivers and Compromises.

* * * * *

(b) Selection. The Director shall 

designate the employees to serve as 

Chairperson, members, and alternates. 

Except upon specific authorization of 

the Under Secretary for Benefits, when 

workload warrants a full-time 

committee, such designation will be 

part-time additional duty upon call of 

the Chairperson. 

(c) Control and staff. The 

administrative control of each 

Committee on Waivers and 

Compromises is the responsibility of the 

station’s Fiscal Officer. However, the 

station Director has the authority to 

reassign the administrative control 

function to another station activity, 

rather than the Fiscal Officer, whenever 

the Director determines that such 

reassignment is appropriate. The quality 

control of the professional and clerical 

staff of the Committee is the 

responsibility of the Chairperson. 

(d) Overall control. The Assistant 

Secretary for Management is delegated 

complete management authority, 

including planning, policy formulation, 

control, coordination, supervision, and 

evaluation of Committee operations.

* * * * *

■ 43. Section 1.956 is amended by:

■ A. Revising paragraphs (a)(2)(i) and 

(a)(2)(ii).

■ B. Removing paragraph (a)(2)(iii).

■ C. Redesignating paragraph (a)(2)(iv) as 

new paragraph (a)(2)(iii).

■ D. Revising newly redesignated 

paragraph (a)(2)(iii).

■ E. Adding paragraph (a)(2)(iv).

■ F. Revising paragraphs (a)(3) and (b).

The revisions and addition read as 

follows:

§ 1.956 Jurisdiction. 

(a) * * * 

(2) Arising out of operations of the 

Veterans Health Administration: 

(i) Debts resulting from services 

furnished in error (§ 17.101(a) of this 

chapter). 

(ii) Debts resulting from services 

furnished in a medical emergency 

(§ 17.101(b) of this chapter).

(iii) Other claims arising in 

connection with transactions of the 

Veterans Health Administration 

(§ 17.103(c) of this chapter). 

(iv) Fiscal officers at VA medical 

facilities are authorized to waive 

veterans’ debts arising from medical 

care copayments (§ 17.105(c) of this 

chapter). 

(3) Claims for erroneous payments of 

pay and allowances, and erroneous 

payments of travel, transportation, and 

relocation expenses and allowances, 

made to or on behalf of employees (5 

U.S.C. 5584). 

(b) The Under Secretary for Benefits 

may, at his or her discretion, assume 

original jurisdiction and establish an ad 

hoc Board to determine a particular 

issue arising within this section.

* * * * *

■ 44. Section 1.957 is amended by:

■ A. Revising paragraphs (a)(1) 

introductory text and (a)(1)(iii).

■ B. Removing paragraph (a)(3).

The revisions read as follows:

§ 1.957 Committee authority. 

(a) * * * 

(1) Waivers. A decision may be 

rendered to grant or deny waiver of 

collection of a debt in the following debt 

categories:

* * * * *

(iii) Services erroneously furnished 

(§ 17.101(a)).

* * * * *

■ 45. Section 1.958 is revised to read as 

follows:

§ 1.958 Finality of decisions. 

A decision by the regional office 

Committee, operating within the scope 

of its authority, denying waiver of all or 

part of a debt arising out of participation 

62202 Federal Register / Vol. 69, No. 205 / Monday, October 25, 2004 / Rules and Regulations 

in a VA benefit or home loan program, 

is subject to appeal in accordance with 

38 CFR parts 19 and 20. A denial of 

waiver of an erroneous payment of pay 

and allowances is subject to appeal in 

accordance with § 1.963a(a). There is no 

right of appeal from a decision rejecting 

a compromise offer.

(Authority: 38 U.S.C. 501 and 7104).

■ 46. Section 1.963a is revised to read as 

follows:

§ 1.963a Waiver; erroneous payments of 

pay and allowances. 

