Thursday 

April 2, 1998 

federal register
 Part V 

Department of the 

Treasury 

Fiscal Service 

31 CFR Part 285 

Transfer of Debts to Treasury for 

Collection; Interim Rule 

16353 
16354 Federal Register / Vol. 63, No. 63 / Thursday, April 2, 1998 / Rules and Regulations 

DEPARTMENT OF THE TREASURY 

Fiscal Service 

31 CFR PART 285 

RIN 1510–AA68 

Transfer of Debts to Treasury for 

Collection 

AGENCY: Financial Management Service, 

Fiscal Service, Treasury. 

ACTION: Interim rule with request for 

comments. 

SUMMARY: The Debt Collection 

Improvement Act of 1996 (DCIA) 

requires Federal agencies to transfer any 

nontax debt which is over 180 days 

delinquent to the Department of the 

Treasury for debt collection action; this 

is known as ‘‘cross-servicing.’’ This rule 

establishes the procedures and criteria 

for transferring delinquent debt to the 

Department of the Treasury, explains 

the statutory exceptions to this 

requirement, and establishes standards 

under which the Secretary of the 

Treasury will make a determination 

whether or not to grant exemptions. 

This rule also mandates that agencies 

refer debts to private collection 

contractors and to debt collection 

centers in accordance with procedures 

established by the Financial 

Management Service. 

DATES: Effective: April 2, 1998. 

Comments must be received on or 

before May 4, 1998. 

ADDRESSES: All comments should be 

addressed to Gerry Isenberg, Financial 

Program Specialist, Debt Management 

Services, Financial Management 

Service, 401 14th Street SW, Room 151, 

Washington, D.C. 20227. A copy of this 

rule is being made available for 

downloading from the Financial 

Management Service web site at the 

following address: http:// 

www.fms.treas.gov. 

FOR FURTHER INFORMATION CONTACT: 

Gerry Isenberg, Financial Program 

Specialist, at (202) 874–6859; or Ellen 

Neubauer or Ronda Kent, Senior 

Attorneys, at (202) 874–6680. 

SUPPLEMENTARY INFORMATION: 

Background 

Section 31001(m)(1) of the Debt 

Collection Improvement Act of 1996 

(DCIA), Pub. L. 104–134, 110 Stat. 

1321–358 (1996), codified at 31 U.S.C. 

3711(g), requires Federal agencies to 

transfer to the Secretary of the Treasury 

any nontax debt that has been 

delinquent for a period of 180 days. 

Upon such transfer the Secretary of the 

Treasury will take appropriate action to 

collect or terminate collection action on 

the debt. The DCIA lists several 

exemptions to this requirement. In 

addition, the Secretary of the Treasury 

may exempt any class of debts from this 

requirement. 

Under the DCIA, the Secretary of the 

Treasury is authorized to prescribe 

regulations as the Secretary considers 

necessary to carry out this requirement. 

The Financial Management Service 

(FMS), a bureau of the Department of 

the Treasury, is responsible for 

promulgating the regulations governing 

this and other provisions of the DCIA. 

This rule describes when a debt must be 

transferred to the Department of the 

Treasury for debt collection action and 

when a debt will be considered in an 

exempt category. This rule explains the 

relationship between the requirement to 

transfer debt to Treasury for debt 

collection action (i.e., cross-servicing) 

and the DCIA requirement, codified at 

31 U.S.C. 3716(c), that agencies notify 

the Secretary of the Treasury of all debt 

over 180 days delinquent for purposes 

of administrative offset. This rule also 

describes the factors that the Secretary 

of the Treasury will consider in 

determining whether to exempt a class 

of debts from the mandatory provisions 

of 31 U.S.C. 3711(g). 

The DCIA also authorizes the 

Secretary of the Treasury to designate 

other Federal agencies as debt collection 

centers and to maintain a schedule of 

private collection contractors eligible for 

referral of debts owed to the United 

States. This rule mandates that agencies 

refer debts to debt collection centers and 

to private collection contractors in 

accordance with procedures established 

by the FMS. 

