CONGRESSIONAL RECORD---HOUSE

April 25, 1996 (H4087)

Congressman Horn's Comments on the 

Debt Collection Improvement Act of 1996

     

       Mr. LIVINGSTON. Mr. Speaker, I yield 1 minute to the gentleman from 

     California [Mr. Horn].

       (Mr. HORN asked and was given permission to revise and extend his 

     remarks and to include extraneous material.)

     

       Mr. HORN. Mr. Speaker, I rise in very strong support of the Omnibus 

     Appropriations Act. Included in this measure is a bill I have worked on 

     for more than a year now, the Debt Collection Improvement Act, which 

     was introduced on August 4, 1995. This measure was drafted with the 

     assistance and support of the administration, particularly the chief 

     financial officers and the inspectors general.

       As the bill proceeded through committee, it commanded widespread 

     bipartisan support. The gentlewoman from New York [Mrs. Maloney] and 

     professional staff member Mark Guiton were also helpful. Among the 

     majority staff of the Subcommittee on Government Management, 

     Information, and Technology, professional staff member Mark Brasher and 

     staff director Russell George were the key staff on this legislation. 

     My thanks go to all of the leadership staff and those on the Committee 

     on Ways and Means and the Committee on Government Reform and Oversight 

     who have been helpful.

       This measure marks a long overdue beginning of our efforts to collect 

     delinquent debts which now are in the tens off billions--over $100 

     billion to be precise. This is a victory for the taxpayers of America. 

     When this bill is implemented by the agencies, the Federal Government 

     will find that its rising tide of delinquent debts can be stemmed.

       Mr. Speaker, I include for the Record the following statement in 

     report format which clarifies the legislative intent:

     

                     Debt Collection Improvement Act of 1995

     

            This bill enhances Government-wide debt collection 

          activities by adding a new offset authority to 31 U.S.C. 

          3716; by creating a new exception to the Privacy Act (5 

          U.S.C. 552a); by revising the salary offset authority at 5 

          U.S.C. 5514; by requiring agencies to obtain taxpayer 

          identifying numbers; by permitting the reporting of non-

          delinquent consumer debt to credit bureaus; by adding a new 

          subsection to 31 U.S.C. 3711 that allows the Department of 

          the Treasury and other agencies to cross-service the debts of 

          other agencies; by extending the authority of agencies to 

          compromise claims; by permitting agencies to garnish the 

          wages of delinquent debtors; by permitting agencies 

          additional authority to sell delinquent debts; by revising 

          the Federal Civil Monetary Penalties Act of 1990 to require 

          adjustments for inflation every four years; by adding a new 

          section to title 31, United States Code, that allows agencies 

          to retain a portion of annual collections of delinquent 

          debts; by expanding tax refund offset authority; by requiring 

          that disbursements are conducted electronically; by requiring 

          that disbursements are associated with a taxpayer 

          identification number; by revising definitions at 31 U.S.C. 

          3701 to broaden the scope of the general debt collection 

          procedures; by providing for monitoring and reporting on debt 

          collection centers; and by giving the Attorney General 

          permanent authority to contract with private counsel to 

          collect delinquent non-tax civil debt.

            The debt collection authorities created under this bill 

          will enhance the cooperation of Federal agencies in 

          collecting Federal debt, by providing centralized 

          administrative offset and cross-servicing authority. It is 

          intended that the Department of the Treasury will act as the 

          coordinator of Government-wide debt collection activities, 

          providing a mechanism for effective administrative offset and 

          acting as a clearinghouse to assure that Federal debts are 

          collected in a timely and efficient manner.

     

     

                   PART I--GENERAL DEBT COLLECTION INITIATIVES

     

                             General offset authority

     

            Short Title:

            Effective Date:

            Purposes:

            Expansion of Administrative Offset Authority:

            This section amends various sections in chapter 37 of title 

          31, United States Code, to cover judicial agencies and 

          instrumentalities. Currently, these sections only apply to 

          executive and legislative departments, agencies, and 

          instrumentalities.

     

                  Enhancement of Administrative Offset Authority

     

            This section would create additional authority for 

          conducting Government-wide Administrative Offset at the 

          Financial Management Service of the Department of the 

          Treasury. Under this authority, Federal payment files would 

          be matched against Federal debtor files to determine whether 

          any debtors were receiving payments. Those payments would be 

          subject to offset to satisfy any Federal non-tax debt or 

          claim owed by the debtor.

            Subsection (a) amends the application of administrative 

          offset authority under 31 U.S.C. 3716 and the requirements 

          for charging interest and penalties on claims pursuant to 31 

          U.S.C. 3717 to include debts owed to the United States by 

          States and units of general local government.

            Subsection (b)(1) amends 31 U.S.C. 3716 to allow Federal 

          agencies to choose between adopting, without change, 

          regulations promulgated by the Department of Justice, the 

          General Accounting Office or the Department of The Treasury 

          or promulgating their own administrative offset regulations 

          consistent with those regulations.

