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[Federal Register Volume 78, Number 133 (Thursday, July 11, 2013)]
[Rules and Regulations]
[Pages 41677-41684]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-16470]

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Rules and Regulations
                                                Federal Register
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Federal Register / Vol. 78, No. 133 / Thursday, July 11, 2013 / Rules 
and Regulations

[[Page 41677]]

BUREAU OF CONSUMER FINANCIAL PROTECTION

12 CFR Part 1073

[Docket No.: CFPB-2013-0021]

Procedures for Bureau Debt Collection

AGENCY: Bureau of Consumer Financial Protection.

ACTION: Final rule.

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SUMMARY: This rule implements the Bureau of Consumer Financial 
Protection's debt collection regulations. These regulations conform to 
requirements set forth in laws applicable to the collection of nontax 
debts owed to the United States.

DATES: This rule is effective July 11, 2013.

FOR FURTHER INFORMATION CONTACT: David Snyder, Attorney-Advisor, Legal 
Division, Consumer Financial Protection Bureau, 1700 G Street NW., 
Washington, DC 20552 at 202-435-7758.

SUPPLEMENTARY INFORMATION:

I. Background

    This rule implements the Debt Collection Improvement Act of 1996 
(DCIA), which applies to non-tax debts owed to the United States 
government, with respect to the Bureau of Consumer Financial Protection 
(CFPB or Bureau). The DCIA requires Federal agencies to collect debts 
owed to the United States under regulations prescribed by the head of 
each agency and standards prescribed by the Department of Justice and 
the Department of Treasury. 31 U.S.C. 3711. These standards, known as 
the Federal Claims Collection Standards (FCCS), became effective on 
December 22, 2000. 31 CFR Parts 900 through 904.
    The DCIA also requires agencies, prior to collecting debts owed to 
the United States by administrative offset, to: (1) Adopt without 
change the FCCS on collecting debts by administrative offset; or (2) 
prescribe agency regulations for collecting such debts by 
administrative offset which are consistent with the FCCS. 31 U.S.C. 
3716(b). Those agency regulations must set forth the procedural 
protections that the agency provides to a debtor when the agency seeks 
to collect a debt by administrative offset.
    The Bureau has decided to issue its own regulations for debt 
collection and administrative offset. The regulations are consistent 
with the FCCS, as required by the DCIA. The salary offset portion of 
the regulations has been submitted to and approved by the Office of 
Personnel Management (OPM), as required by 5 U.S.C. 5514. In addition, 
the administrative wage garnishment provisions of the regulations 
satisfy the prerequisite in 31 CFR 285.11(f) that the Bureau adopt 
regulations for the conduct of administrative wage garnishment hearings 
consistent with 31 CFR 285.11. The tax refund offset provisions of the 
regulations satisfy the prerequisite in 31 CFR 285.2(c) that the Bureau 
adopt regulations authorizing its collection of debts by tax refund 
offset.

II. Summary of the Rule

Subpart A--Scope, Purpose, and Definitions

    This part establishes Bureau procedures for the collection of 
certain debts owed to the United States. In addition to the procedures 
set forth in this rule, the Bureau shall also follow the procedures set 
forth in 5 CFR part 550, subpart K, for the collection by offset from 
indebted government employees, and in 31 CFR part 285 and the FCCS (31 
CFR parts 900 through 904) for the collection of non-tax debts owed to 
the United States. These regulations govern the following areas of the 
debt collection process: Prompt demand of payment of the claim from the 
debtor; review, upon the debtor's demand for a final agency 
determination, of whether the amount claimed is accurate; collection of 
debts in installment payments; assessment of interest, penalties, and 
administrative costs on debts claimed; compromise of claims; 
determinations whether to suspend or terminate collection action; 
referral of delinquent debts to the Secretary of the Treasury for 
collection by means of centralized administrative offset under the 
Treasury Offset Program; reporting of debts to consumer reporting 
agencies; use of credit reports; and the sale of delinquent debts. When 
the Bureau elects to pursue a specific debt collection remedy such as 
salary offset, administrative wage garnishment, or offset against tax 
refunds, the Bureau shall follow the applicable procedures for that 
debt collection remedy set forth in these regulations.

Subpart B--Administrative Offset

    Pursuant to 31 U.S.C. 3716, the Bureau may, in appropriate 
circumstances, collect debts owed to the United States through 
administrative offset. Under the administrative offset regulations, the 
Bureau is authorized to collect debts owed to the United States by: (1) 
Withholding money payable by the Bureau to the debtor or held by the 
Bureau for the debtor; (2) requesting that another Federal agency 
withhold money payable to the debtor or held by the agency for the 
debtor; or (3) referring the debts to the Secretary of the Treasury or 
a designated debt collection center for collection under the Treasury's 
centralized offset program. Subpart B of the regulations satisfies the 
prerequisite under 31 U.S.C. 3716(b) that the Bureau promulgate 
regulations for administrative offset procedures that are consistent 
with the FCCS. Subpart B of the regulations also satisfies the 
prerequisite under 31 CFR 901.3 that the Bureau prescribe specified 
administrative offset regulations prior to conducting administrative 
offset.