Readers are reminded that most of the 

provisions of the DCIA became effective 

upon enactment on April 26, 1996. FMS 

is publishing this rule to clarify and 

interpret the DCIA provisions pertaining 

to the referral of debts to the Department 

of the Treasury and Treasury-designated 

debt collection centers for collection 

action. However, publication of this rule 

does not delay the effective date of the 

DCIA, nor does it postpone the duty of 

Federal agencies to comply with the 

provisions of the DCIA. 

Section Analysis 

(a) Definitions 

The intent of 31 U.S.C. 3711(g) is to 

centralize the collection of delinquent 

debt owed to the Government within 

Treasury, which has the authority to 

designate debt collection centers to 

administer centralized collection. 

Therefore, the definitions in paragraph 

(a) of this rule are intended to apply to 

every Federal agency in the Government 

and every entity who owes delinquent 

nontax debt to the Federal Government. 

(b) General Rule 

Paragraph (b) of this section explains 

that ‘‘cross-servicing’’ is the term used 

to refer to the function performed by a 

Federal agency that is providing debt 

collection services for another Federal 

agency. Debt collection services may 

include, but are not limited to, sending 

demand letters, telephoning the debtor, 

and referring the debt for collection by 

offset or by a private collection 

contractor. The Department of the 

Treasury and debt collection centers, 

more fully described in paragraph (f) of 

this section, are authorized to perform 

cross-servicing. 

(c) Mandatory Transfer to FMS 

Paragraph (c)(1) of this section states 

the general rule that unless a nontax 

debt which is over 180 days delinquent 

falls within one of the exempt categories 

listed under paragraph (d) of this 

section, it must be transferred to the 

Financial Management Service (FMS) of 

the Department of the Treasury for 

collection action. For accounting and 

reporting purposes, however, the debt 

remains on the books and records of the 

agency which transferred the debt, i.e., 

the creditor agency. The terms 

‘‘transfer’’ and ‘‘refer’’ (see paragraph 

(h), below) as used in this rule have the 

same meaning. 

Paragraph (c)(2) of this section 

describes the actions which FMS may 

take relative to a debt which is 

transferred to FMS under this 

paragraph. Paragraph (c)(2) clarifies that 

FMS will take action upon a debt in 

accordance with the statutory and 

regulatory requirements and other 

authorities that apply to that debt or to 

the particular action being taken subject 

to terms and conditions agreed upon, in 

writing, between FMS and the creditor 

agency. Transfer of a debt to FMS does 

not change the rights and/or obligations 

of the debtor. Thus, for example, if an 

agency’s authority to compromise a 

certain type of debt is set forth in a 

statute or regulation, that statute or 

regulation would continue to govern. 

Paragraph (c)(3) of this section 

describes when a debt will be 

considered 180 days delinquent for 

purposes of mandatory transfer to FMS. 

Paragraph (c)(3) recognizes that there 

are circumstances where 180 days or 

more has passed from the time a debt is 

first established as delinquent on an 

agency’s books and records, but 

collection action on that debt may not 

be appropriate either because there has 

not been a final agency determination 
Federal Register / Vol. 63, No. 63 / Thursday, April 2, 1998 / Rules and Regulations 16355 

regarding the debt, or there is a legal bar 

to further collection action. The 180 day 

period begins when the creditor agency 

first establishes the debt as delinquent 

and continues to run even though 

collection action may be barred. 

Nevertheless, agencies are not required 

to transfer to FMS debts which are over 

180 days delinquent until such time as 

a final agency determination regarding 

the debt is made or the legal bar to 

further collection action is removed. For 

example, agencies are not required to 

transfer debt where the amount due is 

in dispute and the agency has not yet 

made a final determination regarding 

the amount due; where an 

administrative appeals process is 

pending and continued collection action 

during the appeals process is 

prohibited; or where the automatic stay 

in a bankruptcy proceeding applies. 

Once a final agency determination 

regarding the debt is made or the legal 

bar to further collection action is 

removed, however, the debt must be 

immediately transferred to FMS. 

Agencies are cautioned that 

circumstances where an agency’s 

determination regarding a debt is still 

pending at the time the debt is 180 days 

delinquent should generally exist only 

where an applicable statute or 

regulation requires it. In all other 

circumstances, agency determinations 

regarding debts must be made within 

reasonable time frames which, absent 

compelling circumstances, should not 

exceed 180 days from the time the debt 

is first established. 

