Tuesday 

December 8, 1998 

federal register
 Part III 

Department of the 

Treasury 

Fiscal Service 

31 CFR Part 285 

Barring Delinquent Debtors From 

Obtaining Federal Loans or Loan 

Insurance or Guarantees; Final Rule 
67754 Federal Register / Vol. 63, No. 235 / Tuesday, December 8, 1998 / Rules and Regulations 

DEPARTMENT OF THE TREASURY 

Fiscal Service 

31 CFR Part 285 

RIN 1510–AA71 

Barring Delinquent Debtors From 

Obtaining Federal Loans or Loan 

Insurance or Guarantees 

AGENCY: Financial Management Service, 

Fiscal Service, Treasury. 

ACTION: Final rule. 

SUMMARY: The Debt Collection 

Improvement Act of 1996 (DCIA) 

mandated a new eligibility requirement 

for persons seeking Federal financial 

assistance, namely that delinquent 

Federal debtors are ineligible for Federal 

direct and indirect loan assistance 

(other than disaster loans). On April 22, 

1998, the Financial Management Service 

issued a notice of proposed rulemaking 

proposing rules to define when a debt 

is in delinquent status and when a 

delinquency is resolved for purposes of 

determining whether the DCIA bars a 

person from receiving financial 

assistance. The notice of proposed 

rulemaking also proposed rules 

governing when the Secretary of the 

Treasury may exempt a class of 

delinquent debts from affecting a 

debtor’s loan eligibility, and proposed 

factors for authorized agency officials to 

consider when deciding whether to 

waive the DCIA eligibility requirement. 

This final rule finalizes the proposed 

rule, with changes, and addresses issues 

raised in comments received on the 

notice of proposed rulemaking. 

EFFECTIVE DATE: January 7, 1999. 

FOR FURTHER INFORMATION CONTACT: 

Gerry Isenberg, Financial Program 

Specialist, at (202) 874–6859; Ellen 

Neubauer or Randall Lewis, Senior 

Attorneys, at (202) 874–6680. A copy of 

this final rule is being made available 

for downloading from the Financial 

Management Service web site at the 

following address: http:// 

www.fms.treas.gov/debt. 

SUPPLEMENTARY INFORMATION: 

Background 

Section 31001(j)(1) of the Debt 

Collection Improvement Act of 1996 

(DCIA), Pub. L. 104–134, 110 Stat. 

1321–358 (Apr. 26, 1996), codified at 31 

U.S.C. 3720B (section 3720B), provides 

that a person owing a delinquent nontax 

debt to the Federal Government is 

ineligible for Federal financial 

assistance in the form of a loan (other 

than a disaster loan) or loan insurance 

or guarantee. The head of an agency that 

administers a Federal financial 

assistance program may waive this 

provision. The waiver authority may be 

delegated only to the agency’s Chief 

Financial Officer or Deputy Chief 

Financial Officer. In addition, the 

Secretary of the Treasury may exempt 

any class of debts from affecting a 

person’s eligibility for receiving 

financial assistance. 

The DCIA requires the Secretary of 

the Treasury to prescribe standards 

under which agencies will determine 

whether a person has an outstanding 

delinquent debt that would trigger the 

DCIA bar to Federal financial assistance. 

As the lead agency for the collection of 

delinquent nontax debt in the Federal 

Government, 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 final rule 

defines when a debt is in delinquent 

status and when the delinquency is 

resolved for purposes of determining 

whether the DCIA bars a person from 

receiving financial assistance. This final 

rule also prescribes standards under 

which a Treasury exemption may be 

granted and sets forth factors for an 

agency to consider when deciding 

whether an agency waiver is 

appropriate. 

Summary of Comments 

On April 22, 1998, FMS published a 

Notice of Proposed Rulemaking in the 

Federal Register (63 FR 20006) entitled 

‘‘Barring Delinquent Debtors from 

Obtaining Federal Loans or Loan 

Insurance or Guarantees.’’ FMS received 

written comments from three Federal 

agencies, two financial institutions, and 

one university. 

