Debt Collection, 16481-16488 [06-3135]

Agencies

• DEPARTMENT OF STATE

[Federal Register Volume 71, Number 63 (Monday, April 3, 2006)]
[Rules and Regulations]
[Pages 16481-16488]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 06-3135]


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DEPARTMENT OF STATE

22 CFR Part 34

[Public Notice: 5310]


Debt Collection

AGENCY: Department of State.

ACTION: Final rule.

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SUMMARY: The Department of State is revising its debt collection 
regulations to conform to changes in Federal Government-wide debt 
collection laws and regulations, including the Debt Collection 
Improvement Act of 1996 and the revised Federal Claims Collections 
Standards jointly issued by the Department of the Treasury and 
Department of Justice in 2000.

DATES: This rule is effective May 3, 2006.

ADDRESSES: You may submit comments by any of the following methods:
     E-mail: AmoryER@state.gov
     Mail paper submissions to the Deputy Assistant Secretary 
for Global Financial Services, Charleston Financial Service Center, 
P.O. Box 150008, Charleston, S.C. 29415-5008.
    Persons with access to the internet may also view this notice by 
going to the regulations.gov Web site at: https://www.regulations.gov/
index.cfm.

FOR FURTHER INFORMATION CONTACT: Elizabeth Amory, Office of the Legal 
Adviser, Charleston Financial Service Center, telephone 843-308-5605.

SUPPLEMENTARY INFORMATION: This rule revises the Department of State's 
(State) debt collection regulations found at 22 CFR part 34 to conform 
to the Debt Collection Improvement Act of 1996 (DCIA), Public Law 104-
134, 110 Stat. 1321, 1358 (Apr. 26, 1996), the revised Federal Claims 
Collection Standards, 31 CFR Chapter IX (parts 900 through 904), and 
other laws applicable to the collection of non-tax debt owed to the 
Government.
    This regulation provides procedures for the collection of debts 
owed to State entities. State adopts the Government-wide debt 
collection standards promulgated by the Departments of the Treasury and 
Justice, known as the Federal Claims Collection Standards (FCCS), as 
revised on November 22, 2000 (65 FR 70390), and supplements the FCCS by 
prescribing procedures

[[Page 16482]]

consistent with the FCCS, as necessary and appropriate for State 
operations. Nothing in this regulation precludes the use of otherwise 
authorized collection remedies not contained in this regulation.

Regulatory Analysis

Administrative Procedures Act

    No notice of proposed rulemaking is required under the 
Administrative Procedure Act (APA) because these rules relate solely to 
agency procedure and practice (5 U.S.C. 553(b)(3)(A)).

Regulatory Flexibility Act

    The Department, in accordance with the Regulatory Flexibility Act 
(5 U.S.C. 605(b)), has reviewed this regulation and, by approving it, 
certifies that this final rule will not have a significant economic 
impact on a substantial number of small entities.

Unfunded Mandated Reform Act of 1995

    This rule will not result in the expenditure by State, local, and 
tribal governments, in the aggregate, or by the private sector, of $100 
million or more in any one year and it will not significantly or 
uniquely affect small governments. Therefore, no actions were deemed 
necessary under the provisions of the Unfunded Mandates Reform Act of 
1995.

Small Business Regulatory Enforcement Act of 1996

    This rule is not a major rule as defined by section 251 of the 
Small Business Regulatory Enforcement Act of 1996 (5 U.S.C. 804). This 
rule will not result in an annual effect on the economy of $100 million 
or more; a major increase in costs or prices for consumers, individual 
industries, Federal, State, or local government agencies, or geographic 
regions; or significant adverse effects on competition, employment, 
investment, productivity, innovation, or on the ability of United 
States-based enterprises to compete with foreign-based enterprises in 
domestic and export markets.

Executive Order 12866

    The Department does not consider this rule to be a ``significant 
regulatory action'' under Executive Order 12866, section 3(f), 
Regulatory Planning and Review. In addition, the Department is exempt 
from Executive Order 12866 except to the extent that it is promulgating 
regulations in conjunction with a domestic agency that are significant 
regulatory actions. The Department has nevertheless reviewed the 
regulation to ensure its consistency with the regulatory philosophy and 
principles set forth in the Executive Order.

Executive Order 12988

    The Department has reviewed this regulation in light of sections 
3(a) and 3(b)(2) of Executive Order 12988, Civil Justice Reform, to 
eliminate ambiguity, minimize litigation, establish clear legal 
standards, and reduce burden.

Executive Order 13132

    This regulation will not have substantial direct effects on the 
States, the relationship between the National Government and the 
States, or on the distribution of power and responsibilities among the 
various levels of government. Therefore, the Department determines that 
this rule does not have sufficient federalism implications to require 
consultations or warrant the preparation of a federalism summary impact 
statement.

Executive Order 12372

    This regulation does not require review under Executive Order 
12372, Intergovernmental Review of Federal Programs.

Paperwork Reduction Act

    This rule does not impose any new reporting or recordkeeping 
requirements subject to the Paperwork Reduction Act, 44 U.S.C. chapter 
35.

