Federal Register / Vol. 65, No. 226 / Wednesday, November 22, 2000 / Rules and Regulations 70391

extent that it is not inconsistent with the

final rule and the DCIA.

The final rule does not incorporate

one commenter’s suggestion to prescribe

a standard under the FCCS for the

‘‘write-off’’ of debts (i.e., removal of the

debt from the agency’s accounting

records), consistent with ‘‘Managing

Federal Receivables’’ guidance. The

DCIA gives the Office of Management

and Budget (OMB) the responsibility to

review the standards and policies of

Federal agencies regarding the ‘‘writeoff’’ of delinquent debts, which is an

accounting process. See 31 U.S.C. 3711

note. OMB Circular A–129, ‘‘Policies for

Federal Credit Programs and Nontax

Receivables,’’ is being revised to

incorporate new policy guidelines for

writing off uncollectible Federal debt.

One commenter’s recommendation to

delete the reference in NPRM § 900.1(a)

to OMB Circular A–129 was not

adopted. OMB Circular A–129

continues to provide valuable guidance

and applies to the extent not

inconsistent with the final rule and

DCIA requirements. OMB Circular A–

129 is being revised to incorporate new

policy guidelines consistent with the

final rule and the DCIA.

NPRM § 900.2—Definitions and

Construction

Several commenters suggested that

the definition of a ‘‘delinquent’’ debt

under NPRM § 900.2(b) is too vague and

that the date of delinquency should be

more clearly defined. Under NPRM

§ 900.2(b), a debt is delinquent ‘‘if it has

not been paid by the date specified in

the agency’s initial written demand for

payment or applicable agreement or

instrument (including a postdelinquency payment agreement),

unless other satisfactory payment

arrangements have been made.’’ The

final rule has not been amended to

incorporate this comment. The

‘‘delinquency’’ definition applies to all

agency programs and obligations owed

to the United States. Agency-specific

regulations may further clarify the

definition of ‘‘delinquency’’ as

applicable to specific agency program

requirements and particular types of

debt. See Treasury’s final rule, Barring

Delinquent Debtors From Obtaining

Federal Loans or Loan Insurance or

Guarantees (63 FR 67754, Dec. 8, 1998),

for an example of the term ‘‘delinquent’’

being defined for a specific, limited

purpose.

NPRM § 900.3—Antitrust, Fraud, and

Tax and Interagency Claims Excluded

One commenter suggested amending

NPRM § 900.3(a) to provide that the

exclusion from the application of the

FCCS to debts involving fraud (whereby

DOJ retains authority over such debts)

applies only to debts known to involve

fraud at the time a debt is transferred to,

or processed by, a private collection

agency. No change has been made to the

final rule to incorporate this comment

since only DOJ has the authority to

compromise, suspend, or terminate

collection action on such claims.

Accordingly, DOJ retains sole authority

under the final rule over activity on all

debts involving fraud. Private collection

agencies that become aware of

fraudulent activity on the part of the

debtor (or any third party) at any time

must cease collection activity and

promptly return the debt back to the

referring agency for coordination with

DOJ.

NPRM § 901.1—Aggressive Agency

Collection Activity

Comments involving the provisions

under NPRM § 901.1 related to the DCIA

requirement that agencies transfer to

Treasury nontax debts that have been

delinquent for more than 180 days are

outside the scope of the FCCS. A final

rule, published by Treasury (64 FR

22906, Apr. 28, 1999), provides

guidance regarding the DCIA transfer of

debt requirement. See also 31 U.S.C.

3711(g).

One commenter suggested that the

final rule be amended to clarify whether

the 180-day delinquency period begins

before or after the 30-day period within

which a debtor may pay a debt without

penalties or interest. See NPRM

§ 901.10(g). No change has been made to

the final rule to incorporate this

comment. The 180-day delinquency

period begins to run on the date a debt

becomes delinquent, that is, when the

debt is not paid on the date due or the

date as specified in accordance with

§ 900.2(b) of the NPRM and final rule.

A debt is delinquent notwithstanding

any statutory or regulatory grace period

for the assessment or payment of

interest, administrative costs, or

penalties.

NPRM § 901.2—Demand for Payment

One commenter recommended that

the final rule clarify that the provision

under NPRM § 901.2(a) providing that

‘‘[g]enerally, one demand letter should

suffice’’ does not prohibit agencies from

sending progressively stronger demand

letters. No change is necessary to the

final rule to incorporate this comment.

NPRM § 901.2(a) does not prohibit

agencies from sending more than one

demand letter.

In accordance with one commenter’s

suggestion, § 901.2(b)(3) of the final rule

has been amended to clarify that the

term ‘‘late charges’’ refers to interest,

penalties, and administrative costs.

The final rule does not adopt one

commenter’s suggestion to delete the

requirement under NPRM § 901.2(d)

that agency demand letters discuss

alternative methods of payment. The

NPRM did not include such a

requirement. Contrary to the

commenter’s concern, NPRM § 901.2(d)

does not limit agency discretion; it

merely provides that a demand letter

should inform a debtor of the agency’s

‘‘willingness to consider’’ alternative

methods of payment to satisfy the debt.

Many debt collection tools require

agencies to give debtors the opportunity

to enter into a written agreement with

the head of an agency to repay the debt.

See, e.g., 31 U.S.C. 3716(a)(4)

(administrative offset authority); 31

U.S.C. 3720A (tax refund offset); 31

U.S.C. 3720D (wage garnishment); see

also NPRM § 901.9 (establishing

standards for the collection of

delinquent debts in installment

payments).

A related comment, recommending

that agencies be given the flexibility to

include only those provisions of

demand letters listed in NPRM

§ 901.2(d) ‘‘as appropriate to the

circumstances,’’ has not been

incorporated into the final rule. Section

901.2(d), as proposed, does not restrict

an agency’s discretion to tailor its use of

particular debt collection tools in

specific cases. NPRM § 901.2(d)

provides only that an agency should

provide notice to a debtor in a demand

letter of its willingness to discuss

alternative methods of payment, the

agency’s remedies to enforce payment of

the debt, information concerning the

requirement that debts over 180 days

delinquent be transferred to Treasury

(see discussion involving NPRM § 901.1

above), and applicable waiver

consideration information. Demand

letters also must satisfy the other

requirements of NPRM § 901.2,

including, but not limited to, providing

notice to the debtor of the basis of the

indebtedness and the opportunity

available to the debtor for a review

within the agency.

Another commenter suggested

deleting the second reference to

‘‘collection agencies’’ under NPRM

§ 901.2(d) to avoid duplication. The

final rule has not been amended to

incorporate this suggested technical

amendment. The first reference to

‘‘collection agencies’’ relates to an

agency’s policy with regard to the use of

this debt collection tool. The second

reference refers to the enforcement

action that will be taken regarding the

70392 Federal Register / Vol. 65, No. 226 / Wednesday, November 22, 2000 / Rules and Regulations

specific debt referenced in the demand

letter.

One commenter suggested deleting

the requirement under NPRM § 901.2(g)

that agencies advise litigation counsel

for the Government that a debtor has

been given notice that litigation may be

initiated unless the debt can be

collected administratively. The

commenter incorrectly interprets this

provision as requiring agencies to advise

litigation counsel at the time the

agency’s notice is given to the debtor,

rather than at the time the debt is

referred to DOJ for litigation. No change

has been made to the final rule to

incorporate this comment.

NPRM § 901.3—Collection by

Administrative Offset

The administrative offset section has

been redrafted in the final rule to

emphasize that disbursing official offset,

which is renamed as centralized

administrative offset in the final rule, is

the primary administrative offset

collection tool, consistent with the

DCIA. See 31 U.S.C. 3716(c)(6)

(requiring Federal agencies to notify the

Secretary of the Treasury of all debts

over 180 days delinquent for purposes

of conducting centralized administrative

offset).

Consistent with this approach, the

final rule provides that the nondisbursing official administrative offset

process, which is renamed as noncentralized administrative offset in the

final rule, is a backup procedure to be

used by creditor agencies on an ad hoc

case-by-case basis when centralized

administrative offset is otherwise not

available or appropriate. For example,

agencies should utilize the ad hoc noncentralized offset process to offset

payments that have not been

incorporated into the centralized

administrative offset process. In any

event, an agency’s collection by the noncentralized administrative offset process

shall not provide the grounds to

invalidate any offset on the basis that

centralized offset was not used.

In addition, NPRM § 901.4

(authorizing creditor agencies to request

the Office of Personnel Management

(OPM) to conduct administrative offsets)

has been merged into revised § 901.3 of

the final rule since the procedure

described in NPRM § 901.4 is a form of

non-centralized administrative offset.

Revised § 901.3(d) of the final rule refers

to OPM offsets of Civil Service

Retirement and Disability Fund (Fund)

payments. The Fund includes payments

made under the Federal Employee

Retirement System.

One commenter suggested that NPRM

§ 901.3(a)(5) is overly restrictive in that

it permits administrative offset only

after the debtor has been given written

notice of the type and amount of debt,

the intent to collect the debt by offset,

an opportunity to inspect and copy

agency records pertaining to the debt, an

opportunity for review of indebtedness,

and an opportunity to make a written

repayment agreement. No change has

been made to the final rule to

incorporate this comment. NPRM

§ 901.3(a)(5) and the final rule track the

statutory due process requirements

under 31 U.S.C. 3716(a).

Another commenter noted that NPRM

§ 901.3(a)(5) provides that agency

regulations must specify that

administrative offset can be initiated

only after the debtor has ‘‘received’’

written notice of the due process

requirements under 31 U.S.C. 3716(a).

The commenter suggested that an

agency would have no way of verifying

that a debtor has actually received the

notice required by NPRM § 901.3(a)(5).

Revised § 901.3(b)(4)(ii) of the final rule

has been changed to clarify that the

required due process notice must be

‘‘sent’’ to the debtor. This is consistent

with constitutional and statutory due

process requirements, provided that

creditor agencies ensure that reasonable

steps are taken to send the notice to the

debtor’s last known address. See, e.g.,

Setlech v. United States, 816 F. Supp.

161 (E.D.N.Y. 1993) (mailing of tax

refund offset notice on behalf of

Department of Education to debtor’s last

known address satisfied due process

even though debtor did not receive

notice prior to offset; notice was

reasonably calculated to apprise debtor

of impending action); see also United

States v. 51 Pieces of Real Property, 17

F.3d 1306, 1316 (10th Cir. 1996)(due

process does not require actual receipt

of notice provided Government acts

reasonably in selecting means likely to

inform the persons affected).

Another commenter suggested that all

references under NPRM §§ 901.3(a) and

901.4(d) to pre-administrative offset

‘‘oral hearings’’ be deleted since the

statutory authority for administrative

offset under 31 U.S.C. 3716(a)(3) only

provides the debtor with an

‘‘opportunity for a review’’ within the

agency. No change has been made to

revised § 901.3(e) of the final rule to

incorporate this comment because oral

hearings may be required in those

instances where the determination of

indebtedness cannot be made by a

review of the written record. An oral

hearing is not required when the

question of indebtedness can be

resolved by a review of the written

record. See revised § 901.3(e) of the final

rule.

A second commenter suggested

deleting the provision under NPRM

§ 901.3(a)(7)(i)(A) requiring an oral

hearing under certain circumstances

when a waiver statute authorizes or

requires an agency to consider waiver of

the indebtedness. This provision has

been deleted from revised § 901.3 of the

final rule since oral hearing

requirements involving waiver requests

are governed by specific statutory and

regulatory waiver authorities, rather

than the FCCS.

One commenter suggested revising

NPRM § 901.3(b)(1) to provide that the

administrative offset of a reimbursement

payment could substantially interfere

with, or defeat the purposes of, the

program giving rise to the payment. The

final rule was not changed to

incorporate this comment. Under the

DCIA, the Secretary of Treasury

determines whether a particular type of

payment should be exempt from

administrative offset. See 31 U.S.C.