Subpart C--Salary Offset

    Subpart C of the regulations provides that when the Bureau collects 
a debt by means of deductions from the current pay account of a Bureau 
employee, or any individual currently employed by the Federal 
Government (including a former Bureau employee), the Bureau shall 
initiate salary offset under 5 U.S.C. 5514(a)(1). Salary offset is a 
form of administrative offset governed by statute (5 U.S.C. 5514) and 
by regulations issued by the Office of Personnel Management (OPM) (5 
CFR part 550, subpart K). The statute authorizing salary offset 
requires agencies to promulgate regulations to carry out salary offset 
subject to OPM approval. 5 U.S.C. 5514(b)(1). Subpart C implements 
those statutory requirements.

[[Page 41678]]

Subpart D--Administrative Wage Garnishment

    Subpart D of the regulations incorporates by reference 31 CFR 
285.11, which sets forth procedures that agencies may use to collect 
debts by garnishing the wages of individuals employed outside the 
Federal Government. This includes persons employed by the private 
sector, as well as state and local governments. The administrative wage 
garnishment regulations do not apply to the collection of delinquent 
debts from the wages of Federal employees; Federal pay is subject to 
the Federal salary offset procedures set forth in 5 U.S.C. 5514 and 
other applicable laws, including Subpart C of these regulations. 
Subpart D of the regulations meets the requirement under 31 CFR 
285.11(f) that the Bureau promulgate regulations governing the conduct 
of administrative wage garnishment hearings consistent with that 
section or adopt by reference the section without change.

Subpart E--Tax Refund Offset

    Where collection by salary offset or administrative offset is not 
feasible, the Bureau also may seek to recover a legally enforceable, 
past-due debt owed to the United States by requesting that the 
Financial Management Service of the Department of the Treasury offset 
all or part of a tax refund to a debtor by the amount of the debt and 
pay such money to the Bureau. 31 U.S.C. 3720A; 26 CFR 301.6402-1 
through .6402-6. In order to collect a debt by means of a tax refund 
offset, the Bureau is required to promulgate its own regulations under 
31 U.S.C. 3716 and 31 U.S.C. 3720A, governing its authority to collect 
debts by administrative offset, including offset of tax refund 
payments. 31 U.S.C. 3720A(b)(4); 31 CFR 285.2(c). Subpart E of the 
regulations implements this requirement.

III. Legal Authority and Effective Date

    This rule is issued under the DCIA, 31 U.S.C. 3711 et seq., which 
in part authorizes the Bureau to collect certain debts owed to the 
United States. It is also issued under 5 U.S.C. 5514, which in part 
authorizes the Bureau to collect certain debts owed to the United 
States via salary offset.
    This rule is procedural and not substantive and, thus, is not 
subject to the 30-day delay in effective date required by 5 U.S.C. 
553(d). The Bureau is making the rule effective immediately upon 
publication in the Federal Register.

IV. Regulatory Requirements

    No notice of proposed rulemaking is required under the 
Administrative Procedure Act (APA) because this rule relates solely to 
agency procedure and practice. 5 U.S.C. 553(b). Because no notice of 
proposed rulemaking is required, the Regulatory Flexibility Act does 
not require an initial or final regulatory flexibility analysis. 5 
U.S.C. 603, 604.
    The Bureau has determined that the Rule does not impose any new 
recordkeeping, reporting, or disclosure requirements on covered 
entities or members of the public that would be collections of 
information requiring OMB approval under the Paperwork Reduction Act, 
44 U.S.C. 3501, et seq.

List of Subjects in 12 CFR Part 1073

    Administrative practice and procedure, Government employees, 
Hearing and appeal procedures, Salaries, Wages.

Authority and Issuance

    For the reasons set forth in the preamble, the Bureau adds Part 
1073 to Chapter X in Title 12 of the Code of Federal Regulations to 
read as follows:

PART 1073--PROCEDURES FOR BUREAU DEBT COLLECTION

Subpart A--Scope, Purpose, and Definitions
Sec.
1073.101 Scope.
1073.102 Purpose.
1073.103 Definitions.
Subpart B--Administrative Offset
1073.201 Applicability and scope.
1073.202 Collection.
1073.203 Omission of procedures.
1073.204 Debtor's rights.
1073.205 No requirement for duplicate notice.
1073.206 Interest, penalties, and administrative costs.
1073.207 Termination or suspension of collection action.
1073.208 Refunds.
1073.209 Requests for offset to other Federal agencies.
1073.210 Requests for offset from other Federal agencies.
Subpart C--Salary Offset
1073.301 Scope.
1073.302 Notice requirement where CFPB is creditor agency.
1073.303 Procedures to request a hearing.
1073.304 Failure to timely submit request for a hearing.
1073.305 Procedures for hearing.
1073.306 Salary offset process.
1073.307 Voluntary repayment agreements as alternative to salary 
offset where the CFPB is the creditor agency.
1073.308 Special review of repayment agreement or salary offset due 
to changed circumstances.
1073.309 Interest, penalties, and administrative costs.
1073.310 Refunds.
1073.311 Non-waiver of rights by payment.
1073.312 Exception to procedures.
Subpart D--Administrative Wage Garnishment
1073.401 Administrative wage garnishment.
Subpart E--Tax Refund Offset
1073.501 Tax refund offset.

    Authority:  5 U.S.C. 301; 5 U.S.C. 5514; 31 U.S.C. 3711, et seq.

Subpart A--Scope, Purpose, and Definitions

Sec.  1073.101  Scope.