     

     [[Page H4088]]

     

            Subsection (b)(2) expands the application of administrative 

          offset to every instance except where a statute explicitly 

          prohibits the use of administrative ``offset'' or ``setoff'' 

          for collection purposes. This should increase the funds 

          available for offset from which delinquent claims may be 

          offset.

            Subsection (b)(3), renumbers certain sections.

            Subsection (b)(4), amends 31 U.S.C. 3716 by adding a new 

          subsection (c). This paragraph statutorily requires 

          disbursing officials of the Department of the Treasury, the 

          Department of Defense, the United States Postal Service or 

          disbursing officials designated by the Secretary of the 

          Treasury to offset payments made by the United States to pay 

          delinquent claims certified to the Secretary of the Treasury 

          by creditor agencies in accordance with requirements issued 

          by the Secretary. This paragraph enhances administrative 

          offset authority contained in 31 U.S.C. 3716 by providing for 

          centralized administrative offset at the disbursing official 

          level. Currently, administrative offset is not conducted 

          centrally within the Federal Government and is not 

          effectively used. Disbursing officials of the Department of 

          Defense and the United States Postal Service and other 

          disbursing officials at any other Federal agencies will match 

          their certification records with the debtor records reported 

          to the Secretary of the Treasury by creditor agencies, in 

          order to avoid duplicative reporting by creditor agencies to 

          disbursing agencies, and assure that payments are 

          intercepted.

            Congress intends to include all eligible government 

          payments in this centralized offset program, including the 

          payments of all government corporations. Congress is 

          concerned at the growing trend of fragmentation of disbursing 

          authority, and support centralized coordination for the 

          purpose of collecting debts and conducting offsets. Congress 

          notes that because debt has been referred to the Department 

          of the Treasury for offset does not necessarily mean that 

          other debt collection tools (such as the use of private 

          collection agencies or wage garnishment) should not be 

          employed. The use of private collection agencies is long 

          overdue. Agencies should use all cost-effective tools 

          available to them to maximize the collection of delinquent 

          debts.

            Under subsection 3716(c)(4), the Secretary of the Treasury 

          is authorized to charge a fee to cover the cost of conducting 

          administrative offsets under this subsection, and to deposit 

          fees collected to a fund to be determined by the Secretary. 

          It is the intent of Congress that the fee will be collected 

          from the proceeds recovered through offset and the amount 

          charged to each agency be apportioned according to actual 

          offsets. See fees should be considered costs of collections 

          and should be borne by the debtor.

            Section 3716(a)(5), authorizes the Secretary of the 

          Treasury, in consultation with affected agencies, to issue 

          regulations and procedures to implement the administrative 

          offset authority. These regulations will include a provision 

          for dealing with the potential of simultaneous offsets 

          involving tax refunds under 31 U.S.C. 3720A and salary 

          offsets under 5 U.S.C. 5514.

            Section 3716(c)(6) provides that any Federal agency which 

          is owed a legally enforceable past due debt more than 180 

          days shall notify the Secretary of the Treasury of the debt 

          for the purpose of conducting administrative offset.

            Section 3716(c)(7) requires that the payee receive the 

          applicable offset notification.

            Section 3716(c)(8) makes it clear that tax levies shall 

          have a priority in collection from disbursements to be made 

          over requests for offset received from other agencies.

            Section 3716(d) clarifies that the Debt Collection 

          Improvement Act is not intended to prohibit the use of any 

          existing authority to perform administrative offset under 

          statute or common law.

            Subsection (c) revises section 3701(a) of title 31, United 

          States Code, to define ``non-tax debt or claim'' for the 

          purposes of claims collection. The definition clarifies that 

          claims arising under the tariff laws of the United States are 

          considered non-tax claims.

            Subsection (d) authorizes the Secretary of the Treasury to 

          offset amounts payable by the Federal Reserve to banks which 

          have wrongfully negotiated forged or fraudulent Treasury 

          checks.

     

     Exemption From Computer Matching Requirements Under the Privacy Act of 

                                       1974

     

            This section exempts matches conducted for the purposes of 

          administrative offset under 31 U.S.C. 3716 from certain 

          provisions of the Computer Matching and Privacy Protection 

          Act of 1988, as amended. This section would permit offsets, 

          and eliminate duplicative due process notifications, as well 

          as duplicative actions by agency Data Integrity Boards.

     

            Use of Administrative Offset Authority for Debts to States

     

            This section authorizes the Secretary of the Treasury to 

          enter into agreements for conducting reciprocal offset 

          agreements with a State. The Secretary has broad 

          discretion with regards to the terms of any reciprocal 

          offset agreement. Congress believes that intergovernmental 

          cooperation is in the best interest of the United States, 

          and that Treasury participation in a program of 

          intergovernmental offset is very important. Congress 

          intends that such agreements will allow States to report 

          the debts of any State agency or instrumentality, and any 

          legally constituted local subdivision or local government 

          within the State.

