Friday


November 21, 1997


federal register
 Part III 

Department of the 

Treasury 

Fiscal Service 

31 CFR Part 285 

Administrative Wage Garnishment; 

Proposed Rule 

62457 
62458 Federal Register / Vol. 62, No. 225 / Friday, November 21, 1997 / Proposed Rules 

DEPARTMENT OF THE TREASURY 

Fiscal Service 

31 CFR Part 285 

[Docket No. FMS–285.11] 

RIN 1510–AA67 

Administrative Wage Garnishment 

AGENCY: Financial Management Service, 

Fiscal Service, Treasury. 

ACTION: Notice of proposed rulemaking. 

SUMMARY: This proposed rule 

implements the administrative wage 

garnishment provisions contained in the 

Debt Collection Improvement Act of 

1996 (DCIA). The DCIA authorizes 

Federal agencies to garnish the 

disposable pay of an individual to 

collect delinquent nontax debts owed to 

the United States in accordance with 

regulations issued by the Secretary of 

the Treasury. 

DATE: Comments must be received by 

December 22, 1997. 

ADDRESSES: Comments should be sent to 

Gerry Isenberg, Financial Program 

Specialist, Debt Management Services, 

Financial Management Service, 

Department of the Treasury, 401 14th 

Street, S.W., Room 151, Washington, 

D.C. 20227. 

FOR FURTHER INFORMATION CONTACT: 

Gerry Isenberg, Financial Program 

Specialist, at (202) 874–6660; Ronda 

Kent or Ellen Neubauer, Senior 

Attorneys, or Laurie Levin, AttorneyAdvisor, at (202) 874–6680. This 

document is available for downloading 

from the Financial Management Service 

web site at the following address: http:/ 

/www.fms.treas.gov. 

SUPPLEMENTARY INFORMATION: 

Background 

This proposed regulation implements 

the wage garnishment provision in 

section 31001(o) 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. 3720D. 

Under this provision Federal agencies 

may administratively garnish up to 15 

percent of the wages of a debtor to 

satisfy delinquent nontax debt owed to 

the United States. Prior to the enactment 

of the DCIA, agencies were required to 

obtain a court judgment before 

garnishing the wages of non-Federal 

employees. Section 31001(o) of the 

DCIA preempts State laws that prohibit 

wage garnishment or otherwise govern 

wage garnishment procedures. 

As authorized by the DCIA, a Federal 

agency which is collecting delinquent 

nontax debt may administratively 

garnish a delinquent debtor’s wages in 

accordance with regulations 

promulgated by the Secretary of the 

Treasury. As the lead agency for the 

collection of 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 implementing this and other 

debt collection tools established by the 

DCIA. 

In accordance with the requirements 

of the DCIA, this proposed rule 

establishes the following rules and 

procedures: 

1. Notice. At least 30 days before an 

agency initiates garnishment 

proceedings, the agency will give the 

debtor written notice informing him or 

her of the nature and amount of the 

debt, the intention of the agency to 

collect the debt through deductions 

from pay, and an explanation of the 

debtor’s rights regarding the proposed 

action. 

2. Rights of the debtor. The agency 

will provide the debtor with an 

opportunity to inspect and copy records 

related to the debt, to establish a 

repayment agreement, and to receive a 

hearing concerning the existence or 

amount of the debt and the terms of a 

repayment schedule. The hearing will 

be held prior to the issuance of a 

withholding order if the debtor’s request 

is timely received. For hearing requests 

that are not received in the specified 

time frame, an agency need not delay 

issuance of the withholding order prior 

to conducting a hearing. An agency may 

not garnish the wages of a debtor who 

has been involuntarily separated from 

employment until that individual has 

been reemployed continuously for at 

least 12 months. 

3. Employer’s responsibilities. The 

agency will send to the employer of a 

delinquent debtor a wage garnishment 

order directing that the employer pay a 

portion of the debtor’s wages to the 

Federal Government. This proposed 

regulation requires the debtor’s 

employer to certify certain payment 

information about the debtor. Employers 

will not be required to vary their normal 

pay cycles in order to comply with the 

garnishment order. 

The DCIA prohibits employers from 

taking disciplinary actions against the 

debtor based on the fact that the debtor’s 

wages are subject to administrative 

garnishment. In addition, the DCIA 

authorizes an agency to sue an employer 

for amounts not properly withheld from 

the wages payable to the debtor. 

Section Analysis 

(a) Purpose 

The purpose of this section is to 

implement the wage garnishment 

provision in the DCIA, codified at 31 

U.S.C. 3720D, under which Federal 

agencies may administratively garnish 

up to 15% of the wages of a debtor to 

satisfy delinquent nontax debt owed to 

the United States. 

(b) Scope 

Paragraph (b)(1) states that all Federal 

agencies are authorized to utilize this 

collection tool to collect delinquent 

nontax debt owed to the United States. 

The term ‘‘agency’’ is defined in 

paragraph (c). 

As provided in the DCIA, paragraph 

(b)(2) explains that State law does not 

apply to the withholding of an 

employee’s wages under this section to 

the extent that such State law conflicts 

or interferes with the procedures and 

requirements of this section. 

Paragraph (b)(3) explains that an 

agency’s use of this collection tool does 

not interfere with an agency’s discretion 

to compromise a debt, or to suspend or 

terminate collection action of the debt. 

