Source: https://www.gao.gov/products/GAO-02-313
Timestamp: 2018-03-17 04:22:13
Document Index: 560889360

Matched Legal Cases: ['art 3', 'art 34', 'arts 1015', 'art 17', 'art 32', 'arts 404', 'arts 1', 'arts 134', 'art 32']

U.S. GAO - Debt Collection Improvement Act of 1996: Status of Selected Agencies' Implementation of Administrative Wage Garnishment
GAO-02-313: Published: Feb 28, 2002. Publicly Released: Apr 1, 2002.
To improve federal debt collection, the Debt Collection Improvement Act of 1996 established a framework of debt collection tools, including administrative wage garnishment (AWG). This report discusses the extent to which nine agencies use or plan to use AWG to collect delinquent nontax federal debt and provides GAO's perspective on ways to make AWG more widespread and effective. GAO found that none of the nine agencies had yet implemented AWG. Although AWG is not mandatory, by failing to use this tool--more than five years after the act's enactment and more than three years after the Department of the Treasury issued implementing regulations--agencies have missed an opportunity to maximize collection of delinquent debt. Agencies identified various reasons for not yet implementing AWG or for deciding not to do so, including the need to focus their resources on implementing the act's mandatory provisions. Although some agencies or programs may have valid reasons for not implementing wage garnishment, all of the larger programs that deal with individuals and that have a demonstrated risk of financial loss resulting from unpaid debt should have AWG as a viable debt collection option. Reliance on the Financial Management Service (FMS) to perform AWG as part of cross-servicing might be prudent for some agencies, provided the collection tool is used as early as practicable to maximize its collection potential. However, the act does not require that agencies refer debts for cross-servicing until they are more than 180 days delinquent, and FMS, which views wage garnishment as a tool of last resort, does not contemplate initiating AWG in most cases until the debt has been with FMS for at least 90 days. As a result, FMS's use of AWG could be significantly limited and delayed.
Comments: During GAO's review of Agriculture's progress in implementing certain key provisions of DCIA, including administrative wage garnishment (AWG), GAO found that Agriculture had completed its departmentwide AWG implementation plan. The implementation plan, with supporting documentation, provides milestone dates that need to be met and key elements that are needed to implement AWG, including describing the types of debt subject to AWG, the policies and procedures for administering AWG, and the process for conducting hearings.
Recommendation: To help ensure that agencies effectively incorporate Administrative Wage Garnishment (AWG) into their debt collection processes, GAO recommends that the Secretaries of the Departments of Agriculture, Education, Energy, Health and Human Services, Housing and Urban Development, and Veterans Affairs; and the commissioner of the Social Security Administration (SSA) direct their chief financial officers and the Administrator of the Small Business Administration (SBA) direct the Associate Deputy Administrator for Capital Access to take the following steps: prepare comprehensive written implementation plans that clearly define, at a minimum, the types of debt that will be subject to AWG, the policies and procedures for administering AWG, and the process for conducting hearings. Some of the details that should be considered for inclusion in the plan are (1) whether the agency will conduct AWG in-house, at a debt collection center, or both; (2) the types of debts, if any, that will be sent to the Financial Management Service (FMS) prior to becoming 180 days delinquent; and (3) whether hearings will be conducted by the agency or contracted out.
Comments: Since 1993, Education has utilized administrative wage garnishment (AWG) under provisions of the Higher Education Act, which allowed it to garnish up to 10 percent of debtors' wages. Therefore, comprehensive policies and procedures for administering AWG and for conducting hearings were already in place prior to the passage of DCIA. However, Education developed plans to implement AWG at 15 percent as allowed under DCIA. These plans were reflected in a FSA Bulletin to all users notifying them of changes required for the implementation of AWG at 15 percent, notices sent to debtors concerning increased withholding at the rate of 15 percent, similar letters sent to employers, revised training manuals, and the final rule as published in the Federal Register on February 19, 2003.
Comments: The Department of Energy developed a written implementation plan for administrative wage garnishment (AWG). The plan notes that Treasury's Financial Management Service will be authorized to collect all Energy debts using AWG as part of cross-servicing. The plan also contains a detailed timetable listing specific events, completion dates, and points of contact for implementing AWG as well as a copy of Energy's hearing procedures.