(a) The provisions applicable to VA 

(including refunds) concerning waiver 

actions relating to erroneous payments 

to VA employees of pay and allowances, 

and travel, transportation, and 

relocation expenses and allowances, are 

set forth in 5 U.S.C. 5584. The members 

of Committees on Waivers and 

Compromises assigned to waiver actions 

under § 1.955 of this part are delegated 

all authority granted the Secretary under 

5 U.S.C. 5584 to deny waiver or to grant 

waiver in whole or in part of any debt 

regardless of the amount of the 

indebtedness. Committee members also 

have exclusive authority to consider and 

render a decision on the appeal of a 

waiver denial or the granting of a partial 

waiver. However, the Chairperson of the 

Committee must assign the appeal to a 

different Committee member or 

members than the member or members 

who made the original decision that is 

now the subject of the appeal. The 

following are the only provisions of 

§§ 1.955 through 1.970 of this part 

applicable to waiver actions concerning 

erroneous payments of pay and 

allowances, and travel, transportation, 

and relocation expenses and 

allowances, under 5 U.S.C. 5584: 

§§ 1.955(a) through (e)(2), 

1.956(a)(introductory text) and (a)(3), 

1.959, 1.960, 1.963a, and 1.967(c). 

(b) Waiver may be granted under this 

section and 5 U.S.C. 5584 when 

collection would be against equity and 

good conscience and not in the best 

interest of the United States. Generally, 

these criteria will be met by a finding 

that the erroneous payment occurred 

through administrative error and that 

there is no indication of fraud, 

misrepresentation, fault, or lack of good 

faith on the part of the employee or 

other person having an interest in 

obtaining a waiver of the claim, and 

waiver would not otherwise be 

inequitable. Generally, waiver is 

precluded when an employee receives a 

significant unexplained increase in pay 

or allowances, or otherwise knows, or 

reasonably should know, that an 

erroneous payment has occurred, and 

fails to make inquiries or bring the 

matter to the attention of the 

appropriate officials. Waiver under this 

standard will depend upon the facts 

existing in each case. 

(c) An application for waiver must be 

received within 3 years immediately 

following the date on which the 

erroneous payment was discovered.

(Authority: 5 U.S.C. 5584; 38 U.S.C. 501).

■ 47. Section 1.965 is amended by 

removing paragraph (b)(3).

■ 48. Section 1.966 is amended by 

adding an authority citation at the end of 

the section to read as follows:

§ 1.966 Scope of waiver decisions.

* * * * *

(Authority: 38 U.S.C. 501, 5302).

■ 49. Section 1.970 is amended by 

removing ‘‘§§ 1.900 through 1.937’’ and 

adding, in its place, ‘‘§§ 1.930 through 

1.936’’ and by revising the authority 

citation at the end of the section to read 

as follows:

§ 1.970 Standards for compromise.

* * * * *

(Authority: 31 U.S.C. 3711; 38 U.S.C. 501, 

3720).

■ 50. Section 1.980 is amended by:

■ A. Revising paragraphs (a) and (b).

■ B. Redesignating paragraphs (f) and (g) 

as paragraphs (h) and (i).

■ C. Adding new paragraphs (f) and (g).

■ D. Revising newly redesignated 

paragraph (h). 

The revisions and additions read as 

follows:

§ 1.980 Scope.

(a) In accordance with 5 CFR part 550, 

subpart K, the provisions set forth in 

§§ 1.980 through 1.995 implement VA’s 

authority for the use of salary offset to 

satisfy certain debts owed to VA. 

(b) These regulations apply to offsets 

from the salaries of current employees 

of VA, or any other agency, who owe 

debts to VA. Offsets by VA from salaries 

of current VA employees who owe debts 

to other agencies shall be processed in 

accordance with procedures set forth in 

5 CFR part 550, subpart K.

* * * * *

(f) These regulations do not apply to 

a routine intra-agency adjustment of pay 

that is made to correct an overpayment 

of pay attributable to clerical or 

administrative errors or delays in 

processing pay documents, if the 

overpayment occurred within the four 

pay periods preceding the adjustment 

and, at the time of such adjustment, or 

as soon thereafter as practicable, the 

individual is provided written notice of 

the nature and amount of the 

adjustment and a point of contact for 

contesting such adjustment. 