    This part establishes Bureau procedures for the collection of 
certain debts owed to the United States.
    (a) This part applies to collections by the Bureau from:
    (1) Federal employees who are indebted to the Bureau;
    (2) Employees of the Bureau who are indebted to other agencies; and
    (3) Other persons, organizations, or entities that are indebted to 
the United States, except those excluded in paragraph (b) of this 
section.
    (b) This part does not apply:
    (1) To debts or claims arising under the Internal Revenue Code 
(Title 26, U.S. Code), the Social Security Act (42 U.S.C. 301 et seq.), 
or the tariff laws of the United States;
    (2) To a situation to which the Contract Disputes Act (41 U.S.C. 
7101 et seq.) applies; or
    (3) To debts arising out of acquisition contracts subject to the 
Federal Acquisition Regulation. These debts shall be determined, 
collected, compromised, terminated, or settled in accordance with that 
regulation (see 48 CFR part 32).
    (4) In any other case where collection of a debt is exclusively 
provided for or prohibited by another statute or applicable regulation.
    (c) In addition to the procedures set forth in this part, the 
Bureau shall also follow the procedures set forth in 5 CFR part 550, 
subpart K, for the collection by offset from indebted government 
employees, and in 31 CFR part 285 and the Federal Claims Collection 
Standards (FCCS) (31 CFR chapter IX and parts 900 through 904) for the 
collection of debts owed to the United States.
    (d) Nothing in this part precludes the compromise, suspension, or 
termination of collection actions, where appropriate, under standards 
implementing the Debt Collection Improvement Act (DCIA) (31

[[Page 41679]]

U.S.C. 3711 et seq.), the FCCS, or any other applicable law.

Sec.  1073.102  Purpose.

    The purpose of this part is to implement Federal statutes and 
regulatory standards authorizing the Bureau to collect debts owed to 
the United States. This part is intended to be consistent with the 
following Federal statutes and regulations:
    (1) DCIA at 31 U.S.C. 3711 (collection and compromise of claims), 
section 3716 (administrative offset), section 3717 (interest and 
penalty on claims), and section 3718 (contracts for collection 
services); 31 CFR part 285 (debt collection authorities under the DCIA)
    (2) 31 CFR chapter IX and parts 900 through 904 (FCCS);
    (3) 5 U.S.C. 5514, 5 CFR part 550, subpart K (salary offset);
    (4) 5 U.S.C. 5584 (waiver of claims for overpayment);
    (5) 31 U.S.C. 3720D, 31 CFR 285.11 (administrative wage 
garnishment); and
    (6) 26 U.S.C. 6402(d), 31 U.S.C. 3720A, and 31 CFR 285.2 (tax 
refund offset).

Sec.  1073.103  Definitions.

    Except where the context clearly indicates otherwise, the following 
definitions shall apply to this part.
    Administrative offset means withholding funds payable by the United 
States to, or held by the United States for, a person to satisfy a 
debt.
    Agency means a department, agency, court, court administrative 
office, or instrumentality in the executive, judicial, or legislative 
branch of the Federal government, including government corporations.
    Bureau or CFPB means the Bureau of Consumer Financial Protection.
    Centralized administrative offset means an offset initiated by 
referral to the Secretary of the Treasury, or where applicable a debt 
collection center designated by the Department of the Treasury, by a 
creditor agency of a past due debt for the purpose of collection under 
the Treasury's centralized offset program.
    Certification means a written statement transmitted from a creditor 
agency to a paying agency for purposes of administrative or salary 
offset, to the Financial Management Service (FMS) for offset or to the 
Secretary of the Treasury for centralized administrative offset. The 
certification confirms the existence and amount of the debt and 
verifies that the creditor agency has afforded the debtor the required 
procedural protections. Where the debtor requests a hearing on a 
claimed debt, the decision by a hearing official or administrative law 
judge constitutes a certification.
    Compromise means the settlement or forgiveness of a debt under 31 
U.S.C. 3711, in accordance with standards set forth in the FCCS and 
applicable Federal law.
    Creditor agency means an agency of the Federal Government to which 
the debt is owed, or a debt collection center when acting on behalf of 
a creditor agency to collect a debt. An agency may be both the creditor 
agency and the paying agency.
    Debt or claim means 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 entity. For 
purposes of this part, a debt or claim owed to the Bureau constitutes a 
debt or claim owed to the United States.
    Debt collection center means the Department of the Treasury or 
other government agency or division designated by the Secretary of the 
Treasury with authority to collect debts on behalf of creditor agencies 
in accordance with 31 U.S.C. 3711(g).
    Debtor means a person who owes a debt or a claim. The term 
``person'' includes any individual, organization, or entity, except 
another Federal agency.
    Director means the Director of the Bureau of Consumer Financial 
Protection or the Director's designee.
    Disposable pay means that part of current adjusted basic pay, 
special pay, incentive pay, retired pay, retainer pay, and, in the case 
of an employee not entitled to adjusted basic pay, other authorized 
pay, remaining for each pay period after the deduction of any amount 
required by law to be withheld.
    Federal Claims Collection Standards (FCCS) means standards 
published at 31 CFR Parts 900 through 904.
    Financial Management Service (FMS) is a Bureau of the Department of 
the Treasury.
    Garnishment means the process of withholding amounts from the 
disposable pay of a person employed outside the Federal Government, and 
the paying of those amounts to a creditor in satisfaction of a 
withholding order.
    Non-centralized administrative offset means offsets that an agency 
conducts, at the agency's discretion, internally or in cooperation with 
the agency certifying or authorizing payment to the debtor.
    Notice of Intent to Offset or Notice of Intent means a written 
notice from a creditor agency to an employee, organization, entity, or 
restitution debtor that claims a debt and informs the debtor that the 
creditor agency intends to collect the debt by administrative or salary 
offset. The notice also informs the debtor of certain procedural rights 
with respect to the claimed debt and respective offset procedure.
    Paying agency means the agency of the Federal Government that 
withholds funds payable to a person who owes a debt to an agency of the 
Federal Government. The term ``person'' includes any individual, 
organization, or entity, except another Federal agency. An agency may 
be both the creditor agency and the paying agency.
    Recoupment means a special method of adjusting debts arising under 
the same transaction or occurrence.
    Salary offset means an administrative offset to collect a debt 
under 5 U.S.C. 5514 by deduction(s) at one or more officially 
established pay intervals from the current pay account of a Federal 
employee without his or her consent.
    Withholding order means any order for withholding or garnishment of 
pay issued by an agency, or judicial or administrative body.