Comments: The Department of Housing and Urban Development (HUD) Chief Financial Officer issued as a Special Directive HUD's Administrative Wage Garnishment (AWG) Implementation Plan dated September 2003 and provided GAO with a copy of that plan. HUD's AWG Implementation Plan clearly defines (1) the types of debts that will be subject to AWG, (2) the policies and procedures for administering AWG, and (3) the process for conducting hearings. The plan states that (1) HUD will primarily conduct AWG through the Department of the Treasury's Financial Management Service (FMS) Cross-Servicing program, (2) HUD will conduct AWG in-house only in instances where AWG action is appropriate and where AWG action by means of FMS is not possible, and (3) the HUD Board of Contract Appeals will conduct AWG hearings for both in-house and FMS-initiated AWG actions. The implementation plan (1) identifies the types of debts that HUD will send to FMS prior to those debts becoming 180 days delinquent and (2) refers to the FMS and HUD AWG regulations, which were issued in May 1998, and July 2002, respectively. Additionally, among other things, HUD's AWG Implementation Plan states that (1) HUD demand letters and other communications with delinquent consumer debtors will be modified to indicate that AWG is an available collection tool that will be used by HUD if necessary; (2) HUD will refer delinquent debts to FMS at the earliest possible date in order to maximize the collection potential from initiating AWG via Cross-Servicing; (3) HUD modified its Cross-Servicing profile with FMS in September 2002, to allow FMS to conduct AWG on referred HUD debts; and (4) HUD's debt collection staff will be provided with AWG training and reference material, as well as the HUD AWG implementation plan.
Comments: Although HHS did not provide GAO with a formal written implementation plan for administrative wage garnishment (AWG), its final regulations for AWG were published in the Federal Register on March 28, 2003. In these final regulations, as GAO had recommended be considered in an implementation plan, HHS detailed the types of debt subject to AWG, the policies and procedures for administering AWG, and the process for conducting hearings. Therefore, HHS's plans for implementing AWG, although not issued separately, are evident in its final regulations.
Comments: SSA developed a written plan for implementing administrative wage garnishment (AWG). The plan focuses on the factors required to fully implement AWG, including systems, policy and procedures, notices to debtors, regulations, and training. It includes major milestones and associated completion dates. Details of SSA's rules to implement AWG, including the types of debt subject to AWG and the policies and procedures for administering AWG, are included in 20 CFR 422, issued April 1, 2004.
Comments: Although VA did not provide GAO with a formal written implementation plan for administrative wage garnishment (AWG), its final regulations for AWG were published in the Federal Register on October 25, 2004. In these final regulations, as GAO had recommended be considered in an implementation plan, VA detailed the types of debt subject to AWG, the policies and procedures for administering AWG, and the process for conducting hearings. Therefore, VA's plans for implementing AWG, although not issued separately, are evident in its final regulations.
Comments: SBA developed a written plan for implementing administrative wage garnishment (AWG). The plan includes information about AWG regulations and the effective date of its final rule, how AWG will be administered, the types of debt subject to AWG, the timing of SBA's referral of debt that is subject to AWG by Treasury, the in-house use of AWG by SBA, and the hearings and appeals process. Details of SBA's rules to implement AWG are included in the Federal Register, Vol. 70, No. 66, page 17583, which was published on April 7, 2005.
Comments: USDA published a Final Rule on January 2, 2008, that added AWG as authorized under DCIA to 7 CFR Part 3, and implemented the authority established under the DCIA for USDA to collect the agency's past due debt through AWG of up to 15 percent of a debtor's disposable pay. The effective date of USDA's Final Rule was February 1, 2008.
Recommendation: To help ensure that agencies effectively incorporate Administrative Wage Garnishment (AWG) into their debt collection processes, GAO recommends that the Secretaries of the Departments of Agriculture, Education, Energy, Health and Human Services, Housing and Urban Development, and Veterans Affairs; and the Commissioner of SSA direct their chief financial officers and that the Administrator of SBA direct the Associate Deputy Administrator for Capital Access to complete and finalize regulations for conducting AWG.
