Claims Collection, 10404-10419 [E7-4002]
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Federal Register / Vol. 72, No. 45 / Thursday, March 8, 2007 / Rules and Regulations
(Catalog of Federal Domestic Assistance No.
83.100, ‘‘Flood Insurance.’’)
Dated: February 28, 2007.
David I. Maurstad,
Director, Mitigation Division, Federal
Emergency Management Agency, Department
of Homeland Security.
[FR Doc. E7–4157 Filed 3–7–07; 8:45 am]
BILLING CODE 9110–12–P
DEPARTMENT OF HEALTH AND
HUMAN SERVICES
Office of the Secretary
45 CFR Part 30
RIN 0991–AB18
Claims Collection
Department of Health and
Human Services.
ACTION: Final rule.
AGENCY:
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SUMMARY: This final rule amends the
Department of Health and Human
Services’ (HHS) regulations to
implement the provisions of the Debt
Collection Improvement Act of 1996
(DCIA), as implemented by the
Department of Justice (Justice) and the
Department of the Treasury (Treasury)
as the Federal Claims Collection
Standards (FCCS). This final rule
implements the final rule promulgated
by Justice and Treasury, and amends the
process by which HHS can
administratively collect, offset,
compromise, suspend and terminate
collection activity for civil claims for
money, funds, or property, and the rules
and process by which HHS can refer
civil claims to Treasury, Treasurydesignated debt collection centers, or
Justice for collection by further
administrative action or litigation, as
applicable.
DATES: Effective Date: March 8, 2007.
FOR FURTHER INFORMATION CONTACT:
Jeffrey S. Davis, Associate General
Counsel, General Law Division, Office
of the General Counsel, Department of
Health and Human Services, Room 4760
Cohen Building, 330 Independence
Avenue SW., Washington, DC 20201.
SUPPLEMENTARY INFORMATION:
Background
The Debt Collection Act of 1982
(DCA), Public Law No. 97–365, was
implemented on a government-wide
basis by the FCCS, set forth at 4 CFR
part 101 et seq., issued by Justice and
the General Accounting Office on March
9, 1984. See 49 FR 8889 (1984). HHS
implemented the FCCS at 45 CFR part
30. As mandated by the DCIA, Justice
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and Treasury jointly promulgated the
revised FCCS at 31 CFR parts 900–904
to reflect the legislative changes to the
Federal debt collection procedures
enacted by the DCIA. The revised FCCS
superseded the current FCCS, and
removed the Comptroller General as
promulgator of the FCCS. HHS is
required to implement regulations,
consistent with the DCIA and the
regulations promulgated by Justice and
Treasury. The following changes to the
Department’s current debt collection
regulation are incorporated in the
proposed regulation to reflect the DCIA
and the implementing final rule:
1. Demand Letter. One demand
should be sufficient. It will include the
applicable standards for imposing any
interest, penalties, or administrative
costs; use of collection agencies, Federal
salary offset, tax refund offset,
administrative offset, and litigation; any
rights the debtor may have to seek
review of the Department’s
determination of the debt and to enter
into a reasonable repayment agreement;
and information regarding the
Department’s remedies to enforce
payment of the debt.
2. Mutual Releases. HHS and debtors
will exchange mutual releases of nontax liabilities, in all appropriate
instances, when a claim is
compromised.
3. Increase in Amounts. The principal
claim amount that HHS is authorized to
compromise or to suspend or terminate
collection activity thereon, without
concurrence by Justice, is increased
from $20,000 to $100,000. In addition,
the minimum amount of a claim that
may be referred to Justice for litigation
is increased from $600 to $2,500.
4. Transferring or Referring
Delinquent Debt. There are new debt
collection procedures for transferring or
referring delinquent debt to Treasury or
a Treasury-designated debt collection
center for collection.
5. Centralized Administrative Offset.
There are new debt collection
procedures for mandatory, centralized
administrative offset by disbursing
officials.
6. Mandatory Credit Bureau
Reporting. There are new debt
collection procedures for mandatory
credit bureau reporting.
7. Prohibition Against Federal
Financial Assistance. There are new
debt collection procedures prohibiting
Federal financial assistance in the form
of loans, loan guarantees, or loan
insurance to debtors, unless waived by
the Secretary. Disaster loans are exempt
from this prohibition.