Delinquency Standards 

One commenter recommended that 

determinations of delinquency and 

resolutions of defaults be made based on 

existing eligibility criteria under 

applicable program specific statutes and 

regulations. Another commenter 

suggested that individual creditor 

agencies be allowed to determine when 

its debts are sufficiently delinquent for 

purposes of barring a debtor from 

obtaining additional Federal financial 

assistance. A third commenter 

recommended that the rule authorize 

credit-granting agencies to determine 

when debt reported as delinquent by a 

creditor agency is sufficiently 

delinquent to warrant ineligibility for 

assistance. 

The DCIA created a new eligibility 

requirement applicable to all Federal 

financial assistance programs and 

directed the Secretary of the Treasury to 

issue government-wide standards for 

determining when a debt is delinquent 

for purposes of barring delinquent 

debtors from obtaining additional 

Federal financial assistance. Thus, as 

required by the DCIA, the final rule 

retains uniform government-wide 

guidelines. While government-wide 

standards apply to this particular 

eligibility criteria, nothing in this rule 

precludes an agency from setting its 

own standards with regard to other 

eligibility criteria applicable to a 

specific program. Paragraph 285.13(b)(3) 

specifically states that nothing in this 

rule requires an agency to grant Federal 

financial assistance if denial otherwise 

is authorized by statute, regulation or 

agency policies and procedures. For 

instance, if a delinquent debt is resolved 

in accordance with paragraph 285.13(e), 

an agency still may deny an application 

if the applicant fails to meet other 

requirements imposed under a specific 

program. Additionally, under the DCIA 

and in accordance with paragraph 

285.13(g) of this rule, agencies also may 

waive the requirements of this section 

under appropriate circumstances. 

Application of This Rule to Financial 

Institutions 

One commenter requested 

clarification on whether the regulation 

applies to parties other than Federal 

agencies, such as financial institutions 

which issue loans which are federally 

insured or guaranteed. Another 

commenter suggested that the rule be 

clarified with regard to who has the 

responsibility for determining whether a 

prospective borrower is delinquent, and 

whether a delinquent debt has been 

resolved. 

This rule applies to Federal loans, 

loan insurance and loan guarantees. The 

responsibilities of financial institutions 

that issue federally guaranteed or 

insured loans continue to be governed 

by program specific statutes, 

regulations, and agency policies and 

procedures, as well as individual 

agreements between agencies and 

lenders. Federal agencies will have to 

ensure that such regulations, policies 

and procedures, and agreements address 

the eligibility requirements of the DCIA 

and this regulation. 

Application of the Equal Credit 

Opportunity Act 

One commenter asked whether 

protected classes comprise a significant 

number of delinquent debtors impacted 

by this rule, and expressed concern that 

denial of credit under this rule might 

violate the Equal Credit Opportunity 

Act. 
Federal Register / Vol. 63, No. 235 / Tuesday, December 8, 1998 / Rules and Regulations 67755 

The Equal Credit Opportunity Act 

prohibits a creditor from discriminating 

against an applicant on a prohibited 

basis regarding any aspect of a credit 

transaction. The fact that an applicant 

owes a delinquent debt to the United 

States is not a prohibited basis. See 12 

CFR 202.2 (Regulation B). Even if the 

effect of the DCIA and this rule would 

be to disadvantage protected classes, as 

a general matter, a lender acting 

pursuant to a regulation or statute when 

denying credit would have a nondiscriminatory business reason for 

doing so. Consequently, compliance 

with the DCIA and this rule does not, in 

and of itself, constitute a violation of the 

Equal Credit Opportunity Act. 

Application of the Fair Credit 

Reporting Act 

Another commenter expressed 

concern that, under the Fair Credit 

Reporting Act, 15 U.S.C. 1681, lenders 

would be unable to obtain credit reports 

relating to the status of loans for which 

an applicant is a guarantor. While the 

commenter is correct, for purposes of 

the bar imposed by the DCIA and this 

rule, the fact that an applicant is a 

guarantor on another loan is irrelevant 

unless the applicant/guarantor becomes 

responsible for repaying the loan and 

subsequently becomes delinquent. In 

the event the applicant/guarantor does 

become responsible for the loan, any 

delinquency should appear on the 

applicant’s credit report. 