            Congress does not intend to apply Federal resources to the 

          collection of debts with very small denominations, or to 

          those where the debtor has not been given any applicable due 

          process rights. In addition, the Secretary of the Treasury 

          should ensure that the reciprocal offset agreements 

          authorized by this section protect the financial interests of 

          the United States. Congress anticipates that Federal agencies 

          will offset State debts in which there is no Federal interest 

          or Federal/State cost-sharing (such as State tax debts). 

          Similarly, Congress anticipates that States will offset 

          Federal debts in which there is no State financial interest 

          or Federal/State cost-sharing (such as debts owed to the 

          Customs Service). It is the intent of Congress that the 

          agreement be broadly in the mutual interests of Federal, 

          State and local government.

     

                       Technical and Conforming Amendments

     

            Subsection (a) makes several technical changes to title 31, 

          United States Code.

            Subsection (b) amends 26 U.S.C. 6103 to allow disclosure of 

          taxpayer information to the Financial Management Service for 

          the purpose of conducting offsets of tax refunds. This change 

          allows the tax refund offset program to be implemented at the 

          time of disbursement, and permits the Secretary of the 

          Treasury to consolidate its non-tax debt offset programs.

     

                      Enhancement of salary offset authority

     

                      Enhancement of Salary Offset Authority

     

            This section enhances current Federal salary offset 

          authority by expanding agency coverage and by establishing 

          annual matching requirements. Congress believes that 

          employees of the Federal Government should be held to an 

          exemplary standard and pay debts owed to the Federal 

          Government. This section makes Federal salary offset 

          mandatory.

            Section 5514(1)(A) amends 5 U.S.C. 5514(a)(1) by adding new 

          language requiring all Federal agencies to participate in 

          computer matches of delinquent debtor files against Federal 

          employee records at least annually. This provision requires 

          the Secretary of the Treasury to establish and maintain a 

          consortium to implement centralized salary offset computer 

          matching, and to promulgate regulations for that purpose.

            Section 5514(1)(B) and (C) facilitate the collection of 

          debts by salary offset by exempting routine adjustments from 

          the extensive and costly due process protections of section 

          5514.

     

                           Taxpayer identifying numbers

     

                           Access to Debtor Information

     

            This section amends section 4 of the Debt Collection Act of 

          1982 by requiring agencies to obtain taxpayer identifying 

          numbers from all individuals and entities doing business with 

          the Federal Government to facilitate the collection of any 

          receivables which arise as the result of that business 

          relationship. This section defines what relationships are 

          considered ``doing business with'' the Federal Government and 

          requires agencies to disclose the purpose of their request 

          for taxpayer identifying numbers. The taxpayer identifying 

          numbers are needed to facilitate the collection of delinquent 

          debts. Creditor agencies are authorized to verify the 

          accuracy of their debtor records with records from the 

          Department of Health and Human Services and the Department of 

          Labor. It is the intent of Congress that creditor agencies 

          have access to all relevant records at those agencies, 

          including any delinquent parent locator service and 

          unemployment insurance records.

     

         Barring Delinquent Debtors From Obtaining Federal Loans or Loan 

                                    Guarantees

     

            This section would bar debtors who are delinquent on 

          Federal non-tax claims from receiving financial assistance in 

          the form of a Federal direct loan or a loan guarantee. The 

          intent of this section is to provide authority to Federal 

          agencies which administer credit programs to refuse to 

          approve credit to parties who are delinquent on Federal 

          claims to resolve their debts with the appropriate agency.

            Congress also considered extending this debarment provision 

          to other forms of assistance given to debtors. Agencies, in 

          coordination with the Office of Management and Budget, should 

          examine additional benefits, such as discretionary grants or 

          non-mandatory benefits, which could feasibly be denied to 

          debtors. Congress is pleased with the level of success 

          attained by the Immigration and Naturalization Service's 

          [INS] collection of inspection fees and the aggressiveness 

          with which INS has pursued debtors by denying inspection 

          services to airlines which are delinquent in the payment of 

          certain fees owed to the INS. Congress is concerned with the 

          growing delinquencies at the Customs Service, and note 

          disapprovingly that the Customs Service has not responded to 

          this situation by exercising authority to deny entry and 

          inspection to vessels whose owners are also delinquent 

          debtors. The Office of Management and Budget should direct 

          the Customs Service to use these additional tools to collect 

          debts owed to the Federal Government.

     

               Expansion and enhancement of collection authorities

     

       Disclosure to Consumer Reporting Agencies and Commercial Reporting 

                                     Agencies

     

            Congress notes the success that the Department of Education 

          has achieved with the reporting of delinquent loans to 

          consumer reporting agencies. This section would allow

     

     [[Page H4089]]

     

          agencies to conform to private sector practice by also 

          reporting current loans to consumer reporting agencies. This 

          will promote better credit information and good credit risks, 

          and especially help recently-graduated students entering the 

          workplace for the first time.

            Subsection (1) amends the credit bureau reporting authority 

          contained in 31 U.S.C. 3711(f) by requiring agencies to 

          report delinquent debts.