List of Subjects in 22 CFR Part 34

    Administrative practice and procedure, Claims, Debts, Garnishment 
of wages, Government employee, Hearing and appeal procedures, Pay 
administration, Salaries, Wages.

0
In consideration of the foregoing, the State Department amends Title 22 
of the Code of Federal Regulations, by revising Part 34 to read:

PART 34--DEBT COLLECTION

Subpart A--General Provision
Sec.
34.1 Purpose
34.2 Scope
34.3 Exceptions
34.4 Definitions
34.5 Other procedures or actions
34.6 Interest, penalties, and administrative cost
34.7 Collection in installments
Subpart B--Collection Actions
34.8 Notice and demand for payment
34.9 Request for internal administrative review
34.10 Collection Methods
Subpart C--Salary Offset
34.11 Scope
34.12 Coordinating offset with another Federal agency
34.13 Notice requirements before offset
34.14 Request for an outside hearing for certain debts
34.15 Outside hearing
34.16 Procedures for salary offset
34.17 Non-waiver of rights by payment
Subpart D--Collection Adjustments
34.18 Waiver of indebtedness
34.19 Compromise
34.20 Suspension
34.21 Termination
34.22 Discharge
34.23 Bankruptcy
34.24 Refunds

    Authority: 31 U.S.C. 3701-3719; 5 U.S.C. 5514; 31 C.F.R. part 
285; 31 CFR parts 900-904; 5 CFR 550 subpart K.

Subpart A--General Provisions


Sec.  34.1  Purpose.

    These regulations prescribe the procedures to be used by the United 
States Department of State (STATE) in the collection of debts owed to 
STATE and to the United States.


Sec.  34.2  Scope.

    (a) Except as set forth in this part or otherwise provided by law, 
STATE will conduct administrative actions to collect debts (including 
offset, compromise, suspension, termination, disclosure and referral) 
in accordance with the Federal Claims Collection Standards (FCCS) of 
the Department of the Treasury and Department of Justice, 31 CFR parts 
900-904.
    (b) This part is not applicable to STATE claims against another 
Federal agency, any foreign country or any political subdivision 
thereof, or any public international organization.


Sec.  34.3  Exceptions.

    (a) Debts arising from the audit of transportation accounts 
pursuant to 31 U.S.C. 3726 shall be determined, collected, compromised, 
terminated, or settled in accordance with the regulations published at 
41 CFR part 102-118.
    (b) Debts arising out of acquisition contracts subject to the 
Federal Acquisition Regulation (FAR) shall be determined, collected, 
compromised, terminated, or settled in accordance with those 
regulations (see 48 CFR part 32).
    (c) Debts based in whole or in part on conduct in violation of the 
antitrust laws, or in regard to which there is an indication of fraud, 
presentation of a false claim, or misrepresentation on the part of the 
debtor or any other party having an interest in the claim, shall be 
referred to the Department of Justice for compromise, suspension, or 
termination of collection action.

[[Page 16483]]

    (d) Tax debts are excluded from the coverage of this regulation.


Sec.  34.4  Definitions.

    For purposes of the section:
    (a) Administrative offset means withholding funds payable by the 
United States to, or held by the United States for, a person to satisfy 
a debt owed by the person to the United States.
    (b) Administrative wage garnishment means the process by which a 
Federal agency orders a non-Federal employer to withhold amounts from a 
debtor's wages to satisfy a debt owed to the United States.
    (c) Compromise means that the creditor agency accepts less than the 
full amount of an outstanding debt in full satisfaction of the entire 
amount of the debt.
    (d) Creditor agency means the Federal agency to which a debt is 
owed.
    (e) Debt or claim means an amount of money which has been 
determined to be owed to the United States from any person. A debtor's 
liability arising from a particular contract or transaction shall be 
considered a single claim for purposes of the monetary ceilings of the 
FCCS.
    (f) Debtor means a person who owes the Federal government money.
    (g) Delinquent debt means a debt that has not been paid by the date 
specified in STATE's written notification or applicable contractual 
agreement, unless other satisfactory arrangements have been made by 
that date, or that has not been paid in accordance with a payment 
agreement with STATE.
    (h) Discharge means the release of a debtor from personal liability 
for a debt. Further collection action is prohibited.
    (i) Disposable pay means the amount that remains from an employee's 
current basic pay, special pay, incentive pay, retired pay, retainer 
pay, or in the case of an employee not entitled to basic pay, other 
authorized pay remaining after required deductions for Federal, State 
and local income taxes; Social Security taxes, including Medicare 
taxes; Federal retirement programs; normal premiums for life and health 
insurance benefits and such other deductions that are required by law 
to be withheld, excluding garnishments.
    (j) FCCS means the Federal Claims Collection Standards published 
jointly by the Departments of the Treasury and Justice and codified at 
31 CFR parts 900-904.
    (k) Person means an individual, corporation, partnership, 
association, organization, State or local government, or any other type 
of entity other than a Federal agency, Foreign Government, or public 
international organization.
    (l) Salary offset means the withholding of amounts from the current 
pay account of a Federal employee to satisfy a debt owed by that 
employee to the United States.
    (m) Suspension means the temporary cessation of active debt 
collection pending the occurrence of an anticipated event.
    (n) Termination means the cessation of all active debt collection 
action for the foreseeable future.
    (o) Waiver means a decision to forgo collection of a debt owed to 
the United States, as provided for by a specific statute and according 
to the standards set out under that statute.