Paragraph (b)(4) explains that 

administrative wage garnishment is one 

of many debt collection tools available 

to an agency. An agency may use 

administrative wage garnishment 

concurrently with other collection tools, 

even if an agency receives payments 

through the use of wage garnishment. 

Paragraph (b)(5) distinguishes Federal 

salary offset from administrative wage 

garnishment. Federal salary offset 

procedures, whereby Federal salary 

payments payable to Federal employees 

who owe debt to the United States are 

withheld to satisfy the outstanding 

obligations, are set forth in 5 U.S.C. 

5514 and the implementing regulations. 

(c) Definitions 

Agency. The term ‘‘agency’’ has the 

same meaning as found in 31 U.S.C. 

3701(a)(4). The term refers to an agency 

in the executive, judicial or legislative 

branches of the Government, including 

government corporations, that either 

administers the program that gave rise 

to the debt or pursues recovery of the 

debt. For example, the Department of 

the Treasury and Treasury-designated 

debt collection centers may collect debts 

by administrative wage garnishment in 

accordance with the provisions of this 

rule when collecting debts for other 

agencies. 

Business day. The term ‘‘business 

day’’ means Monday through Friday and 

shall be calculated consistent with Rule 
Federal Register / Vol. 62, No. 225 / Friday, November 21, 1997 / Proposed Rules 62459 

6(a) of the Federal Rules of Civil 

Procedure. 

Certificate of service. A ‘‘certificate of 

service’’ refers to a signed certificate 

that an agency is required to retain as 

evidence of mailing of a document. A 

certificate may be retained 

electronically and may contain a 

computer generated signature. 

Day. Unless otherwise indicated, the 

term ‘‘day’’ means calendar day and 

shall be calculated consistent with Rule 

6(a) of the Federal Rules of Civil 

Procedure. 

Debt or claim. For the purposes of this 

rule, the terms ‘‘debt’’ and ‘‘claim’’ refer 

to delinquent nontax debt. The term 

‘‘delinquent nontax debt’’ refers to debt 

that is past-due. 

Debtor. The term ‘‘debtor’’ refers to an 

individual who owes a delinquent 

nontax debt to the United States. 

Disposable pay. ‘‘Disposable pay’’ is 

all of a debtor’s compensation except 

health insurance premiums and those 

amounts required to be withheld by law, 

such as social security taxes. Lump sum 

payments, such as bonuses and back 

pay, are included in disposable pay. For 

purposes of calculating disposable pay, 

voluntary withholdings, such as savings 

allotments, are not deducted from a 

debtor’s compensation. 

Employer. The term ‘‘employer’’ refers 

to a person or entity that employs the 

services of others and includes State 

and local Governments. For purposes of 

this section, however, the Federal 

Government is not an ‘‘employer’’ 

because debts owed by Federal 

employees are collected in accordance 

with the Federal salary offset 

procedures. 

Garnishment. The term 

‘‘garnishment’’ refers to the process of 

withholding amounts from an 

employee’s pay and forwarding those 

amounts to a creditor in satisfaction of 

a withholding order. 

Withholding order. The term 

‘‘withholding order’’ refers to any order 

for withholding or garnishment of pay, 

whether issued under the provisions of 

this section or otherwise. A withholding 

order may be issued by an agency, or a 

judicial or administrative body. For 

purposes of this proposed rule, the 

terms ‘‘wage garnishment order’’ and 

‘‘garnishment order’’ have the same 

meaning as ‘‘withholding order.’’ 

(d) General Rule 

Paragraph (d) sets forth the authority 

contained in the DCIA that authorizes 

an agency to administratively garnish 

the wages of a delinquent debtor. 

Agencies authorized to administratively 

garnish the wages of a delinquent debtor 

include the Department of the Treasury 

and Treasury-designated debt collection 

centers when collecting debt for other 

agencies. 

(e) Notice Requirements 

Paragraph (e)(1) contains the DCIA 

requirement that the agency give the 

debtor written notice at least 30 days 

before initiating garnishment 

proceedings. The notice will inform the 

debtor of the nature and amount of the 

debt, the intention of the agency to 

collect the debt through deductions 

from pay, and an explanation of the 

debtor’s rights regarding the proposed 

action. The notice will include the time 

frame within which a debtor may 

exercise his or her rights. This notice 

may be combined with and made a part 

of any notice of intent to use other 

collection tools that an agency sends to 

the debtor. 

Paragraph (e)(2) contains the DCIA 

requirement that the agency provide the 

debtor with an opportunity to inspect 

and copy records related to the debt, to 

establish a repayment agreement, and to 

receive a hearing. Agencies should 

review a debtor’s request to establish a 

repayment agreement under paragraph 

(e)(2)(ii) of this section in accordance 

with the requirements of the Federal 

Claims Collection Standards (4 CFR 

Parts 101–105), or other applicable 

standards, to ensure that the debtor’s 

ability to pay is considered. The debtor 

is entitled to a hearing only with respect 

to (1) the existence of the debt; (2) the 

amount of the debt; or, (3) the terms of 

the proposed repayment schedule under 

the garnishment order, e.g., that the 

amount withheld would create a 

financial hardship. However, the debtor 

is not entitled to a hearing concerning 

the terms of the proposed repayment 

schedule if these terms have been 

established by written agreement 

between the debtor and the agency. As 

discussed below, a debtor who is subject 

to a wage garnishment order may 

request a review by the agency of the 

amount garnished based on materially 

changed circumstances that result in 

financial hardship. See paragraph (k) of 

this section. 