3716(c)(3)(B). Therefore, exemption is

not addressed in this rule.

One commenter suggested that NPRM

§ 901.3(c)(5) be revised to clarify its

application to non-Treasury disbursing

officials, such as the Department of

Agriculture’s Commodity Credit

Corporation. No change to the final rule

is necessary. The debtor/payee

notification requirements under revised

§ 901.3(b)(3) of the final rule apply to

both Treasury and non-Treasury

disbursing officials conducting

centralized administrative offsets. As

required by the DCIA, Treasury

disbursing officials and non-Treasury

disbursing officials, such as officials of

the Department of Defense, United

States Postal Service, any other

Government corporation, or any

Treasury-designated United States

disbursing office, are required to

conduct administrative offsets. See 31

U.S.C. 3716(c)(1)(A).

Another commenter recommended

adding a provision to NPRM

§ 901.3(c)(5) requiring disbursing

officials to notify payment and creditor

agencies once an administrative offset of

a payment has been made. This

comment is beyond the scope of the

final rule. Detailed regulations involving

various types of DCIA administrative

offset procedures are codified under 31

CFR part 285.

NPRM § 901.4—Administrative Offset

Against Amounts Payable From Civil

Service Retirement and Disability Fund

and the Federal Employee Retirement

System

NPRM § 901.4 addresses ad hoc noncentralized administrative offsets

conducted by OPM to satisfy debts that

Federal Register / Vol. 65, No. 226 / Wednesday, November 22, 2000 / Rules and Regulations 70393

have not been referred for centralized

administrative offset. Under the final

rule, this provision has been merged

into § 901.3 since the procedure

described under NPRM § 901.4 is a type

of non-centralized administrative offset

that should be utilized when centralized

administrative offset is not available or

appropriate. Accordingly, NPRM

§§ 901.5, 901.6, 901.7, 901.8, 901.9,

901.10, 901.11, 901.12, 901.13 have

been redesignated in the final rule as

§§ 901.4, 901.5, 901.6, 901.7, 901.8,

901.9, 901.10, 901.11, 901.12,

respectively. This change properly

emphasizes the requirement for

centralized administrative offset under

the DCIA. See, e.g., 31 U.S.C. 3716(c)(6)

(mandating that Federal agencies notify

the Secretary of the Treasury of all debts

over 180 days delinquent for purposes

of centralized administrative offset).

NPRM § 901.5—Reporting Debts

The final rule does not incorporate

one commenter’s suggestion to delete

the requirement under NPRM § 901.5(a)

that agencies develop and implement

procedures for reporting delinquent

debts to credit bureaus. The commenter

stated that this provision is not

necessary because Treasury and

Treasury-designated debt collection

centers, not creditor agencies, will be

responsible for reporting debts that have

been transferred to Treasury or

Treasury-designated debt collection

centers, as required by the DCIA and

NPRM § 901.1(e). Creditor agencies are

reminded that the DCIA mandates credit

bureau reporting for delinquent debts

(see 31 U.S.C. 3711(e)), and that debts

should be reported early in the debt

collection process. Nevertheless,

agencies could develop procedures,

consistent with this rule, to provide that

credit bureau reporting will be handled

by Treasury or Treasury-designated debt

collection centers for transferred debts.

Another commenter suggested that

the mandatory language of NPRM

§ 901.5(a) requiring agencies to develop

credit bureau reporting procedures

should not apply to an agency whose

statutory authority provides that the

agency ‘‘may,’’ but is not required to,

report delinquent debts to credit

bureaus. No change is necessary to

address this concern because § 900.1 of

the final rule specifically provides that

the FCCS govern an agency’s debt

collection activity ‘‘unless specific

agency statutes or regulations apply to

such activities.’’

Section 901.4(b) of the final rule has

not been amended to incorporate a

commenter’s suggestion to mandate that

agencies report delinquent debts to the

Department of Housing and Urban

Development’s Credit Alert Interactive

Voice Response System (CAIVRS).

Agencies are strongly encouraged to

report to CAIVRS when feasible.

Reporting will assist agencies in

complying fully with the DCIA

provision, codified at 31 U.S.C. 3720B,

barring delinquent debtors from

obtaining Federal financial assistance.

Agencies can utilize CAIVRS to

determine whether a loan applicant is

delinquent on obligations owed the

United States. However, because

reporting to CAIVRS may not be feasible

in every case, reporting, while strongly

encouraged, is not mandatory.

NPRM § 901.6—Contracting for Private

Collection Contractors and To Locate

and Recover Unclaimed Assets

NPRM § 901.6(b) has been revised to

clarify that Federal agencies may refer

debts to private collection contractors

pursuant to a contract between the

agency and the private collection

contractor only if such debts are not

subject to the DCIA requirement to

transfer debts to Treasury for debt

collection services, e.g., debts are less

than 180 days delinquent. See 31 U.S.C.

3711(g); 31 CFR 285.12(e). Agencies also

may refer debts to a private collection

contractor listed on FMS’s schedule of

private collection contractors provided

they do so in accordance with

procedures established by FMS.

The final rule does not incorporate

one commenter’s recommendation that

NPRM § 901.6(a)(1) be amended to

allow agencies to authorize private

collection contractors to compromise,

suspend, or terminate collection

activity, and refer for litigation debts

less than a specific threshold amount.

Federal law requires agencies to retain

the authority ‘‘to resolve a dispute,

compromise a debt, end collection

action, and refer a matter to the

Attorney General to bring a civil

action.’’ 31 U.S.C. 3718(a)(1). Nothing in

§ 901.5(a)(1) of the final rule prohibits

agencies from establishing agencyspecific compromise review procedures

within the scope of 31 U.S.C. 3718(a)(1).

For example, agencies could set

parameters within which private

collection contractors could

compromise debt.

Another commenter suggested that

the final rule clarify that private

collection contractors collecting debts

on behalf of creditor agencies are

authorized to invoke certain agency

rights, including cross-default on

obligations, set-off, and certain

Governmental defenses. No change has

been made to incorporate this comment

which is beyond the scope of the final

rule. Private collection contractors

should contact the creditor agency

before invoking any rights with respect

to the agency’s debt.

One commenter suggested that NPRM

§ 901.6 be amended to clarify that

agencies are authorized to contract for

debtor asset and income search reports.

Such reports could be used by DOJ

litigation attorneys and other agencies to

determine whether, and to what extent,

debtors have assets which could be

pursued to satisfy delinquent

obligations. Section 901.5(e) has been

added to the final rule to incorporate

this comment.

The final rule also provides that

debtor asset and income search report

contracts, private collection contractors

contracts, and contracts to locate and

recover unclaimed assets of the United

States may be paid for out of amounts

collected, consistent with 31 U.S.C.

3718(d), unless otherwise prohibited by

law.

The final rule does not incorporate

one commenter’s suggestion to amend

NPRM § 901.6 to limit the time a debt

may remain with a private collection

contractor to a 180-day period, after

which the debt should be referred to

DOJ for enforced collection. The time

period that a debt is at a private

collection contractor is more

appropriately a matter of contract

between the private collection

contractor and the Federal agency; the

setting of a regulatory time limit would

not further the goal of the FCCS to

provide agencies with greater flexibility.

In addition, debts are referred to DOJ

after a private collection contractor has

been unable to collect the debt, and only

when it is appropriate to do so. See part

904 (Referrals to Department of Justice).

NPRM § 901.9—Collection by

Installments

One commenter suggested amending

NPRM § 901.9(a) to allow agencies to

accept installment payments without

independent verification of the debtor’s

inability to pay. The commenter stated

that the change would give agencies

more flexibility in cases involving very

small debts. The final rule does not

incorporate this suggestion because the

FCCS only require such verification

‘‘whenever possible.’’

One commenter suggested amending

NPRM § 901.9 to clarify the application

of installment payments to satisfy

multiple debts as provided in the 1984

FCCS (4 CFR 102.11(b)). The application

of installment payments under such

circumstances varies depending on the

type of debt. Agencies may address this

issue in agency-specific regulations. In

addition, further guidance will be

issued in the Treasury Financial Manual

70394 Federal Register / Vol. 65, No. 226 / Wednesday, November 22, 2000 / Rules and Regulations

supplement ‘‘Managing Federal

Receivables.’’

NPRM § 901.10—Interest, Penalties, and

Administrative Costs

One commenter suggested that the

final rule clarify whether NPRM

§ 901.10(a) applies to Social Security

Administration debts. Section 204(f)(1)

of the Social Security Act (Act) governs

the charging of interest, penalties, and

administrative costs for social security

debts. The Act provides that the Social

Security Administration ‘‘may,’’ but is

not required to, charge interest,

penalties, and administrative costs. No

change to the final rule is required since

the FCCS do not apply when specific

statutes or regulations govern particular

agency debt collection activities. See

NPRM § 900.1 (Prescription of

Standards).

Several commenters suggested that

the final rule provide a more precise

standard for the ‘‘date of delinquency’’

that triggers the charging of interest,

penalties, and administrative costs

under NPRM § 901.10. One commenter

recommended defining the ‘‘date of

delinquency’’ as the ‘‘day after the due

date contained in the initial demand

letter.’’ A second commenter suggested

retaining the current standard under 4

CFR 102.13(b) of the FCCS (‘‘Interest

shall accrue from the date on which

notice of the debt and the interest

requirements is first mailed or handdelivered to the debtor.’’). The final rule

has not been changed to incorporate

these comments. Consistent with the

intent of the FCCS to provide

Government-wide debt collection

standards, the NPRM § 900.2(b) general

definition of ‘‘delinquency’’ is broad

enough to apply to all Federal agency

programs that give rise to delinquent

debts. Federal agencies should

promulgate debt collection regulations

tailored to specific agency program

requirements. Nothing in the FCCS

prohibits an agency from specifying

that, for purposes of a particular type of

debt, ‘‘date of delinquency’’ is the date

on which notice of the debt and the

accrual of interest is first mailed or

hand-delivered to the debtor, or some

other appropriate standard.

NPRM § 902.2—Bases for Compromise

As suggested by one commenter, the

final rule amends NPRM § 902.2(g) to

clarify that, when evaluating a

compromise proposal, agencies need

only obtain a current financial statement

from a debtor to assess the merits of a

proposal that is based on the debtor’s

inability to pay.

NPRM § 902.6—Consideration of Tax

Consequences to the Government

In response to one commenter’s

suggestion that NPRM § 902.6 be

amended to require agencies to report

discharges of indebtedness to the

Internal Revenue Service (IRS), new

§ 903.5 (Discharge of indebtedness;

reporting requirements) has been added

to the final rule. Section 903.5(a) of the

final rule requires agencies to make a

determination that further collection

action is not warranted before making a

determination to discharge a debt (also

referred to as ‘‘close out’’ for Federal

government accounting purposes).

Specifically, § 903.5(a) of the final rule

requires an agency to take all

appropriate steps to collect a debt in

accordance with 31 U.S.C. 3711(g), as

appropriate. It also provides that

agencies may not discharge a debt until

the requirements of 31 U.S.C. 3711(i)

(sale of debt) have been met. After a

debt has been reported to the IRS as

discharged, the Federal government may

not take any further legal action to

collect such debt, including the filing or

continuation of judgment liens. The IRS

is responsible for the collection of taxes

due, if any, when the discharge is

reported as income to the debtor.

Before discharging a debt, agencies

must terminate debt collection action.

The FCCS contain provisions related to

the termination of debt collection action

at § 903.3 of the final rule. Policies and

standards with respect to write-off, an

accounting process outside the scope of

the FCCS, are found in OMB Circular

A–129, ‘‘Policies for Federal Credit

Programs and Nontax Receivables,’’

which is being revised to incorporate

new write-off policy guidelines.