(g) These regulations do not apply to 

any adjustment to collect a debt 

amounting to $50 or less, if at the time 

of such adjustment, or as soon thereafter 

as practicable, the individual is 

provided with written notice of the 

nature and amount of the adjustment 

and a point of contact for contesting 

such adjustment. 

(h) These regulations do not preclude 

the compromise, suspension, or 

termination of collection action under 

the Federal Claims Collection Standards 

(FCCS) (31 CFR parts 900–904) and VA 

regulations 38 CFR 1.930 through 1.944.

* * * * *

■ 51. Section 1.982 is amended by 

revising paragraphs (a), (b), and (c)(3) to 

read as follows:

§ 1.982 Salary offsets of debts involving 

benefits under the laws administered by VA. 

(a) VA will not collect a debt 

involving benefits under the laws 

administered by VA by salary offset 

unless the Secretary or appropriate 

designee first provides the employee 

with a minimum of 30 calendar days 

written notice. 

(b) If the employee has not previously 

appealed the amount or existence of the 

debt under 38 CFR parts 19 and 20 and 

the time for pursuing such an appeal 

has not expired (§ 20.302), the Secretary 

or appropriate designee will provide the 

employee with written notice of the 

debt. The written notice will state that 

the employee may appeal the amount 

and existence of the debt in accordance 

with the procedures set forth in 38 CFR 

parts 19 and 20 and will contain the 

determination and information required 

by § 1.983(b)(1) through (5), (7), (9), (10), 

and (12) though (14). The notice will 

also state that the employee may request 

a hearing on the offset schedule under 

the procedures set forth in § 1.984 and 

such a request will stay the 

commencement of salary offset. 

(c) * * * 

(3) That the employee may request a 

waiver of the debt pursuant to 38 CFR 

1.911(c)(2) subject to the time limits of 

38 U.S.C. 5302.

* * * * *

■ 52. Section 1.983 is amended by 

revising paragraphs (b)(8) and (b)(13) to 

read as follows:

§ 1.983 Notice requirements before salary 

offsets of debts not involving benefits 

under laws administered by VA.

* * * * *

(b) * * * 

(8) The VA employee’s right to 

request an oral or paper hearing on the 

Federal Register / Vol. 69, No. 205 / Monday, October 25, 2004 / Rules and Regulations 62203

Secretary or appropriate designee’s 

determination of the existence or 

amount of the debt, or the percentage of 

disposable pay to be deducted each pay 

period, so long as a request is filed by 

the employee as prescribed by the 

Secretary. A VA Board of Contract 

Appeals Administrative Judge or 

Hearing Examiner shall conduct such a 

hearing for any VA employee. A VA 

Board of Contract Appeals 

Administrative Judge or Hearing 

Examiner, or any other VA hearing 

official, may also conduct an oral or 

paper hearing at the request of a non-VA 

employee on the determination by an 

appropriately designated official of the 

employing agency of the existence or 

amount of the debt, or the percentage of 

disposable pay to be deducted each pay 

period, so long as a hearing request is 

filed by the non-VA employee as 

prescribed by the employing agency.

* * * * *

(13) The employee’s right, if 

applicable, to request waiver under 5 

U.S.C. 5584 and 38 CFR 1.963a and any 

other rights and remedies available to 

the employee under statutes or 

regulations governing the program for 

which the collection is being made; and

* * * * *

■ 53. Section 1.984 is amended by:

■ A. In paragraph (a), removing ‘‘20 

calendar days’’ and adding, in its place, 

‘‘30 calendar days’’.

■ B. In paragraph (b), removing ‘‘20 day 

period’’ and adding, in its place, ‘‘30-day 

period’’.

■ 54. In § 1.989, paragraph (a) is 

amended by removing ‘‘20 calendar 

days’’ and adding, in its place, ‘‘30 

calendar days’’.

■ 55. In § 1.990, paragraph (a) is 

amended by removing ‘‘20 calendar 

days’’ and adding, in its place, ‘‘30 

calendar days’’.