(d) Exceptions to Mandatory Transfer 

Paragraph (d) of this section describes 

more fully the exceptions to mandatory 

transfer listed in the DCIA. Paragraph 

(d)(1) lists the statutory exceptions. 

Paragraph (d)(2) more fully describes 

each exception. 

Under paragraph (d)(2)(i) of this 

section, a debt is in litigation only if it 

has been referred to the Attorney 

General for litigation or if proceedings 

before a court of competent jurisdiction 

are actually pending. For debts which 

have been referred to the Attorney 

General for litigation, it is not necessary 

that court proceedings actually be 

pending. For other debts, however, such 

as debts owed to agencies with 

independent litigating authority or those 

debts which are the subject of defensive 

litigation, proceedings before a court 

must actually be pending. A debt which 

has only been referred to agency counsel 

for legal review is not considered to be 

in litigation. Nothing in the DCIA or in 

this rule is intended to affect an 

agency’s authority to refer debts, which 

are not subject to mandatory transfer to 

FMS, to the Attorney General where 

appropriate. 

Under paragraph (d)(2)(ii) of this 

section, a debt is in foreclosure if 

judicial foreclosure proceedings before a 

court of competent jurisdiction are 

actually pending or a Notice of Default 

or comparable action required under 

applicable law to initiate a nonjudicial 

foreclosure proceeding against real or 

personal property has been issued. 

Additionally, for a debt to be considered 

in foreclosure it is also necessary that 

the agency expects to receive proceeds 

from the foreclosure which may be 

applied to the debt. 

Under paragraph (d)(3) of this section, 

a debt is scheduled for sale only if it is 

scheduled to be sold under an 

established asset sales program within 

one year (or longer if approved by the 

Office of Management and Budget) from 

the time it is eligible for sale, that is, 

from the time the debt has been 

approved to be included in an asset 

sales program. 

Under paragraph (d)(4) of this section, 

a debt is at a private collection 

contractor only if it has been referred to 

a private collection contractor in 

accordance with paragraph (e) of this 

section. 

Under paragraph (d)(5) of this section, 

a debt is at a debt collection center only 

if it has been referred to a debt 

collection center in accordance with 

paragraph (f) of this section. 

Under paragraph (d)(6) of this section, 

a debt is being collected by internal 

offset only if an internal offset has been 

initiated and the agency expects that the 

debt will be collected in full within 

three years from the date of 

delinquency. An internal offset will be 

considered to have been initiated if 

funds payable to the debtor by the 

creditor agency have been withheld or, 

in cases where prior notice to the debtor 

is required, if such notice has been 

issued. 

Paragraph (d)(7) of this section sets 

forth the factors the Secretary of the 

Treasury will consider in granting 

exemptions for other classes of debts. 

Generally, the presumption is that an 

exemption will not be granted absent 

compelling circumstances. 

(e) Schedule of Private Collection 

Contractors 

The DCIA requires the Secretary of 

the Treasury to maintain a schedule of 

private collection contractors eligible to 

receive debts owed to Federal agencies. 

FMS and other debt collection centers 

must utilize this schedule of contractors 

when referring debts to a private 

collection contractor. Agencies which 

refer debts which are less than 180 days 

delinquent to private collection 

contractors may utilize this schedule of 

contractors provided they do so in 

accordance with procedures established 

by FMS. Agencies are not required to 

use this schedule of contractors for 

debts which are less than 180 days 

delinquent or for debts which are 

otherwise exempt from the mandatory 

transfer requirement described in 

paragraph (c) of this section. 

(f) Debt Collection Centers 

Paragraph (f) of this section explains 

that a debt collection center is a Federal 

agency designated by the Secretary of 

the Treasury, under standards and terms 

established by the Secretary, to collect 

debts owed to the United States. A debt 

collection center may be an agency, or 

a unit or subagency within a Federal 

agency. Debt collection centers will take 

action upon a debt in accordance with 

the statutory or regulatory requirements 

and other authorities that apply to the 

debt or to the particular action being 

taken. Debt collection centers are 

authorized, subject to the terms under 

which the debt collection center has 

been designated as such by the 

Secretary of the Treasury, to take any 

action on behalf of the creditor agency 

to collect, compromise, suspend or 

terminate collection action on debts, in 

accordance with the terms and 

conditions set forth, in writing, by the 

creditor agency. The action a debt 

collection center may take is intended to 

be interpreted broadly to include 

actions, such as reporting debts to credit 

bureaus and obtaining credit reports, 

which facilitate collection. 