            Subsections (2) and (3) make conforming amendments to allow 

          commercial debts to be reported to commercial reporting 

          agencies.

            Subsection (4) requires agencies to require that any 

          participating lender in a guaranteed loan program provides 

          information relating to the extension of credit to credit 

          reporting bureaus. Congress is concerned that some agencies 

          do not comply with the existing guidance in OMB Circular A-

          129. In particular, the Department of Housing and Urban 

          Development does not refer claims for assigned multifamily 

          mortgages to credit reporting bureaus; the Departments of 

          Agriculture and Veterans Affairs does not report nor require 

          lending institutions to report guaranteed loans to credit 

          reporting bureaus. Congress intends this section to fix this 

          deficiency, and that agencies will comply.

            Subsection (4) also allows the head of an agency to report 

          claims to a credit reporting agency which are current in 

          payment. This change allows Federal credit reporting to be 

          more consistent with private sector practice, and debtors 

          whose accounts are current with the Federal Government shall 

          receive the benefit of having favorable information provided 

          to credit bureaus.

     

                        Contracts for Collection Services

     

            This section permits agencies to contract with persons to 

          locate and recover assets and pay for such services out of 

          the proceeds that are recovered. The intent is to permit 

          agencies to pay ``finders fees'' to persons who locate and 

          recover assets of the United States the existence of or 

          location of which is unknown to the applicable Federal 

          Government agency.

            Congress notes that the U.S. Marshals Service provides 

          asset locator services for U.S. Attorneys in connection with 

          debt litigation, and is very successful at this task. 

          Congress further notes that this essential service is 

          hampered by limits on Full-Time Equivalents imposed by the 

          Federal Workforce Restructuring Act (FWRA) and a reliable 

          funding source. In view of this essential service, Congress 

          believes that the Director of the Office of Management and 

          Budget should grant a waiver to the FWRA and associated 

          Executive orders and that the Secretary of the Treasury 

          should consider using the existing expertise in the U.S. 

          Marshals Service in providing skip-tracing services to 

          supplement any private persons obtaining contracts under 

          this section.

     

       Cross-Servicing Partnerships and Centralization of Debt Collection 

                   Activities in the Department of the Treasury

     

            Subsection (a) amends 31 U.S.C. 3711 by creating new 

          subsections (g) and (h).

            Section 3711(g)(1) requires the heads of executive, 

          legislative or judicial agencies to refer non-tax claims owed 

          to the Department of the Treasury for servicing, collection, 

          compromise or write off. The intent of this section is to 

          improve the debt management performance of the United States 

          by establishing a centralized cross-servicing mechanism 

          wherein Federal agencies that do not have the expertise, 

          personnel, or funding to implement effective claims 

          collection policies on their own can use the services of 

          Federal agencies that have effective claims collection 

          processes. This section provides the referred to transferred 

          non-tax claims will be administered by the debt collection 

          centers consistent with existing statutory requirements and 

          authorities.

            The Debt Collection Improvement Act, through its cross-

          servicing provision, provides independent authority for all 

          Federal non-tax debt to be collected by those Federal 

          agencies that are proficient in debt collection and have been 

          designated as debt collection centers. Agencies which 

          currently run large debt collection operations and should be 

          considered for designation as debt collection centers by the 

          Secretary of the Treasury include the Department of Veterans' 

          Affairs, the Small Business Administration, the Department of 

          Education and the Department of Housing and Urban 

          Development. Each agency remains responsible for managing an 

          effective debt collection program and to use effective debt 

          collection tools, such as private collection contractors, 

          debt collection centers, and litigation through the 

          Department of Justice. Consistent with other initiatives in 

          the Debt Collection Improvement Act, general oversight and 

          operational responsibility for cross-servicing and effective 

          debt collection has been delegated to the Department of the 

          Treasury.

            Section 3711(g)(2) describes exemptions to the requirement 

          that agencies transfer debts to the Department of the 

          Treasury under Section 3711(g)(1). Congress carefully 

          structured these exemptions so that exemptions will only 

          apply to those debts associated with a demonstrated repayment 

          source. Congress believes the Secretary of the Treasury 

          should exempt from transfer under this section collateralized 

          obligations of the Government National Mortgage Association. 

          Congress cautions the Secretary of the Treasury with liberal 

          use of the Secretary's discretion in exemption claims from 

          the transfer requirement, and note that the Secretary is 

          responsible for government-wide debt collection. The 

          exemption from this requirement should only be provided when 

          it is demonstrated that an exemption is the best means to 

          protect the Federal Government's financial interest in 

          collecting the delinquent debt or claim.

            Section 3711(g)(3) authorizes the Secretary of the Treasury 

          to designate debt collection centers. It is anticipated that 

          the Secretary of the Treasury shall monitor the performance 

          of these centers, since ultimately, the Secretary is 

          responsible for the work they perform. A debt collection 

          center's degree of success, which is the basis of their 

          designation as a debt collection center, may be dependent 

          upon the type of claim referred to the center. In order to 

          fairly establish a performance baseline, the Secretary should 

          examine collection success of similar types and maturities of 

          debts at private collection agencies and at other Federal 

          agencies.