Sec.  34.5  Other procedures or actions.

    (a) Nothing contained in this regulation is intended to require 
STATE to duplicate administrative proceedings required by contract or 
other laws or regulations.
    (b) Nothing in this regulation is intended to preclude utilization 
of informal administrative actions or remedies which may be available.
    (c) Nothing contained in this regulation is intended to deter STATE 
from demanding the return of specific property or from demanding the 
return of the property or the payment of its value.
    (d) The failure of STATE to comply with any provision in this 
regulation shall not serve as defense to the debt.


Sec.  34.6  Interest, penalties, and administrative costs.

    Except as otherwise provided by statute, contract or excluded in 
accordance with the FCCS, STATE will assess:
    (a) Interest on delinquent debts in accordance with 31 CFR 901.9.
    (b) Penalties at the rate of 6 percent a year or such other rate as 
authorized by law on any portion of a debt that is delinquent for more 
than 90 days.
    (c) Administrative costs to cover the costs of processing and 
calculating delinquent debts.
    (d) Late payment charges under paragraphs (a) and (b) of this 
section shall be computed from the date of delinquency.
    (e) When a debt is paid in partial or installment payments, amounts 
received shall be applied first to outstanding penalty and 
administrative cost charges, second to accrued interest, and then to 
outstanding principal.
    (f) STATE shall consider waiver of interest, penalties and/or 
administrative costs in accordance with the FCCS, 31 CFR 901.9(g).


Sec.  34.7  Collection in installments.

    Whenever feasible, and except as required otherwise by law, debts 
owed to the United States, together with interest, penalties, and 
administrative costs as required by this regulation, should be 
collected in one lump sum. This is true whether the debt is being 
collected under administrative offset, including salary offset, or by 
another method, including voluntary payment. However, if the debtor is 
financially unable to pay the indebtedness in one lump sum, payment may 
be accepted in regular installments. If STATE agrees to accept payment 
in installments, it may require a legally enforceable written agreement 
from the debtor that specifies all of the terms of the arrangement and 
which contains a provision accelerating the debt in the event the 
debtor defaults. The size and frequency of the payments should bear a 
reasonable relation to the size of the debt and ability of the debtor 
to pay. If possible, the installment payments should be sufficient in 
size and frequency to liquidate the Government's claim within 3 years.

Subpart B--Collection Actions


Sec.  34.8  Notice and Demand for Payment.

    (a) STATE shall promptly hand deliver or send by first-class mail 
to the debtor at the debtor's most current address in the records of 
STATE at least one written notice. Written demand under this subpart 
may be preceded by other appropriate actions under this part and or the 
FCCS, including but not limited to actions taken under the procedures 
applicable to administrative offset, including salary offset.
    (b) The written notice shall inform the debtor of:
    (1) The basis of the debt;
    (2) The amount of the debt;
    (3) The date by which payment should be made to avoid the 
imposition of interest, penalties and administrative costs, and the 
enforced collection actions described in paragraph (b)(7) of this 
section;
    (4) The applicable standards for imposing of interest, penalties 
and administrative costs to delinquent debts;
    (5) STATE's readiness to discuss alternative payment arrangements 
and how the debtor may offer to enter into a written agreement to repay 
the debt under terms acceptable to STATE;
    (6) The name, address and telephone number of a contact person or 
office within STATE;
    (7) STATE's intention to enforce collection by taking one or more 
of the following actions if the debtor fails to pay or otherwise 
resolve the debt:

[[Page 16484]]

    (i) Offset from Federal payments otherwise due to the debtor, 
including income tax refunds, salary, certain benefit payments, 
retirement, vendor payments, travel reimbursement and advances, and 
other Federal payments due from STATE, other Federal agencies, or 
through centralized disbursing from the Department of the Treasury;
    (ii) Referral to private collection agency
    (iii) Report to credit bureaus
    (iv) Administrative Wage Garnishment
    (v) Litigation by the Department of Justice
    (vi) Referral to the Financial Management Service of the Department 
of the Treasury for collection
    (vii) Liquidation of collateral
    (viii) Other actions as permitted by the FCCS and applicable law;
    (8) The debtor's right to inspect and copy records related to the 
debt;
    (9) The debtor's right to an internal review of STATE's 
determination that the debtor owes a debt or the amount of the debt;
    (10) The debtor's right, if any, to request waiver of collection of 
certain debts, as applicable (see Sec.  34.18);
    (11) Requirement that the debtor advise STATE of any bankruptcy 
proceeding of the debtor; and
    (12) Provision for refund of amounts collected if later decision 
finds that the amount of the debt is not owed or is waived.
    (c) Exceptions to notice requirements. STATE may omit from a notice 
to a debtor one or more of the provisions contained in paragraphs 
(b)(7) through (b)(12) of this section if STATE determines that any 
provision is not legally required given the collection remedies to be 
applied to a particular debt, or which have already been provided by 
prior notice, applicable agreement, or contract.


Sec.  34.9  Requests for Internal Administrative Review.