(g) Administrative Offset 

This section explains the relationship 

between (1) the DCIA requirement that 

debts over 180 days delinquent be 

transferred to Treasury for collection 

action (i.e., cross-servicing) and (2) the 

DCIA requirement that agencies notify 

the Secretary of the Treasury of debts 

over 180 days delinquent for purposes 

of administrative offset. Debts which are 

transferred to FMS or a Treasurydesignated debt collection center under 

this rule will, where appropriate, be 

referred for collection by administrative 

offset and agencies are not required to 

take any further action to comply with 

the DCIA requirement regarding 

administrative offset. Debts not 

transferred under this rule, for example, 

debts which fall within one of the 

exempt categories, may nevertheless be 

subject to the mandatory offset 

requirement. 
16356 Federal Register / Vol. 63, No. 63 / Thursday, April 2, 1998 / Rules and Regulations 

(h) Voluntary Referral of Debts Less 

Than 180 Days Delinquent. 

Although agencies are required to 

transfer debt to FMS which is more than 

180 days delinquent, paragraph (h) of 

this section is intended to clarify that 

agencies may voluntarily refer debt less 

than 180 days delinquent to FMS, to a 

private collection contractor in 

accordance with paragraph (e) of this 

section and procedures established by 

FMS, or to a debt collection center in 

accordance with paragraph (f) of this 

section and procedures established by 

FMS. As noted above, the terms 

‘‘transfer’’ and ‘‘refer’’ as used in this 

rule have the same meaning. 

(i) Certification 

Paragraph (i) of this section describes 

the requirement that the head of an 

agency or someone with authority to act 

on behalf of the head of the agency with 

regard to debt collection matters, must 

certify to FMS or to a debt collection 

center that debts transferred are valid, 

legally enforceable, that there are no 

legal bars to collection, and that all due 

process requirements have been met. 

This means that the agency must certify 

that it has made a final determination 

that the debt is due in the amount 

transferred, that there are no legal bars 

to collection such as bankruptcy, and 

that the agency has provided (or has 

arranged to provide) the debtor with 

notice and an opportunity to be heard 

where required as a prerequisite to a 

particular collection action. In addition, 

paragraph (i) explains that the creditor 

agency is responsible for notifying FMS 

of any changes to the status of the legal 

enforceability of the debt. For example, 

unless the creditor agency determines 

that the automatic stay imposed at the 

time of a bankruptcy 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. Therefore, it is imperative 

that the creditor agency notify FMS 

immediately upon learning that a 

bankruptcy petition has been filed with 

respect to a debtor. 

(j) Fees 

Paragraph (j) of this section describes 

the DCIA authority for FMS and debt 

collection centers to charge fees, to 

retain fees from amounts collected, and 

to deposit and use fees. Paragraph (j) of 

this section also describes the authority 

for creditor agencies to add these fees to 

the amount of the debt. 

Regulatory Analysis 

This interim rule is not a significant 

regulatory action as defined in 

Executive Order 12866. Because no 

notice of proposed rulemaking is 

required for this interim rule, the 

provisions of the Regulatory Flexibility 

Act do not apply. 

Special Analyses 

FMS is promulgating this interim rule 

without opportunity for prior public 

comment pursuant to the 

Administrative Procedure Act, 5 U.S.C. 

553 (the ‘‘APA’’), because FMS has 

determined, for the following reasons, 

that a comment period would be 

unnecessary, impracticable, and 

contrary to the public interest. The 

DCIA was effective immediately upon 

its enactment on April 26, 1996. In 

implementing the DCIA provision 

requiring Federal agencies to transfer 

debt over 180 days delinquent to 

Treasury for debt collection, FMS has 

identified the need to provide guidance 

to Federal agencies. To ensure that this 

guidance was provided in a consistent 

and meaningful manner, FMS has 

determined that a rule is desirable. 

Nothing in this rule impacts the rights 

or obligations of debtors nor changes the 

authorities under which Federal 

agencies collect debt. This rule provides 

critical guidance needed to facilitate the 

ongoing transfer of debts to Treasury for 

debt collection. Thus, FMS believes that 

it is in the public interest to issue this 

interim rule without opportunity for 

prior public comment. 