Paragraph (e)(3) requires that the 

agency keep a copy of the certificate of 

service indicating the date of mailing of 

the notice required by this section as 

evidence of the agency having provided 

the debtor with notice and the 

opportunity for review. This regulation 

does not specify how the certificate 

should be retained by the agency, and 

accordingly the certificate may be 

retained electronically. However, 

agencies are advised to consult with the 

Department of Justice as to the adequacy 

of computer generated records for 

evidentiary purposes. 

(f) Hearing 

The DCIA requires agencies to 

promulgate regulations concerning 

procedures for the conduct of 

administrative wage garnishment 

hearings. Agencies may use established 

hearing procedures so long as they meet 

the requirements of this section. 

Paragraph (f)(1) allows agencies either to 

prescribe their own regulations for this 

purpose or adopt this section without 

change. 

Under paragraph (f)(2), agencies may 

decide whether to hold an oral or 

written hearing. The subject matter of 

the hearing is limited to the existence or 

amount of the debt or the terms of an 

involuntary repayment schedule as 

described under paragraph (e) of this 

section. 

Paragraph (f)(3) sets forth factors an 

agency should consider in determining 

the type of hearing or review to provide. 

If an agency determines that an oral 

hearing is appropriate, the debtor may 

choose an in-person hearing or a hearing 

by telephone conference. 

As required by the DCIA, paragraph 

(f)(4) provides that a hearing will be 

held prior to the issuance of a 

withholding order if the debtor’s request 

for a hearing is timely received by the 

agency. Timely received means that the 

request for a hearing is received by the 

agency on or before the 15th business 

day following the mailing of the notice 

described in paragraph (e)(1) of this 

section. Agencies are required to inform 

the debtor of the deadline for requesting 

a hearing prior to the issuance of a 

withholding order. 

Paragraph (f)(5) addresses hearing 

requests received after the 15th business 

day following the mailing of the notice 

described in paragraph (e)(1) of this 

section. As provided in the DCIA, an 

agency need not delay issuance of the 

withholding order prior to conducting a 

hearing if the request for a hearing is not 

timely received. 

Paragraph (f)(6) authorizes the head of 

the agency to designate any qualified 

individual as a hearing official. 

Paragraph (f)(7) requires an agency to 

notify the debtor about the hearing, 

including the date and time of the 

hearing or the deadlines for the 

submission of evidence. 

Paragraph (f)(8) describes the burden 

of proof on the respective parties to a 

hearing. The agency must present 

evidence as to the existence or amount 

of the debt. To dispute the debt, the 

debtor must present clear and 

convincing evidence that no debt exists 

or that the amount of the debt is 
62460 Federal Register / Vol. 62, No. 225 / Friday, November 21, 1997 / Proposed Rules 

incorrect. If the terms of the repayment 

schedule are an issue, the debtor must 

show that such terms are unreasonable 

or unlawful. 

Paragraph (f)(9) describes the type of 

record required for a hearing provided 

under this section. 

As required by the DCIA, under 

paragraph (f)(10), the hearing official is 

required to issue a written decision no 

later than sixty (60) days after the 

request for a hearing was made. Thus, 

a hearing must be held and a decision 

rendered within 60 days after the 

receipt of a hearing request by the 

debtor. The agency may not issue a 

withholding order until a hearing is 

held and a decision rendered. If an 

agency has previously issued a 

withholding order and the agency is 

unable to hold a hearing and issue a 

decision within the 60-day time period, 

the agency must suspend the 

withholding order until a hearing and a 

decision have been provided to the 

debtor. The provisions of this paragraph 

(f)(10) do not apply to financial 

hardship reviews under the provisions 

of paragraph (k) of this section. 

Paragraph (f)(11) sets forth the 

information that must be included in 

the hearing official’s written decision. 

Paragraph (f)(12) states that the 

hearing official’s decision is the final 

agency action for appeal purposes. 

Paragraph (f)(13) provides that if a 

debtor, without good cause shown, fails 

to appear at a scheduled hearing, an 

agency may issue a withholding order 

prior to rescheduling or holding a 

subsequent hearing. 

(g) Wage Garnishment Order 

In accordance with the provisions of 

the DCIA, paragraph (g)(1) requires 

agencies to send to employers of 

delinquent debtors a wage garnishment 

order directing the employer to pay a 

portion of the debtor’s wages to the 

Federal Government. The agency is 

required to send the order within 30 

days after the debtor fails to make a 

timely request for a hearing, or if a 

timely request is made, within 30 days 

after a final decision is made to proceed 

with the garnishment. 

Paragraph (g)(2) describes the format 

and content of a withholding order. A 

withholding order may contain a 

computer generated signature. 

Paragraph (g)(3) requires that the 

agency retain a copy of the certificate of 

service indicating the date of mailing of 

the withholding order as evidence of the 

agency having served the employer with 

the order. While a copy of the certificate 

may be retained electronically, agencies 

are advised to consult with the 

Department of Justice as to the adequacy 

of computer generated records for 

evidentiary purposes. 