Section 285.13(a) Definitions 

One commenter requested that the 

definition of Federal financial 

assistance or financial assistance be 

revised to specifically include price 

support loans with non-recourse 

provisions issued by the Commodity 

Credit Corporation of the Department of 

Agriculture. The definition of ‘‘Federal 

financial assistance’’ or ‘‘financial 

assistance’’ includes all loans (other 

than disaster loans), including nonrecourse loans. Therefore, because price 

support loans are a type of loan already 

covered by the definition, a specific 

reference to one type of loan is not 

necessary. 

Section 285.13(b) Purpose and Scope 

One commenter requested that the 

rule be revised to include guidance 

regarding whether a person, such as a 

corporation, would be barred from 

obtaining Federal financial assistance 

where the corporation seeking Federal 

financial assistance is not a delinquent 

debtor, but a person with a controlling 

interest in the corporation, such as an 

officer, director, or shareholder, is a 

delinquent debtor. In response, FMS has 

revised the rule to clarify that a person 

seeking Federal financial assistance may 

be ineligible for such financial 

assistance if that person either controls 

or is controlled by a person who owes 

a delinquent nontax debt to the United 

States. Whether or not a person controls 

or is controlled by a delinquent debtor 

and the extent to which such person is 

ineligible for Federal financial 

assistance is to be determined in 

accordance with standards and 

procedures established by the credit 

granting agency. See paragraph 

285.13(c)(2). 

Another commenter asked whether 

this rule applies to applicants for 

Federal grants. The DCIA defines 

Federal financial assistance as any loan 

(other than a disaster loan), loan 

insurance or loan guarantee. Thus this 

rule does not apply to applicants for 

grants. 

Section 285.13(c) General Rule 

FMS received several comments 

regarding the methods to determine 

whether an applicant has delinquent 

Federal debts that bar the applicant 

from obtaining new Federal financial 

assistance. Commenters suggested that 

the list of possible sources of 

information included in the preamble to 

the proposed rule be added to the text 

of the final rule. FMS has incorporated 

this suggestion. Commenters also 

suggested that the list be expanded to 

include FMS’ delinquent debtor 

database. FMS is resolving legal and 

technical issues involved in making the 

information contained in FMS’ 

delinquent debtor database available to 

Federal agencies. Thus, although not 

currently available, we anticipate that 

FMS’ database will be available in the 

future as one of many sources of 

information concerning delinquent 

debtors. A commenter also suggested 

that the rule require applications for 

Federal financial assistance to include a 

self-certification, under penalty of 

perjury, by which applicants would be 

required to list outstanding obligations 

to the Federal government and whether 

such obligations were current. FMS 

agrees that a self-certification could 

assist in identifying delinquent debtors 

and recommends that agencies adopt 

this approach. A mandatory selfcertification requirement is not included 

in this rule because loan application 

procedures are established by the creditgranting agency. 

Two agencies requested clarification 

regarding the meaning of the term 

‘‘guarantor’’ for purposes of this rule. 

The reference to ‘‘guarantor’’ in 

§ 285.13(c)(1) of the final rule is 

intended to cover credit applicants who 

owe delinquent debt as a result of an 

obligation to pay under a guaranty. 

Once the guarantor’s obligation to pay is 

triggered and the obligation is not paid 

in accordance with the terms and 

conditions of the guaranty, the defaulted 

obligation would be an outstanding debt 

in delinquent status. 

The DCIA bar also applies if the entity 

seeking to guarantee a loan is a 

delinquent debtor since the entity 

seeking to guarantee a loan may 

ultimately become obligated for 

repayment of the loan. Therefore, a 

person owing a delinquent debt is 

ineligible for additional Federal 

financial assistance whether applying 

for such assistance as a direct borrower 

or as a guarantor. 