The public is invited to submit 

comments on the interim rule which 

will be taken into account before a final 

rule is issued. 

FMS has determined that good cause 

exists to make this interim rule effective 

upon publication without providing the 

30 day period between publication and 

the effective date contemplated by 5 

U.S.C. 553(d). The purpose of a delayed 

effective date is to afford persons 

affected by a rule a reasonable time to 

prepare for compliance. However, in 

this case, the requirement to transfer 

debt to Treasury for debt collection 

became effective on April 26, 1996. 

Inasmuch as this interim rule provides 

important guidance that is expected to 

facilitate full implementation of the 

authority contained in the law, FMS 

believes that good cause exists to make 

the rule effective upon publication. 

List of Subjects in Part 285 

Administrative Practice and 

Procedure, Credit, Debt, Loan Programs 

Authority and Issuance 

For the reasons set forth in the 

preamble, 31 CFR part 285 is amended 

as follows: 

PART 285—DEBT COLLECTION 

AUTHORITIES UNDER THE DEBT 

COLLECTION IMPROVEMENT ACT OF 

1996 

1. The authority citation for Part 285 

is revised to read as follows: 

Authority: 26 U.S.C. 6402; 31 U.S.C. 321, 

3701, 3711, 3716, 3720A; E.O. 13019, 3 CFR, 

1996 Comp., p. 216. 

2. Subpart B is added to Part 285 to 

read as follows: 

Subpart B—Authorities Other Than Offset 

Sec.


285.11 [Reserved]


285.12 Transfer of debts to Treasury for


Debt collection 

Subpart B—Authorities Other Than 

Offset 

§ 285.11 [Reserved] 

§ 285.12 Transfer of Debts to Treasury for 

debt collection. 

(a) Definitions. For purposes of this 

section: 

Agency means a department, agency, 

court, court administrative office, or 

instrumentality in the executive, 

judicial, or legislative branch of the 

Federal Government, including 

government corporations. 

Creditor agency means any Federal 

agency that is owed a debt. 

Debt means any amount of money, 

funds or property that has been 

determined by an appropriate official of 

the Federal government to be owed to 

the United States by a person. As used 

in this rule, the term ‘‘debt’’ does not 

include debts arising under the Internal 

Revenue Code of 1986 or the tariff laws 

of the United States. 

FMS means the Financial 

Management Service, a bureau of the 

Department of the Treasury. 

Person means an individual, 

corporation, partnership, association, 

organization, State or local government, 

or any other type of entity other than a 

Federal agency. 

Secretary means the Secretary of the 

Treasury. 

(b) In general. Cross-servicing means 

that FMS, a Federal agency, or a unit or 

subdivision within a Federal agency, 

under a designation by the Secretary of 

the Treasury, is taking appropriate debt 

collection action on behalf of one or 

more Federal agencies or unit or 

subdivision thereof. Agencies which 

provide such cross-servicing are known 

as debt collection centers. 

(c) Mandatory transfer of debts to 

FMS. (1) Except as set forth in paragraph 

(d) of this section, a creditor agency 

shall transfer any debt that is more than 

180 days delinquent to FMS for debt 
Federal Register / Vol. 63, No. 63 / Thursday, April 2, 1998 / Rules and Regulations 16357 

collection services. For accounting and 

reporting purposes, the debt remains on 

the books and records of the agency 

which transferred the debt. 

(2) On behalf of the creditor agency, 

FMS will take appropriate action to 

collect or compromise the transferred 

debt, or to suspend or terminate 

collection action thereon, in accordance 

with the statutory and regulatory 

requirements and authorities applicable 

to the debt and the action. Appropriate 

action to collect a debt may include 

referral to another debt collection 

center, a private collection contractor, or 

the Department of Justice for litigation. 

The creditor agency shall advise FMS, 

in writing, of any specific statutory or 

regulatory requirements pertaining to 

their debt and will agree, in writing, to 

a collection strategy which includes 

parameters for entering into 

compromise and repayments 

agreements with debtors. 

