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TITLE 31--MONEY AND FINANCE: TREASURY
(DEPARTMENT OF THE TREASURY--DEPARTMENT OF JUSTICE)
31 CFR Parts 900-904 Federal Claims Collection Standards
Part 900 SCOPE OF STANDARDS--Table of Contents
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.
Sec. 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 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.''
Sec. 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 post-delinquency 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.
Sec. 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).
Sec. 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).
Sec. 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.
Sec. 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.
Sec. 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.
Sec. 900.7 Required administrative proceedings.
Agencies are not required to omit, foreclose, or duplicate
administrative proceedings required by contract or other laws or
regulations.
Sec. 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
--Table of Contents
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.
Sec. 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 Treasury-designated ``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 Treasury-designated 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 Sec. 901.10).
Sec. 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 Sec. 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 hand-delivered; 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 Sec. 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 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.
Sec. 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 Sec. 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., Sec. 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 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 case-by-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 non-
centralized 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.
Sec. 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 Sec. 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., Sec. 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 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 case-by-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 non-
centralized 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.
Sec. 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 government-wide 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.
Sec. 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.
Sec. 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.
Sec. 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 Sec. 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. 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.
Sec. 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.
Sec. 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.
Sec. 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.
PART 902 STANDARDS FOR THE COMPROMISE OF CLAIMS--Table of Contents
Sec.
902.1 Scope and application.
902.2 Bases for compromise.
902.3 Enforcement policy.
902.4 Joint and several liability.
902.6 Consideration of tax consequences to the Government.
902.7 Mutual releases of the debtor and the Government.
Sec. 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.
Sec. 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.
Sec. 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.
Sec. 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 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.
Sec. 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.
Sec. 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-loss-carry-back
rights of the debtor. For information on discharge of indebtedness
reporting requirements see Sec. 903.5 of this chapter.
Sec. 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
--Table of Contents
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.
Sec. 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.
Sec. 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.
Sec. 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
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.
Sec. 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.
Sec. 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, Treasury-designated 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--Table of Contents
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.
Sec. 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.
Sec. 904.2 Claims Collection Litigation Report.
(a) Unless excepted by the Department of Justice, agencies shall
complete the CCLR (see Sec. 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 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.
Sec. 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.
Sec. 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.
32 CFR Part 34 Salary Offset to Recover Overpayments of Pay or
Allowances from U.S. Department of Education Employees
Please gofor the full text of these regulations.
The Debt Collection Act of 1982, the Federal Claims Collection Act of 1966,
P.L. 89-508 (July 19, 1966), Chief Financial
Officers Act of 1990,
P.L. 101-576, (January 23, 1990), The Privacy Act of 1974,
as amended,
may all be found on the GPO website. To review these statutes, please go
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