■ 56. Section 1.991 is amended by:

■ A. In paragraph (a), removing 

‘‘§§ 1.982, 19.1 through 19.200 or 

§ 1.988’’ and adding, in its place ‘‘§ 1.982 

or § 1.988, or parts 19 and 20’’.

■ B. Revising paragraph (d) to read as 

follows:

§ 1.991 Procedures for salary offset: when 

deductions may begin.

* * * * *

(d) If an employee retires, resigns, or 

his or her employment ends before 

collection of the amount of the 

indebtedness is completed, the 

remaining indebtedness will be 

collected according to procedures for 

administrative offset (see 5 CFR 

831.1801 through 831.1808, 31 CFR 

901.3, and 38 CFR 1.912).

■ 57. Section 1.992 is amended by 

revising paragraph (c) and the authority 

citation following paragraph (c) to read 

as follows:

§ 1.992 Procedures for salary offset.

* * * * *

(c) Imposition of interest, penalties, 

and administrative costs. Interest, 

penalties, and administrative costs shall 

be charged in accordance with 31 CFR 

901.9 and 38 CFR 1.915.

(Authority: 5 U.S.C. 5514; 38 U.S.C. 501).

■ 58. Section 1.995 is added to read as 

follows:

§ 1.995 Requesting recovery through 

centralized administrative offset. 

(a) Under 31 U.S.C. 3716, VA and 

other creditor agencies must notify 

Treasury of all debts over 180 days 

delinquent so that recovery of such 

debts may be made by centralized 

administrative offset. This includes 

those debts that VA and other agencies 

seek from the pay account of an 

employee of another Federal agency via 

salary offset. Treasury and other 

disbursing officials will match 

payments, including Federal salary 

payments, against these debts. Where a 

match occurs, and all the requirements 

for offset have been met, the payment 

will be offset to satisfy the debt in whole 

or part. 

(b) Prior to submitting a debt to 

Treasury for the purpose of collection 

by offset, including salary offset, VA 

shall provide written certification to 

Treasury that: 

(1) The debt is past due and legally 

enforceable in the amount submitted to 

Treasury and that VA will ensure that 

any subsequent collections are credited 

to the debt and that Treasury shall be 

notified of such; 

(2) Except in the case of a judgment 

debt or as otherwise allowed by law, the 

debt is referred to Treasury for offset 

within 10 years after VA’s right of action 

accrues; 

(3) VA has complied with the 

provisions of 31 U.S.C. 3716 and 38 CFR 

1.912 and 1.912a including, but not 

limited to, those provisions requiring 

that VA provide the debtor with 

applicable notices and opportunities for 

a review of the debt; and 

(4) VA has complied with the 

provisions of 5 U.S.C. 5514 (salary 

offset) and 38 CFR 1.980 through 1.994 

including, but not limited to, those 

provisions requiring that VA provide 

the debtor with applicable notices and 

opportunities for a hearing. 

(c) Specific procedures for notifying 

Treasury of debts for purposes of 

collection by centralized administrative 

offset are contained in the 31 CFR 285.7. 

VA and other creditor agencies may 

notify Treasury of debts that have been 

delinquent for 180 days or less, 

including debts that VA and other 

creditor agencies seek to recover from 

the pay of an employee via salary offset.

(Authority: 31 U.S.C. 3716; 38 U.S.C. 501).

PART 2—DELEGATIONS OF 

AUTHORITY

■ 1. The authority citation for part 2 is 

revised to read as follows:

Authority: 5 U.S.C. 302, 552a; 38 U.S.C. 

501, 512, 515, 1729, 1729A, 5711; 44 U.S.C. 

3702, and as noted in specific sections.

■ 2. Section 2.6 is amended by:

■ A. Revising the heading of paragraph 

(c).

■ B. In paragraph (c)(1), removing 

‘‘Assistant Secretary for Finance and 

Information Resources Management’’

and adding, in its place, ‘‘Assistant 

Secretary for Management’’.