            Section 3711(g)(4) authorizes the referral of debts by the 

          Secretary of the Treasury to a debt collection center, a 

          private collection agency, or to the Department of Justice. 

          In referring debts to private collection agencies, the 

          Congress has purposely given latitude to the Secretary of the 

          Treasury to determine the most appropriate private collection 

          agent. Debts may be referred to a private debt collector, 

          collection agency or commercial attorney. This subsection 

          does not authorize a commercial attorney to represent the 

          Federal Government in a litigation action in the absence of 

          supervision of the Department of Justice.

            Section 3711(g)(5) describes the authorities and 

          responsibilities of the Secretary of the Treasury with 

          regards to debt collection. It is the intent of Congress to 

          give contracting authority for the purposes of debt 

          collection to the Secretary of the Treasury broadly similar 

          to that given to the Department of Education. Congress 

          commends the Department of Education for the steps it has 

          taken to rely successfully on the expertise of private 

          collection contractors, and would like to see similar success 

          at the Department of the Treasury and at the Internal Revenue 

          Service in particular.

            Section 3711(g)(6) and (7) authorize the executive 

          department or agency operating a debt collection center to 

          charge a fee to cover costs of program implementation, and 

          provide that fees may be collected from recoveries. Congress 

          intends to give agencies authority to pay debt collection 

          centers and contractors from collection proceeds, and that 

          costs of recovery shall be borne by the debtor.

            Section 3711(g)(8) requires that amounts collected as fees 

          which are not needed for debt collection purposes in the 

          fiscal year shall be deposited into the Treasury as 

          miscellaneous receipts.

            Section 3711(g)(9) requires that agencies take appropriate 

          steps in the collection process to collect delinquent debts 

          prior to writeoff or discharge, including administrative 

          offset, tax refund offset, Federal salary offset, referral to 

          private collection contractors or agency debt collection 

          centers, credit bureau reporting, wage garnishment and 

          litigation or foreclosure.

            Under Section 3711(g)(10) the Secretary of the Treasury is 

          authorized to issue regulations and procedures to implement 

          this subsection.

            Section 3711(h) authorizes agencies to employ a consumer 

          report to evaluate collection efforts with respect to an 

          individual. Such data can be particularly helpful in 

          evaluating whether to terminate collection action and 

          determine repayment schedules. Agencies should develop 

          policies on when the use of a credit report is appropriate 

          based on its cost and potential benefit.

            Subsection (b) creates a new procedure whereby agencies 

          may, in lieu of filing a return required under Section 6050P 

          of the Internal Revenue Code, provide to the Secretary of the 

          Treasury, or his designee, the data necessary to accomplish 

          this task. It is anticipated that the Financial Management 

          Service will perform this task for the Secretary of the 

          Treasury. Congress is concerned about the problem of 

          inadequate reporting to the Internal Revenue Service related 

          to discharges of indebtedness. The Office of Management and 

          Budget, with the assistance of the Department of the 

          Treasury, should monitor agencies to ensure compliance with 

          the requirements of Section 6050P.

     

                               Compromise of Claims

     

            This section clarifies that the increased authority of a 

          head of an agency to compromise a claim under 31 U.S.C. 

          3711(a)(2) contained in the Administrative Dispute Resolution 

          Act is a permanent authority and is not subject to the sunset 

          provision contained in that Act.

     

                           Wage Garnishment Requirement

     

            This section authorizes agencies to garnish 

          administratively the wages of delinquent debtors. It is the 

          intent of Congress that every debtor that has a job or income 

          should be in a repayment schedule. The Congress considered 

          making this a mandatory tool, and agencies should consider 

          aggressive use of wage garnishment to compel repayment of 

          delinquent debts. The section also describes the procedures 

          that an agency must follow to administratively garnish a 

          debtor's wages, including a description of the debtor's due 

          process rights and limitations on agency authority.

     

                              Debt Sales by Agencies

     

            This section amends 31 U.S.C. 3711 to include a new 

          subsection (h)(1) authorizing

     

     [[Page H4090]]

     

          sales of debts delinquent for more than 90 days. It is the 

          intent of Congress to increase debt sales where appropriate. 

          Debt sales are an appropriate collection tool which results 

          in the privatization of the liability for a debt and the 

          costs of collection. Congress is impressed with the results 

          of loan sales at the Department of Housing and Urban 

          Development. This example should be followed by other 

          Federal agencies which lack the administrative capacity to 

          manage their large portfolio of distressed properties.

            Section 3711(h)(2) requires that delinquent debts be sold 

          if the Secretary of the Treasury determines that such sales 

          would be in the best interest of the United States. It is the 

          intent of Congress that, to the greatest extent possible, 

          prior to terminating collection action, agencies should sell 

          delinquent debts in order to realize at least some amount of 

          the delinquent receivable.