Subpart B--Administrative Offset

Sec.  1073.201  Applicability and scope.

    (a) Applicability. The provisions of this subpart apply to the 
collection of debts owed to the United States arising out of the 
activities of, or referred to, the Bureau. This subpart is intended to 
be consistent with the Federal Claims Collection Standards (31 CFR 
chapter IX and parts 900 through 904) on administrative offset issued 
by the Department of Treasury and the Department of Justice.
    (b) Centralized administrative offset. (1) The Director will refer 
any eligible debt over 180 days delinquent to the Department of the 
Treasury or a designated debt collection center for collection by 
centralized administrative offset. The Director may also refer any 
eligible debt less than 180 days delinquent to the Department of the 
Treasury for offset.
    (2) At least 60 days prior to referring a debt to the Department of 
the Treasury in accordance with paragraph (b)(1) of this section, the 
Director will send notice to the debtor in accordance with the 
requirements of Sec.  1073.204 of this subpart.
    (c) Non-centralized administrative offset. (1) When centralized 
administrative offset is not available or appropriate, the Director may 
collect past-due, legally enforceable debts through non-centralized 
administrative offset. In these cases, the Director may

[[Page 41680]]

offset a payment internally or make an offset request directly to a 
paying agency.
    (2) At least 30 days prior to offsetting a payment internally or 
requesting a paying agency to offset a payment in accordance with 
paragraph (c)(1) of this section, the Director will send notice to the 
debtor in accordance with the requirements of Sec.  1073.204 of this 
subpart.

Sec.  1073.202  Collection.

    (a) The Director may collect a claim from a person by 
administrative offset of monies payable by the Government only after:
    (1) Providing the debtor with the procedures of this subpart; and
    (2) Providing the paying agency with written certification that the 
debtor owes the debt in the amount stated and that the Bureau, as 
creditor agency, has complied with this part.
    (b) The Director will initiate collection by administrative offset 
of only those debts for which that remedy is permissible under 31 CFR 
901.3(a).
    (c) Unless otherwise provided, debts or payments not subject to 
administrative offset under 31 U.S.C. 3716 may be collected by 
administrative offset under common law, or any other applicable 
statutory authority.

Sec.  1073.203  Omission of procedures.

    The Bureau shall not be required to follow the procedures described 
in Sec.  1073.204 where:
    (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); or
    (c) In the case of non-centralized administrative offsets, the 
Bureau 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 to review. 
When prior notice and an opportunity to review are omitted, the 
Director 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 be due to the U.S. Government.

Sec.  1073.204  Debtor's rights.

    (a) Debtor's rights prior to collection or referral. Prior to 
collecting any claim by administrative offset or referring such claim 
to another agency for collection through administrative offset, the 
Director shall provide the debtor with the following:
    (1) A Notice of Intent to Offset, which shall include written 
notice of the type and amount of the debt, the intention of the 
Director to use administrative offset to collect the debt, and an 
explanation of the debtor's rights under 31 U.S.C. 3716;
    (2) An opportunity to inspect and copy Bureau records related to 
the debt, unless such records are exempt from disclosure;
    (3) An opportunity for review within the Bureau of the 
determination of indebtedness; and
    (4) An opportunity to enter into a written agreement to repay the 
debt.
    (b) Opportunity for review. (1) Any request by the debtor for such 
review shall be in writing and shall be submitted to the Bureau within 
30 calendar days of the date of the Notice of Intent to Offset. The 
Director may waive the time limit for requesting review for good cause 
shown by the debtor;
    (2) Upon receipt of a request for review by the debtor, the 
Director shall provide the debtor with a reasonable opportunity for an 
oral hearing when the Director determines that the question of the 
indebtedness cannot be resolved by review of the documentary evidence 
alone (e.g., when the determination turns on an issue of credibility or 
veracity). Unless otherwise required by law, an oral hearing under this 
section is not required to be a formal evidentiary hearing, although 
all significant matters discussed at the hearing shall be documented.
    (3) In cases where an oral hearing is not required by this section, 
the Bureau shall make its determination based on a documentary hearing 
consisting of a review of the written record.