■ C. In paragraph (c)(2), removing 

‘‘Assistant Secretary for Finance and 

Information Resources Management’’

each time it appears and adding, in its 

place, ‘‘Assistant Secretary for 

Management’’.

■ D. Revising paragraph (d).

■ E. In paragraph (e), removing the 

heading of paragraph (e)(4) introductory 

text, and revising the authority citations 

following paragraphs (e)(4)(iii) and 

(e)(9). 

The revisions read as follows:

§ 2.6 Secretary’s delegations of authority 

to certain officials (38 U.S.C. 512).

* * * * *

(c) Office of Management.

* * * * *

(d) Assistant Secretary for 

Management (Chief Financial Officer); 

administration heads and staff office 

directors. The Assistant Secretary for 

Management (Chief Financial Officer) is 

delegated authority to take appropriate 

action (other than provided for in 

paragraphs (e)(3) and (e)(4) of this 

section) in connection with the 

collection of civil claims by VA for 

money or property, as authorized in 

§ 1.900, et seq. The Assistant Secretary 

for Management (Chief Financial 

Officer) may redelegate such authority 

as he/she deems appropriate to 

administration heads and staff office 

directors.

(Authority: 38 U.S.C. 501, 512).

(e) * * * 

(4) * * * 

(iii) * * *

62204 Federal Register / Vol. 69, No. 205 / Monday, October 25, 2004 / Rules and Regulations 

(Authority: 31 U.S.C. 3711(a)(2); 38 U.S.C. 

501, 512).

* * * * *

(9) * * *

(Authority: 38 U.S.C. 501, 512, 1729(c)(1)).

* * * * *

[FR Doc. 04–23754 Filed 10–22–04; 8:45 am] 

BILLING CODE 8320–01–P

DEPARTMENT OF VETERANS 

AFFAIRS 

38 CFR 17 

RIN 2900–AK29 

Waivers

AGENCY: Department of Veterans Affairs.

ACTION: Final rule.

SUMMARY: This document amends VA’s 

medical regulation to give Fiscal 

Officers at VA medical facilities the 

authority to waive veterans’ debts 

arising from the medical care copayments. This change in regulation 

will codify an existing 1995 delegation 

of authority to Fiscal Officers from the 

Secretary of Veterans Affairs. The 

purpose of this 1995 delegation was to 

increase the efficiency of the waiver 

process.

DATES: Effective Date: This rule shall 

become effective on November 24, 2004.

FOR FURTHER INFORMATION CONTACT:

Eileen P. Downey, Business Policy, 

Veterans Health Administration, Chief 

Business Office (16), 810 Vermont 

Avenue, NW., Washington DC 20420, 

(202) 254–0347.

SUPPLEMENTARY INFORMATION: In a 

document published in the Federal 

Register on April 20, 2004 (69 FR 

21075), we proposed amending 38 CFR 

17.105 to give Fiscal Officers at VA 

medical facilities the authority to waive 

veterans’ debts arising from the medical 

care co-payments. 

We asked interested parties to submit 

comments on or before June 21, 2004. 

We received no comments. Based on the 

rationale noted above and as set forth in 

the proposed rule, we are adopting the 

proposed rule as a final rule without 

change. 

Unfunded Mandates 

The Unfunded Mandates Reform Act 

requires, at 2 U.S.C. 1532, that agencies 

prepare an assessment of anticipated 

costs and benefits before developing any 

rule that may result in expenditure by 

State, local, or tribal governments, in the 

aggregate, or by the private sector, of 

$100 million or more in any given year. 

This rule will have no such effect on 

State, local or tribal governments, or the 

private sector. 

Paperwork Reduction Act 

Although this document contains 

provisions constituting a collection of 

information in 38 CFR 17.105 (c) 

referencing VA Form 5655, under the 

provision of the Paperwork Reduction 

Act (44 U.S.C. 3501–3521), no new or 

proposed revised collections of 

information are associated with this 

final rule. The Office of Management 

and Budget has approved this 

information collection in VA Form 5655 

under control number 2900–0165. 