Section 903.5(c) provides that

agencies must report a discharge of

indebtedness in accordance with the

requirements of 26 U.S.C. 6050P and 26

CFR 1.6050P–1. Discharge of

indebtedness is reported on IRS Form

1099-C. An agency may request

Treasury or Treasury-designated debt

collection centers to file such a

discharge report to the IRS on the

agency’s behalf. A cross reference to

§ 903.5 has been added to § 902.6 in the

final rule.

NPRM § 902.7—Mutual Releases of

Debtor and the Government

In response to one commenter’s

suggestion, NPRM § 902.7 has been

revised to emphasize the mutuality of

the debtor and Government releases.

Additional language has been added in

the final rule to NPRM § 902.7 to clarify

the impact of a compromise on potential

related claims against the Government

when a mutual release has not been

executed. Specifically, unless

prohibited by law, when a debt is

compromised but a mutual release has

not been executed, the debtor is deemed

to have waived any claims and causes

of action against the Government or its

officials arising from the same

transaction related to the compromised

debt.

NPRM § 903.2—Suspension of

Collection Activity

The final rule does not incorporate

one commenter’s suggestion that NPRM

§ 903.2(c)(2) be amended to give

agencies the flexibility to suspend

collection activity for groups or

categories of debtors. NPRM

§ 903.2(c)(2) addresses a request for

waiver or administrative review of a

debt when a statute does not mandate

suspension of collection activity during

the pendency of such requests. The

determination of whether to suspend

collection activity in these cases should

be reviewed on a case-by-case basis. A

case-by-case standard is appropriate

because it ensures that agencies review

individual cases to confirm that waiver

or indebtedness reconsideration

requests are not frivolous or made

primarily for the purpose of delaying

collection. Nothing in the FCCS prohibit

suspension of collection activity by the

agency for groups or categories of

debtors when appropriate.

[NEW] § 903.5—Discharge of

Indebtedness; Reporting requirements

See the discussion related to NPRM

§ 902.6, above, for an analysis of new

§ 903.5 of the final rule (Discharge of

indebtedness; reporting requirements).

NPRM § 904.1—Prompt Referral

One commenter suggested amending

NPRM § 904.1 to provide that debts

arising from audit exceptions taken by

the General Accounting Office (GAO) be

reviewed by GAO prior to referral to

DOJ. No change has been made to

incorporate this comment because the

Comptroller General’s role in the

Federal debt collection process has been

eliminated. Although the opinions and

legal interpretations of the Comptroller

General often provide helpful guidance

on audit exception matters and related

issues, they are not binding upon

departments, agencies, or officers of the

executive branch. See e.g., Bowsher v.

Synar, 478 U.S. 714, 727–32 (1986).

NPRM § 904.3—Preservation of

Evidence

NPRM § 904.3 requires agencies to

provide original documents

immediately upon request by DOJ. The

Federal Register / Vol. 65, No. 226 / Wednesday, November 22, 2000 / Rules and Regulations 70395

final rule does not incorporate one

commenter’s suggestion to amend

NPRM § 904.3 to authorize agencies to

certify copies of essential documents

related to a debt referred to DOJ instead

of providing original documents in

certain types of cases, such as in debts

for fire suppression costs. The essential

purpose behind NPRM § 904.3 is to

require agencies to ‘‘take care to

preserve all files and records that may

be needed by the Department of Justice’’

to prove debts in court. The amendment

of § 904.3 to incorporate the

commenter’s concern would not further

this intent.

NPRM § 904.4—Minimum Amount of

Referrals to the Department of Justice

One commenter suggested reducing

the threshold amount of debts

(exclusive of interest, penalties, and

administrative costs) to be referred to

DOJ for litigation from $2,500 to $1,500.

No change has been made to the final

rule to incorporate this comment. The

DOJ may waive the minimum threshold

amount in appropriate cases, including

cases which are referred by DOJ to

private counsel under 31 U.S.C. 3718.

Regulatory Analysis

Executive Order 12866

The Department of the Treasury and

the Department of Justice have

determined that this regulation is not a

significant regulatory action as defined

in Executive Order 12866 and,

accordingly, this regulation has not been

reviewed by the Office of Management

and Budget.

Regulatory Flexibility Act

It is hereby certified that this

regulation will not have a significant

economic impact on a substantial

number of small entities because the

regulation either (1) results in greater

flexibility for Federal agencies to

streamline their own debt collection

regulations, or (2) reflects the statutory

language contained in the DCIA.

Accordingly, a Regulatory Flexibility

Analysis is not required.

Executive Order 13132

This regulation will not have a

substantial direct effect on the states, on

the relationship between the national

government and the states, or on

distribution of power and

responsibilities among the various

levels of government. Therefore, in

accordance with Executive Order 13132,

it is determined that this regulation does

not have sufficient federalism

implications to warrant the preparation

of a Federalism Assessment.

Unfunded Mandates Reform Act of 1995

This regulation will not result in the

expenditure by state, local and tribal

governments, in the aggregate, or by the

private sector, of $100 million or more

in any one year, and it will not

significantly or uniquely affect small

governments. Therefore, no actions were

deemed necessary under the provisions

of the Unfunded Mandates Reform Act

of 1995.

Small Business Regulatory Enforcement

Fairness Act of 1996

This rule is not a major rule as

defined by section 251 of the Small

Business Regulatory Enforcement Act. 5

U.S.C. 804. This rule will not result in

an annual effect on the economy of $100

million or more; a major increase in

costs or prices; or significant adverse

effects on competition, employment,

investment, productivity, innovation, or

on the ability of United States-based

companies to compete with foreignbased companies in domestic or export

markets.

List of Subjects

31 CFR Part 900

Antitrust, Claims, Fraud.

31 CFR Part 901

Administrative practice and

procedure, Claims, Federal employees,

Penalties, Privacy.

31 CFR Part 902

Claims.

31 CFR Part 903

Claims.

31 CFR Part 904

Claims.

Authority and Issuance

For the reasons set out in the

preamble, chapter IX, consisting of parts

900 through 904, is established in title

31 of the Code of Federal Regulations to

read as follows:

CHAPTER IX—FEDERAL CLAIMS

COLLECTION STANDARDS (DEPARTMENT

OF THE TREASURY—DEPARTMENT OF

JUSTICE)

Part

900 Scope of standards

901 Standards for the administrative

collection of claims

902 Standards for the compromise of claims

903 Standards for suspending or

terminating collection activity

904 Referrals to the Department of Justice

PART 900—SCOPE OF STANDARDS

Sec.

900.1 Prescription of standards.

900.2 Definitions and construction.

900.3 Antitrust, fraud, and tax and

interagency claims excluded.

900.4 Compromise, waiver, or disposition

under other statutes not precluded.

900.5 Form of payment.

900.6 Subdivision of claims not authorized.

900.7 Required administrative proceedings.

900.8 No private rights created.

Authority: 31 U.S.C. 3711.

§ 900.1 Prescription of standards.

(a) The Secretary of the Treasury and

the Attorney General of the United

States are issuing the regulations in

parts 900–904 of this chapter under the

authority contained in 31 U.S.C.

3711(d)(2). The regulations in this

chapter prescribe standards for Federal

agency use in the administrative

collection, offset, compromise, and the

suspension or termination of collection

activity for civil claims for money,

funds, or property, as defined by 31

U.S.C. 3701(b), unless specific Federal

agency statutes or regulations apply to

such activities or, as provided for by

Title 11 of the United States Code, when

the claims involve bankruptcy. Federal

agencies include agencies of the

executive, legislative, and judicial

branches of the Government, including

Government corporations. The

regulations in this chapter also prescribe

standards for referring debts to the

Department of Justice for litigation.

Additional guidance is contained in the

Office of Management and Budget’s

Circular A–129 (Revised), ‘‘Policies for

Federal Credit Programs and Non-Tax

Receivables,’’ the Department of the

Treasury’s ‘‘Managing Federal

Receivables,’’ and other publications

concerning debt collection and debt

management. These publications are

available from the Debt Management

Services, Financial Management

Service, Department of the Treasury,

401 14th Street SW., Room 151,

Washington, DC 20227.

(b) Additional rules governing

centralized administrative offset and the

transfer of delinquent debt to the

Department of the Treasury (Treasury)

or Treasury-designated debt collection

centers for collection (cross-servicing)

under the Debt Collection Improvement

Act of 1996, Public Law 104–134, 110

Stat. 1321, 1358 (April 26, 1996), are

issued in separate regulations by

Treasury. Rules governing the use of

certain debt collection tools created

under the Debt Collection Improvement

Act of 1996, such as administrative

wage garnishment, also are issued in

separate regulations by Treasury. See

generally 31 CFR part 285.

(c) Agencies are not limited to the

remedies contained in parts 900–904 of

70396 Federal Register / Vol. 65, No. 226 / Wednesday, November 22, 2000 / Rules and Regulations

this chapter and are encouraged to use

all authorized remedies, including

alternative dispute resolution and

arbitration, to collect civil claims, to the

extent that such remedies are not

inconsistent with the Federal Claims

Collection Act, as amended, Public Law

89–508, 80 Stat. 308 (July 19, 1966), the

Debt Collection Act of 1982, Public Law

97–365, 96 Stat. 1749 (October 25,

1982), the Debt Collection Improvement

Act of 1996, or other relevant statutes.

The regulations in this chapter are not

intended to impair agencies’ common

law rights to collect debts.

(d) Standards and policies regarding

the classification of debt for accounting

purposes (for example, write off of

uncollectible debt) are contained in the

Office of Management and Budget’s

Circular A–129 (Revised), ‘‘Policies for

Federal Credit Programs and Non-Tax

Receivables.’’

§ 900.2 Definitions and construction.

(a) For the purposes of the standards

in this chapter, the terms ‘‘claim’’ and

‘‘debt’’ are synonymous and

interchangeable. They refer to an

amount of money, funds, or property

that has been determined by an agency

official to be due the United States from

any person, organization, or entity,

except another Federal agency. For the

purposes of administrative offset under

31 U.S.C. 3716, the terms ‘‘claim’’ and

‘‘debt’’ include an amount of money,

funds, or property owed by a person to

a State (including past-due support

being enforced by a State), the District

of Columbia, American Samoa, Guam,

the United States Virgin Islands, the

Commonwealth of the Northern Mariana

Islands, or the Commonwealth of Puerto

Rico.

(b) A debt is ‘‘delinquent’’ if it has not

been paid by the date specified in the

agency’s initial written demand for

payment or applicable agreement or

instrument (including a postdelinquency payment agreement),

unless other satisfactory payment

arrangements have been made.

(c) In parts 900–904 of this chapter,

words in the plural form shall include

the singular and vice versa, and words

signifying the masculine gender shall

include the feminine and vice versa.

The terms ‘‘includes’’ and ‘‘including’’

do not exclude matters not listed but do

include matters that are in the same

general class.

(d) Recoupment is a special method

for adjusting debts arising under the

same transaction or occurrence. For

example, obligations arising under the

same contract generally are subject to

recoupment.

(e) For purposes of the standards in

this chapter, unless otherwise stated,

‘‘Secretary’’ means the Secretary of the

Treasury or the Secretary’s delegate.

§ 900.3 Antitrust, fraud, and tax and

interagency claims excluded.

(a) The standards in parts 900–904 of

this chapter relating to compromise,

suspension, and termination of

collection activity do not apply to any

debt based in whole or in part on

conduct in violation of the antitrust

laws or to any debt involving fraud, the

presentation of a false claim, or

misrepresentation on the part of the

debtor or any party having an interest in

the claim. Only the Department of

Justice has the authority to compromise,

suspend, or terminate collection activity

on such claims. The standards in parts

900–904 of this chapter relating to the

administrative collection of claims do

apply, but only to the extent authorized

by the Department of Justice in a

particular case. Upon identification of a

claim based in whole or in part on

conduct in violation of the antitrust

laws or any claim involving fraud, the

presentation of a false claim, or

misrepresentation on the part of the

debtor or any party having an interest in

the claim, agencies shall promptly refer

the case to the Department of Justice for

action. At its discretion, the Department

of Justice may return the claim to the

forwarding agency for further handling

in accordance with the standards in

parts 900–904 of this chapter.