Sec.  1073.205  No requirement for duplicate notice.

    Where the Director previously has given a debtor any of the 
required notice and review opportunities with respect to a particular 
debt, the Director is not required to duplicate such notice and review 
opportunities prior to initiating administrative offset.

Sec.  1073.206  Interest, penalties, and administrative costs.

    (a) Pursuant to 31 U.S.C. 3717, the Director shall assess interest, 
penalties, and administrative costs on debts owed to the United States. 
Interest, penalties, and administrative costs will be assessed in 
accordance with 31 CFR 901.9.
    (b) The Director shall waive collection of interest on a debt or 
any portion of the debt which is paid in full within 30 days after the 
date on which the interest began to accrue.
    (c) The Director may waive interest accrued during a period a 
disputed debt is under investigation or review by the Bureau, i.e., 
from the date the Bureau receives a request for review until the date 
the Bureau issues a final agency decision. The Director may only grant 
this waiver for good cause shown by the debtor. This waiver must be 
requested by the debtor before the expiration of the 30-day waiver 
period described in paragraph (b) of this section.
    (d) The Director may at any time waive collection of interest, 
penalties, or administrative costs if he or she finds that one or more 
of the following conditions exists:
    (1) The Debtor is unable to pay any significant sum toward the debt 
within a reasonable period of time;
    (2) Collection of interest, penalties, or administrative costs will 
jeopardize collection of the principal of the debt;
    (3) The Bureau is unable to enforce collection in full within a 
reasonable period of time through collection proceedings; or
    (4) Collection is against equity and good conscience or is not in 
the best interest of the United States.
    (e) The Director is authorized to assess interest, penalties, 
administrative costs, or other related charges on debts that are not 
subject to 31 U.S.C. 3717 to the extent authorized under the common law 
or other applicable statutory authority.

Sec.  1073.207  Termination or suspension of collection action.

    The Director may suspend or terminate collection action on a claim 
not in excess of $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. 
Any such termination or suspension shall be conducted in accordance 
with the requirements of 31 U.S.C. 3711 under the procedures 
established in 31 CFR part 903.

Sec.  1073.208  Refunds.

    Amounts recovered by administrative offset but later found not to 
be owed to the Government shall be promptly refunded. Unless required 
by law or contract, such refunds shall not bear interest.

Sec.  1073.209  Request for offset to other Federal agencies.

    The Director may request that a debt owed to the Bureau be 
administratively offset against funds due and payable to a debtor by 
another Federal agency. In requesting administrative offset, the

[[Page 41681]]

Bureau, as the creditor agency, will provide written certification to 
the Federal agency holding funds payable to the debtor, stating:
    (a) That the debtor owes the debt;
    (b) The amount and basis of the debt; and
    (c) That the Bureau has fully complied with the requirements of its 
own administrative offset regulations and the applicable provisions of 
31 U.S.C. 3716.

Sec.  1073.210  Request for offset from other Federal agencies.

    Any Federal agency may request that funds due and payable to its 
debtor by the Bureau be administratively offset by the Bureau in order 
to collect a debt owed to such agency by the debtor. The Director shall 
initiate the requested offset only upon:
    (a) Receipt of written certification from the creditor agency 
stating:
    (1) That the debtor owes the debt;
    (2) The amount and basis of the debt; and
    (3) That the creditor agency has fully complied with its own 
administrative offset regulations and with the applicable provisions of 
31 U.S.C. 3716; and
    (b) A determination that collection by offset against funds payable 
by the Bureau would be in the best interest of the United States and 
that such offset would not be contrary to law.

Subpart C--Salary Offset

Sec.  1073.301  Scope.

    (a) These salary offset regulations should be read in conjunction 
with 5 U.S.C. 5514 and 5 CFR part 550, subpart K, and apply to the 
collection of debts owed by employees of the Bureau or other Federal 
agencies.
    (b) These salary offset procedures do not apply:
    (1) Where an employee consents to the recovery of a debt from his 
current pay account;
    (2) To debts arising under the Internal Revenue Code (Title 26, 
U.S. Code), the tariff laws of the United States, or to any case where 
collection of a debt by salary offset is explicitly provided for or 
prohibited by another statute.
    (c) These procedures do not preclude an employee from requesting a 
waiver of an erroneous payment under 5 U.S.C. 5584, or from questioning 
the amount or validity of a debt, in the manner specified by law or 
these agency regulations. This subpart also does not preclude an 
employee from requesting waiver of the collection of a debt under any 
other applicable statutory authority.
    (d) When possible, salary offset through centralized administrative 
offset procedures should be attempted before seeking salary offset from 
a paying agency different than the creditor agency.

Sec.  1073.302  Notice requirement where CFPB is creditor agency.