Comments: As published in the Federal Register on February 19, 2003, Education's Final Rule, 34 CFR Part 34, implementing its provisions for administrative wage garnishment under the Debt Collection Improvement Act of 1996, became effective on March 21, 2003.
Comments: As published in the Federal Register on August 14, 2003, Energy's Direct Final Rule, 10 CFR Parts 1015 and 1018, implementing its provisions for administrative wage garnishment under the Debt Collection Improvement Act of 1996, became effective on November 12, 2003.
Comments: On July 18, 2002, HUD published a Final Rule for administrative wage garnishment at 24 CFR Part 17 Subpart C, which implements the authority established under the DCIA for HUD to collect the Department's past due debt through administrative wage garnishment. The Final Rule adopts, without change, the hearing procedures issued by the Department of Treasury implementing AWG under DCIA. The effective date was August 19, 2002.
Comments: HHS published final AWG regulations as 45 CFR Part 32 in the Federal Register on March 28, 2003. HHS's final rule states that, except for minor editorial changes to make the provisions agency-specific, HHS's final rule is substantially identical to Treasury's final rule for AWG.
Comments: As published in the Federal Register on December 23, 2003, SSA's Final Rule, 20 CFR Parts 404, 416, and 422, implementing its provisions for administrative wage garnishment under the Debt Collection Improvement Act of 1996, became effective on January 22, 2004.
Comments: As published in the Federal Register on October 25, 2004, VA's Final Rule, 38 CFR Parts 1 and 2, implementing its provisions for administrative wage garnishment under the Debt Collection Improvement Act of 1996, became effective on November 24, 2004.
Comments: As published in the Federal Register on April 7, 2005, SBA's Direct Final Rule, 13 CFR Parts 134 and 140, implementing its provisions for administrative wage garnishment under the Debt Collection Improvement Act of 1996, became effective on June 6, 2005.
Comments: USDA completed and issued its final regulations implementing AWG effective February 1, 2008. According to those regulations, USDA will inform debtors using demand letters that USDA intends to enforce collection if the debtor fails to pay or otherwise resolve the debt by referring the debt to Treasury for possible collection by garnishing the debtor's wages through AWG. By including such language in its demand letters, USDA is using AWG as leverage to obtain payments from delinquent debtors.
Recommendation: To help ensure that agencies effectively incorporate Administrative Wage Garnishment (AWG) into their debt collection processes, GAO recommends that the Secretaries of the Departments of Agriculture, Education, Energy, Health and Human Services, Housing and Urban Development, and Veterans Affairs; and that the Commissioner of SSA direct their chief financial officers and the Administrator of SBA direct the Associate Deputy Administrator for Capital Access to use AWG in conjunction with other debt collection tools, when practicable, as leverage to obtain payments from delinquent debtors.
Comments: Education's final regulations implementing administrative wage garnishment (AWG) under the DCIA were effective on March 21, 2003. Education also modified its due process notice to include the potential of garnishing up to 15 percent of the debtor's disposable pay. By notifying delinquent debtors about the possible use of wage garnishment, Education in effect uses AWG as leverage to obtain payments from delinquent debtors.
Comments: Energy's final regulations implementing administrative wage garnishment (AWG) under the DCIA were effective on November 12, 2003. The Department relies on Treasury to perform AWG as part of its cross-servicing program. Energy also revised its due process notice to inform delinquent debtors their debt may be sent to Treasury for collection action, which could include the use of AWG. These debtors are sent similar due process notices by Treasury's Debt Management Service when the debt is referred. By modifying its due process notice to include the potential of garnishing up to 15 percent of the debtor's disposable pay, as well as the due process notice sent to debtors from Treasury acknowledging the possible use of AWG, Energy in effect uses AWG as leverage to obtain payments from delinquent debtors.
Comments: In April 2003, HUD revised its demand notice to include AWG as a collection tool for delinquent debtors. That notice includes a section captioned "FAILURE TO PAY" that states "If you do not make the full payment or enter into an acceptable repayment plan by (INSERT 30 DAYS FROM DATE OF THIS NOTICE), HUD may," among other actions, "garnish your wages." On August 12, 2003, HUD began using that revised demand letter in its collection efforts. HUD provided GAO three actual demand notices dated January 15, 2004, each sent to a different debtor and from a different HUD Debt Servicing Representative. All three of the sample demand notices included the above quoted statement regarding the potential use of wage garnishment, thus demonstrating HUD's use of AWG as leverage to obtain payments from delinquent debtors.