    (a) For all collection methods for debts owed to STATE, the debtor 
may request a review within State of the existence or the amount of the 
debt. For offset of current Federal salary under 5 U.S.C. 5514 for 
certain debts, debtors may also request an outside hearing. See subpart 
C of this part.
    This subpart rather than subpart C applies to collections by salary 
offset for debts arising under 5 U.S.C. 5705 (travel advances), 5 
U.S.C. 4108 (training expenses), and other statutes specifically 
providing for collection by salary offset.
    (b) A debtor requesting an internal review shall do so in writing 
to the contact office by the payment due date stated within the initial 
notice sent under 34.8(b) or other applicable provision. The debtor's 
written request shall state the basis for the dispute and include any 
relevant documentation in support.
    (1) STATE will provide for an internal review of the debt by an 
appropriate official. The review may include examination of documents, 
internal discussions with relevant officials and discussion by letter 
or orally with the debtor, at STATE's discretion. An oral hearing may 
be provided when the matter cannot be decided on the documentary record 
because it involves issues of credibility or veracity. Unless otherwise 
required by law, such oral hearing shall not be a formal evidentiary 
hearing. If an oral hearing is appropriate, the time and location of 
the hearing shall be established by STATE. An oral hearing may be 
conducted, at the debtor's option, either in-person or by telephone 
conference. All travel expenses incurred by the debtor in connection 
with an in-person hearing will be borne by the debtor. All telephonic 
charges incurred during the hearing will be the responsibility of 
STATE. During the period of review, STATE may suspend collection 
activity, including the accrual of interest and penalties, on any 
disputed portion of the debt if STATE determines that suspension is in 
the Department's best interest or would serve equity and good 
conscience.
    (2) If after review STATE either sustains or amends its 
determination, it shall notify the debtor of its intent to collect the 
sustained or amended debt. If previously suspended, collection actions 
will be re-instituted unless payment of the sustained or amended amount 
is received or the debtor has made a proposal for a payment plan to 
which STATE agrees, by the date specified in the notification of 
STATE's decision.


Sec.  34.10  Collection Methods.

    Upon completion of notice and provision of all due process rights 
as listed in 34.8(b) of this section and upon final determination of 
the existence and amount of a debt, unless other acceptable payment 
arrangements have been made or procedures under a specific statute 
apply, STATE shall collect the debt by one or more of the following 
methods:
    (a) Administrative offset.
    (1) Payments otherwise due the debtor from the United States shall 
be offset from the debt in accordance with 31 CFR 901.3. These may be 
funds under the control of the Department of State or other Federal 
agencies. Collection may be made through centralized offset by the 
Financial Management Service (``FMS'') of the Department of the 
Treasury.
    (2) Such payments include but are not limited to vendor payments, 
salary, retirement, lump sum payments due upon Federal employment 
separation, travel reimbursements, tax refunds, loans or other 
assistance. For offset of Federal salary payments under 5 U.S.C. 5514 
for certain types of debt see subpart C of this part.
    (3) Administrative offset under this subsection does not apply to 
debts specified in the FCCS, 31 CFR 901.3(a)(2).
    (4) Before administrative offset is instituted by another Federal 
agency or the FMS, STATE shall certify in writing to that entity that 
the debt is past due and legally enforceable and that STATE has 
complied with all applicable due process and other requirements as 
described in this part and other Federal law and regulations.
    (5) Administrative offset of anticipated or future benefit payments 
under the Civil Service Retirement and Disability Fund will be 
requested by STATE pursuant to 5 CFR 831.1801-1808.
    (6) Expedited offset. STATE may effect an offset against a debtor 
prior to sending a notice to the debtor as described in Sec.  34.8, 
when:
    (i) The offset is in the nature of a recoupment,
    (ii) Offset is executed pursuant to procedures set out in the 
Contracts Disputes Act,
    (iii) Previous notice and opportunity for review have been given, 
or
    (iv) There is insufficient time before payment would be made to the 
debtor/payee to allow prior notice and an opportunity for review. In 
such case, STATE shall give the debtor 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.
    (7) 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 charged with the 
responsibility to discover and collect such debts. This limitation does 
not apply to debts reduced to a judgment.
    (b) Referral to Private Collection Agency. STATE may contract for 
collection services to recover delinquent

[[Page 16485]]

debts, or transfer a delinquent debt to FMS for private collection 
action, pursuant to 31 U.S.C. 3718, 22 U.S.C. 2716 and the FCCS, 31 CFR 
901.5, as applicable. STATE will not use a collection agency to collect 
a debt owed by a currently employed or retired Federal employee, if 
collection by salary or annuity offset is available.
    (c) Disclosure to consumer reporting agencies. STATE may disclose 
delinquent debts to consumer reporting agencies and other automated 
databases in accordance with 31 U.S.C. 3711(e) and the FCCS, 31 CFR 
901.4, and in compliance with the Bankruptcy Code and the Privacy Act 5 
U.S.C. 552a.
    (d) Liquidation of Collateral, if applicable, in accordance with 
the FCCS, 31 CFR 901.7.
    (e) Suspension or revocation of eligibility for loans and loan 
guaranties, licenses, permits, or privileges in accordance with the 
FCCS, 31 CFR 901.6.
    (f) Litigation. Debts may be referred to the Department of Justice 
for litigation for collection in accordance with the standards set 
forth in the FCCS, 31 CFR part 904.
    (g) Transfer to FMS. Debts delinquent more than 180 days shall be 
transferred to the Financial Management Service of the Department of 
the Treasury for collection by all available means. Debts delinquent 
less that 180 days may also be so transferred.
    (h) Administrative Wage Garnishment. STATE may collect debts from a 
non-Federal employee's wages by means of administrative wage 
garnishment in accordance with the requirements of 31 U.S.C. 3720D and 
31 CFR 285.11. All parts of 31 CFR 285.11 are incorporated by reference 
into these regulations, including the hearing procedures described in 
31 CFR 285.11(f).
    (i) Salary Offset. See subpart C of this part.