    Where the Bureau seeks salary offset under 5 U.S.C. 5514 as the 
creditor agency, the Director shall first provide the employee with a 
written Notice of Intent to Offset at least 30 calendar days before 
salary offset is to commence. The Notice of Intent to Offset shall 
include the following information and statements:
    (a) That the Director has determined that a debt is owed to the 
Bureau, and the origin, nature, and amount of the debt;
    (b) That the Director intends to collect the debt by means of 
deduction from the employee's current disposable pay account;
    (c) The frequency and amount of the intended deduction, stated as a 
fixed dollar amount or as a percentage of disposable pay, not to exceed 
15 percent of disposable pay;
    (d) That the Director intends to continue the deductions until the 
debt is paid in full or otherwise resolved;
    (e) The opportunity (under terms agreeable to the Director) to 
establish a schedule for the voluntary repayment of the debt or enter 
into a written agreement to establish a schedule for repayment of the 
debt in lieu of offset. The agreement must be in writing, signed by 
both the employee and the Director, and documented in the Bureau's 
files;
    (f) The Bureau's policy concerning interest, penalties, and 
administrative costs, including a statement that such assessments must 
be made unless excused in accordance with the FCCS or these 
regulations;
    (g) That the employee has the right to inspect and copy Bureau 
records not exempt from disclosure that relate to the debt or, if the 
employee or his or her representative cannot personally inspect the 
records, to request and receive a copy of such records;
    (1) Such requests must be made in writing, and identify by name and 
address the designated individual to whom the request should be sent.
    (2) Upon receipt of such a request, the designated official shall 
notify the employee of the time and location where the records may be 
inspected and copied;
    (h) That the employee has a right to a hearing regarding the 
existence and amount of the debt claimed or the salary offset schedule 
proposed by the Director, provided that the employee files a request 
for such a hearing with the Bureau in accordance with Sec.  1073.303. 
Such a hearing will be conducted by an impartial official who is an 
administrative law judge or who is an other hearing official not under 
the supervision or control of the Director;
    (i) The procedure and deadline for requesting a hearing, including 
the name, address, and telephone number of the designated individual to 
whom a request for hearing must be sent;
    (j) That a request for hearing must be received by the Bureau 
within 15 calendar days following receipt of the Notice of Intent, and 
that filing of a request for hearing will stay the commencement of 
collection proceedings;
    (k) That the Director will initiate salary offset procedures not 
less than 30 days from the date of the employee's receipt of the Notice 
of Intent to Offset, unless the employee files a timely request for a 
hearing;
    (l) That if a hearing is held, the administrative law judge or 
other hearing official will issue a decision on the hearing at the 
earliest practical date, but not later than 60 days after the filing of 
the request for the hearing, unless the employee requests and the 
hearing official grants a delay in the proceedings;
    (m) That any knowingly false or frivolous statements, 
representations, or evidence may subject the employee to:
    (1) Disciplinary procedures appropriate under 5 U.S.C. chapter 75, 
5 CFR part 752, or any other applicable statutes or regulations;
    (2) Penalties under the False Claims Act, 31 U.S.C. 3729 through 
3731, or under any other applicable statutory authority; or
    (3) Criminal penalties under 18 U.S.C. 286, 287, 1001, and 1002 or 
under any other applicable statutory authority;
    (n) That the employee also has the right to request waiver of 
overpayment pursuant to 5 U.S.C. 5584, and may exercise any other 
rights and remedies available under statutes or regulations governing 
the program for which the collection is being made; and
    (o) That amounts paid on or deducted from the debt which are later 
waived or found not to be owed to the United States will be promptly 
refunded to the employee, unless there are applicable contractual or 
statutory provisions to the contrary.

Sec.  1073.303  Procedures to request a hearing.

    (a) To request a hearing, an employee must send a written request 
to the designated official indicated in the Notice of Intent stating 
why the

[[Page 41682]]

employee believes the determination concerning the existence or amount 
of debt is in error. The request must be received by the Bureau within 
15 calendar days following the employee's receipt of the Notice of 
Intent.
    (b) The request must be signed by the employee and fully identify 
and explain with reasonable specificity all the facts, evidence, and 
witnesses, if any, which the employee believes support his or her 
position. The request for hearing must state whether the employee is 
requesting an oral or documentary hearing. If an oral hearing is 
requested, the request shall explain why the matter cannot be resolved 
by a review of documentary evidence alone.

Sec.  1073.304  Failure to timely submit request for a hearing.

    If the Bureau does not receive an employee's request for hearing 
within the 15-day period set forth in Sec.  1073.303, the employee 
shall not be entitled to a hearing, and salary offset may be initiated. 
However, the Bureau may accept an untimely request for hearing if the 
employee can show that the delay was because of circumstances beyond 
his or her control or because of failure to receive notice of the time 
limit (unless otherwise aware of it).

Sec.  1073.305  Procedures for hearing.