As noted above, one commenter 

requested that the rule be revised to 

include guidance under circumstances 

where an applicant for Federal financial 

assistance controls or is controlled by a 

delinquent debtor. A new paragraph has 

been added to § 285.13(c) clarifying that 

an agency may, under standards issued 

by the agency, deny Federal financial 

assistance to persons who control or are 

controlled by a delinquent debtor. 

Section 285.13(d) Delinquent Status 

Several commenters objected to the 

proposed standards in § 285.13(d)(1) 

under which a debt would be in 

delinquent status if not paid by the 

payment due date. Commenters pointed 

out that under the standards contained 

in the proposed rule, a debt on which 

a payment was one day late would be 

considered a debt in delinquent status. 

Under such a standard agencies would 

have no practical way to determine if a 

debt was delinquent nor any way to 

distinguish between payments which 

are merely late (or timely payments 

which are posted late) and those which 

are seriously delinquent. Additionally, 

commenters noted that being a day late 

on a single payment was not a valid 

indication of credit worthiness. 

In response to these comments, 

§ 285.13(d)(1) of the final rule is revised 

to provide that a debt is delinquent for 

purposes of barring additional Federal 

financial assistance when the debt has 

not been paid within 90 days of the due 

date. FMS agrees that agencies may have 

no practical way of knowing about a 

debt which is less than 90 days pastdue. Credit granting agencies will rely 

on credit reports as a way to determine 

that an applicant owes a delinquent 

debt to the United States. Federal 

agencies must give debtors at least 60 

days notice before reporting a debt to a 

consumer credit bureau. Thus, 

providing that a debt is not in 

delinquent status for purposes of this 
67756 Federal Register / Vol. 63, No. 235 / Tuesday, December 8, 1998 / Rules and Regulations 

rule until it is 90 days past-due allows 

sufficient time for the debt to be 

reported to a credit bureau. 

Additionally, the 90-day period 

ensures that only those debtors owing 

debts in delinquent status, and not 

debtors whose payments are late or 

untimely posted, will be denied 

financial assistance as required by the 

DCIA. Consistent with standard lending 

practices which classify a loan as nonperforming when the loan is 90 days 

past-due, the final rule classifies a debt 

as being in a delinquent status when the 

debt is 90 days past-due. See, e.g., 12 

CFR 933.1(u), 26 CFR 1.585–6(d)(iii)(A). 

The 90-day provision protects against an 

applicant being denied financial 

assistance merely because of a late 

payment or an untimely posting. At the 

same time the rule furthers the intent of 

the DCIA to reduce losses by screening 

potential borrowers. 

As noted in the preamble to the 

proposed rule, nothing in this rule 

defines the term ‘‘delinquent’’ for any 

purpose other than the application of 

section 3720B of the DCIA and this rule. 

In addition, nothing in this rule 

precludes a credit-granting agency from 

denying loans if an applicant owes a 

delinquent debt which is less than 90 

days past-due if otherwise authorized. 

Section 285.13(e) Delinquency 

Resolution 

One commenter suggested that the 

rule be revised to clarify the difference 

between portions of debt that have been 

written-off after a compromise, and 

debts that have been written-off because 

they were uncollectible. Under 

§ 285.13(e)(2), a delinquent debt which 

has been written off is not considered 

resolved unless the provisions of 

paragraph (e)(1) apply. Under paragraph 

(e)(1), a debt is resolved if a compromise 

amount has been paid in full. Thus, 

where a debt has been compromised 

and the debtor pays the full 

compromised amount, the compromised 

portion of the debt which has been 

written-off is not in delinquent status. 

Clarifying language has been added to 

paragraph (e)(2) of the final rule. 

Another commenter suggested that 

the rule be revised to include a 

requirement that a lender determine 

whether an applicant is in default on a 

repayment agreement before approving 

additional Federal financial assistance. 