(h) Certification by Employer 

When a debtor’s employer receives a 

withholding order, paragraph (h) 

requires the employer to complete a 

certification in a form prescribed by the 

Secretary of the Treasury. The 

certification will address matters such 

as information about the debtor’s 

employment status and disposable pay 

available for withholding. 

(i) Amounts Withheld 

Paragraphs (i)(1), (i)(2), and (i)(3) 

describe the restrictions on the amounts 

that can be withheld from an 

employee’s pay to satisfy a withholding 

order issued pursuant to this proposed 

rule. As provided in the DCIA, under 

paragraph (i)(1) no more than 15% of 

the debtor’s disposable pay for each pay 

period may be garnished. 

Special rules apply to calculating the 

amount to be withheld from a debtor’s 

pay that is subject to multiple 

withholding orders. Paragraph (i)(2) 

describes the amount that may be 

garnished from a debtor’s disposable 

pay if, at the time of the withholding, 

the debtor’s pay is subject to other wage 

garnishment orders, whether issued 

under this section or otherwise, e.g., a 

wage garnishment order issued pursuant 

to the provisions of 28 U.S.C. 3205 

(Garnishment) or a commercial wage 

garnishment. 

For garnishments issued under this 

section, an employer is required to 

withhold from a debtor’s pay the 

amounts set forth in paragraph (i)(1). 

However, when the employee’s pay is 

subject to multiple withholding orders 

that would result in the withholding of 

more than 25% of a debtor’s disposable 

pay, this proposed rule requires that the 

amounts withheld under this section be 

reduced if the other withholding orders 

are for family support or were served on 

the employer prior in time. For 

example, if the employer is withholding 

15% of a debtor’s disposable pay for a 

family support or prior withholding 

order, the amount withheld for the 

subsequent withholding order issued 

under this section is limited to 10% of 

the debtor’s disposable pay. When the 

family support or prior withholding 

order terminates, the amount withheld 

for the subsequent withholding order 

issued under this section may be 

increased to the maximum 15% allowed 

under (i)(1). 

The following examples illustrate 

how the rules described in paragraphs 

(i)(1) and (i)(2) work. 

Examples: An agency issues a garnishment 

order under this section setting the amount 

of garnishment at 15% of the debtor’s 

disposable pay. 

(A) If the debtor’s disposable pay is $200 

weekly and is not subject to other 

garnishment orders with priority, then the 

amount of the garnishment under this section 

will be $30 weekly, 15% of disposable pay 

(15%×$200=$30). 

(B) If the debtor’s disposable pay is $200 

weekly and is subject to a prior garnishment 

order in the amount of $40 weekly, then the 

amount of the garnishment under this section 

will be $10 weekly. The $10 amount is the 

lesser of 15% of disposable pay 

(15%×$200=$30) or the maximum amount to 

be garnished where a debtor’s pay is subject 

to withholding orders with priority 

(25%×$200=$50; $50¥$40=$10). When the 

prior garnishment order terminates, the 

amount of the garnishment shall be increased 

to $30 weekly because the calculation 

regarding the prior withholding orders is no 

longer necessary. 

(C) If the debtor’s disposable pay is $200 

weekly and is subject to a garnishment order 

with priority in the amount of $100 weekly, 

then the amount of the garnishment under 

this section will be $0. The $0 amount is the 

lesser of 15% of disposable pay 

(15%×$200=$30) or the maximum amount to 

be garnished where a debtor’s pay is subject 

to withholding orders with priority 

(25%×$200=$50; $50—$100 $0). When the 

prior garnishment order terminates, the 

amount of the garnishment shall be increased 

to $30 weekly because the calculation 

regarding the prior withholding orders is no 

longer necessary. 

Paragraph (i)(3) allows the debtor to 

consent in writing to withholding a 

greater amount than provided in 

paragraphs (i)(1) and (i)(2). 

Under paragraph (i)(4), the employer 

is required to promptly pay to the 

agency amounts withheld under the 

garnishment order, generally within 10 

days. 

As provided in the DCIA, under 

paragraph (i)(5) an employer is not 

required to vary its pay cycle or 

disbursement cycle to comply with a 

withholding order issued pursuant to 

this section. 

Paragraph (i)(6) provides that a 

withholding order issued under this 

section will take priority over any 

assignment or allotment by an employee 

of his wages, except for an assignment 

or allotment made pursuant to a family 

support judgment or order. 

Paragraph (i)(7) requires the employer 

to continue to garnish an employee’s 

wages until the agency notifies the 

employer that garnishment is no longer 

appropriate. 

(j) Exclusions From Garnishment 

As required by the DCIA, paragraph (j) 

provides that no withholding of a 

debtor’s wages may occur in the case of 

an individual who has been 

involuntarily separated from 
Federal Register / Vol. 62, No. 225 / Friday, November 21, 1997 / Proposed Rules 62461 

employment until that individual has 

been reemployed continuously for at 

least 12 months. The debtor bears the 

burden of notifying the agency of an 

involuntary separation and the 

circumstances surrounding any 

separation from employment to avoid 

wage withholding based on this 

provision. 