(3) A debt is considered 180 days 

delinquent for purposes of this section 

if it is 180 days past due and is legally 

enforceable. A debt is legally 

enforceable if there has been a final 

agency determination that the debt, in 

the amount stated, is due and there are 

no legal bars to collection action. 

Where, for example, a debt is the subject 

of a pending administrative review 

process required by statute or regulation 

and collection action during the review 

process is prohibited, the debt is not 

considered legally enforceable for 

purposes of mandatory transfer to FMS 

and is not to be transferred even if the 

debt is more than 180 days past-due. 

Once there has been a final agency 

determination that the debt, in the 

amount stated, is due and there are no 

legal bars to collection action, however, 

any debt over 180 days delinquent must 

be immediately transferred to FMS. 

Nothing in this section is intended to 

impact the date of delinquency of a debt 

for other purposes such as for purposes 

of accruing interest and penalties. 

(d) Exceptions to mandatory transfer. 

(1) A creditor agency is not required to 

transfer a debt to FMS pursuant to 

paragraph (c)(1) of this section only 

during such period of time that the debt: 

(i) Is in litigation or foreclosure as 

described in paragraph (d)(2) of this 

section; 

(ii) Is scheduled for sale as described 

in paragraph (d)(3) of this section; 

(iii) Is at a private collection 

contractor if the debt has been referred 

to a private collection contractor in 

accordance with paragraph (e) of this 

section; 

(iv) Is at a debt collection center if the 

debt has been referred to a Treasurydesignated debt collection center in 

accordance with paragraph (f) of this 

section; 

(v) Is being collected by internal offset 

as described in paragraph (d)(4) of this 

section; or 

(vi) Is covered by an exemption 

granted by the Secretary as described in 

paragraph (d)(5) of this section. 

(2)(i) A debt is in litigation if: 

(A) The debt has been referred to the 

Attorney General for litigation by the 

creditor agency; or 

(B) The debt is the subject of 

proceedings pending in a court of 

competent jurisdiction, including 

bankruptcy proceedings, whether 

initiated by the creditor agency, the 

debtor, or any other party. 

(ii) A debt is in foreclosure if: 

(A)(1) Collateral securing the debt is 

the subject of judicial foreclosure 

proceedings in a court of competent 

jurisdiction; or 

(2) Notice has been issued that 

collateral securing the debt will be 

foreclosed upon, liquidated, sold, or 

otherwise transferred pursuant to 

applicable law in a nonjudicial 

proceeding; and 

(B) The creditor agency anticipates 

that proceeds will be available from the 

liquidation of the collateral for 

application to the debt. 

(3) A debt is scheduled for sale if: 

(i) The debt will be disposed of under 

an asset sales program within one (1) 

year after becoming eligible for sale; or 

(ii) The debt will be disposed of under 

an asset sales program and a schedule 

established by the creditor agency and 

approved by the Director of the Office 

of Management and Budget. 

(4) A debt is being collected by 

internal offset if a creditor agency 

expects the debt to be collected in full 

within three (3) years from the date of 

delinquency through internal offset. 

‘‘Internal offset’’ means withholding of 

funds payable by the creditor agency to 

the debtor to satisfy, in whole or part, 

the debt owed to the creditor agency by 

that debtor. 

(5)(i) Upon the written request of the 

head of an agency, or as the Secretary 

may determine on his/her own 

initiative, the Secretary may exempt any 

class of debts from the application of the 

requirement described in paragraph 

(c)(1) of this section. In determining 

whether to exempt a class of debts, the 

Secretary will determine whether 

exemption is in the best interests of the 

Government after considering the 

following factors: 

(A) Whether an exemption is the best 

means to protect the government’s 

financial interest, taking into 

consideration the number, dollar 

amount, age and collection rates of the 

debts for which exemption is requested; 

(B) Whether the nature of the program 

under which the delinquencies have 

arisen is such that the transfer of such 

debts would interfere with program 

goals; and 

(C) Whether an exemption would be 

consistent with the purposes of the Debt 

Collection Improvement Act of 1996 

(DCIA), Pub. L. 104–134, 110 Stat. 

1321–358 (April 26, 1996). 

(ii) Requests for exemptions must 

clearly identify the class of debts for 

which an exemption is sought and must 

explain how application of the factors 

listed above to that class of debts 

warrants an exemption. 