Comments: HHS published final AWG regulations as 45 CFR Part 32 in the Federal Register on March 28, 2003, is in the process of delegating hearing officers, and will implement AWG within 45 days after issuing the delegations. HHS provided GAO a copy of HHS's pro forma Notice of Intent to Initiate AWG Proceedings, which informs the debtor that HHS will require the debtor's employer to deduct up to 15 percent of the debtor's pay to satisfy the debtor's debt unless the debtor pays the debt or takes other suitable action. HHS also provided GAO with demand letters used by the HHS Program Support Center (PSC) to collect delinquent federal debts from actual debtors. The letters notify the debtors of the potential for administrative wage garnishment, thus demonstrating that HHS uses AWG as leverage to collect its delinquent debts.
Comments: SSA's final regulations implementing administrative wage garnishment (AWG) under the DCIA were effective on January 22, 2004. SSA also modified its due process notice to include the potential of administratively garnishing up to 15 percent of the debtor's disposable pay. By notifying delinquent debtors about the possible use of wage garnishment, SSA in effect uses AWG as leverage to obtain payments from delinquent debtors.
Comments: VA's final regulations implementing administrative wage garnishment (AWG) became effective on November 24, 2004. These regulations state the VA or Treasury shall send a written notice, as described in 31 CFR 285.11(e), by first class mail to the debtor's last known address. This notice shall inform the debtor, among other things, that VA or Treasury intends to initiate proceedings to collect the debt through deductions from the debtor's pay until the debt and all accumulated interest and other late payment charges are paid in full. By providing due process notices informing the debtors of the potential use of wage garnishment as a debt collection tool, VA uses AWG as leverage to obtain payments from delinquent debtors.
Comments: SBA's final regulations implementing administrative wage garnishment (AWG) under DCIA were effective on June 6, 2005. SBA also modified its due process notice to include the potential of garnishing delinquent debtors' wages. By notifying delinquent debtors about the possible use of wage garnishment, SBA in effect uses AWG as leverage to obtain payments from delinquent debtors.
Comments: In its Final Rule implementing AWG, which was issued on January 2, 2008, USDA included language to expedite referrals of delinquent debt to Treasury by requiring agencies to consider referring legally enforceable non-tax debts that are less than 180 days delinquent to Treasury or to Treasury-designated debt collection centers to accomplish efficient, cost-effective debt collection if no USDA payments will be available to collect the debt through internal administrative offset.
Recommendation: To help ensure that agencies effectively incorporate Administrative Wage Garnishment (AWG) into their debt collection processes, GAO recommends that the Secretaries of the Departments of Agriculture, Education, Energy, Health and Human Services, Housing and Urban Development, and Veterans Affairs; and the Commissioner of SSA direct their chief financial officers and that the Administrator of SBA direct the Associate Deputy Administrator for Capital Access to expedite referrals of eligible debts to FMS for cross-servicing when relying on FMS to perform AWG. Agencies should refer such debt prior to the 180-day delinquency threshold when practicable.
Comments: As permitted under the DCIA and approved by Treasury, delinquent and defaulted student loans held by Education are exempted from the DCIA requirement to transfer debts more than 180 days delinquent to Treasury for collection. Education performs its own collection activities on such debts. Education complies with GAO's recommendation to expedite referral of eligible debts to Treasury, when practicable, because, as of the end of fiscal year 2004, Education reported having no debt over 180 days delinquent that was eligible for referral that had not already been referred to Treasury for cross-servicing.
Comments: According to an Energy official, Energy policy states that its offices should send an initial due process notice 30 days after a debt becomes delinquent and one follow-up notice 30 days after the initial notice, which advises debtors of their rights and that their debt will be transferred to Treasury for further collection action. If there is no response from the debtor by 60 days from the first notice, the paperwork is started to refer the debt to Treasury for cross-servicing. Energy's debts are usually transferred to Treasury between 60 and 90 days. Energy complies with GAO's recommendation to expedite referral of eligible debts to Treasury, when practicable, because, as of December 31, 2004, Energy had referred 99 percent of all eligible debt to Treasury's cross-servicing program.
