Due Process for Debt Collection

2018 Annual Governmentwide Federal Receivables Management Symposium

May 24, 2018

L E A D ∙ T R A N S F O R M ∙ DE L I V E R
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No person shall be . . . deprived of life, liberty, or 

property, without due process of law . . .

Fifth Amendment to the 

U.S. Constitution

Due Process Clause
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• Procedural due process mandates a fair 

decision-making process.

• Procedural due process seeks to put 

procedures in place to minimize the risk of 

error.

• A “flexible concept.”

Procedural Due Process
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• Prior to using most debt collection tools, 

agencies must provide the debtor with due 

process.

• Both individual and non-individual debtors 

are entitled to due process.

Due Process Prerequisites
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• Due process is generally required prior to 

depriving someone of property (e.g., taking an 

adverse debt collection action).

• For example, due process is required for:

– Administrative and tax refund offset

– Salary offset or administrative wage garnishment

– Credit bureau reporting

• However, due process is generally not required 

for:

– Sending demand letters

– Placing collection calls

When Due Process is Required
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• The Constitution requires due process.

• Statutes and regulations generally 

define what process is due.

• Provides for fairness in the process 

before an agency takes an adverse 

action.

Why Provide Due Process?
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• The precise due process requirements may 

differ by:

• Type of debt to be collected

• Collection action to be used

• Generally, a single due process notice can 

cover notice requirements for all collection 

actions. 

How to Provide Due Process?
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Notice 

and

Opportunity 

to Dispute or Challenge

Procedural Due Process Components
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• Generally, the statute or regulation for each 

collection tool specifies its own due process 

requirements. 

Most Debt Collection Tools Require Due Process
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• Most statutes authorizing the use of a particular 

debt collection tool require that the agency provide 

the debtor with prior written notice of the nature 

and amount of the debt and a description of how 

the debtor can dispute the debt or the proposed 

collection action. 

• See, e.g., 31 U.S.C. §§ 3711(e) (credit bureau 

reporting), 3716(a) (administrative offset), 3720A(b) 

(tax refund offset), 3720D(b) (administrative wage 

garnishment); 5 U.S.C. § 5514(a) (salary offset). 

Most Debt Collection Tools Require Due Process
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Minimum Due Process Requirements
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• Notice should provide information regarding:

• Amount and type of debt

• Actions the agency might take to collect the debt

• Opportunity to review agency records

• Opportunity to dispute agency’s determination

• Opportunity to enter into repayment plan

• Notice should be clearly written.

Contents of Notice
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• The notice letter must be sent to the debtor 

in a way that is “reasonably calculated” to 

reach the debtor.

• Generally, this means that the notice should 

be sent to debtor’s last address known to the 

agency.

Delivery of Notice
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• Actual receipt of notice is generally not required for 

due process requirements to be satisfied.

• If agency knows that debtor did not receive notice 

(e.g., letter was returned undelivered), agency should 

consider whether to obtain a better address. 

• Depends on age of debt, debtor population, obligation of 

debtor to keep agency informed, possibility that agency failed 

to update its address records properly, etc.

• To find updated address information:

• Review available agency records.

• Access IRS address information – 26 U.S.C. § 6103(m).

• Research in commercial databases.

Delivery of Notice
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• A major purpose of the notice is to provide 

the debtor with the opportunity to dispute the 

proposed collection action(s).

Opportunity to Dispute
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• Debtor may dispute:

• Existence or amount of debt 

• Includes correct identity of the debtor

• Legality of a particular collection action

• In some cases, the amount to be collected 

through a particular collection action

• Example: wage garnishment, benefit offset, etc.

Opportunity to Dispute
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• How to dispute?

• Debtor can request proof of debt

• Debtor can review file

• Debtor can request agency review 

(administrative review)

• Debtor can request a hearing for:

• Federal salary offset

• Administrative wage garnishment (AWG)

Opportunity to Dispute
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Opportunity to Dispute

• Agencies are required to have procedures 

to: 

• Process requests for reviews and/or hearings

• Communicate results of requested reviews 

and/or hearings
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• Generally, an agency need not duplicate due 

process.

• Examples:

• Agency provided AWG hearing on identity of the debtor. 

Agency issued hearing decision determining that it had 

identified the correct individual as the debtor. Several 

months later, after receiving the due process notice 

required for administrative offset, the debtor requests an 

agency review on the same issue. Need the agency 

conduct the review?

• NO. The issue of the debtor’s identity has already been 

determined by a more formal level of agency review.

No Duplication of Due Process
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• Examples:

• Agency realized that it made a calculation error on the 

debt, and the debt is actually $100 more than what the 

debtor was told in the due process notice. Must the 

agency re-do due process?

• YES. But, only with regard to the additional $100.

• Agency obtained a judgment against the debtor. Does 

the agency need to send a due process notice to the 

debtor before offsetting the debtor’s payments? 

• YES. The debtor may have already received some of the 

required due process notification through the court proceeding. 

But, did the agency warn the debtor about each possible 

collection action and provide the debtor with all the required 

opportunities (e.g., opportunity for a repayment agreement)?

No Duplication of Due Process
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• Periodically revisit your agency’s form demand and due 

process letter(s) to ensure that they are well-written and 

include all required notifications.

– Some situations may require an individualized due process notice 

(e.g., if the debtor is subject to bankruptcy).

• Does your agency combine its due process and demand 

letters?

– Combining these letters is generally the recommended approach but, 

there may be circumstances where it is preferable to separate the 

two letters.

• Do you send your due process notice at an appropriate time 

in the collection cycle?

– The earlier the due process letter is sent, the sooner collection action 

can begin.

Tips & Best Practice
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• Have a process for promptly responding to 

requests for repayment agreements, including how 

to evaluate such requests.

• Have a process for responding to disputes, proof of 

debt requests, requests for repayment agreements 

and hearing requests.

• Have a process for determining when a 

communication qualifies as a request for agency 

review or for a hearing request.

• Retain appropriate records regarding due process.

• Engage with your agency’s legal counsel.

Tips & Best Practice
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• Below is a non-exhaustive list of the 

information that generally should be included 

in an agency’s due process letter:

• Inform debtor of the nature and amount of the 

debt.

• Explain how interest, penalties, and 

administrative costs will be added to the debt 

balance.

• List the date by which payment should be made 

to avoid enforced collection.

Checklist
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• List all collection tools that the agency may use 

to collect the debt.

• Explain how the debtor can exercise the 

opportunity to: inspect and copy agency records, 

request a review of the agency’s determination 

regarding the debt, or enter into a reasonable 

repayment agreement.

• If the agency intends to collect the debt through 

salary offset or AWG, explain how the debtor can 

request a hearing. 

Checklist (continued)
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• Provide contact information for the agency.

• Advise the debtor:

• To notify the agency if a bankruptcy is filed.

• Of the penalties for making false statements.

• That excess collections will be refunded to the debtor, 

unless prohibited by law.

• If collecting through tax refund offset, that the nondebtor spouse should file a Form 8379 with the IRS to 

obtain his/her share of the tax refund. 

• Provide the debtor with any notice required by 

any law applicable to your agency or program.

Checklist (continued)