    (a) Obtaining the services of a hearing official. The Director must 
obtain the services of an impartial hearing official who is an 
administrative law judge or who is an other official not under the 
supervision or control of the Director. The Director shall designate an 
administrative law judge or contact an agent of another agency 
designated in appendix A to 5 CFR part 581 to arrange for a hearing 
official.
    (b) Notice and format of hearing--(1) Notice. The hearing official 
shall determine whether the hearing shall be oral or documentary and 
shall notify the employee of the form of the hearing. If the hearing 
will be oral, the notice shall set forth the date, time, and location 
of the hearing, which must be held within 30 calendar days after the 
request is received, unless the employee requests that the hearing be 
delayed. If the hearing will be documentary, the employee shall be 
notified to submit evidence and written arguments in support of his or 
her case to the hearing official within 30 calendar days.
    (2) Oral hearing. The hearing official may grant a request for an 
oral hearing if he or she determines that the issues raised by the 
employee cannot be resolved by review of documentary evidence alone 
(e.g., where credibility or veracity is at issue). Witnesses who 
testify in oral hearings shall do so under written or recorded oath or 
affirmation. An oral hearing is not required to be a formal evidentiary 
hearing. Oral hearings may take the form of, but are not limited to:
    (i) Informal conferences with the hearing official in which the 
employee and Bureau representative are given full opportunity to 
present evidence, witnesses, and argument;
    (ii) Informal meetings in which the hearing official interviews the 
employee; or
    (iii) Formal written submissions with an opportunity for oral 
presentation.
    (3) Documentary hearing. If the hearing official determines that an 
oral hearing is not necessary, he or she will make the determination 
based upon a review of the available written record, including any 
documentation submitted by the employee in support of his or her 
position.
    (4) Record. The hearing official shall maintain a summary record of 
any hearing conducted under this section.
    (c) Rescheduling of the hearing date. The hearing official shall 
reschedule a hearing if requested to do so by both parties, who shall 
be given reasonable notice of the time and place of this new hearing.
    (d) Failure to appear or submit documentary evidence. In the 
absence of good cause shown, an employee who fails to appear at an oral 
hearing, or fails to submit documentary evidence for a documentary 
hearing, will have waived the right to a hearing. Furthermore, the 
employee will have been deemed to admit the existence and amount of the 
debt as described in the Notice of Intent. If the representative of the 
creditor agency fails to appear without good cause shown, the hearing 
official shall proceed with the hearing as scheduled, and issue a 
decision based upon the oral testimony presented and the documentation 
submitted by both parties.
    (e) Date of decision. The hearing official shall issue a written 
decision based upon the evidence and information developed at the 
hearing, as soon as practicable after the hearing, but not later than 
60 calendar days after the date on which the request for hearing was 
received by the Bureau, unless the hearing was delayed at the request 
of the employee. In the event of such a delay, the 60-day decision 
period shall be extended by the number of days by which the hearing was 
postponed. The decision of the hearing official shall be final.
    (f) Content of decision. The written decision shall include:
    (1) The facts purported to evidence the nature and origin of the 
proposed debt;
    (2) The hearing official's analysis, findings and conclusions, in 
light of the hearing, as to the employee's and/or Bureau's grounds, the 
amount and validity of the alleged debt and, where applicable, the 
repayment schedule.

Sec.  1073.306  Salary offset process.

    (a) Method and source of deductions. Salary offsets under this 
subpart shall be deducted from current disposable pay, except as 
provided in paragraph (e) of this section.
    (b) Determination of disposable pay. The Bureau's Office of the 
Chief Financial Officer will consult with the Bureau's Office of Human 
Capital to determine the amount of a Bureau employee's disposable pay 
and will implement the salary offset. If the debtor is not employed by 
the Bureau, the agency employing the debtor will determine the amount 
of the employee's disposable pay and will implement the salary offset.
    (c) When salary offset may begin. Deductions shall begin within 
three official pay periods following, as applicable, the initiation of 
salary offset without a hearing under Sec.  1073.304, the decision of 
the hearing official under Sec.  1073.305, or receipt of the creditor 
agency's request for offset where the Bureau is not the creditor 
agency.
    (d) Amount of salary offset. The amount to be offset from each 
salary payment will be up to 15 percent of a debtor's disposable pay, 
as follows:
    (1) If the amount of the debt is equal to or less than 15 percent 
of the disposable pay, such debt generally will be collected in one 
lump sum payment;
    (2) If the employee is financially unable to pay in one lump sum or 
the amount of the debt exceeds 15 percent of disposable pay for an 
officially established pay interval, collection will be made in 
installments. Installment deductions will be made over a period of no 
greater than the anticipated period of employment, except as provided 
in paragraph (e) of this section. Installment deductions must 
ordinarily bear a reasonable relationship to the size of the debt and 
the employee's ability to pay. An installment deduction will not exceed 
15 percent of the disposable pay from which the deduction is made 
unless the employee has agreed in writing to the deduction of a greater 
amount. The creditor agency may determine that smaller deductions are 
appropriate based on the employee's ability to pay.
    (e) Final salary or other payment. After the employee has separated 
either

[[Page 41683]]

voluntarily or involuntarily from the payment agency, the payment 
agency may, pursuant to 31 U.S.C. 3716, make a lump sum deduction 
exceeding 15 percent of disposable pay from any final salary or other 
payments in order to satisfy a debt. If the debt cannot be liquidated 
by offset from any final payment due the former employee as of the date 
of separation, it may be offset under 31 U.S.C. 3716 from later 
payments of any kind due the former employee from the United States, 
unless prohibited by law.

Sec.  1073.307  Voluntary repayment agreements as alternative to salary 
offset where the CFPB is the creditor agency.