(k) Financial Hardship 

Paragraph (k)(1) allows a debtor to 

request a review by the agency of the 

amount being garnished under a wage 

garnishment order based on materially 

changed circumstances which result in 

a financial hardship. 

Paragraph (k)(2) requires the debtor to 

explain and submit evidence of the 

materially changed circumstances and 

the effect of the change on the debtor’s 

ability to pay. 

Paragraph (k)(3) explains that an 

agency is required to adjust the amounts 

withheld under the garnishment order if 

a financial hardship is found to exist. 

(l) Ending Garnishment 

Paragraph (l)(1) requires an agency to 

instruct the employer to discontinue 

garnishment upon its receipt of the full 

amount of the debt, including interest, 

penalties, and administrative costs. 

Paragraph (l)(2) requires an agency to 

review its debtors’ accounts, at least 

annually, to ensure that garnishment 

has been terminated for accounts that 

have been paid in full. 

(m) Actions Prohibited by the Employer 

As mandated by the DCIA, paragraph 

(m) prohibits employers from taking 

disciplinary actions against a debtor 

based on the fact that the debtor’s wages 

are subject to administrative 

garnishment. 

(n) Refunds 

Paragraph (n)(1) requires an agency to 

refund promptly to a debtor amounts 

improperly withheld from wages. 

Paragraph (n)(2) provides that, unless 

required by law or contract, refunds 

shall not bear interest. 

(o) Right of Action 

As authorized by the DCIA, paragraph 

(o) provides that an agency may sue an 

employer for the amounts that were not 

properly withheld from the wages 

payable to the debtor. The agency may 

initiate action against an employer only 

after terminating its collection efforts 

against the debtor. For purposes of this 

section, this occurs when an agency (1) 

has terminated collection action in 

accordance with the Federal Claims 

Collection Standards or other applicable 

standards, or (2) has not received any 

payments for the debt from any source 

for at least one year. 

Regulatory Analyses 

This proposed rule is not a significant 

regulatory action as defined in 

Executive Order 12866. 

It is hereby certified that this 

proposed regulation, including the 

certification referenced in this notice of 

proposed rulemaking (see paragraph (h) 

of this section), will not have a 

significant economic impact on a 

substantial number of small entities. 

Although a substantial number of small 

entities will be subject to this proposed 

regulation and to the certification 

requirement in this proposed rule, the 

requirements will not have a significant 

economic impact on these entities. 

Employers of delinquent debtors must 

certify certain information about the 

debtor such as the debtor’s employment 

status and earnings. This information is 

contained in the employer’s payroll 

records. Therefore, it will not take a 

significant amount of time or result in 

a significant cost for an employer to 

complete the certification form. Even if 

an employer is served withholding 

orders on several employees over the 

course of a year, the cost imposed on the 

employer to complete the certifications 

would not have a significant economic 

impact on that entity. Employers are not 

required to vary their normal pay cycles 

in order to comply with a withholding 

order issued pursuant to this proposed 

rule. 

List of Subjects in 31 CFR Part 285 

Administrative practice and 

procedure, Claims, Debts, Garnishment 

of wages, Hearing and appeal 

procedures, Salaries, Wages. 

Authority and Issuance 

For the reasons set forth in the 

preamble, 31 CFR Part 285 is proposed 

to be amended to read as follows: 

PART 285—DEBT COLLECTION 

AUTHORITIES UNDER THE DEBT 

COLLECTION IMPROVEMENT ACT OF 

1996 

1. The authority citation for Part 285 

is revised to read as follows: 

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

3701, 3716, 3720A, 3720D; E.O. 13019 

2. Subpart B consisting of § 285.11 is 

added to Part 285 to read as follows: 

Subpart B—Authorities Other Than 

Offset 

§ 285.11 Administrative wage 

garnishment. 

(a) Purpose. This regulation provides 

procedures for Federal agencies to 

collect money from a debtor’s 

disposable pay by means of 

administrative wage garnishment to 

satisfy delinquent nontax debt owed to 

the United States. 

(b) Scope. (1) This regulation applies 

to any Federal agency that administers 

a program that gives rise to a delinquent 

nontax debt owed to the United States 

and to any agency that pursues recovery 

of such debt. 

(2) This regulation shall apply 

notwithstanding any provision of State 

law. 

(3) Nothing in this regulation 

precludes the compromise of a debt or 

the suspension or termination of 

collection action in accordance with 

applicable law. See, for example, the 

Federal Claims Collection Standards 

(FCCS), 4 CFR Parts 101–105. 

(4) The receipt of payments pursuant 

to this regulation does not preclude a 

Federal agency from pursuing other debt 

collection remedies, including the offset 

of Federal payments to satisfy 

delinquent nontax debt owed to the 

United States. A Federal agency may 

pursue such debt collection remedies 

separately or in conjunction with 

administrative wage garnishment. 

(5) This regulation does not apply to 

the collection of delinquent nontax debt 

owed to the United States from the 

wages of Federal employees from their 

Federal employment. Federal pay is 

subject to the Federal salary offset 

procedures set forth in 5 U.S.C. 5514 

and the implementing regulations. 

(c) Definitions. As used in this section 

the following definitions shall apply: 

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. For purposes 

of this regulation, agency means either 

the agency that administers the program 

that gave rise to the debt or the agency 

that pursues recovery of the debt. 

