1 Circuit Judge of the Ninth Circuit, sitting by designation.

2 Pursuant to 5 T H C IR

. R. 47.5, the court has determined that th i s

opinion s h ould not be published and is not precedent except under the limited

circumstances set forth in 5 TH C IR

. R. 47.5.4. UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT

No. 00-30080

HOWARD MAKOFSKY

Plaintiff-Appellant,

v.

KENNETH S. APFEL

Commissioner, Social Security Administration

Defendant-Appellee,

Appeal from the United States District Court for the

Eastern District of Louisiana

(99-CV-1720-LLM)

January 23, 2001

Before GOODWIN 1 , GARWOOD and JONES, Circuit Judges.

EDITH H. JONES, Circuit Judge: 2

Appellant Howard Makofsky received an overpayment of

Social Se curity benefits and seeks to waive reimbursement to the

Social Security Administration (SSA). An administrative law judge

(ALJ) held that Makofsky failed to show that he was “without fault”

under 42 U.S.C. § 404(b), and refused to waive the overpayment.2

Makofsky appeals. Concluding that there is not sufficient evidence

to sustain the ALJ’s conclusion, we reverse and remand.

Makofsky began receiving retirement benefits from the SSA

in 1989. At that time, he signed a preprinted application that

stated, “[m]y reporting responsibilities have been explained to me

and I h ave also received a printed explanation of those

responsibilities.” Makofsky testified that the SSA office was very

busy on the day he applied for bene fits, and that SSA personnel

spoke to him only briefly. He did not recall receiving any oral or

written instructions to notify t he SSA if he went to prison. He

understood from SSA Form 1099 tax documents that he could earn only

limited income while receiving benefits and that he was obliged to

notify SSA of changes in address.

Makofsky was i n prison between February 1995 and April

1996 for writing bad checks, a felony. Under 42 U.S.C. § 402(x),

he was not entitled to receive social security benefits during this

period. Makofsky testified that he never knew this, and he

therefore did not notify the SSA of his confinement. He continued

to receive benefits in a post office box, his sole mailing address

since at least 1982. Makofsky’s former spouse had power of

attorney over his affairs, and she received and cashed his benefits

for him. She paid his bills and rent during his confinement, and

sent cash to him.3 In May 1996, the SSA notified Makofsky tha t he had

received an overpayment and asked him to repay $ 14,136. Makofsky

asked the SSA to waive the overpayment. The SSA refused to do so,

but it reduced the debt to $13,196.

The ALJ held a hearing at which only Makofsky testified.

In his decision, the ALJ briefly described Makofsky’s testimony and

ruled:

Although [Makofsky] asserts that he did not know that he

had the duty to inform the Administration if he were

incarcerated, he did know that he had to report a change

of address, other sources of income, and other

circumstances. . . .

I conclude claimant knew or should have known that he had

to inform the Administration when he became incarcerated

due to conviction of a felony in February 1995. He was

aware of other reporting procedures which are explained

conc urrently with the one requiring that he report any

incarcerations due to felony convictions.

Record at 10 (citations omitted). The ALJ concluded that Makofsky

was at fault, and refused to waive the overpayment.

This decision cited no SSA instructions that would have

notified Makofsky to report incarc eration. It made no explicit

findings about Makofsky’s credibility. It also did not explicitly

consider Makofsky’s physical, mental, educational, or linguistic

limitations.

The district court affirmed, finding that substantial

evidence supported the ALJ’s decision. Makofsky appeals.4 STANDARD OF REVIEW

We may revi ew only two issues: 1) whether substantial

evide nce supports the decision, and 2) whether the ALJ correctly

a pplied the law. S ee Paul v. Shalala

, 29 F.3d 208, 21 0 (5th

Cir.1994). Substantial evidence is “more than a mere scintilla and

less tha n a preponderance. It is such relevant evidence as a

reasonable mind might accept as adequate to support a conclusion.”

Id. (citing Muse v. Sullivan , 925 F.2d 785, 589 (5th Cir.1991).

DISCUSSION

Makofsky contends that substantial evidence does not

support the determination that he was at fault. He argues that the

SSA never told him to report incarceration, and that he never knew

he had to. He also argues that the ALJ did not impugn his

credibility, and thus the ALJ should have credited his testimony.

Section 404(b), “No recovery from persons without fault,”

states

In any case in which more than the correct amount of

payment has been made, t here shall be no adjustment of

payments to, or recovery by the United States from, any

person who is without fault if s uch adjustment or

recovery would defeat the purpose of this subchapter or

would be against equity and good conscience.

42 U.S.C. § 404(b). Thus, Makofsky cannot benefit from this

section unless he was without fault. Makofsky has the burden of

proof on this issue. S ee Bra y v. Bowen , 854 F.2d 685, 687 (5th

Cir.1988) (holding that the evidence supported a finding of fault).5 SSA regulation § 404.507, “Fault,” states:

Wha t constitutes fault on the part of the overpaid

individual

. . . depends upon whether the facts show that

the incorrect payment to the individual . . . resulted

from: . . .

(b) Failure to furnish information which he knew or

should have known to be material.

20 C.F.R. § 404.5 07. Our inquiry therefore is whether there is

substantial evidence that Makofsky knew or should have known that

his imprisonment was material to his eligibility.

If the SSA told Makofsky to report imprisonment, he

certainly would be at fault. In B ray

, the SSA infor med the

claimant of her obligation to report marriage at the time she filed

and through periodic check “s tuffers.” This court, refusing to

waive an overpayment, concluded that she was at fault for not

reporting her change in marital status. S ee Bray

, 854 F.2d at 687.