8. Army Hold-up List. The use of the
Army hold-up list to report indebted
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contractors to the Department of the
Army has been discontinued.
Additionally, we note that the current
HHS claims collection regulations at 45
CFR 30.13(d) provided: ‘‘[u]nless
specifically authorized by statute,
regulation or written agreement, or
unless the debts arise from, or involve,
fraud or criminal activity, the Secretary
will not charge interest on debts arising
from payments to beneficiaries under
Titles II, XVI, and XVIII of the Social
Security Act.’’ This rule will not change
this Departmental practice. For debts
arising from payments to beneficiaries
under Titles XVI and XVIII of the Social
Security Act (Title II is now
administered by the Social Security
Administration), the Secretary will not
assess interest unless specifically
required to do so by statute, regulation
or written agreement, or unless the
debts arise from, or involve, fraud or
criminal activity.
To the extent any provision of this
rule is inconsistent with a more specific
provision (e.g., certain provisions in 45
CFR parts 31, 32, and 33 and 42 CFR
parts 401 and 405), the more specific
provision shall apply.
Basic Provisions
In accordance with the requirements
of the DCIA and the implementing
regulations promulgated by Justice and
Treasury at 31 CFR parts 900–904, this
final rule establishes the procedures for
the administrative collection, offset,
compromise, suspension and
termination of collection activity for
civil claims for money, funds, or
property, as defined by 31 U.S.C.
3701(b), and the process by which HHS
can refer civil claims to Treasury,
Treasury-designated debt collection
centers, or Justice for collection by
further administrative action or
litigation, as applicable. The rule does
not apply to claims between Federal
agencies. The rule affects HHS’s debtors.
This rule revises the current Department
regulation in accordance with the
substantive and procedural
requirements of the DCIA and the
implementing final rule.
(Authority: 31 U.S.C. 3711.)
Public Comments
We received the following comments
on the proposed rule.
Comment: One commenter asserted
that the mandatory demand letter
statements required by § 30.11 of the
proposed rule potentially conflicted
with validation disclosures of § 809 of
the Fair Debt Collection Practices Act
(FDCPA) that private collection
contractors are required to deliver in
their initial demand letters.
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Response: We do not agree that the
requirements of § 30.11 of the final rule
conflict with the FDCPA and have made
no changes to the final rule based on
this comment. Section 30.11(b)(1)
provides a listing of the information that
must be included in a demand letter.
The specific clauses that concerned the
commenter are found in § 30.11(b)(2)
which provides the listing of the
information which should be included
in a demand letter, including the
statements of fact that: (1) A debtor
delinquent on a debt is ineligible for
Government loans, loan guarantees, or
loan insurance until the debtor resolves
the debt; (2) when seeking to collect
statutory penalties, forfeiture or other
similar types of claims, the debtor’s
licenses, permits, or other privileges
may be suspended or revoked if failure
to pay the debt is inexcusable or willful;
and (3) knowingly making false
statements or bringing frivolous actions
may subject the debtor to civil or
criminal penalties under 31 U.S.C.
3729–3731, 18 U.S.C. 286, 287, 1001,
and 1002, or any other applicable
statutory authority, and, if the debtor is
a Federal employee, to disciplinary
action under 5 CFR part 752 or other
applicable authority.
Comment: One commenter noted that
in the Medicare Secondary Payer (MSP)
context, the Centers for Medicare &
Medicaid Services (CMS) currently
utilizes two demand letters and
requested either the section 30.11(b)
statement, ‘‘[g]enerally one demand
letter should suffice * * *’’ be deleted
or recognize that in the MSP context
two demand letters are generally
appropriate.
Response: We are making no changes
to the final rule based on this comment.
Under the FCCS, agencies are permitted
to use more than one demand letter to
meet the requirements at 31 CFR 901.2.
Therefore, there is no need to change
the current language of § 30.11(b) to
accommodate the use of more than one
demand letter.