(b) Parts 900–904 of this chapter do

not apply to tax debts.

(c) Parts 900–904 of this chapter do

not apply to claims between Federal

agencies. Federal agencies should

attempt to resolve interagency claims by

negotiation in accordance with

Executive Order 12146 (3 CFR, 1980

Comp., pp. 409–412).

§ 900.4 Compromise, waiver, or

disposition under other statutes not

precluded.

Nothing in parts 900–904 of this

chapter precludes agency disposition of

any claim under statutes and

implementing regulations other than

subchapter II of chapter 37 of Title 31

of the United States Code (Claims of the

United States Government) and the

standards in this chapter. See, e.g., the

Federal Medical Care Recovery Act,

Public Law 87–693, 76 Stat. 593

(September 25, 1962) (codified at 42

U.S.C. 2651 et seq.), and applicable

regulations, 28 CFR part 43. In such

cases, the laws and regulations that are

specifically applicable to claims

collection activities of a particular

agency generally take precedence over

parts 900–904 of this chapter.

§ 900.5 Form of payment.

Claims may be paid in the form of

money or, when a contractual basis

exists, the Government may demand the

return of specific property or the

performance of specific services.

§ 900.6 Subdivision of claims not

authorized.

Debts may not be subdivided to avoid

the monetary ceiling established by 31

U.S.C. 3711(a)(2). A debtor’s liability

arising from a particular transaction or

contract shall be considered a single

debt in determining whether the debt is

one of less than $100,000 (excluding

interest, penalties, and administrative

costs) or such higher amount as the

Attorney General shall from time to time

prescribe for purposes of compromise or

suspension or termination of collection

activity.

§ 900.7 Required administrative

proceedings.

Agencies are not required to omit,

foreclose, or duplicate administrative

proceedings required by contract or

other laws or regulations.

§ 900.8 No private rights created.

The standards in this chapter do not

create any right or benefit, substantive

or procedural, enforceable at law or in

equity by a party against the United

States, its agencies, its officers, or any

other person, nor shall the failure of an

agency to comply with any of the

provisions of parts 900–904 of this

chapter be available to any debtor as a

defense.

PART 901—STANDARDS FOR THE

ADMINISTRATIVE COLLECTION OF

CLAIMS

Sec.

901.1 Aggressive agency collection activity.

901.2 Demand for payment.

901.3 Collection by administrative offset.

901.4 Reporting debts.

901.5 Contracting with private collection

contractors and with entities that locate

and recover unclaimed assets.

901.6 Suspension or revocation of

eligibility for loans and loan guaranties,

licenses, permits, or privileges.

901.7 Liquidation of collateral.

901.8 Collection in installments.

901.9 Interest, penalties, and administrative

costs.

901.10 Analysis of costs.

901.11 Use and disclosure of mailing

addresses.

901.12 Exemptions.

Authority: 31 U.S.C. 3701, 3711, 3716,

3717, 3718, and 3720B.

Federal Register / Vol. 65, No. 226 / Wednesday, November 22, 2000 / Rules and Regulations 70397

§ 901.1 Aggressive agency collection

activity.

(a) Federal agencies shall aggressively

collect all debts arising out of activities

of, or referred or transferred for

collection services to, that agency.

Collection activities shall be undertaken

promptly with follow-up action taken as

necessary. Nothing contained in parts

900–904 of this chapter requires the

Department of Justice, Treasury, or other

Treasury-designated debt collection

centers, to duplicate collection activities

previously undertaken by other agencies

or to perform collection activities that

other agencies should have undertaken.

(b) Debts referred or transferred to

Treasury, or Treasury-designated debt

collection centers under the authority of

31 U.S.C. 3711(g), shall be serviced,

collected, or compromised, or the

collection action will be suspended or

terminated, in accordance with the

statutory requirements and authorities

applicable to the collection of such

debts.

(c) Agencies shall cooperate with one

another in their debt collection

activities.

(d) Agencies should consider referring

debts that are less than 180 days

delinquent to Treasury or to Treasurydesignated ‘‘debt collection centers’’ to

accomplish efficient, cost effective debt

collection. Treasury is a debt collection

center, is authorized to designate other

Federal agencies as debt collection

centers based on their performance in

collecting delinquent debts, and may

withdraw such designations. Referrals

to debt collection centers shall be at the

discretion of, and for a time period

acceptable to, the Secretary. Referrals

may be for servicing, collection,

compromise, suspension, or termination

of collection action.

(e) Agencies shall transfer to the

Secretary any debt that has been

delinquent for a period of 180 days or

more so that the Secretary may take

appropriate action to collect the debt or

terminate collection action. See 31 CFR

285.12 (Transfer of Debts to Treasury for

Collection). This requirement does not

apply to any debt that:

(1) Is in litigation or foreclosure;

(2) Will be disposed of under an

approved asset sale program;

(3) Has been referred to a private

collection contractor for a period of time

acceptable to the Secretary;

(4) Is at a debt collection center for a

period of time acceptable to the

Secretary (see paragraph (d) of this

section);

(5) Will be collected under internal

offset procedures within three years

after the debt first became delinquent; or

(6) Is exempt from this requirement

based on a determination by the

Secretary that exemption for a certain

class of debt is in the best interest of the

United States. Agencies may request

that the Secretary exempt specific

classes of debts.

(f) Agencies operating Treasurydesignated debt collection centers are

authorized to charge a fee for services

rendered regarding referred or

transferred debts. The fee may be paid

out of amounts collected and may be

added to the debt as an administrative

cost (see § 901.10).

§ 901.2 Demand for payment.

(a) Written demand as described in

paragraph (b) of this section shall be

made promptly upon a debtor of the

United States in terms that inform the

debtor of the consequences of failing to

cooperate with the agency to resolve the

debt. The specific content, timing, and

number of demand letters shall depend

upon the type and amount of the debt

and the debtor’s response, if any, to the

agency’s letters or telephone calls.

Generally, one demand letter should

suffice. In determining the timing of the

demand letter(s), agencies should give

due regard to the need to refer debts

promptly to the Department of Justice

for litigation, in accordance with § 904.1

of this chapter or otherwise. When

necessary to protect the Government’s

interest (for example, to prevent the

running of a statute of limitations),

written demand may be preceded by

other appropriate actions under parts

900–904 of this chapter, including

immediate referral for litigation.

(b) Demand letters shall inform the

debtor of:

(1) The basis for the indebtedness and

the rights, if any, the debtor may have

to seek review within the agency;

(2) The applicable standards for

imposing any interest, penalties, or

administrative costs;

(3) The date by which payment

should be made to avoid late charges

(i.e. interest, penalties, and

administrative costs) and enforced

collection, which generally should not

be more than 30 days from the date that

the demand letter is mailed or handdelivered; and

(4) The name, address, and phone

number of a contact person or office

within the agency.

(c) Agencies should exercise care to

ensure that demand letters are mailed or

hand-delivered on the same day that

they are dated. There is no prescribed

format for demand letters. Agencies

should utilize demand letters and

procedures that will lead to the earliest

practicable determination of whether

the debt can be resolved

administratively or must be referred for

litigation.

(d) Agencies should include in

demand letters such items as the

agency’s willingness to discuss

alternative methods of payment; its

policies with respect to the use of credit

bureaus, debt collection centers, and

collection agencies; the agency’s

remedies to enforce payment of the debt

(including assessment of interest,

administrative costs and penalties,

administrative garnishment, the use of

collection agencies, Federal salary

offset, tax refund offset, administrative

offset, and litigation); the requirement

that any debt delinquent for more than

180 days be transferred to the

Department of the Treasury for

collection; and, depending on

applicable statutory authority, the

debtor’s entitlement to consideration of

a waiver.

(e) Agencies should respond promptly

to communications from debtors, within

30 days whenever feasible, and should

advise debtors who dispute debts to

furnish available evidence to support

their contentions.

(f) Prior to the initiation of the

demand process or at any time during

or after completion of the demand

process, if an agency determines to

pursue, or is required to pursue, offset,

the procedures applicable to offset

should be followed (see § 901.3). The

availability of funds or money for debt

satisfaction by offset and the agency’s

determination to pursue collection by

offset shall release the agency from the

necessity of further compliance with

paragraphs (a), (b), (c), and (d) of this

section.

(g) Prior to referring a debt for

litigation, agencies should advise each

person determined to be liable for the

debt that, unless the debt can be

collected administratively, litigation

may be initiated. This notification

should comply with Executive Order

12988 (3 CFR, 1996 Comp., pp. 157–

163) and may be given as part of a

demand letter under paragraph (b) of

this section or in a separate document.

Litigation counsel for the Government

should be advised that this notice has

been given.

(h) When an agency learns that a

bankruptcy petition has been filed with

respect to a debtor, before proceeding

with further collection action, the

agency should immediately seek legal

advice from its agency counsel

concerning the impact of the

Bankruptcy Code on any pending or

contemplated collection activities.

Unless the agency determines that the

automatic stay imposed at the time of

70398 Federal Register / Vol. 65, No. 226 / Wednesday, November 22, 2000 / Rules and Regulations

filing pursuant to 11 U.S.C. 362 has

been lifted or is no longer in effect, in

most cases collection activity against the

debtor should stop immediately.

(1) After seeking legal advice, a proof

of claim should be filed in most cases

with the bankruptcy court or the

Trustee. Agencies should refer to the

provisions of 11 U.S.C. 106 relating to

the consequences on sovereign

immunity of filing a proof of claim.

(2) If the agency is a secured creditor,

it may seek relief from the automatic

stay regarding its security, subject to the

provisions and requirements of 11

U.S.C. 362.

(3) Offset is stayed in most cases by

the automatic stay. However, agencies

should seek legal advice from their

agency counsel to determine whether

their payments to the debtor and

payments of other agencies available for

offset may be frozen by the agency until

relief from the automatic stay can be

obtained from the bankruptcy court.

Agencies also should seek legal advice

from their agency counsel to determine

whether recoupment is available.

§ 901.3 Collection by administrative offset.

(a) Scope. (1) The term

‘‘administrative offset’’ has the meaning

provided in 31 U.S.C. 3701(a)(1).

(2) This section does not apply to:

(i) Debts arising under the Social

Security Act, except as provided in 42

U.S.C. 404;

(ii) Payments made under the Social

Security Act, except as provided for in

31 U.S.C. 3716(c) (see 31 CFR 285.4,

Federal Benefit Offset);

(iii) Debts arising under, or payments

made under, the Internal Revenue Code

(see 31 CFR 285.2, Tax Refund Offset)

or the tariff laws of the United States;

(iv) Offsets against Federal salaries to

the extent these standards are

inconsistent with regulations published

to implement such offsets under 5

U.S.C. 5514 and 31 U.S.C. 3716 (see 5

CFR part 550, subpart K, and 31 CFR

285.7, Federal Salary Offset);

(v) Offsets under 31 U.S.C. 3728

against a judgment obtained by a debtor

against the United States;

(vi) Offsets or recoupments under

common law, State law, or Federal

statutes specifically prohibiting offsets

or recoupments of particular types of

debts; or

(vii) Offsets in the course of judicial

proceedings, including bankruptcy.

(3) Unless otherwise provided for by

contract or law, debts or payments that

are not subject to administrative offset

under 31 U.S.C. 3716 may be collected

by administrative offset under the

common law or other applicable

statutory authority.