            Section 3711(h)(3) describes the conditions of sale for 

          debts. It is the intent of Congress that agencies should be 

          able to sell debts while retaining some portion of equity 

          participation in the collection of the delinquent debt. This 

          form of structured security (sometimes referred to as a joint 

          venture between an agency and another person) allows agencies 

          to obtain income as well as the possibly of future payments. 

          Congress encourages agencies to employ the collection tool 

          that maximizes repayments.

            Section 3711(h)(4) requires agencies to develop an 

          inventory of loan assets. Congress intends to use this 

          information to evaluate the results of collections and loan 

     sales. The successful loan sales at HUD resulted in receipts 

     far in excess of the proceeds anticipated under the Federal 

     Credit Reform Act. Agencies should consider the results of 

     these valuations and compare them against collections.

       To assure that agencies use the most economically effective 

     means in collecting delinquent debt, agencies contemplating 

     the sale of unsecured debt should prepare a cost-benefit 

     analysis comparing the benefits of immediate sale to 

     collection using other debt collection tools, including 

     administrative offset, transfer to the Department of the 

     Treasury and use of private collection agencies.



                   Adjustments of Administrative Debt



       This section allows agencies to simplify the complicated 

     series of fines, interest and penalties required under 31 

     U.S.C. 3717. Congress views the requirement to charge 

     interest and penalties with great seriousness. The 

     disappointing performance of nearly every agency, with the 

     exception of the Department of Education, in assessing and 

     collecting these amounts should be improved. Congress directs 

     agencies to comply with the law, and for OMB to ensure that 

     this requirement is met.

       The intent of this section is to allow agencies option to 

     combine these fines and penalties into a single, easy assess 

     charge. Congress is aware of the inadequate systems agencies 

     face in assessing these amounts. Agencies that lack the 

     technical accounting expertise to comply with 31 U.S.C. 3717 

     should privatize the management of their credit portfolio. 

     the Department of Agriculture should rely on the expertise of 

     private contractors to improve the dismal collection 

     performance of its portfolio of farmers' home loans.



 Dissemination of Information Regarding Identity of Delinquent Debtors



       This section authorizes agencies to publicize the identity 

     of delinquent debtors to help collect debts. Congress notes 

     the success of the Public Health Service's program regarding 

     dissemination of the identity of doctors delinquent in the 

     repayment of medical school loans. The head of other agencies 

     should seek to replicate this success, and make this tool 

     more widely known among the debtor population. Congress 

     recognizes that this is a powerful enforcement tool and urges 

     judicious use.



                    Federal civil monetary penalties



        Adjusting Federal Civil Monetary Penalties for Inflation



       Subsection (a) amends section 4 of the Federal Civil 

     Penalties Inflation Adjustment Act of 1990 to require 

     agencies to make an initial adjustment of such penalties 

     within 180 days of the enactment of this bill, and also 

     requires agencies to make additional adjustments at least 

     once every four years.

       Subsection (b) limits the amount of the initial adjustment 

     to ten percent of the amount of the penalty prior to such 

     adjustment.



                              Gain sharing



                  Debt Collecting Improvement Account



       Subsection (a) of this section creates a new section 3720C 

     in Title 31, United States Code.

       Section 3720C(a) establishes an account in the Treasury 

     entitled the ``Debt Collection Improvement Account'' 

     (``Account''). The Department of the Treasury shall maintain 

     and manage the Account.

       Section 3720C(b) provides that agencies collecting 

     delinquent claims may transfer into the Account five percent 

     of the delinquent debt collected during any fiscal year 

     beyond a baseline established for the prior fiscal year. The 

     Office of Management and Budget shall determine the baseline 

     from which increased collections are measured over the prior 

     year, taking into account the recommendations made by the 

     Secretary of the Treasury in consultation with credit 

     agencies.

       Section 3720C(c) provides that the amount available for 

     expenditure in any fiscal year will be available for certain 

     purposes designed to improve debt collection, financial 

     management or asset disposition. Section 3720C(c) also 

     provides that the amount available to the agency will be in 

     proportion to amounts transferred to the account.

       Section 3720C(d) modifies the treatment of amounts credited 

     to the Account that are subject to the requirements of the 

     Federal Credit Reform Act of 1990. That Act requires that 

     collections for direct loans and loan guarantees made since 

     1991 be credited to a financing account and included in the 

     cash flows used to calculate the subsidy cost of the credit 

     program. This section provides that collections that are 

     credited to the Account will not be included in the subsidy 

     cost calculation in order to avoid counting them both in the 

     cost calculation and on a cash basis.

       Section 3720C(e) authorizes the Secretary of the Treasury 

     to issue regulations and procedures to implement this 

     section.



                      Tax refund offset authority



                 Expanding Tax Refund Offset Authority



       Subsections (a) and (b) change the exclusion of the 

     Tennessee Valley Authority (TVA) by authorizing the TVA to 

     use tax refund offset.



            Expanding Authority To Collect Past-Due Support



       This section allows the Secretary of the Treasury and the 

     Secretary of Health and Human Services to choose between 

     using the tax refund offset authorities of either 31 U.S.C. 