    (a) In response to a Notice of Intent, an employee may propose to 
voluntarily repay the debt through scheduled voluntary payments, in 
lieu of salary offset. An employee who wishes to repay a debt in this 
manner shall submit to the Bureau a written agreement proposing a 
repayment schedule. This proposal must be received by the Bureau within 
30 calendar days following the date of the Notice of Intent.
    (b) The Director shall notify the employee whether the employee's 
proposed voluntary repayment agreement is acceptable. It is within the 
discretion of the Director whether to accept or reject the debtor's 
proposal, or whether to propose to the debtor a modification of the 
proposed repayment agreement:
    (1) If the Director decides that the proposed repayment agreement 
is unacceptable, he or she shall notify the employee and the employee 
shall have 30 calendar days from the date he or she received notice of 
the decision in which to file a request for a hearing on the proposed 
repayment agreement, as provided in Sec.  1073.303; or
    (2) If the Director decides that the proposed repayment agreement 
is acceptable or the debtor agrees to a modification proposed by the 
Director, the agreement shall be put in writing and signed by both the 
employee and the Director.

Sec.  1073.308  Special review of repayment agreement or salary offset 
due to changed circumstances.

    (a) An employee subject to a voluntary repayment agreement or 
salary offset payable to the Bureau as creditor agency may request a 
special review by the Director of the amount of the salary offset or 
voluntary repayment, based on materially changed circumstances, 
including, but not limited to, catastrophic illness, divorce, death, or 
disability. A request for special review may be made at any time.
    (b) In support of a request for special review, the employee shall 
submit to the Bureau a detailed statement and supporting documents for 
the employee, his or her spouse, and dependents indicating:
    (1) Income from all sources;
    (2) Assets;
    (3) Liabilities;
    (4) Number of dependents;
    (5) Monthly expenses for food, housing, clothing, and 
transportation;
    (6) Medical expenses; and
    (7) Exceptional expenses, if any.
    (c) The employee shall also file an alternative proposed offset or 
payment schedule and a statement, with supporting documents, showing 
why the current salary offset or payments result in extreme financial 
hardship to the employee.
    (d) The Director shall evaluate the statement and supporting 
documents and determine whether the original salary offset or repayment 
schedule imposes extreme financial hardship on the employee, for 
example, by preventing the employee from meeting essential subsistence 
expenses such as food, housing, clothing, transportation, and medical 
care. The Director shall notify the employee in writing within 30 
calendar days of his or her determination.
    (e) If the special review results in a revised salary offset or 
repayment schedule, the Director shall provide a new certification to 
the paying agency.

Sec.  1073.309  Interest, penalties, and administrative costs.

    Where the Bureau is the creditor agency, it shall assess interest, 
penalties, and administrative costs pursuant to the procedures set 
forth in Sec.  1073.206 and in accordance with 31 U.S.C. 3717 and 31 
CFR parts 900 through 904.

Sec.  1073.310  Refunds.

    (a) Where the Bureau is the creditor agency, it shall promptly 
refund any amount deducted under the authority of 5 U.S.C. 5514 when 
the debt is waived or otherwise found not to be owing to the United 
States (unless expressly prohibited by statute or regulation), or when 
an administrative or judicial order directs the Bureau to refund 
amounts deducted from the employee's current pay.
    (b) Unless required by law or contract, such refunds shall not bear 
interest.

Sec.  1073.311  Non-waiver of rights by payment.

    An employee's involuntary payment of all or any portion of a debt 
being collected under 5 U.S.C. 5514 shall not be construed as a waiver 
of any rights which the employee may have under 5 U.S.C. 5514 or any 
other provision of contract or law, unless there are statutory or 
contractual provisions to the contrary.

Sec.  1073.312  Exception to procedures.

    (a) The procedures set forth in this subpart shall not apply to the 
following:
    (1) Any adjustment to pay arising out of an employee's election of 
coverage or a change in coverage under a Federal benefits program 
requiring periodic deductions from pay, if the amount to be recovered 
was accumulated over four pay periods or less;
    (2) A routine intra-agency adjustment of pay that is made to 
correct an overpayment attributable to clerical or administrative 
errors or delays in processing pay documents, if the overpayment 
occurred within the four pay periods preceding the adjustment and, at 
the time of such adjustment, or as soon thereafter as practical, the 
individual is provided written notice of the nature and amount of the 
adjustment and a point of contact for contesting such adjustment; or
    (3) Any adjustment to collect a debt amounting to $50 or less, if, 
at the time of such adjustment, or as soon thereafter as practical, the 
individual is provided written notice of the nature and amount of the 
adjustment and a point of contact for contesting such adjustment.
    (b) In the event of a negative adjustment to pay, as described in 
subsection (a)(1), the Bureau will provide a clear and concise 
statement in the employee's earnings statement advising the employee of 
the previous overpayment at the time the adjustment is made.

Subpart D--Administrative Wage Garnishment

Sec.  1073.401  Administrative wage garnishment.

    The Director may collect debts from a debtor's wages by means of 
administrative wage garnishment in accordance with the requirements of 
31 U.S.C. 3720D under the procedures established in 31 CFR 285.11.

Subpart E--Tax Refund Offset

Sec.  1073.501  Tax refund offset.

    The provisions of 26 U.S.C. 6402(d) and 31 U.S.C. 3720A authorize 
the Secretary of the Treasury to offset a debt owed to the United 
States Government from the tax refund due a taxpayer. The Director may 
administer tax refund offsets in accordance with the requirements of 31 
U.S.C. 3720A under the procedures established in 31 CFR 285.2.

[[Page 41684]]

    Dated: July 1, 2013.
Richard Cordray,
Director, Bureau of Consumer Financial Protection.
[FR Doc. 2013-16470 Filed 7-10-13; 8:45 am]
BILLING CODE P
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