(e) Schedule of private collection 

contractors. FMS will maintain a 

schedule of private collection 

contractors eligible for referral of debts 

from FMS, other debt collection centers, 

and creditor agencies for collection 

action. An agency with debt which has 

not been transferred to FMS or referred 

to another debt collection center, for 

example, debt that is less than 180 days 

delinquent, may refer such debt to a 

private collection contractor listed on 

FMS’ schedule of private collection 

contractors provided they do so in 

accordance with procedures established 

by FMS. Alternatively, an agency may 

refer debt that is less than 180 days 

delinquent to a private collection 

contractor pursuant to a contract 

between the creditor agency and the 

private collection contractor, as 

authorized by law. 

(f) Debt collection centers. A debt 

collection center is a Federal agency or 

a unit or subagency within a Federal 

agency that has been designated by the 

Secretary of the Treasury to collect debt 

owed to the United States. FMS is a debt 

collection center. Debt collection 

centers will take action upon a debt in 

accordance with the statutory or 

regulatory requirements and other 

authorities that apply to the debt or to 

the particular action being taken. Debt 

collection centers may, on behalf of the 

creditor agency, subject to the terms 

under which the debt collection center 

has been designated as such by the 

Secretary, take any action to collect, 

compromise, suspend or terminate 

collection action on debts in accordance 

with terms and conditions agreed upon 

in writing by the creditor agency and 

the debt collection center or FMS. 

(g) Administrative offset. As described 

in paragraph (c) of this section, under 

the DCIA agencies are required to 

transfer all debts over 180 days 

delinquent to FMS for purposes of debt 

collection (i.e., cross-servicing). 

Agencies are also required, under the 
16358 Federal Register / Vol. 63, No. 63 / Thursday, April 2, 1998 / Rules and Regulations 

DCIA, to notify the Secretary of all debts 

over 180 days delinquent for purposes 

of administrative offset. Administrative 

offset is one type of collection tool used 

by FMS and Treasury-designated debt 

collection centers to collect debts 

transferred under this section. Thus, by 

transferring debt to FMS or to a 

Treasury-designated debt collection 

center under this section, Federal 

agencies will satisfy the requirement to 

notify the Secretary of debts for 

purposes of administrative offset and 

duplicate referrals are not required. A 

debt which is not transferred to FMS for 

purposes of debt collection, however, 

such as a debt which falls within one of 

the exempt categories listed in 

paragraph (d) of this section, 

nevertheless, may be subject to the 

DCIA requirement of notification to the 

Secretary for purposes of administrative 

offset. 

(h) Voluntary referral of debts less 

than 180 days delinquent. A creditor 

agency may refer any debt that is less 

than 180 days delinquent to FMS or, 

with the consent of FMS, to a Treasurydesignated debt collection center for 

debt collection services. 

(i) Certification. Before a debt may be 

transferred to FMS or another debt 

collection center, the head of the 

creditor agency or his or her delegatee 

must certify, in writing, that the debts 

being transferred are valid, legally 

enforceable, and that there are no legal 

bars to collection. Creditor agencies 

must also certify that they have 

complied with all prerequisites to a 

particular collection action under the 

laws, regulations or policies applicable 

to the agency unless the creditor agency 

has requested, and FMS has agreed, to 

do so on the creditor agency’s behalf. 

The creditor agency shall notify FMS 

immediately of any change in the status 

of the legal enforceability of the debt, for 

example, if the creditor agency receives 

notice that the debtor has filed for 

bankruptcy protection. 

(j) Fees. FMS and other debt 

collection centers may charge fees for 

debt collection services. Fees must be 

based on costs, however, fees paid to 

recover amounts owed may not exceed 

amounts collected. Nothing in this rule 

precludes a credit agency from agreeing 

to pay fees for debt collection services 

which are not based on amounts 

collected. FMS and debt collection 

centers are authorized to retain fees 

from amounts collected and may 

deposit and use such fees in accordance 

with 31 U.S.C. 3711(g). Fees charged by 

FMS and other debt collection centers 

may be added on to the debt as an 

administrative cost if authorized under 

3717(e). 

Dated: March 25, 1998. 

Richard L. Gregg, 

Commissioner. 

[FR Doc. 98–8453 Filed 4–1–98; 8:45 am] 

BILLING CODE 4810–35–P