     3720A or 42 U.S.C. 664 to collect past-due child support. 

     This change in Section 3720A of title 31 is not intended in 

     any way to hinder, restrict, or add any additional 

     requirements to the collection of past-due support under 42 

     U.S.C. 664.



         Offset of Tax Refund Payments by Disbursing Officials



       This section allows the Secretary of the Treasury to 

     implement the tax refund offset program through the 

     disbursing official of the Department of the Treasury (i.e., 

     the Financial Management Service). This will allow for more 

     efficient operations, as the Financial Management Service 

     also operates the administrative offset program. By merging 

     these two offset programs, the Department of the Treasury 

     will streamline and improve its operations.

       It is the intent of Congress that the Financial Management 

     Service should perform both the tax refund offset and the 

     administrative offset programs. This legislation makes 

     changes in those two programs so that their administrative 

     requirements are broadly similar, and can be performed by the 

     same entity, the Financial Management Service. This change 

     will allow the Internal Revenue Service to focus its efforts 

     on other management problems identified by it and Congress. 

     Congress intends that the Internal Revenue Service will 

     transfer the operation of the tax refund offset program to 

     the Financial Management Service.



                             Disbursements



                                Payments



       Subsection (a) mandates that all Federal payments to 

     individuals who become eligible for that type of payment 

     after 90 days after the date of enactment of this Act shall 

     be made by electronic funds transfer. Further, individuals 

     already receiving payments will begin to receive those 

     payments electronically after 1999. This section will 

     facilitate offset and improve audits associated with 

     counterfeit, stolen, forged and fraudulent checks.

       Since this section will require participating beneficiaries 

     to obtain a bank account, Congress expects the Secretary of 

     the Treasury to work vigorously to accommodate the needs of 

     the unbanked recipients through such means as: (1) the 

     planned implementation of a national electronic benefits 

     transfer system for Federal payments through the designation 

     of depositaries and financial agents under the Secretary's 

     existing authority. Under this program, recipients will 

     receive all benefit payments under a single access card; (2) 

     implement through the private sector consumer owned bank 

     accounts where recipients access their funds by debit card or 

     other means, rather than through traditional account 

     features, such as checking. This product is known as Direct 

     Deposit Too and is an extension of the Treasury's Direct 

     Deposit Program; (3) intensive marketing of the Treasury's 

     existing Direct Deposit Program for both individuals and 

     businesses; and (4) other forms of electronic benefits 

     transfer. The Financial Management Service should evaluate 

     several recent pilots, including its Direct Deposit Too and 

     various state pilots, to determine the best mechanism for 

     benefit delivery.

       The Secretary of the Treasury is given broad discretion to 

     waive the requirements of this section to avoid imposing a 

     hardship on a beneficiary. Congress expects the Department of 

     the Treasury to promulgate regulations addressing such 

     hardship waivers and to consider various factors in defining 

     hardship. Congress recognizes that adherence to these 

     provisions may be difficult for a variety of beneficiaries. 

     We are concerned that individuals who have geographical, 

     physical, mental, educational, or language barriers or as a 

     result of natural or environmental disasters will not be able 

     to receive benefits. Recipients in this category includes 

     small businesses as well as individuals. Waivers should be 

     provided in order to minimize disruptions to any beneficiary. 

     Additionally,



[[Page H4091]]



     the Secretary of the Treasury may waive this section for 

     recipients who reside in a country where delivery of an 

     electronic payment is impractical.

       The Congress further directs the disbursing official to 

     study the socioeconomic and demographic characteristics of 

     those who currently do not have direct deposit and determine 

     how best to increase usage among all groups. The Congress 

     further directs the disbursing official to study the adequacy 

     of consumer protections available to individuals who are 

     required to obtain a bank account under this section.

       The exclusion of the application of this section to tax 

     refunds is to allow time for development of the necessary 

     infrastructure for making these electronic payments. However, 

     the Secretary of the Treasury should, to the maximum extent 

     possible, implement a system to disburse tax refunds 

     electronically and conduct demonstrations of other electronic 

     technologies to maximum outreach to recipients.

       Subsections (b) and (c) allow the Secretary of the Treasury 

     to issue substitute checks to repay Federal recipients whose 

     checks have been stolen, forged or fraudulently cashed. The 

     Check Forgery Insurance Fund provision would authorize the 

     Secretary of the Treasury to establish a flexible procedure 

     for facilitating the timely payment of forged Government 

     checks by providing a permanent and indefinite appropriation 

     which would ensure readily available funds to provide 

     innocent payees with replacement checks in a timely manner. 

     It enables the Department of the Treasury to comply with two 

     decisions of the Comptroller General Decision B-242666, dated 

     August 31, 1993 and B-243536, dated September 7, 1993. These 

     decisions concluded that the Check Forgery Insurance Fund Act 

     (31 U.S.C. 3343) requires that the Department of the Treasury 

     certify all checks issued to replace those checks paid over 

     forged endorsements and charged to the Fund.