Comment: One commenter stated that
in the MSP context, initial demand
letters and intent to refer letters are not
often directed to the appropriate,
responsible party. As a result, the entity
bearing responsibility for the debt may
not have an opportunity to respond
prior to the referral of the debt to
Treasury for collection. The commenter
recommended HHS:
(1) Amend proposed § 30.11(a)(2) to
state that demand letters ‘‘shall be sent
by first class mail to the debtor’s last
known address, as confirmed through
reasonable efforts’’;
(2) Add a new sentence stating that if
a letter is returned as undeliverable, the
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Secretary shall take reasonable steps to
determine the appropriate address of the
alleged debtor and send a second letter;
and
(3) Add a new provision stating that
the Secretary shall provide alleged
debtors (generally employers, insurers
or third party administrators) with the
opportunity to designate a central agent
(at a specific location) to receive MSP
demand letters.
Response: We are making no changes
to the final rule based on this comment.
As to the first two suggestions, CMS
uses the most recent address
information in its system specific to a
particular debt. As to the third
suggestion, the final rule would not
prohibit an employer, insurer, or third
party administrator from reaching an
agreement with CMS on a designated
agent for the receipt of MSP demand
letters to the extent that CMS systems
can handle the request and the specific
debtor information can be appropriately
matched. Employers, insurers, and third
party administrators should have
internal procedures which ensure
correct internal routing of such letters if
the letter is received at any address of
the entity.
Comment: In another comment
relating to MSP debts, a commenter
urged HHS to amend proposed
§ 30.11(b)(1) to state that the written
demand for payment ‘‘shall include
sufficient information to allow the
recipient to identify the specific debt
involved.’’ The commenter noted in the
MSP context, sufficient information
includes: beneficiary name, HIC
number, basis for Medicare eligibility,
policy number, services included in the
claim, dates of service, provider type,
amount due, and member name/
company.
Response: We are making no changes
to the final rule based on this comment.
The current CMS process is adequate
because most of the information listed is
already included in the demand letter
package. The demand package contains
sufficient information to allow the
recipient to identify the specific debt
involved. The intent to refer letter
package includes the initial demand
letter (including attachments) when it is
issued. However, the content of the
initial demand letter is dependent on
the debtor responding to CMS’s
requests, if any, for additional
information. Finally, CMS has no
control over what information Treasury
includes in its first letter to the debtor
and the information Treasury instructs
the private collection agency to include
in its collection letter.
Comment: One commenter requested
HHS to modify proposed § 30.11 to add
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new text (modeled directly on the FCCS
at 31 CFR 901.2(e)) that reads ‘‘the
Secretary 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.’’
Response: We have made this change
requested by the commenter and have
added a new 30.11(f) providing:
Communications from debtors. The
Secretary should respond promptly to
communications from debtor, within 30
days where feasible, and should advise
debtors who dispute debts to furnish
available evidence to support their
contentions.
Comment: One commenter noted that
§ 30.11(b)(1)(ii) would require that
demand letters state ‘‘[t]he date by
which payment should be made to
avoid late charges and enforced
collection, which generally shall be no
later than 30 days from the date the
demand letter is mailed.’’ The
commenter sought confirmation that the
proposed regulation will not (1) Require
CMS to shorten the period allowed by
the MSP statute for entities to respond
to demands for payment before the
imposition of interest or (2) prohibit the
Secretary from exercising discretion to
waive interest, where appropriate.
Response: We are making no changes
to the final rule based on this comment.
We confirm that the regulation does not
require CMS to shorten the period
allowed by the MSP statute for MSP
debtors to respond to demands for
payment before the imposition of
interest, or prohibit the Secretary from
exercising discretion to waive interest,
where appropriate (see § 30.18(g),
Waiver). Proposed § 30.11(b)(1)(ii) is not
intended to alter any existing CMS
policies and procedures on when
entities must respond to demands for
payment to avoid interest in the MSP
context (currently, 60 days), nor is it
intended to limit the Secretary from
waiving interest where appropriate and
where consistent with government-wide
and agency-specific debt collection
standards. The language in proposed
30.11(b)(1)(ii) states payment ‘‘should’’
be made ‘‘generally’’ no later than 30
days to avoid late charges and enforced
collection. Based on this language, CMS
may exercise discretion in extending the
time frame for entities to respond for
specific types of debt such as MSP
debts.
Comment: Proposed § 30.10(c)(1)
states that ‘‘[t]he Secretary shall transfer
debts 180 days or more delinquent to
the Treasury in accordance with the
requirements of 31 CFR 285.12.’’ A
commenter requested that the regulation
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be amended, consistent with the
Treasury regulations, to make clear that
debt is not required to be transferred to
Treasury unless and until a final agency
determination has been made.
