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
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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
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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
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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