       The Congress recognizes that many payees rely on these 

     payments for their basic subsistence and seeks assurance that 

     claimants receive checks in a timely manner; the prospect of 

     payees not receiving timely replacement payments is 

     unacceptable to Congress. Congress notes the importance of 

     the timely issuance of replacement checks, and that such 

     replacement checks should not be contingent upon the 

     Government's ability to recover the original forged check. 

     Congress also notes that in the case of an innocent payee 

     whose check has been forged, the Government's obligation to 

     pay remains outstanding. This provisions would provide an 

     equitable solution for payees and disbursing and program 

     agencies, by resolving current inequities inherent in the 

     current process of payment of checks bearing forged or 

     unauthorized endorsements.



Requirement To Include Taxpayer Identifying Number With Payment Voucher



       This section requires that Federal agencies include a 

     taxpayer identifying number when a payment is made. This 

     requirement will facilitate offset and increase collections. 

     Congress directs the disbursing official of the Secretary of 

     the Treasury and the Department of Defense to survey agency 

     compliance with this section and include the results of this 

     survey in the consolidated debt collection report to Congress 

     required under Section 1692 of this Act.



                             Miscellaneous



                Miscellaneous Amendments to Definitions



       Subsection (1) revises the definitions for ``administrative 

     offset'' and ``claim'' under 31 U.S.C. 3701 (a)(1) and (b). 

     These changes permit offsets of payments for the collection 

     of debts administered by States such as debts which contain a 

     Federal monetary component (e.g., AFDC overpayments due to 

     fraud) and delinquent child support obligations. The 

     definition of ``claim'' also includes amounts which the 

     United States collects for the benefit of any person under 

     statutory authority.

       In addition, the definition of debt has been amended to 

     include deficiency payments. Federal authority to collect 

     deficiencies has been upheld based on provisions of Federal 

     law preempting State laws governing mortgage debt (in all but 

     a few narrow circumstances). This authority has been upheld 

     by numerous court decisions (including Connelly v. Derwinski, 

     961 F.2d 129, 131; United States v. Shimer, 367 U.S. 374, 

     387; and Burris v. First Financial Corp., 928 F.2d 797, 800-

     801).

       The Congress is concerned that agencies have not 

     established deficiencies as debt consistently. The Federal 

     Housing Administration uniformly establishes as debt and 

     collects deficiencies only in its Title I program. Congress 

     is concerned that debtors under FHA's other loan programs are 

     receiving different treatment. Deficiencies should be 

     established in all cases.

       Congress is also concerned that agencies do not monitor the 

     unpaid share of any non-Federal partner in a program 

     involving a matching, or cost-sharing, payment by the non-

     Federal partner. According to the General Accounting Office, 

     the non-payment of these types of matching payments has 

     become more common. Congress is concerned about this trend, 

     and wants to see those amounts collected.

       This section also adds specific definitions applicable to 

     administrative offsets under 31 U.S.C. 3716 for creditor 

     agencies and payment certifying agencies.



                        Monitoring and Reporting



       Subsection (a) authorizes the Secretary of the Treasury to 

     provide guidelines to monitor the performance of debt 

     collection activities, in consultation with debt collecting 

     agencies.

       Subsection (b) requires the Secretary to report to Congress 

     on the progress of debt collection centers, defined under 

     subsection (c) as those centers providing debt collection 

     services for other agencies.

       Subsection (c) provides that the Secretary of the Treasury 

     will submit reports concerning the status of loans and 

     accounts receivable to Congress in accordance with the 

     Debt Collection Act of 1982. Formerly, reporting was 

     performed by the Director of the Office of Management and 

     Budget.

       Subsection (d) authorizes the Secretary of the Treasury to 

     consolidate all debt collection reports.



   Review of Standards and Policies for Compromise of Write-Down of 

                            Delinquent Debts



       This section requires the Office of Management and Budget 

     to review agencies' standards and policies for compromising, 

     writing-down, forgiving or discharging indebtedness and 

     various reporting requirements. OMB should rely on the 

     expertise and personnel of the Department of the Treasury in 

     preparing this report, which should be consolidated with the 

     annual consolidated debt collection report. However, OMB 

     needs to be very involved in ensuring that each Federal 

     agency complies with changes needed in their policies.

       Congress is seriously concerned about dissimilar standards 

     for discharging indebtedness at different agencies. This 

     needs careful monitoring. Congress is concerned that the 

     credibility of the Federal Government is undermined when 

     similarly-situated beneficiaries under one program receive 

     more generous treatment than those under another program.

       In addition, Congress is very seriously concerned about the 

     poor reporting of the discharge of indebtedness to the 

     Internal Revenue Service on Form 1099. The Office of 

     Management and Budget should ensure that agencies 

     consistently report these amounts or allow the Secretary of 

     the Treasury to report the data to the Internal Revenue 

     Service.



                        Justice debt management



                    Expand Use of Private Attorneys



       This section gives the Attorney General permanent authority 

     to contract with private counsel to collect delinquent non-

     tax civil debt when deemed appropriate.