Subpart C--Salary Offset


Sec.  34.11  Scope.

    (a) This subpart sets forth STATE's procedures for the collection 
of a Federal employee's current pay by salary offset to satisfy certain 
debts owed to the United States.
    (b) This subpart applies to:
    (1) Current employees of STATE and other agencies who owe debts to 
STATE;
    (2) Current employees of STATE who owe debts to other agencies.
    (c) This subpart does not apply to (1)
    Offset of a separating employee's final payments or Foreign Service 
annuity payments which are covered under administrative offset (See 
Sec.  34.10(a)),
    (2) Debts or claims arising under the Internal Revenue Code of 1954 
(26 U.S.C. 1 et seq.); the Social Security Act (42 U.S.C. 301 et seq.); 
the tariff laws of the United States.
    (3) Any adjustment to pay arising out of an employee's election of 
coverage or a change in coverage under a Federal benefits program 
requiring periodic deductions from pay, if the amount to be recovered 
was accumulated over 4 pay periods or less.
    (4) Any routine intra-agency adjustment of pay that is made to 
correct an overpayment of pay attributable to clerical or 
administrative errors or delays in processing pay documents, if the 
overpayment occurred within the 4 pay periods preceding the adjustment 
and, at the time of such adjustment, or as soon thereafter as 
practical, the individual is provided written notice of the nature and 
the amount of the adjustment and point of contact for contesting such 
adjustment.
    (5) Any adjustment to collect a debt amounting to $50 or less, if, 
at the time of such adjustment, or as soon thereafter as practical, the 
individual is provided written notice of the nature and the amount of 
the adjustment and a point of contact for contesting such adjustment.
    (d) These regulations do not preclude an employee from requesting 
waiver of the debt, if waiver is available under subpart D of this part 
or by other regulation or statute.
    (e) Nothing in these regulations precludes the compromise, 
suspension or termination of collection actions where appropriate under 
subpart D of this part or other regulations or statutes.


Sec.  34.12  Coordinating offset with another Federal agency.

    (a) When STATE is owed a debt by an employee of another agency, the 
other agency shall not initiate the requested offset until STATE 
provides the agency with a written certification that the debtor owes 
STATE a debt (including the amount and basis of the debt and the due 
date of payment) and that STATE has complied with these regulations.
    (b) When another agency is owed the debt, STATE may use salary 
offset against one of its employees who is indebted to another agency, 
if requested to do so by that agency. Such request must be accompanied 
by a certification that the person owes the debt (including the amount 
and basis of the debt and the due date of payment) and that the agency 
has complied with its regulations as required by 5 U.S.C. 5514 and 5 
CFR part 550, subpart K.


Sec.  34.13  Notice requirements before offset.

    Except as provided in Sec. 34.16, salary offset deductions will not 
be made unless STATE first provides the employee with a written notice 
that he/she owes a debt to the Federal Government at least 30 calendar 
days before salary offset is to be initiated. When STATE is the 
creditor agency, this notice of intent to offset an employee's salary 
shall be hand-delivered or sent by first class mail to the last known 
address that is available to the Department and will state:
    (a) That STATE has reviewed the records relating to the debt and 
has determined that the debt is owed, its origin and nature, and the 
amount due;
    (b) The intention of STATE to collect the debt by means of 
deduction from the employee's current pay until the debt and any and 
all accumulated interest, penalties and administrative costs are paid 
in full;
    (c) The amount, frequency, approximate beginning date, and duration 
of the intended deductions;
    (d) The requirement to assess and collect interest, penalties, and 
administrative costs in accordance with Sec. 34.6, unless waived in 
accordance with Sec. 34.6(f);
    (e) The employee's right to inspect and copy any STATE records 
relating to the debt, or, if the employee or their representative 
cannot personally inspect the records, to request and receive a copy of 
such records;
    (f) The opportunity to voluntarily repay the debt or to enter into 
a written agreement (under terms agreeable to STATE) to establish a 
schedule for repayment of the debt in lieu of offset;
    (g) Right to an internal review or outside hearing.
    (1) An internal review under Sec. 34.9 may be requested in cases of 
collections by salary offset for debts arising under 5 U.S.C. 5705 
(travel advances), 5 U.S.C. 4108 (training expenses), and other 
statutes specifically providing for collection by salary offset.
    (2) For all other debts, an internal review or an outside hearing 
conducted by an official not under the supervision or control of STATE 
may be requested with respect to the existence of the debt, the amount 
of the debt, or the repayment schedule (i.e. the percentage of 
disposable pay to be deducted each pay period);
    (h) That the timely filing of a request for an outside hearing or 
internal review within 30 calendar days after the date of the notice of 
intent to offset will stay the commencement of collection proceedings;