Comments: Under the Debt Collection Improvement Act of 1996, agencies must refer debts that are more than 180 days delinquent to the Department of the Treasury's Financial Management Service (FMS) for cross-servicing. Agencies may, at their discretion, refer valid, legally enforceable debts for cross-servicing that are less than 180 days delinquent. In September 2002, HUD updated its agency profile with the Treasury by authorizing FMS to use AWG in collecting HUD debt. HUD's September 2003 AWG Implementation Plan states that HUD will refer eligible delinquent debtors to Treasury for cross-servicing action and for the Treasury Offset Program (TOP) at the earliest practicable date. Specifically, if a debt remains unpaid and eligible (i.e., not bankrupt, in dispute, etc.), HUD will refer the debt to FMS for cross-servicing and TOP on the first scheduled weekly/monthly referral date following (1) the debtor's deadline to respond to a notice of intent or (2) the HUD hearing board's authorization to proceed. Since the third quarter of 2003, HUD's report to Treasury on receivables due from the public has shown a steady increase in HUD's debt delinquent 180 days or less that is at Treasury for cross-servicing, thus demonstrating HUD's expeditious referrals of delinquent debt to FMS for cross-servicing.
Comments: The Program Support Center (PSC) of HHS implemented administrative wage garnishment (AWG) in 2005. According to a PSC official, PSC also authorized Treasury to perform AWG on accounts referred to them for collection. HHS complies with GAO's recommendation to expedite referral of eligible debts to Treasury, when practicable, because, as of the end of fiscal year 2005, HHS reported that over 98 percent of its debt over 180 days delinquent that was eligible for cross-servicing had been referred to Treasury.
Comments: SSA is using its own system to conduct AWG to collect programmatic overpayments and does not intend to use Treasury for such collection action. However, SSA complies with our recommendation to expedite referral of eligible debts to Treasury, when practicable, because as of the end of fiscal year 2004, SSA reported having no debt over 180 days delinquent that was eligible for referral to Treasury for cross-servicing.
Comments: VA's Debt Management Center (DMC), which provides a range of debt management and debt collection services, has a 180-day timeframe for due process for those delinquent debts related to VA benefits or services. VA complies with GAO's recommendation to expedite referral of eligible debts to Treasury, when practicable, because, as of the end of fiscal year 2005, VA reported that over 97 percent of its debt over 180 days delinquent that was eligible for cross-servicing had been referred to Treasury.
Comments: According to SBA, although it is not practicable for SBA to transfer debt to Treasury prior to the 180-day delinquency threshold, SBA transfers debts to Treasury as soon as possible following the completion of collection activity by its participant lenders or by the Agency itself. SBA and its participant lenders conduct their own liquidation actions on debts secured by real estate and personal property collateral. Because of the time required to complete foreclosure actions and other litigation proceedings, secured debts are invariably more than 180 days delinquent before being transferred to Treasury. Similarly, lender and SBA-serviced delinquent debts that are unsecured are transferred to Treasury as soon as workout and collection efforts by lender and Agency staff prove to be of no further utility. The transfer to Treasury of these debts generally occurs no sooner than 180 days delinquency because of the necessity to send 60-day due process notifications after completion of workout and collection procedures.
Comments: The Financial Management Service's (FMS) "Private Collection Agency Operations and Procedures Manual" has been modified to state that the private collection agency (PCA) "...shall initiate the AWG process as soon as it is determined that AWG is the best course of action." In addition, PCA Technical Bulletin Number 9, dated June 18, 2002, page 1, states "PCAs are no longer required to wait 60 days from the referral date to initiate the AWG process. PCAs may now request approval from FMS to send a Notice Letter to the debtor as soon as it is determined that AWG is the best course of action."
Recommendation: GAO recommends that the Commissioner of FMS modify FMS's "AWG Operations & Procedures Manual" to incorporate the use of AWG in conjunction with other debt collection tools, when practicable, as leverage to obtain payments from delinquent debtors.