(4) Unless otherwise provided by law,

administrative offset of payments under

the authority of 31 U.S.C. 3716 to collect

a debt may not be conducted more than

10 years after the Government’s right to

collect the debt first accrued, unless

facts material to the Government’s right

to collect the debt were not known and

could not reasonably have been known

by the official or officials of the

Government who were charged with the

responsibility to discover and collect

such debts. This limitation does not

apply to debts reduced to a judgment.

(5) In bankruptcy cases, agencies

should seek legal advice from their

agency counsel concerning the impact

of the Bankruptcy Code, particularly 11

U.S.C. 106, 362, and 553, on pending or

contemplated collections by offset.

(b) Mandatory centralized

administrative offset. (1) Creditor

agencies are required to refer past due,

legally enforceable nontax debts which

are over 180 days delinquent to the

Secretary for collection by centralized

administrative offset. Debts which are

less than 180 days delinquent also may

be referred to the Secretary for this

purpose. See § 901.3(b)(5) for debt

certification requirements.

(2) The names and taxpayer

identifying numbers (TINs) of debtors

who owe debts referred to the Secretary

as described in paragraph (b)(1) of this

section shall be compared to the names

and TINs on payments to be made by

Federal disbursing officials. Federal

disbursing officials include disbursing

officials of Treasury, the Department of

Defense, the United States Postal

Service, other Government corporations,

and disbursing officials of the United

States designated by the Secretary.

When the name and TIN of a debtor

match the name and TIN of a payee and

all other requirements for offset have

been met, the payment will be offset to

satisfy the debt.

(3) Federal disbursing officials will

notify the debtor/payee in writing that

an offset has occurred to satisfy, in part

or in full, a past due, legally enforceable

delinquent debt. The notice shall

include a description of the type and

amount of the payment from which the

offset was taken, the amount of offset

that was taken, the identity of the

creditor agency requesting the offset,

and a contact point within the creditor

agency who will respond to questions

regarding the offset.

(4)(i) Before referring a delinquent

debt to the Secretary for administrative

offset, agencies must have prescribed

administrative offset regulations

consistent with this section or have

adopted this section without change by

cross-reference.

(ii) Such regulations shall provide

that offsets may be initiated only after

the debtor:

(A) Has been sent written notice of the

type and amount of the debt, the

intention of the agency to use

administrative offset to collect the debt,

and an explanation of the debtor’s rights

under 31 U.S.C. 3716; and

(B) The debtor has been given:

(1) The opportunity to inspect and

copy agency records related to the debt;

(2) The opportunity for a review

within the agency of the determination

of indebtedness; and

(3) The opportunity to make a written

agreement to repay the debt.

(iii) Agency regulations may provide

for the omission of the procedures set

forth in paragraph (a)(4)(ii) of this

section when:

(A) The offset is in the nature of a

recoupment;

(B) The debt arises under a contract as

set forth in Cecile Industries, Inc. v.

Cheney, 995 F.2d 1052 (Fed. Cir. 1993)

(notice and other procedural protections

set forth in 31 U.S.C. 3716(a) do not

supplant or restrict established

procedures for contractual offsets

accommodated by the Contracts

Disputes Act); or

(C) In the case of non-centralized

administrative offsets conducted under

paragraph (c) of this section, the agency

first learns of the existence of the

amount owed by the debtor when there

is insufficient time before payment

would be made to the debtor/payee to

allow for prior notice and an

opportunity for review. When prior

notice and an opportunity for review are

omitted, the agency shall give the debtor

such notice and an opportunity for

review as soon as practicable and shall

promptly refund any money ultimately

found not to have been owed to the

Government.

(iv) When an agency previously has

given a debtor any of the required notice

and review opportunities with respect

to a particular debt (see, e.g., § 901.2),

the agency need not duplicate such

notice and review opportunities before

administrative offset may be initiated.

(5) Agencies referring delinquent

debts to the Secretary must certify, in a

form acceptable to the Secretary, that:

(i) The debt(s) is (are) past due and

legally enforceable; and

(ii) The agency has complied with all

due process requirements under 31

U.S.C. 3716(a) and the agency’s

regulations.

(6) Payments that are prohibited by

law from being offset are exempt from

centralized administrative offset. The

Secretary shall exempt payments under

means-tested programs from centralized

Federal Register / Vol. 65, No. 226 / Wednesday, November 22, 2000 / Rules and Regulations 70399

administrative offset when requested in

writing by the head of the payment

certifying or authorizing agency. Also,

the Secretary may exempt other classes

of payments from centralized offset

upon the written request of the head of

the payment certifying or authorizing

agency.

(7) Benefit payments made under the

Social Security Act (42 U.S.C. 301 et

seq.), part B of the Black Lung Benefits

Act (30 U.S.C. 921 et seq.), and any law

administered by the Railroad Retirement

Board (other than tier 2 benefits), may

be offset only in accordance with

Treasury regulations, issued in

consultation with the Social Security

Administration, the Railroad Retirement

Board, and the Office of Management

and Budget. See 31 CFR 285.4.

(8) In accordance with 31 U.S.C.

3716(f), the Secretary may waive the

provisions of the Computer Matching

and Privacy Protection Act of 1988

concerning matching agreements and

post-match notification and verification

(5 U.S.C. 552a(o) and (p)) for centralized

administrative offset upon receipt of a

certification from a creditor agency that

the due process requirements

enumerated in 31 U.S.C. 3716(a) have

been met. The certification of a debt in

accordance with paragraph (b)(5) of this

section will satisfy this requirement. If

such a waiver is granted, only the Data

Integrity Board of the Department of the

Treasury is required to oversee any

matching activities, in accordance with

31 U.S.C. 3716(g). This waiver authority

does not apply to offsets conducted

under paragraphs (c) and (d) of this

section.

(c) Non-centralized administrative

offset. (1) Generally, non-centralized

administrative offsets are ad hoc caseby-case offsets that an agency conducts,

at the agency’s discretion, internally or

in cooperation with the agency

certifying or authorizing payments to

the debtor. Unless otherwise prohibited

by law, when centralized administrative

offset is not available or appropriate,

past due, legally enforceable nontax

delinquent debts may be collected

through non-centralized administrative

offset. In these cases, a creditor agency

may make a request directly to a

payment authorizing agency to offset a

payment due a debtor to collect a

delinquent debt. For example, it may be

appropriate for a creditor agency to

request that the Office of Personnel

Management (OPM) offset a Federal

employee’s lump sum payment upon

leaving Government service to satisfy an

unpaid advance.

(2) Before requesting a payment

authorizing agency to conduct a noncentralized administrative offset,

agencies must adopt regulations

providing that such offsets may occur

only after:

(i) The debtor has been provided due

process as set forth in paragraph (b)(4)

of this section; and

(ii) The payment authorizing agency

has received written certification from

the creditor agency that the debtor owes

the past due, legally enforceable

delinquent debt in the amount stated,

and that the creditor agency has fully

complied with its regulations

concerning administrative offset.

(3) Payment authorizing agencies

shall comply with offset requests by

creditor agencies to collect debts owed

to the United States, unless the offset

would not be in the best interests of the

United States with respect to the

program of the payment authorizing

agency, or would otherwise be contrary

to law. Appropriate use should be made

of the cooperative efforts of other

agencies in effecting collection by

administrative offset.

(4) When collecting multiple debts by

non-centralized administrative offset,

agencies should apply the recovered

amounts to those debts in accordance

with the best interests of the United

States, as determined by the facts and

circumstances of the particular case,

particularly the applicable statute of

limitations.

(d) Requests to OPM to offset a

debtor’s anticipated or future benefit

payments under the Civil Service

Retirement and Disability Fund. Upon

providing OPM written certification that

a debtor has been afforded the

procedures provided in paragraph (b)(4)

of this section, creditor agencies may

request OPM to offset a debtor’s

anticipated or future benefit payments

under the Civil Service Retirement and

Disability Fund (Fund) in accordance

with regulations codified at 5 CFR

831.1801–831.1808. Upon receipt of

such a request, OPM will identify and

‘‘flag’’ a debtor’s account in anticipation

of the time when the debtor requests, or

becomes eligible to receive, payments

from the Fund. This will satisfy any

requirement that offset be initiated prior

to the expiration of the time limitations

referenced in paragraph (a)(4) of this

section.

(e) Review requirements. (1) For

purposes of this section, whenever an

agency is required to afford a debtor a

review within the agency, the agency

shall provide the debtor with a

reasonable opportunity for an oral

hearing when the debtor requests

reconsideration of the debt and the

agency determines that the question of

the indebtedness cannot be resolved by

review of the documentary evidence, for

example, when the validity of the debt

turns on an issue of credibility or

veracity.

(2) Unless otherwise required by law,

an oral hearing under this section is not

required to be a formal evidentiary

hearing, although the agency should

carefully document all significant

matters discussed at the hearing.

(3) 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.

(4) In those cases when an oral

hearing is not required by this section,

an agency shall accord the debtor a

‘‘paper hearing,’’ that is, a determination

of the request for reconsideration based

upon a review of the written record.

§ 901.4 Reporting debts.

(a) Agencies shall develop and

implement procedures for reporting

delinquent debts to credit bureaus and

other automated databases. Agencies

also may develop procedures to report

non-delinquent debts to credit bureaus.

See 31 U.S.C. 3711(e).

(1) In developing procedures for

reporting debts to credit bureaus,

agencies shall comply with the

Bankruptcy Code and the Privacy Act of

1974, 5 U.S.C. 552a, as amended. The

provisions of the Privacy Act do not

apply to credit bureaus.

(2) Agency procedures for reporting

delinquent consumer debts to credit

bureaus shall be consistent with the due

process and other requirements

contained in 31 U.S.C. 3711(e). When an

agency has given a debtor any of the

required notice and review

opportunities with respect to a

particular debt, the agency need not

duplicate such notice and review

opportunities before reporting that

delinquent consumer debt to credit

bureaus.

(b) Agencies should report delinquent

debts to the Department of Housing and

Urban Development’s Credit Alert

Interactive Voice Response System

(CAIVRS). For information about the

CAIVRS program, agencies should

contact the Director of Information

Resources Management Policy and

Management Division, Office of

Information Technology, Department of

Housing and Urban Development, 451

7th Street, SW., Washington, DC 20410.

70400 Federal Register / Vol. 65, No. 226 / Wednesday, November 22, 2000 / Rules and Regulations

§ 901.5 Contracting with private collection

contractors and with entities that locate and

recover unclaimed assets.

(a) Subject to the provisions of

paragraph (b) of this section, Federal

agencies may contract with private

collection contractors, as defined in 31

U.S.C. 3701(f), to recover delinquent

debts provided that:

(1) Agencies retain the authority to

resolve disputes, compromise debts,

suspend or terminate collection activity,

and refer debts for litigation;

(2) The private collection contractor is

not allowed to offer the debtor, as an

incentive for payment, the opportunity

to pay the debt less the private

collection contractor’s fee unless the

agency has granted such authority prior

to the offer;

(3) The contract provides that the

private collection contractor is subject

to the Privacy Act of 1974 to the extent

specified in 5 U.S.C. 552a(m), and to

applicable Federal and state laws and

regulations pertaining to debt collection

practices, including but not limited to

the Fair Debt Collection Practices Act,

15 U.S.C. 1692; and

(4) The private collection contractor is

required to account for all amounts

collected.

(b) Agencies shall use governmentwide debt collection contracts to obtain

debt collection services provided by

private collection contractors. However,

agencies may refer debts to private

collection contractors pursuant to a

contract between the agency and the

private collection contractor only if

such debts are not subject to the

requirement to transfer debts to

Treasury for debt collection. See 31

U.S.C. 3711(g); 31 CFR 285.12(e).

(c) Agencies may fund private

collection contractor contracts in

accordance with 31 U.S.C. 3718(d), or as

otherwise permitted by law.