Business day means Monday through 

Friday. For purposes of computation, 

the last day of the period will be 

included unless it is a Federal legal 

holiday. 

Certificate of service means a 

certificate signed by an agency official 

indicating the nature of the document to 

which it pertains, the date of mailing of 

the document, and to whom the 

document is being sent. 

Day means calendar day. For 

purposes of computation, the last day of 

the period will be included unless it is 

a Saturday, a Sunday, or a Federal legal 

holiday. 

Debt or claim means any amount of 

money, funds or property that has been 
62462 Federal Register / Vol. 62, No. 225 / Friday, November 21, 1997 / Proposed Rules 

determined by an appropriate official of 

the Federal Government to be owed to 

the United States by an individual. 

Delinquent nontax debt means any 

nontax debt that has not been paid by 

the date specified in the agency’s initial 

written demand for payment, or 

applicable agreement, unless other 

satisfactory payment arrangements have 

been made. For purposes of this section, 

the terms ‘‘debt’’ and ‘‘claim’’ are 

synonymous and refer to delinquent 

nontax debt. 

Debtor means an individual who owes 

a delinquent nontax debt to the United 

States. 

Disposable pay means that part of the 

debtor’s compensation (including, but 

not limited to, salary, bonuses, 

commissions, and vacation pay) from an 

employer remaining after the deduction 

of health insurance premiums and any 

amounts required by law to be withheld. 

For purposes of this section, ‘‘amounts 

required by law to be withheld’’ include 

amounts for deductions such as social 

security taxes and withholding taxes, 

but do not include any amount withheld 

pursuant to a court order. 

Employer means a person or entity 

that employs the services of others and 

that pays their wages or salaries. The 

term employer includes, but is not 

limited to, State and local Governments, 

but does not include an agency of the 

Federal Government. 

Garnishment means the process of 

withholding amounts from an 

employee’s disposable pay and the 

paying of those amounts to a creditor in 

satisfaction of a withholding order. 

Withholding order means any order 

for withholding or garnishment of pay 

issued by an agency, or judicial or 

administrative body. For purposes of 

this section, the terms ‘‘wage 

garnishment order’’ and ‘‘garnishment 

order’’ have the same meaning as 

‘‘withholding order.’’ 

(d) General rule. Whenever an agency 

determines that a delinquent debt is 

owed by an individual, the agency may 

initiate proceedings to administratively 

garnish the wages of the delinquent 

debtor. 

(e) Notice requirements. (1) At least 30 

days before the initiation of garnishment 

proceedings, the agency shall mail, by 

first class mail, to the debtor’s last 

known address a written notice 

informing the debtor of: 

(i) The nature and amount of the debt; 

(ii) The intention of the agency to 

initiate proceedings to collect the debt 

through deductions from pay until the 

debt and all accumulated interest, 

penalties and administrative costs are 

paid in full; and 

(iii) An explanation of the debtor’s 

rights, including those set forth in 

paragraph (e)(2) of this section, and the 

time frame within which the debtor may 

exercise his or her rights. 

(2) The debtor shall be afforded the 

opportunity: 

(i) To inspect and copy agency 

records related to the debt; 

(ii) To enter into a written repayment 

agreement with the agency under terms 

agreeable to the agency; and 

(iii) For a hearing in accordance with 

paragraph (f) of this section concerning 

the existence or the amount of the debt 

or the terms of the proposed repayment 

schedule under the garnishment order. 

However, the debtor is not entitled to a 

hearing concerning the terms of the 

proposed repayment schedule if these 

terms have been established by written 

agreement under paragraph (e)(2)(ii) of 

this section. 

(3) The agency will keep a copy of a 

certificate of service indicating the date 

of mailing of the notice. 

(f) Hearing.—(1) In general. Agencies 

shall prescribe regulations for the 

conduct of administrative wage 

garnishment hearings or shall adopt this 

section without change by reference. 

(2) Request for hearing. The agency 

shall provide a hearing, which at the 

agency’s option may be oral or written, 

if the debtor submits a written request 

for a hearing concerning the existence or 

amount of the debt or the terms of the 

repayment schedule (for repayment 

schedules established other than by 

written agreement under paragraph 

(e)(2)(ii) of this section). 

(3) Type of hearing or review. (i) For 

purposes of this section, whenever an 

agency is required to afford a debtor a 

hearing, the agency shall provide the 

debtor with a reasonable opportunity for 

an oral hearing when the agency 

determines that the issues in dispute 

cannot be resolved by review of the 

documentary evidence, for example, 

when the validity of the claim turns on 

the issue of credibility or veracity. 

(ii) If the agency determines that an 

oral hearing is appropriate, the time and 

location of the hearing shall be 

established by the agency. An oral 

hearing may, at the debtor’s option, be 

conducted either in-person or by 

telephone conference. All travel 

expenses incurred by the debtor in 

connection with an in-person hearing 

will be borne by the debtor. All 

telephonic charges incurred during the 

hearing will be the responsibility of the 

agency. 

(iii) This section does not require an 

oral hearing with respect to debt 

collection systems in which a 

determination of indebtedness rarely 

involves issues of credibility or veracity 

and the agency has determined that 

review of the written record is 

ordinarily an adequate means to correct 

prior mistakes. 