[[Page 16486]]

    (i) The method and time period for requesting an internal review or 
outside hearing;
    (j) That a final decision on the internal review or outside hearing 
(if one is requested) will be issued at the earliest practical date, 
but not later than 60 days after the filing of the request, unless the 
employee requests and the outside hearing official grants a delay in 
the proceedings;
    (k) That any knowingly false or frivolous statements, 
representation, or evidence may subject the employee to disciplinary 
procedures (5 U.S.C. Chapter 75, 5 CFR part 752 or other applicable 
statutes or regulations); penalties (31 U.S.C. 3729-3731 or other 
applicable statutes or regulations); or criminal penalties (18 U.S.C. 
286, 287, 1001, and 1002 or other applicable statutes or regulations);
    (l) Any other rights and remedies available to the employee under 
statutes or regulations governing the program for which the collection 
is being made;
    (m) That the amounts paid on the debt which are later waived or 
found not owed to the United States will be promptly refunded to the 
employee, unless there are applicable contractual or statutory 
provisions to the contrary; and
    (n) The name and address of the STATE official to whom 
communications should be directed.


Sec.  34.14  Request for an outside hearing for certain debts.

    (a) Except as provided in paragraph (d) of this section, an 
employee must file a request that is received by STATE not later than 
30 calendar days from the date of STATE's notice described in Sec.  
34.13 if an employee wants an outside hearing pursuant to Sec.  
34.13(g)(2) concerning:
    (1) The existence or amount of the debt; or
    (2) STATE's proposed offset schedule.
    (b) The request must be signed by the employee and should identify 
and explain with reasonable specificity and brevity the facts, evidence 
and witnesses which the employee believes support his or her position. 
If the employee objects to the percentage of disposable pay to be 
deducted from each check, the request should state the objection and 
the reasons for it.
    (c) The employee must also specify whether an oral or paper hearing 
is requested. If an oral hearing is desired, the request should explain 
why the matter cannot be resolved by review of the documentary evidence 
alone.
    (d) If the employee files a request for an outside hearing later 
than the required 30 calendar days as described in paragraph (a) of 
this section, STATE may accept the request if the employee can show 
that the delay was because of circumstances beyond his or her control 
or because of failure to receive notice of the filing deadline (unless 
the employee has actual notice of the filing deadline).
    (e) An employee waives the right to an outside hearing and will 
have his or her pay offset if the employee fails to file a petition for 
a hearing as prescribed in paragraph (a) of this section.


Sec.  34.15  Outside Hearings.

    (a) If an employee timely files a request for an outside hearing 
under Sec.  34.13(g)(2), pursuant to 5 U.S.C. 5514(a)(2), STATE shall 
select the time, date, and location of the hearing.
    (b) Outside hearings shall be conducted by a hearing official not 
under the supervision or control of STATE.
    (c) Procedure. (1) After the employee requests a hearing, the 
hearing official shall notify the employee of the form of the hearing 
to be provided. If the hearing will be oral, notice shall set forth the 
date, time and location of the hearing. If the hearing will be paper, 
the employee shall be notified that he or she should submit arguments 
in writing to the hearing official by a specified date after which the 
record shall be closed. This date shall give the employee reasonable 
time to submit documentation.
    (2) Oral hearing. An employee who requests an oral hearing shall be 
provided an oral hearing if the hearing official determines that the 
matter cannot be resolved by review of documentary evidence alone (e.g. 
when an issue of credibility or veracity is involved). The hearing is 
not an adversarial adjudication, and need not take the form of an 
evidentiary hearing.
    (3) Paper hearing. If the hearing official determines that an oral 
hearing is not necessary, he or she will make a decision based upon a 
review of the available written record.
    (4) Record. The hearing official must maintain a summary record of 
any hearing provided by this subpart. Witnesses who provide testimony 
will do so under oath or affirmation.
    (5) Content of decision. The written decision shall include:
    (i) A statement of the facts presented to support the origin, 
nature, and amount of the debt;
    (ii) The hearing official's findings, analysis, and conclusions; 
and
    (iii) The terms of any repayment schedules, or the date salary 
offset will commence, if applicable.
    (6) Failure to appear. In the absence of good cause shown (e.g. 
excused illness), an employee who fails to appear at a hearing shall be 
deemed, for the purpose of this subpart, to admit the existence and 
amount of the debt as described in the notice of intent. The hearing 
official shall schedule a new hearing date upon the request of the 
creditor agency representative when good cause is shown.
    (d) A hearing official's decision is considered to be an official 
certification regarding the existence and amount of the debt for 
purposes of executing salary offset under 5 U.S.C. 5514 only. It does 
not supersede the finding by STATE that a debt is owed and does not 
affect the Government's ability to recoup the indebtedness through 
alternative collection methods under Sec.  34.10.