(d) Agencies may enter into contracts

for locating and recovering assets of the

United States, such as unclaimed assets.

Agencies must establish procedures that

are acceptable to the Secretary before

entering into contracts to recover assets

of the United States held by a state

government or a financial institution.

(e) Agencies may enter into contracts

for debtor asset and income search

reports. In accordance with 31 U.S.C.

3718(d), such contracts may provide

that the fee a contractor charges the

agency for such services may be payable

from the amounts recovered, unless

otherwise prohibited by statute.

§ 901.6 Suspension or revocation of

eligibility for loans and loan guaranties,

licenses, permits, or privileges.

(a) Unless waived by the head of the

agency, agencies are not permitted to

extend financial assistance in the form

of a loan, loan guarantee, or loan

insurance to any person delinquent on

a nontax debt owed to a Federal agency.

This prohibition does not apply to

disaster loans. The authority to waive

the application of this section may be

delegated to the Chief Financial Officer

and redelegated only to the Deputy

Chief Financial Officer of the agency.

Agencies may extend credit after the

delinquency has been resolved. The

Secretary may exempt classes of debts

from this prohibition and has prescribed

standards defining when a

‘‘delinquency’’ is ‘‘resolved’’ for

purposes of this prohibition. See 31 CFR

285.13 (Barring Delinquent Debtors

From Obtaining Federal Loans or Loan

Insurance or Guarantees).

(b) In non-bankruptcy cases, agencies

seeking the collection of statutory

penalties, forfeitures, or other types of

claims should consider the suspension

or revocation of licenses, permits, or

other privileges for any inexcusable or

willful failure of a debtor to pay such a

debt in accordance with the agency’s

regulations or governing procedures.

The debtor should be advised in the

agency’s written demand for payment of

the agency’s ability to suspend or revoke

licenses, permits, or privileges. Any

agency making, guaranteeing, insuring,

acquiring, or participating in, loans

should consider suspending or

disqualifying any lender, contractor, or

broker from doing further business with

the agency or engaging in programs

sponsored by the agency if such lender,

contractor, or broker fails to pay its

debts to the Government within a

reasonable time or if such lender,

contractor, or broker has been

suspended, debarred, or disqualified

from participation in a program or

activity by another Federal agency. The

failure of any surety to honor its

obligations in accordance with 31 U.S.C.

9305 should be reported to the Treasury.

The Treasury will forward to all

interested agencies notification that a

surety’s certificate of authority to do

business with the Government has been

revoked by the Treasury.

(c) The suspension or revocation of

licenses, permits, or privileges also

should extend to Federal programs or

activities that are administered by the

states on behalf of the Federal

Government, to the extent that they

affect the Federal Government’s ability

to collect money or funds owed by

debtors. Therefore, states that manage

Federal activities, pursuant to approval

from the agencies, should ensure that

appropriate steps are taken to safeguard

against issuing licenses, permits, or

privileges to debtors who fail to pay

their debts to the Federal Government.

(d) In bankruptcy cases, before

advising the debtor of an agency’s

intention to suspend or revoke licenses,

permits, or privileges, agencies should

seek legal advice from their agency

counsel concerning the impact of the

Bankruptcy Code, particularly 11 U.S.C.

362 and 525, which may restrict such

action.

§ 901.7 Liquidation of collateral.

(a) Agencies should liquidate security

or collateral through the exercise of a

power of sale in the security instrument

or a nonjudicial foreclosure, and apply

the proceeds to the applicable debt(s), if

the debtor fails to pay the debt(s) within

a reasonable time after demand and if

such action is in the best interest of the

United States. Collection from other

sources, including liquidation of

security or collateral, is not a

prerequisite to requiring payment by a

surety, insurer, or guarantor unless such

action is expressly required by statute or

contract.

(b) When an agency learns that a

bankruptcy petition has been filed with

respect to a debtor, the agency should

seek legal advice from its agency

counsel concerning the impact of the

Bankruptcy Code, including, but not

limited to, 11 U.S.C. 362, to determine

the applicability of the automatic stay

and the procedures for obtaining relief

from such stay prior to proceeding

under paragraph (a) of this section.

§ 901.8 Collection in installments.

(a) Whenever feasible, agencies shall

collect the total amount of a debt in one

lump sum. If a debtor is financially

unable to pay a debt in one lump sum,

agencies may accept payment in regular

installments. Agencies should obtain

financial statements from debtors who

represent that they are unable to pay in

one lump sum and independently verify

such representations whenever possible

(see § 902.2(g) of this chapter). Agencies

that agree to accept payments in regular

installments should obtain a legally

enforceable written agreement from the

debtor that specifies all of the terms of

the arrangement and that contains a

provision accelerating the debt in the

event of default.

(b) The size and frequency of

installment payments should bear a

reasonable relation to the size of the

debt and the debtor’s ability to pay. If

possible, the installment payments

should be sufficient in size and

frequency to liquidate the debt in three

years or less.

(c) Security for deferred payments

should be obtained in appropriate cases.

Federal Register / Vol. 65, No. 226 / Wednesday, November 22, 2000 / Rules and Regulations 70401

Agencies may accept installment

payments notwithstanding the refusal of

the debtor to execute a written

agreement or to give security, at the

agency’s option.

§ 901.9 Interest, penalties, and

administrative costs.

(a) Except as provided in paragraphs

(g), (h), and (i) of this section, agencies

shall charge interest, penalties, and

administrative costs on debts owed to

the United States pursuant to 31 U.S.C.

3717. An agency shall mail or handdeliver a written notice to the debtor, at

the debtor’s most recent address

available to the agency, explaining the

agency’s requirements concerning these

charges except where these

requirements are included in a

contractual or repayment agreement.

These charges shall continue to accrue

until the debt is paid in full or

otherwise resolved through

compromise, termination, or waiver of

the charges.

(b) Agencies shall charge interest on

debts owed the United States as follows:

(1) Interest shall accrue from the date

of delinquency, or as otherwise

provided by law.

(2) Unless otherwise established in a

contract, repayment agreement, or by

statute, the rate of interest charged shall

be the rate established annually by the

Secretary in accordance with 31 U.S.C.

3717. Pursuant to 31 U.S.C. 3717, an

agency may charge a higher rate of

interest if it reasonably determines that

a higher rate is necessary to protect the

rights of the United States. The agency

should document the reason(s) for its

determination that the higher rate is

necessary.

(3) The rate of interest, as initially

charged, shall remain fixed for the

duration of the indebtedness. When a

debtor defaults on a repayment

agreement and seeks to enter into a new

agreement, the agency may require

payment of interest at a new rate that

reflects the current value of funds to the

Treasury at the time the new agreement

is executed. Interest shall not be

compounded, that is, interest shall not

be charged on interest, penalties, or

administrative costs required by this

section. If, however, a debtor defaults on

a previous repayment agreement,

charges that accrued but were not

collected under the defaulted agreement

shall be added to the principal under

the new repayment agreement.

(c) Agencies shall assess

administrative costs incurred for

processing and handling delinquent

debts. The calculation of administrative

costs should be based on actual costs

incurred or upon estimated costs as

determined by the assessing agency.

(d) Unless otherwise established in a

contract, repayment agreement, or by

statute, agencies shall charge a penalty,

pursuant to 31 U.S.C. 3717(e)(2), not to

exceed six percent a year on the amount

due on a debt that is delinquent for

more than 90 days. This charge shall

accrue from the date of delinquency.

(e) Agencies may increase an

‘‘administrative debt’’ by the cost of

living adjustment in lieu of charging

interest and penalties under this

section. ‘‘Administrative debt’’ includes,

but is not limited to, a debt based on

fines, penalties, and overpayments, but

does not include a debt based on the

extension of Government credit, such as

those arising from loans and loan

guaranties. The cost of living adjustment

is the percentage by which the

Consumer Price Index for the month of

June of the calendar year preceding the

adjustment exceeds the Consumer Price

Index for the month of June of the

calendar year in which the debt was

determined or last adjusted. Increases to

administrative debts shall be computed

annually. Agencies should use this

alternative only when there is a

legitimate reason to do so, such as when

calculating interest and penalties on a

debt would be extremely difficult

because of the age of the debt.

(f) When a debt is paid in partial or

installment payments, amounts received

by the agency shall be applied first to

outstanding penalties, second to

administrative charges, third to interest,

and last to principal.

(g) Agencies shall waive the collection

of interest and administrative charges

imposed pursuant to this section on the

portion of the debt that is paid within

30 days after the date on which interest

began to accrue. Agencies may extend

this 30-day period on a case-by-case

basis. In addition, agencies may waive

interest, penalties, and administrative

costs charged under this section, in

whole or in part, without regard to the

amount of the debt, either under the

criteria set forth in these standards for

the compromise of debts, or if the

agency determines that collection of

these charges is against equity and good

conscience or is not in the best interest

of the United States.

(h) Agencies shall set forth in their

regulations the circumstances under

which interest and related charges will

not be imposed for periods during

which collection activity has been

suspended pending agency review.

(i) Agencies are authorized to impose

interest and related charges on debts not

subject to 31 U.S.C. 3717, in accordance

with the common law.

§ 901.10 Analysis of costs.

Agency collection procedures should

provide for periodic comparison of costs

incurred and amounts collected. Data on

costs and corresponding recovery rates

for debts of different types and in

various dollar ranges should be used to

compare the cost effectiveness of

alternative collection techniques,

establish guidelines with respect to

points at which costs of further

collection efforts are likely to exceed

recoveries, assist in evaluating offers in

compromise, and establish minimum

debt amounts below which collection

efforts need not be taken.

§ 901.11 Use and disclosure of mailing

addresses.

(a) When attempting to locate a debtor

in order to collect or compromise a debt

under parts 900–904 of this chapter or

other authority, agencies may send a

request to the Secretary (or designee) to

obtain a debtor’s mailing address from

the records of the Internal Revenue

Service.

(b) Agencies are authorized to use

mailing addresses obtained under

paragraph (a) of this section to enforce

collection of a delinquent debt and may

disclose such mailing addresses to other

agencies and to collection agencies for

collection purposes.

§ 901.12 Exemptions.

(a) The preceding sections of this part,

to the extent they reflect remedies or

procedures prescribed by the Debt

Collection Act of 1982 and the Debt

Collection Improvement Act of 1996,

such as administrative offset, use of

credit bureaus, contracting for collection

agencies, and interest and related

charges, do not apply to debts arising

under, or payments made under, the

Internal Revenue Code of 1986, as

amended (26 U.S.C. 1 et seq.); the Social

Security Act (42 U.S.C. 301 et seq.),

except to the extent provided under 42

U.S.C. 404 and 31 U.S.C. 3716(c); or the

tariff laws of the United States. These

remedies and procedures, however, may

be authorized with respect to debts that

are exempt from the Debt Collection Act

of 1982 and the Debt Collection

Improvement Act of 1996, to the extent

that they are authorized under some

other statute or the common law.

(b) This section should not be

construed as prohibiting the use of these

authorities or requirements when

collecting debts owed by persons

employed by agencies administering the

laws cited in paragraph (a) of this

section unless the debt arose under

those laws.

70402 Federal Register / Vol. 65, No. 226 / Wednesday, November 22, 2000 / Rules and Regulations

PART 902—STANDARDS FOR THE

COMPROMISE OF CLAIMS

Sec.

902.1 Scope and application.

902.2 Bases for compromise.

902.3 Enforcement policy.

902.4 Joint and several liability.

902.5 Further review of compromise offers.

902.6 Consideration of tax consequences to

the Government.

902.7 Mutual releases of the debtor and the

Government.

Authority: 31 U.S.C. 3711.

§ 902.1 Scope and application.