Accordingly, the commenter requested
that HHS amend section 30.10 to read:
‘‘(c) The Secretary shall transfer debts
180 days or more delinquent to
Treasury, where appropriate, in
accordance with the requirements of 31
CFR 285.12 when there is a final agency
determination that the debt, in the
amount stated, is due and there are no
legal bars to collection action.’’ The
commenter believed that premature
referral of debt would not only violate
the terms of the Treasury regulation, but
also undermine efficient administration
of debt collection since alleged MSP
debtors, whom the commenter
incorrectly asserted do not receive final
agency determinations prior to referral,
generally seek reconsideration at the
Treasury level. The commenter
contended that this adds an unnecessary
level of complication to the debt
collection process and typically results
in claims being sent back to CMS for
further review and verification of the
validity of the debt.
Response: We are making no changes
to the final rule based on this comment.
It is implicit in the regulatory language
that, before transfer to Treasury, there
will have been a final agency
determination that the debt, in the
amount stated, is due.
Comment: One commenter urged HHS
to modify the proposed regulation to
clearly state the specific process with
which CMS must comply before
transferring MSP debt to Treasury for
administrative offset and/or other crossservicing. The commenter believed that
the proposed regulations do not include
all of the criteria set forth in the
Treasury regulations as prerequisites to
transfer, and recommended that HHS
amend proposed § 30.12(b)(2) to state:
‘‘When referring delinquent debt to the
Secretary of the Treasury for centralized
administrative offset or other debt
collection activity, the appropriate
agency official must certify, in written
form acceptable to the Secretary of the
Treasury, that (i) The debt is valid, past
due and legally enforceable; and (ii) the
Department has complied with all due
process requirements under 31 U.S.C.
3716(a) and paragraph (c)(2) of this
section and all prerequisites to a
particular collection action under the
laws, regulations or policies applicable
to the agency (unless the Secretary of
the Treasury has agreed to comply with
such requirements on the Department’s
behalf).’’
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Response: We are making three
changes to the final rule based on this
comment. First, we are changing the
definition of ‘‘Legally enforceable’’ in
§ 30.2 to add on to the end ‘‘(for
example, the debt is not the subject of
a pending administrative review
required by statute or regulation and
collection action during the review
process is prohibited.)’’ Second, we are
adding ‘‘legally enforceable’’ before the
word ‘‘debts’’ in 30.10(c)(1). While we
believe the requirement that the debt
not be transferred, under mandatory
transfer, if it is the subject of a pending
administrative review required by
statute or regulation and collection
action during the review process is
prohibited was clear, as previously
drafted, since this is a requirement of 31
CFR 285.12(c)(3)(i) and 30.10(c)(1)
specified that transfers to Treasury
would be made in accordance with the
requirements of 31 CFR 285.12, the
regulation is more complete with this
clarification. Related to the part of the
comment that 30.10(c)(2) did not
include all of the criteria set forth in the
Treasury regulations as prerequisites to
transfer, we are also amending
30.10(c)(2) to include ‘‘in accordance
with the requirements of 31 CFR
285.12.’’ Therefore, the requirements of
Treasury’s regulations are clearly
included.
Comment: One commenter suggested
that the Claims Collection regulations be
amended to state that the Secretary may,
where appropriate, in the MSP debt
context, explore the use of alternative
dispute resolution to resolve disputed
debt.
Response: We are making no changes
to the final rule based on this comment
because we believe that CMS’s current
regulations and processes provide
adequate opportunity for the debtor to
dispute a debt.
Comment: One commenter
recommended that HHS define the term
‘‘valid debt’’ under § 30.2 to mean debt
where the government has a reasonable
expectation of being able to prove the
existence of the debt in court, based on
the legal issues and the facts.
Response: We are making no changes
to the Final Rule based on this
comment. We do not agree that it is
necessary to define ‘‘valid debt.’’
Comment: One commenter noted the
proposed Claims Collection regulations
state that the term ‘‘legally enforceable’’
means ‘‘there has been a final agency
determination that the debt, in the
amount stated, is due and there are no
legal bars to collection action.’’