The rule does not need to be revised 

because § 285.13(d)(1) addresses this 

concern. The definition of delinquent 

status in § 285.13(d)(1) of the final rule 

provides that a debt is delinquent if not 

paid within 90 days of the due date. Due 

date is defined in that paragraph as the 

date specified in, among other things, an 

applicable agreement, including a postdelinquency repayment agreement. 

Therefore, the rule does require that 

Federal financial assistance be denied if 

a repayment agreement is in a 

delinquent status. 

Section 285.13(f) Exemptions by the 

Secretary 

One commenter suggested that the 

language of the proposed rule be revised 

to clarify whether, under § 285.13(f), 

exemptions may be requested by both 

the credit-granting agency and/or the 

creditor agency. In response to this 

comment, paragraph 285.13(f) has been 

revised to clearly state that requests for 

exemptions may be made only by 

‘‘creditor’’ agencies. Because the 

authority of the Secretary to grant 

exemptions in 31 U.S.C. 3720B(a) is 

limited to classes of debt, only the 

agency which holds the debt, i.e., the 

creditor agency, may request such 

exemptions. Section 285.13(g) governs 

the authority of credit-granting agencies 

to waive the ineligibility requirement 

contained in the DCIA on a person by 

person basis under appropriate 

circumstances. 

Regulatory Analysis 

This final rule is not a significant 

regulatory action as defined in 

Executive Order 12866. It is hereby 

certified that this rule will not have a 

significant economic impact on a 

substantial number of small entities. 

The basis for this certification is that the 

DCIA provides that entities owing 

delinquent debt to the Federal 

Government are ineligible for Federal 

direct and indirect loan assistance 

(other than disaster loans). This final 

rule provides definitions for purposes of 

determining whether the DCIA mandate 

applies. Therefore a regulatory 

flexibility analysis is not required. 

List of Subjects in 31 CFR 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: 

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, 3720B, 3720D; E.O. 

13019; 3 CFR, 1996 Comp., p. 216. 

2. Section 285.13 is added to subpart 

B to read as follows: 

§ 285.13 Barring delinquent debtors from 

obtaining federal loans or loan insurance or 

guarantees. 

(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 or an agency thereof 

by a person, including debt 

administered by a third party as an 

agent for the Federal Government. 

Federal financial assistance or 

financial assistance means any Federal 

loan (other than a disaster loan), loan 

insurance, or loan guarantee. 

FMS means the Financial 

Management Service, a bureau of the 

Department of the Treasury. 

Nontax debt means any debt other 

than a debt under the Internal Revenue 

Code of 1986 (26 U.S.C. 1 et seq.). 

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) Purpose and scope. (1) This 

section prescribes standards for 

determining whether an outstanding 

nontax debt owed to the Federal 

Government is in delinquent status and 

whether such delinquency is resolved 

for the purpose of denying Federal 

financial assistance to a debtor. In 

addition, this section prescribes the 

circumstances under which the 

Secretary may exempt a class of debts 

from affecting a debtor’s loan eligibility. 

This section also outlines the factors an 

agency should consider when 

determining whether waiver of the 

general rule in paragraph (c) of this 

section is appropriate. 

(2) Additional guidance concerning 

debt collection and debt management is 

provided in ‘‘Managing Federal 

Receivables’’ and other FMS 

publications. 

(3) Nothing in this section requires an 

agency to grant Federal financial 

assistance if denial otherwise is 

authorized by statute, regulation, or 

agency policies and procedures. For 

example, if an agency requires 

borrowers to have a satisfactory credit 

history, the agency may deny financial 
Federal Register / Vol. 63, No. 235 / Tuesday, December 8, 1998 / Rules and Regulations 67757 

assistance even if a delinquent debt has 

been resolved. 

(4) This section does not confer any 

new rights or benefits on persons 

seeking Federal financial assistance. 

(5) This section applies to any person 

owing delinquent nontax debt and to 

any agency that administers a program 

that grants Federal financial assistance. 

(c) General rule. (1) As required by the 

provisions of 31 U.S.C. 3720B, a person 

owing an outstanding nontax debt that 

is in delinquent status shall not be 

eligible for Federal financial assistance. 