(iv) In those cases when an oral 

hearing is not required by this section, 

an agency shall nevertheless accord the 

debtor a ‘‘paper hearing,’’ that is, an 

agency will decide the issues in dispute 

based upon a review of the written 

record. The agency will establish a 

reasonable deadline for the submission 

of evidence. 

(4) Effect of timely request. Subject to 

paragraph (f)(13) of this section, if the 

debtor’s written request is received by 

the agency on or before the 15th 

business day following the mailing of 

the notice described in paragraph (e)(1) 

of this section, the agency shall not 

issue a withholding order under 

paragraph (g) of this section until the 

debtor has been provided the requested 

hearing and a decision in accordance 

with paragraphs (f)(10) and (f)(11) of 

this section has been rendered. 

(5) Failure to timely request a hearing. 

If the debtor’s written request is 

received by the agency after the 15th 

business day following the mailing of 

the notice described in paragraph (e)(1) 

of this section, the agency shall provide 

a hearing to the debtor but will not 

delay issuance of a withholding order 

unless the agency determines that the 

delay in filing the request was caused by 

factors over which the debtor had no 

control, or the agency receives 

information that the agency believes 

justifies a delay or cancellation of the 

withholding order. 

(6) Hearing official. A hearing official 

may be any qualified individual, as 

determined by the head of the agency, 

including an administrative law judge. 

(7) Procedure. After the debtor 

requests a hearing, the hearing official 

shall notify the debtor of: 

(i) The date and time of a telephonic 

hearing; 

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

in-person oral hearing; or 

(iii) The deadline for the submission 

of evidence for a written hearing. 

(8) Burden of proof. (i) The agency 

will have the burden of going forward 

to prove the existence or amount of the 

debt. 

(ii) Thereafter, if the debtor disputes 

the existence or amount of the debt, the 

debtor must present clear and 

convincing evidence that no debt exists 

or that the amount of the debt is 

incorrect. In addition, the debtor may 

present evidence that the terms of the 

repayment schedule are unreasonable or 

unlawful. 
Federal Register / Vol. 62, No. 225 / Friday, November 21, 1997 / Proposed Rules 62463 

(9) Record. The hearing official must 

maintain a summary record of any 

hearing provided under this section. A 

hearing is not required to be a formal 

evidentiary-type hearing, however, 

witnesses who testify in oral hearings 

will do so under oath or affirmation. 

(10) Date of decision. The hearing 

official shall issue a written opinion 

stating his or her decision, as soon as 

practicable, but not later than sixty (60) 

days after the date on which the request 

for such hearing was received by the 

agency. If an agency is unable to provide 

the debtor with a hearing and render a 

decision within 60 days after the receipt 

of the request for such hearing: 

(i) The agency may not issue a 

withholding order until the hearing is 

held and a decision rendered; or 

(ii) If the agency had previously 

issued a withholding order to the 

debtor’s employer, the agency must 

suspend the withholding order 

beginning on the 61st day after the 

receipt of the hearing request and 

continuing until a hearing is held and 

a decision is rendered. 

(11) Content of decision. The written 

decision shall include: 

(i) A summary of the facts presented; 

(ii) The hearing official’s findings, 

analysis and conclusions; and 

(iii) The terms of any repayment 

schedules, if applicable. 

(12) Final agency action. The hearing 

official’s decision will be the final 

agency action for the purposes of 

judicial review under the 

Administrative Procedures Act (5 U.S.C. 

701 et seq.). 

(13) Failure to appear. In the absence 

of good cause shown, a debtor who fails 

to appear at a hearing scheduled 

pursuant to paragraph (f)(4) of this 

section, will be deemed as not having 

timely filed a request for a hearing. 

(g) Wage garnishment order. (1) 

Unless the agency receives information 

that the agency believes justifies a delay 

or cancellation of the withholding order, 

the agency shall send, by first class 

mail, a withholding order to the debtor’s 

employer within 30 days after the 

debtor fails to make a timely request for 

a hearing (i.e., within 15 business days 

after the mailing of the notice described 

in paragraph (e)(1) of this section), or, if 

a timely request for a hearing is made 

by the debtor, within 30 days after a 

final decision is made by the agency to 

proceed with garnishment. 

(2) The withholding order sent to the 

employer under paragraph (g)(1) of this 

section shall be in a form prescribed by 

the Secretary of the Treasury on the 

agency’s letterhead and signed by the 

head of the agency or his/her delegatee. 

The order shall contain only the 

information as may be necessary for the 

employer to comply with the 

withholding order. Such information 

includes the debtor’s name, address, 

and social security number, as well as 

instructions for withholding and 

information as to where payments 

should be sent. 

(3) The agency will keep a copy of a 

certificate of service indicating the date 

of mailing of the order. 

(h) Certification by employer. Along 

with the withholding order, the agency 

shall send to the employer a 

certification in a form prescribed by the 

Secretary of the Treasury. The employer 

shall complete and return the 

certification to the agency within the 

time frame prescribed in the 

instructions to the form. The 

certification will address matters such 

as information about the debtor’s 

employment status and disposable pay 

available for withholding. 