(a) The standards set forth in this part

apply to the compromise of debts

pursuant to 31 U.S.C. 3711. An agency

may exercise such compromise

authority for debts arising out of

activities of, or referred or transferred

for collection services to, that agency

when the amount of the debt then due,

exclusive of interest, penalties, and

administrative costs, does not exceed

$100,000 or any higher amount

authorized by the Attorney General.

Agency heads may designate officials

within their respective agencies to

exercise the authorities in this section.

(b) Unless otherwise provided by law,

when the principal balance of a debt,

exclusive of interest, penalties, and

administrative costs, exceeds $100,000

or any higher amount authorized by the

Attorney General, the authority to

accept the compromise rests with the

Department of Justice. The agency

should evaluate the compromise offer,

using the factors set forth in this part.

If an offer to compromise any debt in

excess of $100,000 is acceptable to the

agency, the agency shall refer the debt

to the Civil Division or other

appropriate litigating division in the

Department of Justice using a Claims

Collection Litigation Report (CCLR).

Agencies may obtain the CCLR from the

Department of Justice’s National Central

Intake Facility. The referral shall

include appropriate financial

information and a recommendation for

the acceptance of the compromise offer.

Justice Department approval is not

required if the agency rejects a

compromise offer.

§ 902.2 Bases for compromise.

(a) Agencies may compromise a debt

if the Government cannot collect the full

amount because:

(1) The debtor is unable to pay the full

amount in a reasonable time, as verified

through credit reports or other financial

information;

(2) The Government is unable to

collect the debt in full within a

reasonable time by enforced collection

proceedings;

(3) The cost of collecting the debt

does not justify the enforced collection

of the full amount; or

(4) There is significant doubt

concerning the Government’s ability to

prove its case in court.

(b) In determining the debtor’s

inability to pay, agencies should

consider relevant factors such as the

following:

(1) Age and health of the debtor;

(2) Present and potential income;

(3) Inheritance prospects;

(4) The possibility that assets have

been concealed or improperly

transferred by the debtor; and

(5) The availability of assets or

income that may be realized by enforced

collection proceedings.

(c) Agencies should verify the debtor’s

claim of inability to pay by using a

credit report and other financial

information as provided in paragraph (g)

of this section. Agencies should

consider the applicable exemptions

available to the debtor under state and

Federal law in determining the

Government’s ability to enforce

collection. Agencies also may consider

uncertainty as to the price that collateral

or other property will bring at a forced

sale in determining the Government’s

ability to enforce collection. A

compromise effected under this section

should be for an amount that bears a

reasonable relation to the amount that

can be recovered by enforced collection

procedures, with regard to the

exemptions available to the debtor and

the time that collection will take.

(d) If there is significant doubt

concerning the Government’s ability to

prove its case in court for the full

amount claimed, either because of the

legal issues involved or because of a

bona fide dispute as to the facts, then

the amount accepted in compromise of

such cases should fairly reflect the

probabilities of successful prosecution

to judgment, with due regard given to

the availability of witnesses and other

evidentiary support for the

Government’s claim. In determining the

litigative risks involved, agencies

should consider the probable amount of

court costs and attorney fees pursuant to

the Equal Access to Justice Act, 28

U.S.C. 2412, that may be imposed

against the Government if it is

unsuccessful in litigation.

(e) Agencies may compromise a debt

if the cost of collecting the debt does not

justify the enforced collection of the full

amount. The amount accepted in

compromise in such cases may reflect

an appropriate discount for the

administrative and litigative costs of

collection, with consideration given to

the time it will take to effect collection.

Collection costs may be a substantial

factor in the settlement of small debts.

In determining whether the cost of

collecting justifies enforced collection of

the full amount, agencies should

consider whether continued collection

of the debt, regardless of cost, is

necessary to further an enforcement

principle, such as the Government’s

willingness to pursue aggressively

defaulting and uncooperative debtors.

(f) Agencies generally should not

accept compromises payable in

installments. This is not an

advantageous form of compromise in

terms of time and administrative

expense. If, however, payment of a

compromise in installments is

necessary, agencies should obtain a

legally enforceable written agreement

providing that, in the event of default,

the full original principal balance of the

debt prior to compromise, less sums

paid thereon, is reinstated. Whenever

possible, agencies also should obtain

security for repayment in the manner set

forth in part 901 of this chapter.

(g) To assess the merits of a

compromise offer based in whole or in

part on the debtor’s inability to pay the

full amount of a debt within a

reasonable time, agencies should obtain

a current financial statement from the

debtor, executed under penalty of

perjury, showing the debtor’s assets,

liabilities, income and expenses.

Agencies also may obtain credit reports

or other financial information to assess

compromise offers. Agencies may use

their own financial information form or

may request suitable forms from the

Department of Justice or the local

United States Attorney’s Office.

§ 902.3 Enforcement policy.

Pursuant to this part, agencies may

compromise statutory penalties,

forfeitures, or claims established as an

aid to enforcement and to compel

compliance, if the agency’s enforcement

policy in terms of deterrence and

securing compliance, present and

future, will be adequately served by the

agency’s acceptance of the sum to be

agreed upon.

§ 902.4 Joint and several liability.

(a) When two or more debtors are

jointly and severally liable, agencies

should pursue collection activity against

all debtors, as appropriate. Agencies

should not attempt to allocate the

burden of payment between the debtors

but should proceed to liquidate the

indebtedness as quickly as possible.

(b) Agencies should ensure that a

compromise agreement with one debtor

does not release the agency’s claim

against the remaining debtors. The

Federal Register / Vol. 65, No. 226 / Wednesday, November 22, 2000 / Rules and Regulations 70403

amount of a compromise with one

debtor shall not be considered a

precedent or binding in determining the

amount that will be required from other

debtors jointly and severally liable on

the claim.

§ 902.5 Further review of compromise

offers.

If an agency is uncertain whether to

accept a firm, written, substantive

compromise offer on a debt that is

within the agency’s delegated

compromise authority, it may refer the

offer to the Civil Division or other

appropriate litigating division in the

Department of Justice, using a CCLR

accompanied by supporting data and

particulars concerning the debt. The

Department of Justice may act upon

such an offer or return it to the agency

with instructions or advice.

§ 902.6 Consideration of tax

consequences to the Government.

In negotiating a compromise, agencies

should consider the tax consequences to

the Government. In particular, agencies

should consider requiring a waiver of

tax-loss-carry-forward and tax-losscarry-back rights of the debtor. For

information on discharge of

indebtedness reporting requirements see

§ 903.5 of this chapter.

§ 902.7 Mutual releases of the debtor and

the Government.

In all appropriate instances, a

compromise that is accepted by an

agency should be implemented by

means of a mutual release, in which the

debtor is released from further non-tax

liability on the compromised debt in

consideration of payment in full of the

compromise amount and the

Government and its officials, past and

present, are released and discharged

from any and all claims and causes of

action arising from the same transaction

that the debtor may have. In the event

a mutual release is not executed when

a debt is compromised, unless

prohibited by law, the debtor is still

deemed to have waived any and all

claims and causes of action against the

Government and its officials related to

the transaction giving rise to the

compromised debt.

PART 903—STANDARDS FOR

SUSPENDING OR TERMINATING

COLLECTION ACTIVITY

Sec.

903.1 Scope and application.

903.2 Suspension of collection activity.

903.3 Termination of collection activity.

903.4 Exception to termination.

903.5 Discharge of indebtedness; reporting

requirements.

Authority: 31 U.S.C. 3711.

§ 903.1 Scope and application.

(a) The standards set forth in this part

apply to the suspension or termination

of collection activity pursuant to 31

U.S.C. 3711 on debts that do not exceed

$100,000, or such other amount as the

Attorney General may direct, exclusive

of interest, penalties, and administrative

costs, after deducting the amount of

partial payments or collections, if any.

Prior to referring a debt to the

Department of Justice for litigation,

agencies may suspend or terminate

collection under this part with respect

to debts arising out of activities of, or

referred or transferred for collection

services to, that agency.

(b) If, after deducting the amount of

any partial payments or collections, the

principal amount of a debt exceeds

$100,000, or such other amount as the

Attorney General may direct, exclusive

of interest, penalties, and administrative

costs, the authority to suspend or

terminate rests solely with the

Department of Justice. If the agency

believes that suspension or termination

of any debt in excess of $100,000 may

be appropriate, the agency shall refer

the debt to the Civil Division or other

appropriate litigating division in the

Department of Justice, using the CCLR.

The referral should specify the reasons

for the agency’s recommendation. If,

prior to referral to the Department of

Justice, an agency determines that a debt

is plainly erroneous or clearly without

legal merit, the agency may terminate

collection activity regardless of the

amount involved without obtaining

Department of Justice concurrence.

§ 903.2 Suspension of collection activity.

(a) Agencies may suspend collection

activity on a debt when:

(1) The agency cannot locate the

debtor;

(2) The debtor’s financial condition is

expected to improve; or

(3) The debtor has requested a waiver

or review of the debt.

(b) Based on the current financial

condition of the debtor, agencies may

suspend collection activity on a debt

when the debtor’s future prospects

justify retention of the debt for periodic

review and collection activity and:

(1) The applicable statute of

limitations has not expired; or

(2) Future collection can be effected

by administrative offset,

notwithstanding the expiration of the

applicable statute of limitations for

litigation of claims, with due regard to

the 10-year limitation for administrative

offset prescribed by 31 U.S.C.

3716(e)(1); or

(3) The debtor agrees to pay interest

on the amount of the debt on which

collection will be suspended, and such

suspension is likely to enhance the

debtor’s ability to pay the full amount

of the principal of the debt with interest

at a later date.

(c)(1) Agencies shall suspend

collection activity during the time

required for consideration of the

debtor’s request for waiver or

administrative review of the debt if the

statute under which the request is

sought prohibits the agency from

collecting the debt during that time.

(2) If the statute under which the

request is sought does not prohibit

collection activity pending

consideration of the request, agencies

may use discretion, on a case-by-case

basis, to suspend collection. Further, an

agency ordinarily should suspend

collection action upon a request for

waiver or review if the agency is

prohibited by statute or regulation from

issuing a refund of amounts collected

prior to agency consideration of the

debtor’s request. However, an agency

should not suspend collection when the

agency determines that the request for

waiver or review is frivolous or was

made primarily to delay collection.

(d) When an agency learns that a

bankruptcy petition has been filed with

respect to a debtor, in most cases the

collection activity on a debt must be

suspended, pursuant to the provisions

of 11 U.S.C. 362, 1201, and 1301, unless

the agency can clearly establish that the

automatic stay has been lifted or is no

longer in effect. Agencies should seek

legal advice immediately from their

agency counsel and, if legally permitted,

take the necessary legal steps to ensure

that no funds or money are paid by the

agency to the debtor until relief from the

automatic stay is obtained.

§ 903.3 Termination of collection activity.

(a) Agencies may terminate collection

activity when:

(1) The agency is unable to collect any

substantial amount through its own

efforts or through the efforts of others;

(2) The agency is unable to locate the

debtor;

(3) Costs of collection are anticipated

to exceed the amount recoverable;

(4) The debt is legally without merit

or enforcement of the debt is barred by

any applicable statute of limitations;

(5) The debt cannot be substantiated;

or

(6) The debt against the debtor has

been discharged in bankruptcy.

(b) Before terminating collection

activity, the agency should have

pursued all appropriate means of

collection and determined, based upon

70404 Federal Register / Vol. 65, No. 226 / Wednesday, November 22, 2000 / Rules and Regulations

the results of the collection activity, that

the debt is uncollectible. Termination of

collection activity ceases active

collection of the debt. The termination

of collection activity does not preclude

the agency from retaining a record of the

account for purposes of:

(1) Selling the debt, if the Secretary

determines that such sale is in the best

interests of the United States;

(2) Pursuing collection at a

subsequent date in the event there is a

change in the debtor’s status or a new

collection tool becomes available;

(3) Offsetting against future income or

assets not available at the time of

termination of collection activity; or

(4) Screening future applicants for

prior indebtedness.