Regulatory Flexibility Act 

The Secretary hereby certifies that 

this final rule would not have a 

significant economic impact on a 

substantial number of small entities as 

they are defined in the Regulatory 

Flexibility Act, 5 U.S.C. 601 through 

612. The final rule would not cause a 

significant economic impact on health 

care providers, suppliers, or entities 

since only a small portion of the 

business of such entities concerns VA 

beneficiaries. Therefore, pursuant to 5 

U.S.C. 605(b), the final rule is exempt 

from the initial and final regulatory 

flexibility analysis requirements of 

sections 603 and 604. 

Catalog of Federal Domestic Assistance 

Numbers 

The Catalog of Federal Domestic 

Assistance numbers for the programs 

affected by this document are 64.005, 

64.007, 64.008, 64.009, 64.010, 64.011, 

64.012, 64.013, 64.014, 64.015, 64.016, 

64.018, 64.019, 64.022, 64.024 and 

64.025.

List of Subjects in 38 CFR Part 17 

Administrative practice and 

procedure, Alcohol abuse, Alcoholism, 

Claims, Day care, Dental health, Drug 

abuse, Foreign relations, Government 

contracts, Grant programs-health, Grant 

programs-veterans, Health care, Health 

facilities, Health professions, Health 

records, Homeless, Medical and dental 

schools, Medical devices, Medical 

research, Mental health programs, 

Nursing homes, Philippines, Reporting 

and record-keeping requirements, 

Scholarships and fellowships, Travel 

and transportation expenses, Veterans.

Approved: October 15, 2004. 

Anthony J. Principi, 

Secretary of Veterans Affairs.

■ For the reasons set out in the preamble, 

38 CFR part 17 is amended as set forth 

below:

■ 1. The authority citation for part 17 

continues to read as follows:

Authority: 38 U.S.C. 501, 1721, unless 

otherwise noted.

■ 2. Section 17.105 is amended by:

■ A. In paragraph (a), removing 

‘‘§ 17.101(a)’’ and adding, in its place, 

‘‘§ 17.102’’.

■ B. Redesignating paragraph (c) as (d).

■ C. Adding a new paragraph (c).

■ D. Adding the OMB information 

collection approval number 

parenthetical immediately following 

paragraph (d).

■ E. Adding an authority citation at the 

end of the section. 

The additions read as follows:

§ 17.105 Waivers.

* * * * *

(c) Of charges for copayments. If the 

debt represents charges for outpatient 

medical care, inpatient hospital care, 

medication or extended care services 

copayments made under §§ 17.108, 

17.110 or 17.111 of this chapter, the 

claimant must request a waiver by 

submitting VA Form 5655 (Financial 

Status Report) to a Fiscal Officer at a VA 

medical facility where all or part of the 

debt was incurred. The claimant must 

submit this form within the time period 

provided in § 1.963(b) of this chapter 

and may request a hearing under 

§ 1.966(a) of this chapter. The Fiscal 

Officer may extend the time period for 

submitting a claim if the Chairperson of 

the Committee on Waivers and 

Compromises could do so under 

§ 1.963(b) of this chapter. The Fiscal 

Officer will apply the standard ‘‘equity 

and good conscience’’ in accordance 

with §§ 1.965 and 1.966(a) of this 

chapter, and may waive all or part of the 

claimant’s debts. A decision by the 

Fiscal Officer under this provision is 

final (except that the decision may be 

reversed or modified based on new and 

material evidence, fraud, a change in 

law or interpretation of law, or clear and 

unmistakable error shown by the 

evidence in the file at the time of the 

prior decision as provided in § 1.969 of 

this chapter) and may be appealed in 

accordance with 38 CFR parts 19 and 

20.

* * * * *

(The Office of Management and 

Budget has approved the information 

collection requirements in this section 

under control number 2900–0165.)

(Authority: 38 U.S.C. 501, 1721, 1722A, 

1724)

[FR Doc. 04–23758 Filed 10–22–04; 8:45 am] 

BILLING CODE 8320–01–P