(i) Amounts withheld. (1) Subject to 

the provisions of paragraph (i)(3), after 

receipt of the garnishment order issued 

under this section the employer shall 

deduct from all disposable pay paid to 

the applicable debtor during each pay 

period the amount indicated on the 

garnishment order up to 15% of the 

debtor’s disposable pay. 

(2) When a debtor’s pay is subject to 

withholding orders with priority the 

following shall apply: 

(i) Unless otherwise provided by 

Federal law, withholding orders issued 

under this section shall be paid in the 

amounts set forth under paragraph (i)(1) 

of this section and shall have priority 

over other withholding orders which are 

served later in time. Notwithstanding 

the foregoing, withholding orders for 

family support shall have priority over 

withholding orders issued under this 

section. 

(ii) If amounts are being withheld 

from a debtor’s pay pursuant to a 

withholding order served on an 

employer before a withholding order 

issued pursuant to this section, or if a 

withholding order for family support is 

served on an employer at any time, the 

amounts withheld pursuant to the 

withholding order issued under this 

section shall be the lesser of: 

(A) The amount calculated under 

paragraph (i)(1) of this section, or 

(B) An amount equal to 25% of the 

debtor’s disposable pay less the 

amount(s) withheld under the 

withholding order(s) with priority. 

(3) An amount greater than that set 

forth in paragraphs (i)(1) and (i)(2) of 

this section may be withheld upon the 

written consent of debtor. 

(4) The employer shall promptly pay 

to the agency all amounts withheld in 

accordance with the withholding order 

issued pursuant to this section. 

(5) An employer shall not be required 

to vary its normal pay and disbursement 

cycles in order to comply with the 

withholding order. 

(6) Any assignment or allotment by an 

employee of his earnings shall be void 

to the extent it interferes with or 

prohibits execution of the withholding 

order issued under this part, except for 

any assignment or allotment made 

pursuant to a family support judgment 

or order. 

(7) The employer shall withhold the 

appropriate amount from the debtor’s 

wages for each pay period until the 

employer receives notification from the 

agency to discontinue wage 

withholding. The garnishment order 

shall indicate a reasonable period of 

time within which the employer is 

required to commence wage 

withholding. 

(j) Exclusions from garnishment. The 

agency may not garnish the wages of a 

debtor who it knows has been 

involuntarily separated from 

employment until the debtor has been 

reemployed continuously for at least 12 

months. The debtor bears the burden of 

informing the agency of the 

circumstances surrounding an 

involuntary separation from 

employment. 

(k) Financial hardship. (1) A debtor 

whose wages are subject to a wage 

withholding order under this section, 

may, at any time, request a review by 

the agency of the amount garnished, 

based on materially changed 

circumstances such as disability, 

divorce, or catastrophic illness which 

result in financial hardship. 

(2) A debtor requesting a review 

under paragraph (k)(1) of this section 

shall submit the basis for claiming that 

the current amount of garnishment 

results in a financial hardship to the 

debtor, along with supporting 

documentation. Agencies shall consider 

any information submitted in 

accordance with procedures and 

standards established by the agency. 

(3) If a financial hardship is found, 

the agency shall downwardly adjust, by 

an amount and for a period of time 

agreeable to the agency, the amount 

garnished to reflect the debtor’s 

financial condition. The agency will 

notify the employer of any adjustments 

to the amounts to be withheld. 

(l) Ending garnishment. (1) Once the 

agency has fully recovered the amounts 

owed by the debtor, including interest, 

penalties, and administrative costs 

consistent with the FCCS, the agency 

shall send the debtor’s employer 
62464 Federal Register / Vol. 62, No. 225 / Friday, November 21, 1997 / Proposed Rules 

notification to discontinue wage 

withholding. 

(2) At least annually, an agency shall 

review its debtors’ accounts to ensure 

that garnishment has been terminated 

for accounts that have been paid in full. 

(m) Actions prohibited by the 

employer. An employer may not 

discharge, refuse to employ, or take 

disciplinary action against the debtor 

due to the issuance of a withholding 

order under this section. 

(n) Refunds. (1) If a hearing official, at 

a hearing held pursuant to paragraph 

(f)(3) of this section, determines that a 

debt is not legally due and owing to the 

United States, the agency shall promptly 

refund any amount collected by means 

of administrative wage garnishment. 

(2) Unless required by Federal law or 

contract, refunds under this section 

shall not bear interest. 

(o) Right of action. The agency may 

sue any employer for any amount that 

the employer, after receipt of the 

garnishment order provided by the 

agency under paragraph (g) of this 

section, fails to withhold from wages 

owed and payable to an employee. 

However, a suit may not be filed before 

the termination of the collection action, 

unless earlier filing is necessary to avoid 

expiration of any applicable statute of 

limitations period. For purposes of this 

section, ‘‘termination of the collection 

action’’ occurs when the agency has 

terminated collection action in 

accordance with the FCCS or other 

applicable standards. In any event, 

termination of the collection action will 

have been deemed to occur if the agency 

has not received any payments to satisfy 

the debt, in whole or in part, from any 

source for a period of one (1) year. 

Dated: November 17, 1997. 

Russell D. Morris, 

Commissioner. 

[FR Doc. 97–30611 Filed 11–20–97; 8:45 am] 

BILLING CODE 4810–35–P