(c) Generally, agencies shall terminate

collection activity on a debt that has

been discharged in bankruptcy,

regardless of the amount. Agencies may

continue collection activity, however,

subject to the provisions of the

Bankruptcy Code, for any payments

provided under a plan of reorganization.

Offset and recoupment rights may

survive the discharge of the debtor in

bankruptcy and, under some

circumstances, claims also may survive

the discharge. For example, the claims

of an agency that it is a known creditor

of a debtor may survive a discharge if

the agency did not receive formal notice

of the proceedings. Agencies should

seek legal advice from their agency

counsel if they believe they have claims

or offsets that may survive the discharge

of a debtor.

§ 903.4 Exception to termination.

When a significant enforcement

policy is involved, or recovery of a

judgment is a prerequisite to the

imposition of administrative sanctions,

agencies may refer debts for litigation

even though termination of collection

activity may otherwise be appropriate.

§ 903.5 Discharge of indebtedness;

reporting requirements.

(a) Before discharging a delinquent

debt (also referred to as a close out of

the debt), agencies shall take all

appropriate steps to collect the debt in

accordance with 31 U.S.C. 3711(g),

including, as applicable, administrative

offset, tax refund offset, Federal salary

offset, referral to Treasury, Treasurydesignated debt collection centers or

private collection contractors, credit

bureau reporting, wage garnishment,

litigation, and foreclosure. Discharge of

indebtedness is distinct from

termination or suspension of collection

activity under part 903 of this title and

is governed by the Internal Revenue

Code. When collection action on a debt

is suspended or terminated, the debt

remains delinquent and further

collection action may be pursued at a

later date in accordance with the

standards set forth in this chapter.

When an agency discharges a debt in

full or in part, further collection action

is prohibited. Therefore, agencies

should make the determination that

collection action is no longer warranted

before discharging a debt. Before

discharging a debt, agencies must

terminate debt collection action.

(b) Section 3711(i), title 31, United

States Code, requires agencies to sell a

delinquent nontax debt upon

termination of collection action if the

Secretary determines such a sale is in

the best interests of the United States.

Since the discharge of a debt precludes

any further collection action (including

the sale of a delinquent debt), agencies

may not discharge a debt until the

requirements of 31 U.S.C. 3711(i) have

been met.

(c) Upon discharge of an

indebtedness, agencies must report the

discharge to the IRS in accordance with

the requirements of 26 U.S.C. 6050P and

26 CFR 1.6050P–1. An agency may

request Treasury or Treasury-designated

debt collection centers to file such a

discharge report to the IRS on the

agency’s behalf.

(d) When discharging a debt, agencies

must request that litigation counsel

release any liens of record securing the

debt.

PART 904—REFERRALS TO THE

DEPARTMENT OF JUSTICE

Sec.

904.1 Prompt referral.

904.2 Claims Collection Litigation Report.

904.3 Preservation of evidence.

904.4 Minimum amount of referrals to the

Department of Justice.

Authority: 31 U.S.C. 3711.

§ 904.1 Prompt referral.

(a) Agencies shall promptly refer to

the Department of Justice for litigation

debts on which aggressive collection

activity has been taken in accordance

with part 901 of this chapter and that

cannot be compromised, or on which

collection activity cannot be suspended

or terminated, in accordance with parts

902 and 903 of this chapter. Agencies

may refer those debts arising out of

activities of, or referred or transferred

for collection services to, that agency.

Debts for which the principal amount is

over $1,000,000, or such other amount

as the Attorney General may direct,

exclusive of interest and penalties, shall

be referred to the Civil Division or other

division responsible for litigating such

debts at the Department of Justice,

Washington, D.C. Debts for which the

principal amount is $1,000,000, or less,

or such other amount as the Attorney

General may direct, exclusive of interest

or penalties, shall be referred to the

Department of Justice’s Nationwide

Central Intake Facility as required by

the CCLR instructions. Debts should be

referred as early as possible, consistent

with aggressive agency collection

activity and the observance of the

standards contained in parts 900–904 of

this chapter, and, in any event, well

within the period for initiating timely

lawsuits against the debtors. Agencies

shall make every effort to refer

delinquent debts to the Department of

Justice for litigation within one year of

the date such debts last became

delinquent. In the case of guaranteed or

insured loans, agencies should make

every effort to refer these delinquent

debts to the Department of Justice for

litigation within one year from the date

the loan was presented to the agency for

payment or re-insurance.

(b) The Department of Justice has

exclusive jurisdiction over the debts

referred to it pursuant to this section.

The referring agency shall immediately

terminate the use of any administrative

collection activities to collect a debt at

the time of the referral of that debt to the

Department of Justice. The agency

should advise the Department of Justice

of the collection activities which have

been utilized to date, and their result.

The referring agency shall refrain from

having any contact with the debtor and

shall direct all debtor inquiries

concerning the debt to the Department

of Justice. The referring agency shall

immediately notify the Department of

Justice of any payments credited by the

agency to the debtor’s account after

referral of a debt under this section. The

Department of Justice shall notify the

referring agency, in a timely manner, of

any payments it receives from the

debtor.

§ 904.2 Claims Collection Litigation

Report.

(a) Unless excepted by the

Department of Justice, agencies shall

complete the CCLR (see § 902.1(b) of

this chapter), accompanied by a signed

Certificate of Indebtedness, to refer all

administratively uncollectible claims to

the Department of Justice for litigation.

Referring agencies shall complete all of

the sections of the CCLR appropriate to

each claim as required by the CCLR

instructions and furnish such other

information as may be required in

specific cases.

(b) Agencies shall indicate clearly on

the CCLR the actions they wish the

Department of Justice to take with

Federal Register / Vol. 65, No. 226 / Wednesday, November 22, 2000 / Rules and Regulations 70405

respect to the referred claim. The CCLR

permits the agency to indicate

specifically any of a number of litigative

activities which the Department of

Justice may pursue, including enforced

collection, judgment lien only, renew

judgment lien only, renew judgment

lien and enforce collection, program

enforcement, foreclosure only, and

foreclosure and deficiency judgment.

(c) Agencies also shall use the CCLR

to refer claims to the Department of

Justice to obtain approval of any

proposals to compromise the claims or

to suspend or terminate agency

collection activity.

§ 904.3 Preservation of evidence.

Referring agencies must take care to

preserve all files and records that may

be needed by the Department of Justice

to prove their claims in court. Agencies

ordinarily should include certified

copies of the documents that form the

basis for the claim in the packages

referring their claims to the Department

of Justice for litigation. Agencies shall

provide originals of such documents

immediately upon request by the

Department of Justice.

§ 904.4 Minimum amount of referrals to the

Department of Justice.

(a) Agencies shall not refer for

litigation claims of less than $2,500,

exclusive of interest, penalties, and

administrative costs, or such other

amount as the Attorney General shall

from time to time prescribe. The

Department of Justice shall promptly

notify referring agencies if the Attorney

General changes this minimum amount.

(b) Agencies shall not refer claims of

less than the minimum amount unless:

(1) Litigation to collect such smaller

claims is important to ensure

compliance with the agency’s policies

or programs;

(2) The claim is being referred solely

for the purpose of securing a judgment

against the debtor, which will be filed

as a lien against the debtor’s property

pursuant to 28 U.S.C. 3201 and returned

to the referring agency for enforcement;

or

(3) The debtor has the clear ability to

pay the claim and the Government

effectively can enforce payment, with

due regard for the exemptions available

to the debtor under state and Federal

law and the judicial remedies available

to the Government.

(c) Agencies should consult with the

Financial Litigation Staff of the

Executive Office for United States

Attorneys in the Department of Justice

prior to referring claims valued at less

than the minimum amount.

Dated: November 6, 2000.

Lawrence H. Summers,

Secretary of the Treasury.

Dated: September 21, 2000.

Janet Reno,

Attorney General of the United States.

[FR Doc. 00–29284 Filed 11–21–00; 8:45 am]

BILLING CODE 4810–35–P; 4410–26–P

GENERAL ACCOUNTING OFFICE

DEPARTMENT OF JUSTICE

4 CFR Chapter II

[A.G. Order No. 2326–2000]

Federal Claims Collection Standards;

Removal of Obsolete Chapter

AGENCIES: General Accounting Office;

Department of Justice.

ACTION: Final rule.

SUMMARY: This final rule removes from

Title 4 of the Code of Federal

Regulations the Federal Claims

Collection Standards (FCCS), which

were issued jointly by the Department of

Justice and the General Accounting

Office (GAO). The GAO no longer has

the statutory authority to issue or

maintain the FCCS.

DATES: This rule is effective December

22, 2000.

FOR FURTHER INFORMATION CONTACT: Tom

Armstrong, General Accounting Office,

(202) 512–8257; or Kathleen A.

Haggerty, Department of Justice, (202)

514–5343.

SUPPLEMENTARY INFORMATION: The FCCS

were promulgated jointly by the

Department of Justice and GAO on

March 9, 1984. 49 FR 8889. The

Comptroller General was removed as a

co-promulgator of the FCCS by section

115(g) of the General Accounting Office

Act of 1996, Public Law 104–316, 110

Stat. 3826 (Oct. 19, 1996). Consequently,

the FCCS are being removed from Title

4 of the Code of Federal Regulations.

The Secretary of the Treasury was

added as a co-promulgator of the FCCS

with the Department of Justice under

section 31001(g)(1)(C) of the Debt

Collection Improvement Act of 1996,

Public Law 104–134, 110 Stat. 1321,

1321–358 (Apr. 26, 1996), as part of the

Omnibus Consolidated Rescissions and

Appropriations Act of 1996. The revised

FCCS, to be published in Title 31 of the

Code of Federal Regulations, will be

administered jointly by the Department

of Justice and the Department of the

Treasury. A final rule establishing a

revised FCCS is being published

elsewhere in this issue of the Federal

Register.

Regulatory Analysis

Administrative Procedure Act

(5 U.S.C. 553)

This rule is a rule of agency

organization and is therefore exempt

from the notice requirement of 5 U.S.C.

553(b), and is made effective upon

issuance.

Regulatory Flexibility Act

It is hereby certified that this

regulation will not have a significant

economic impact on a substantial

number of small entities. Accordingly, a

Regulatory Flexibility Analysis is not

required.

Executive Order 13132

This regulation will not have a

substantial direct effect on the states, on

the relationship between the national

government and the states, or on

distribution of power and

responsibilities among the various

levels of government. Therefore, in

accordance with Executive Order 13132,

it is determined that this regulation does

not have sufficient federalism

implications to warrant the preparation

of a Federalism Assessment.

Unfunded Mandates Reform Act of 1995

This regulation will not result in the

expenditure by state, local, and tribal

governments, in the aggregate, or by the

private sector, of $100 million or more

in any one year, and it will not

significantly or uniquely affect small

governments. Therefore, no actions were

deemed necessary under the provisions

of the Unfunded Mandates Reform Act

of 1995.

Small Business Regulatory Enforcement

Fairness Act of 1996

This rule is not a major rule as

defined by section 251 of the Small

Business Regulatory Enforcement Act. 5

U.S.C. 804. This rule will not result in

an annual effect on the economy of $100

million or more; a major increase in

costs or prices; or significant adverse

effects on competition, employment,

investment, productivity, innovation, or

on the ability of United States-based

companies to compete with foreignbased companies in domestic or export

markets.

Executive Order 12866

This action has been drafted and

reviewed in accordance with Executive

Order 12866, ‘‘Regulatory Planning and

Review,’’ section 1(b), Principles of

Regulation. This rule is limited to

agency organization and management as

described by Executive Order 12866

section 3(d)(3) and, therefore, is not a