Proposed § 30.2, Definitions. The
commenter requested HHS amend the
proposed regulations to expressly state
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that, when an alleged debtor has
disputed a debt, the appropriate agency
official may not refer the debt to
Treasury unless and until a written
determination explaining the basis for
the decision has been issued (and a
copy provided to the alleged debtor)
concerning the validity of the alleged
debt.
Response: We are making no changes
to the final rule based on this comment.
First, in response to a previously
discussed comment, we are changing
the definition of ‘‘Legally enforceable’’
in § 30.2 to add on to the end ‘‘(for
example, the debt is not the subject of
a pending administrative review
required by statute or regulation and
collection action during the review
process is prohibited.)’’ Also, a final
determination that a debt, in the amount
stated, is due and there are no legal bars
to collection action does not require
issuing a formal written determination,
separate from and in addition to the
demand letter, explaining the basis for
such decision. Also, the regulations
provide, in the definition of a debt
(§ 30.2, Definitions) that an appropriate
official of the Federal Government
determined an amount of funds or other
property is owed to the Government.
Such a determination, therefore, is
needed before a demand letter would be
sent and before the debt would be
referred to Treasury for collection.
Comment: One commenter noted that
proposed section 30.12(b) states that
when referring delinquent debts to the
Secretary of Treasury for centralized
administrative offset, the Department
must certify that the Department has
complied with all due process
requirements under 31 U.S.C. 3716(a)
and § 30.12(c)(2) of the proposed rule.
31 U.S.C. 3716(a)(3) states that the head
of an administrative agency may collect
by offset only after, among other things,
giving the debtor ‘‘an opportunity for a
review within the agency of the decision
of the agency related to the claim.’’ The
commenter noted that the proposed
HHS regulations state that where review
is required, the Secretary must afford
the alleged debtor an oral or paper
hearing. See Proposed § 30.12(e). The
commenter supported this provision of
the regulation, but noted the need for
clarification regarding the specific due
process rights that will be afforded to
employers/unions and health plans/
insurers disputing alleged MSP debt.
The commenter noted that CMS has
published proposed Medicare claims
appeal regulations which expressly
allow beneficiaries and providers/
suppliers to appeal Medicare contractor
determinations that they owe the
government monies under the MSP
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statute, but has not provided any
specific due process appeal rights to
employers/unions or health plans/
insurers in similar circumstances. See
67 FR 69311, 69317–20 (Nov. 15, 2003).
The commenter asserted that, as a
matter of law, employers/unions and
health plans/insurers are entitled to
independent review of an alleged MSP
debt determination by a Medicare
contractor prior to referral of the debt to
Treasury for offset. The commenter
strongly urged HHS to identify the
specific due process rights to be
afforded such entities challenging the
existence of MSP debt, particularly the
nature of any associated appeal rights.
The commenter noted that the FCCS
encourages agencies to use ‘‘all
authorized remedies, including
alternative dispute resolution,’’ for
claims collection, 31 CFR 900.1(c), and
requested HHS to amend the Claims
Collection regulation to state that the
Secretary may, in appropriate
circumstances, explore the use of
alternative dispute resolution
mechanisms to resolve disputed debt.
While the commenter does not request
that CMS be required to use such
alternative dispute resolution
mechanisms, the commenter believes
CMS should be granted the flexibility
through regulation to develop creative
and cost-effective ways of resolving
disputed claims short of transfer to
Treasury (and without incurring the
significant costs associated with use of
private collection agencies).
Response: We are making no changes
to the final rule based on this comment.
We believe that current CMS procedures
provide adequate opportunity for the
non-beneficiary or non-provider/
supplier MSP debtor (e.g., employers/
unions or health plans/insurers) to
dispute a debt. Employers, insurers,
third party administrators, plans, or
other plan sponsors that are issued a
demand letter are provided adequate
notice of the debt and an opportunity to
rebut the debt prior to CMS referring the
MSP debt to Treasury.
Comment: One commenter stated that
it is aware of numerous situations in
which offset of a claim occurred after
CMS had determined that monies were
not in fact due with respect to the
particular claim. Accordingly, the
commenter recommended HHS amend
the Claims Collection regulations to
include the following language adapted
from 31 CFR 285.12 of the Treasury
regulations: ‘‘Once a debt is referred to
Treasury, the Secretary must promptly
notify Treasury of any change in the
status of the debt, including any
decision that the debt is not in fact
owed.’’
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Response: We are making no changes
to the final rule based on this comment.