Sec.  34.16  Procedures for salary offset.

    Unless otherwise provided by statute or contract, the following 
procedures apply to salary offset:
    (a) Method. Salary offset will be made by deduction at one or more 
officially established pay intervals from the current pay account of 
the employee without his or her consent.
    (b) Source. The source of salary offset is current disposable pay.
    (c) Types of collection. (1) Lump sum payment. Ordinarily debts 
will be collected by salary offset in one lump sum if possible. 
However, if the amount of the debt exceeds 15 percent of disposable pay 
for an officially established pay interval, the collection by salary 
offset must be made in installment deductions.
    (2) Installment deductions. (i) The size of installment deductions 
must bear a reasonable relation to the size of the debt and the 
employee's ability to pay. If possible, the size of the deduction will 
be that necessary to liquidate the debt in no more than 1 year. 
However, the amount deducted for any period must not exceed 15 percent 
of the disposable pay from which the deduction is made, except as 
provided by other regulations or unless the employee has agreed in 
writing to a greater amount.
    (ii) Installment payments of less than $25 per pay period will be 
accepted only in the most unusual circumstances.
    (iii) Installment deductions will be made over a period of not 
greater than the anticipated period of employment.


Sec.  34.17  Non-waiver of rights by payments.

    So long as there are no statutory or contractual provisions to the 
contrary, no employee payment (of all or a portion of a debt) collected 
under this subpart will be interpreted as a waiver of any rights that 
the employee may have under 5 U.S.C. 5514.

[[Page 16487]]

Subpart D--Collection Adjustments


Sec.  34.18  Waivers of indebtedness.

    (a) Waivers of indebtedness may be granted only as provided for 
certain types of debt by specific statutes and according to the 
standards set out under those statutes.
    (b) Authorities. (1) Debts arising out of erroneous payments of pay 
and allowances. 5 U.S.C. 5584 provides authority for waiving in whole 
or in part debts arising out of erroneous payments of pay and 
allowances, and travel, transportation and relocation expenses and 
allowances, if collection would be against equity and good conscience 
and not in the best interests of the United States.
    (i) Waiver may not be granted if there exists in connection with 
the claim an indication of fraud, misrepresentation, fault, or lack of 
good faith on the part of the employee or any other person having an 
interest in obtaining a waiver.
    (ii) Fault is considered to exist if in light of the circumstances 
the employee knew or should have known through the exercise of due 
diligence that an error existed but failed to take corrective action. 
What an employee should have known is evaluated under a reasonable 
person standard. Employees are, however, expected to have a general 
understanding of the Federal pay system applicable to them.
    (iii) An employee with notice that a payment may be erroneous is 
expected to make provisions for eventual repayment. Financial hardship 
is not a basis for granting a waiver for an employee who was on notice 
of an erroneous payment.
    (iv) If the deciding official finds no indication of fraud, 
misrepresentation, fault, or lack of good faith on the part of the 
employee or any other person having an interest in obtaining a waiver 
of the claim, the employee is not automatically entitled to a waiver. 
Before a waiver can be granted, the deciding official must also 
determine that collection of the claim against an employee would be 
against equity and good conscience and not in the best interests of the 
United States. Factors to consider when determining if collection of a 
claim against an employee would be against equity and good conscience 
and not in the best interests of the United States include, but are not 
limited to:
    (A) Whether collection of the claim would cause serious financial 
hardship to the employee from whom collection is sought.
    (B) Whether, because of the erroneous payment, the employee either 
has relinquished a valuable right or changed positions for the worse, 
regardless of the employee's financial circumstances.
    (C) The time elapsed between the erroneous payment and discovery of 
the error and notification of the employee;
    (D) Whether failure to make restitution would result in unfair gain 
to the employee;
    (E) Whether recovery of the claim would be unconscionable under the 
circumstances.
    (2) Debts arising out of advances in pay. 5 U.S.C. 5524a provides 
authority for waiving in whole or in part a debt arising out of an 
advance in pay if it is shown that recovery would be against equity and 
good conscience or against the public interest.
    (i) Factors to be considered when determining if recovery of an 
advance payment would be against equity and good conscience or against 
the public interest include, but are not limited to:
    (A) Death of the employee;
    (B) Retirement of the employee for disability;
    (C) Inability of the employee to return to duty because of 
disability (supported by an acceptable medical certificate); and
    (D) Whether failure to repay would result in unfair gain to the 
employee.
    (ii) [Reserved]
    (3) Debts arising out of advances in situations of authorized or 
ordered departures. 5 U.S.C. 5522 provides authority for waiving in 
whole or in part a debt arising out of an advance payment of pay, 
allowances, and differentials provided under this section if it is 
shown that recovery would be against equity and good conscience or 
against the public interest.
    (i) Factors to be considered when determining if recovery of an 
advance payment would be against equity and good conscience or against 
the public interest include, but are not limited to:
    (A) Death of the employee;
    (B) Retirement of the employee for disability;
    (C) Inability of the employee to return to duty because of 
disability (supported by an acceptable medical certificate); and
    (D) Whether failure to repay would result in unfair gain to the 
employee.
    (ii) [Reserved]
    (4) Debts arising out of advances of allowances and differentials 
for employees stationed abroad. 5 U.S.C. 5922 provides authority for 
waiving in whole or in part a debt arising out of an advance of 
allowances and differentials provided under this subchapter if it is 
shown that recovery would be against equity and good conscience or 
against the public interest.
    (i) Factors to be considered when determining if recovery of an 
advance payment would be against equity and good conscience or against 
the public interest include, but are not limited to:
    (A) Death of the employee;
    (B) Retirement of the employee for disability;
    (C) Inability of the employee to return to duty because of 
disability (supported by an acceptable medical certificate); and
    (D) Whether failure to repay would result in unfair gain to the 
employee.
    (ii) [Reserved]
    (5) Debts arising out of employee training expenses. 5 U.S.C. 4108 
provides authority for waiving in whole or in part a debt arising out 
of employee training expenses if it is shown that recovery would be 
against equity and good conscience or against the public interest.
    (i) Factors to be considered when determining if recovery of a debt 
arising out of employee training expenses would be against equity and 
good conscience or against the public interest include, but are not 
limited to:
    (A) Death of the employee;
    (B) Retirement of the employee for disability;
    (C) Inability of the employee to return to duty because of 
disability (supported by an acceptable medical certificate); and
    (D) Whether failure to repay would result in unfair gain to the 
employee.
    (ii) [Reserved]
    (6) Under-withholding of life insurance premiums. 5 U.S.C. 8707(d) 
provides authority for waiving the collection of unpaid deductions 
resulting from under-withholding of Federal Employees' Group Life 
Insurance Program premiums if the individual is without fault and 
recovery would be against equity and good conscience.
    (i) Fault is considered to exist if in light of the circumstances 
the employee knew or should have known through the exercise of due 
diligence that an error existed but failed to take corrective action.
    (ii) Factors to be considered when determining whether recovery of 
unpaid deduction resulting from under-withholding would be against 
equity and good conscience include, but are not limited to:
    (A) Whether collection of the claim would cause serious financial 
hardship to the individual from whom collection is sought.
    (B) The time elapsed between the failure to properly withhold and 
discovery of the failure and notification of the individual;
    (C) Whether failure to make restitution would result in unfair gain 
to the individual;