This eligibility requirement applies to 

all persons seeking Federal financial 

assistance and owing an outstanding 

nontax debt in delinquent status, 

including, but not limited to, 

guarantors. This eligibility requirement 

applies to all Federal financial 

assistance even if creditworthiness or 

credit history is not otherwise a factor 

for eligibility purposes, e.g., student 

loans. A person may be eligible for 

Federal financial assistance only after 

the delinquency is resolved in 

accordance with this section. An agency 

may waive this eligibility requirement 

in accordance with paragraph (g) of this 

section. 

(2) An agency from which a person 

seeks Federal financial assistance may 

determine, under standards issued by 

the agency, that a person is ineligible for 

Federal financial assistance under this 

section if: 

(i) The person is controlled by a 

person owing an outstanding nontax 

debt that is in delinquent status (e.g., a 

corporation is controlled by an officer, 

director, or shareholder who owes a 

debt); or 

(ii) The person controls a person 

owing an outstanding nontax debt that 

is in delinquent status (e.g., a 

corporation controls a wholly-owned or 

partially-owned subsidiary which owes 

a debt). 

(3) A creditor agency may obtain 

information concerning whether or not 

a person seeking Federal financial 

assistance owes a delinquent debt from, 

among other sources, credit reports, 

information contained on credit 

applications, and the Department of 

Housing and Urban Development’s 

Credit Alert Interactive Voice Response 

System (CAIVRS). For information 

about participating in the CAIVRS 

program, agencies should contact the 

Director of Information Resources 

Management, Policy and Management 

Division, Office of Information 

Technology, Department of Housing and 

Urban Development, 451 7th Street, 

S.W., Washington, DC 20410. 

(d) Delinquent status. (1) Except as 

otherwise provided in paragraph (d)(2) 

of this section, a debt is in ‘‘delinquent 

status’’ for purposes of this section if the 

debt has not been paid within 90 days 

of the payment due date. The payment 

due date is the date specified in the 

creditor agency’s initial written demand 

for payment or applicable agreement or 

instrument (including a postdelinquency repayment agreement). 

(2) For purposes of this section, a debt 

is not in delinquent status if: 

(i) The person seeking Federal 

financial assistance has been released by 

the creditor agency from any obligation 

to pay the debt, or there has been an 

adjudication or determination that such 

person does not owe or does not have 

to pay the debt; 

(ii) The debtor is the subject of, or has 

been discharged in, a bankruptcy 

proceeding, and if applicable, the 

person seeking Federal financial 

assistance is current on any court 

authorized repayment plan; or 

(iii) The existence of the debt or the 

agency’s determination that the debt is 

delinquent is being challenged under an 

ongoing administrative appeal or 

contested judicial proceeding and the 

appeal was filed by the debtor in a 

timely manner. Unless otherwise 

prohibited, an agency may defer making 

a determination as to whether or not to 

extend credit until the appeal process is 

completed. 

(3) Unless the provisions of paragraph 

(d)(2) apply, a debt is in delinquent 

status even if the creditor agency has 

suspended or terminated collection 

activity with respect to such debt. For 

example, a delinquent nontax debt that 

has been written off the books of the 

creditor agency or reported to the 

Internal Revenue Service as discharged 

(i.e., canceled) is in delinquent status 

for purposes of this section. 

(4) Nothing in this section defines the 

terms ‘‘delinquent’’ or ‘‘delinquent 

status’’ for any purposes other than 

those described in this section. 

(e) Delinquency resolution. (1) For 

purposes of this section, a person’s 

delinquent debt is resolved only if the 

person: 

(i) Pays or otherwise satisfies the 

delinquent debt in full; 

(ii) Pays the delinquent debt in part if 

the creditor agency accepts such part 

payment as a compromise in lieu of 

payment in full; 

(iii) Cures the delinquency under 

terms acceptable to the creditor agency 

in that the person pays any overdue 

payments, plus all interest, penalties, 

late charges, and administrative charges 

assessed by the creditor agency as a 

result of the delinquency; or 

(iv) Enters into a written repayment 

agreement with the creditor agency to 

pay the debt, in whole or in part, under 

terms and conditions acceptable to the 

creditor agency. 