Where the SSA does not expressly warn claimants, however,

federal appeals courts have not assumed that claimants know what is

material to their eligibility. In P eeler v. Heckler

, a prisoner

was already receiving SSA benefits when § 402(x) took effect in

1980. S ee Peeler v. Heckler

, 781 F.2d 649 (8th Cir.1986). The SSA

knew that the claimant was in pri son, but it did not suspend his

benefits until a year after the new law took effect. The Eighth

Circuit stated that “[b]eneficiaries are not presumed to know of

each new arcanum of social-security law. They are not presumed to6

have acted with fault when, in the absence of changed personal

circumstances, they a ccept a benefit payment in the amount which

they have been accustomed to receiving each month.” I d. at 653-54

(citations omitted). The court found that substantial evidence did

not support the ALJ’s determination of fault under § 404(b).

In another circuit decision, claimants argued that they

did not know they had to report a savings account to the SSA. S ee

Romero v. Harris

, 675 F.2d 1100, 1101-02 (10th Cir.1982). Funds in

the savings account were initially below the SSA’s resource limit

but later exceeded it. The claimants testified that the SSA never

told them to report savings accounts. See id. at 1102. Although

the ALJ found them at fault and refused to waive the overpayments

under § 404(b), the Tenth Circuit reversed for lack of evidence in

the record to support a finding of fault. S ee id. at 1104. While

Peeler and Romero are no t exactly like this case, they show that

Makofsky is not at fault unless he had some reason to know that he

was ineligible for benefits.

Here, termination of benefits under § 402(x) is not so

obvious that Makofsky sho uld have been aware of it on his own.

Some might fi nd it intuitive that prisoners cannot receive

benefits, but the rule has not always been this straightforward.

The rule did not even exist before 1980, and prisoners who

committed misdemea nors could receive benefits until 1994. S ee7

Historical and Statutory Notes, 42 U.S.C. § 402 (West 2000). We

believe § 402(x) is beyond the scope of an ordinary applicant’s

knowledge.

Makofsky signed a form stating that he received

instructions on his reporting duties. There is no evidence in the

record, however, of the substance of these instructions or even of

standard SSA instructions to applicants. Granted, Makofsky bears

the burden of proof. Makofsky testified, however, that the SSA

never told him to report imprisonment. Nothing in the record

contradicts this.

The ALJ ’s decision was based in part on Makofsky’s

consciousness of incom e limits and his duty to report address

changes. This is not substantial evidence that Makofsky knew or

should have known to report his imprisonment. Awareness of

fundamental reporting responsibilities does not automatically

translate into awareness of fairl y obscure statutory provisions.

Makofsky did not change his address, so his failure to report his

imprisonment does not create an inference that he was concealing

anything.

Perhaps the ALJ simply disbelieved Makofsky, but if so

the ALJ should have stated this. “Where, as here, credibility is

a critical factor in determining whether the claimant was without

fault, the ALJ must have stated explicitly whether he believed the8

witness’s testimon y.” V alente v. Secretary of Health & Human

Servs.

, 733 F.2d 1037, 1045 (2nd Cir.1984) (reversing a finding of

fault in part on the ALJ’s failure t o make a finding on

credibility); see also Albalos v. Sullivan

, 907 F.2d 871 , 873-74

(9th Cir.1990) (requiring more than merely an implicit finding that

claimant was not credible in a § 404(b) fault case). The Eleventh

Circuit has rev ersed a finding of fault because the ALJ did not

clearly explain whether its ruling was based on the scope of

claimant’s evidence or his credibility. S ee Viehman v. Schweiker

,

679 F.2d 223, 229 (11th Cir.1982). It also demanded that “the fact

finder articulate any reasons for questioning [the claimant’s]

credibility.” We agree with these circuits and hold that where a

witness’s testimony is central to a § 404(b) fault inquiry, the ALJ

should include a credibility finding in his decision.

In sum, substantial evidence does not support the ALJ’s

findings. There is no record evidence that in 1989, the SSA

regularly informed applicants that they must report incarceration.

Moreover, since Makofsky’s testimony excused his fault, there is no

substantial evidence for a contrary finding without some proof, or

explicit, explained finding, that Makofsky lacked credibility.

We recognize that an unpublished decision from the Eighth

Circuit refused to find a claimant without fault on somewhat

analogous facts. In K iefer v. Apf el , 2000 U.S. App. LEXIS 233329

(8th Cir.2000), the claimant indicated on his application that he

had received reportin g instructions, and later received benefits

while in prison. He sought to waive the overpayment, arguing that

he was without fault because he relied on an allegedly ambiguous

letter from the SSA. The court rejected his claim and found that

substantial evidence supported the ALJ’s decision.

Kiefer is factually distinguishable for a couple of

reasons. First, the claimant was not arguing that he had never

received instructions to report confinement. On the contrary, he

wanted to contest the denial of benefits pending confinement.

Second, the court found unpersuasive his reliance on an ambiguous

and self-contradictory letter from SSA. This case, by contrast, is

only about what the SSA told Makofsky (nothing explicit about the

consequence of incarceration) and what he knew or should have

known.

Notwithstanding our conclusion that Makofsky was without

fault, he is not necessarily entitled to a waiver of repayment.

Under § 404(b), he must still show that recovery would defeat the

purpose of Title II benefits or would be against equity and good

conscience. Remand is required to consider this question, which

under the statute includes assessment of the claimant’s physical,

mental, educational or linguistic limitations. Id

.10 For the reasons stated above, we REVERSE because Makofsky

was without fault and REMAND for further proceedings.