[[Page 16488]]

    (D) Whether recovery of the claim would be unconscionable under the 
circumstances.
    (7) Overpayments of Foreign Service Annuities. For waiver of debts 
arising from overpayments from the Foreign Service Retirement and 
Disability Fund under the Foreign Service Retirement and Disability 
System or the Foreign Service Pension System see 22 CFR part 17.
    (8) As otherwise provided by law.
    (c) Waiver of indebtedness is an equitable remedy and as such must 
be based on an assessment of the facts involved in the individual case 
under consideration.
    (d) The burden is on the employee to demonstrate that the 
applicable waiver standard has been met.
    (e) Requests. A debtor requesting a waiver shall do so in writing 
to the contact office by the payment due date stated within the initial 
notice sent under Sec.  34.8(b) or other applicable provision. The 
debtor's written response shall state the basis for the dispute and 
include any relevant documentation in support.
    (f) While a waiver request is pending, STATE may suspend 
collection, including the accrual of interest and penalties, on the 
debt if STATE determines that suspension is in the Department's best 
interest or would serve equity and good conscience.


Sec.  34.19  Compromise.

    STATE may attempt to effect compromise in accordance with the 
standards set forth in the FCCS, 31 CFR part 902.


Sec.  34.20  Suspension.

    The suspension of collection action shall be made in accordance 
with the standards set forth in the FCCS, 31 CFR 903.1-903.2


Sec.  34.21  Termination.

    The termination of collection action shall be made in accordance 
with the standards set forth in the FCCS, 31 CFR 903.1 and 903.3-903.4.


Sec.  34.22  Discharge.

    Once a debt has been closed out for accounting purposes and 
collection has been terminated, the debt is discharged. STATE must 
report discharged debt as income to the debtor to the Internal Revenue 
Service per 26 U.S.C. 6050P and 26 CFR 1.6050P-1.


Sec.  34.23  Bankruptcy.

    A debtor should notify STATE at the contact office provided in the 
original notice of the debt, if the debtor has filed for bankruptcy. 
STATE will require documentation from the applicable court indicating 
the date of filing and type of bankruptcy. Pursuant to the laws of 
bankruptcy, STATE will suspend debt collection upon such filing unless 
the automatic stay is no longer in effect or has been lifted. In 
general, collection of a debt discharged in bankruptcy shall be 
terminated unless otherwise provided for by bankruptcy law.


Sec.  34.24  Refunds.

    (a) STATE will refund promptly to the appropriate individual 
amounts offset under this regulation when:
    (1) A debt is waived or otherwise found not owing the United States 
(unless expressly prohibited by statute or regulation); or
    (2) STATE is directed by an administrative or judicial order to 
make a refund.
    (b) Refunds do not bear interest unless required or permitted by 
law or contract.

    Dated: February 1, 2006.
Henrietta H. Fore,
Under Secretary for Management, Department of State.
[FR Doc. 06-3135 Filed 3-31-06; 8:45 am]
BILLING CODE 4710-37-P