(2) Unless the provisions of paragraph 

(e)(1) of this section apply, a delinquent 

debt is not resolved even if the creditor 

agency has suspended or terminated 

collection activity with respect to such 

debt. For example, a delinquent nontax 

debt that has been written off the books 

of the creditor agency or reported to the 

Internal Revenue Service as discharged 

(i.e., canceled) would not be ‘‘resolved.’’ 

If the provisions of paragraph (e)(1) of 

this section do apply, a delinquent debt 

is considered resolved. For example, if 

a portion of a debt has been written off 

after the person has paid the debt in part 

where the creditor agency accepts such 

part payment as a compromise in lieu of 

payment in full, the entire debt would 

be deemed ‘‘resolved’’ for purposes of 

this section in accordance with 

paragraph (e)(1)(ii) of this section. 

(f) Exemptions by the Secretary. (1) 

Upon the written request and 

recommendation of the head of the 

creditor agency to which a class of debts 

is owed, the Secretary may exempt any 

class of debts from affecting a debtor’s 

eligibility for Federal financial 

assistance based on the provisions of 31 

U.S.C. 3720B and this section. 

(2) The creditor agency 

recommending an exemption for a class 

of debts will provide the Secretary with 

information about: 

(i) The nature of the program under 

which the delinquencies have arisen; 

(ii) The number, dollar amount, and 

age of the debts in the program for 

which exemption is recommended; 

(iii) The reasons why an exemption is 

justified, including why the granting of 

financial assistance to persons owing 

the type of debt for which exemption is 

requested would not be contrary to the 

Government’s goal to reduce losses by 

requiring proper screening of potential 

borrowers; and, 

(iv) Other information the Secretary 

deems necessary to consider the 

exemption request. 

(3) The Secretary may exempt a class 

of debts if exemption is in the best 

interests of the Federal Government. 

(g) Waivers by the agency. (1) The 

head of an agency from which a person 

seeks to obtain Federal financial 

assistance may waive the eligibility 

requirement described in paragraph (c) 

of this section. Waivers shall be granted 

only on a person by person basis. The 

head of the agency may delegate the 

waiver authority only to the Chief 

Financial Officer of the agency. The 

Chief Financial Officer may redelegate 

the authority only to the Deputy Chief 

Financial Officer of the agency. 
67758 Federal Register / Vol. 63, No. 235 / Tuesday, December 8, 1998 / Rules and Regulations 

(2) The authorized agency official 

should balance the following factors 

when deciding whether to grant a 

waiver under paragraph (g)(1) of this 

section: 

(i) Whether the denial of the financial 

assistance to the person would tend to 

interfere substantially with or defeat the 

purposes of the financial assistance 

program or otherwise would not be in 

the best interests of the Federal 

Government; and 

(ii) Whether the agency’s granting of 

the financial assistance to the person is 

contrary to the Government’s goal to 

reduce losses from debt management 

activities by requiring proper screening 

of potential borrowers. 

(3) When balancing the factors 

described in paragraph (d)(2) of this 

section, the authorized agency official 

should consider: 

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

the delinquency and the likelihood that 

the person will resolve the delinquent 

debt; and 

(ii) The amount of total debt, 

delinquent or otherwise, owed by the 

person and the person’s credit history 

with respect to repayment of debt. 

(4) Each agency shall retain a 

centralized record of the number and 

type of waivers granted under this 

section. 

(h) Effect of denial of Federal 

financial assistance. Nothing contained 

in this section precludes a person who 

has been denied Federal financial 

assistance from obtaining such 

assistance after that person’s delinquent 

debt has been resolved in accordance 

with paragraph (e)(1) of this section. 

Dated: December 2, 1998. 

Richard L. Gregg, 

Commissioner. 

[FR Doc. 98–32479 Filed 12–7–98; 8:45 am] 

BILLING CODE 4810–35–P