As noted by the commenter, Treasury’s
current regulations already provide for
notification to Treasury of changes in
the status of the legal enforceability of
a debt. Since 30.10(c) states that the
transfer of debts be in accordance with
31 CFR 285.12, and 31 CFR 285.12(i)
includes this notification of status
requirement, it is unnecessary to restate
that requirement here.
Comment: One commenter noted that
proposed § 30.18 requires the
Department to assess administrative
costs incurred for processing and
handling delinquent debts and,
‘‘[u]nless otherwise established by
contract, repayment agreement, or
statute,’’ to impose a penalty of six
percent a year on the amount due on a
debt that is delinquent for more than 90
days. The commenter asserted that the
mandatory imposition of administrative
costs and penalties is not appropriate
for MSP debt since the interest and
penalty provision of the Debt Collection
Improvement Act, 31 U.S.C. 3717, does
not (with limited exceptions not here
relevant) apply to ‘‘a claim or debt
under, or an amount payable under
* * * the Social Security Act,’’ 31
U.S.C. 3701(d). Accordingly, commenter
requested that HHS amend § 30.18 to
incorporate language from the current
HHS Claims Collection regulations
which states: ‘‘[t]he Secretary will
charge administrative costs or late
payment penalties on debts arising
under the Social Security Act where
authorized by statute, regulations, or
written agreement.’’ See 45 CFR
30.13(d)(2).
Response: We are making no changes
to the final rule based on this comment.
The proposed regulation did not change
the current CMS process for assessing
administrative fees. As to comments on
MSP debts not being subject to the
interest and penalties provisions of the
DCIA, the MSP provisions of the
Medicare statute (section 1862(b) of the
Social Security Act) and implementing
regulations (42 CFR 411.24(m)) provide
CMS separate, independent authority
for assessing interest on delinquent MSP
debts.
Comment: One commenter noted that
proposed § 30.24(b) states ‘‘[t]he
Secretary will ensure that a compromise
agreement with one debtor does not
release the Department’s claim against
the remaining debtors.’’ The commenter
requested that given the unique nature
of MSP claims, HHS delete or modify
the text of the proposed regulation to
expressly authorize the Secretary to
release all potential debtors, where
appropriate with respect to a particular
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debt. The commenter expressed a belief
that historically, MSP settlements with
the government have released claims
against all potential debtors. The
commenter urged HHS to amend the
regulations to allow the Secretary to
retain the flexibility to execute similar
agreements in the future. The
commenter believed that such
comprehensive settlements are
particularly appropriate in the MSP
context where it is not cost-effective to
adjudicate claims twice and health
plans/insurers will have significantly
less incentive to enter into MSP
settlement agreements if potential
claims against their group health plan
customers are not released.
Response: The proposed regulation is
intended to govern situations where
agency (in this case, CMS) regulations
are silent or fail to govern a specific debt
situation. The proposed language in
§ 30.24(b) would not prohibit the
Secretary from executing a compromise
of selected debts where an insurer is
negotiating on its own behalf and on
behalf of others as authorized. However,
HHS will insert the word
‘‘automatically’’ before the word
‘‘release’’ to make clear that some action
could take place which would release
all parties.
Comment: A commenter requested
that HHS amend proposed
§ 30.11(b)(2)(vi) to provide that ‘‘[a]ny
amounts collected and ultimately found
not to have been owed by the debtor
will be refunded promptly.’’ The
commenter explained the proposed
modification is fair and appropriate
where monies are not in fact due. In
addition, the commenter requested that
HHS modify the proposed regulation to
require individual agencies, including
CMS, to establish clearly publicized
processes for debtors to request
reimbursement of disputed amounts
that were paid in order to avoid the
imposition of interest or were taken by
offset and specific timelines for prompt
adjudication of the amounts in dispute.
Response: We are making no changes
to the final rule based on this comment.
Applicable statutes and regulations do
not mandate that the above quoted
language be included in demand letters,
nor do they mandate a specific time
frame or published process for debtors
to request reimbursement of disputed
amounts or for refunding amounts
previously collected. HHS will revisit
this suggestion if it is problematic in
practice.
Comment: One commenter stated that,
when a debt is contested at the
Treasury/private collection agency
level, Treasury will often seek input
from CMS concerning the validity of the
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underlying debt. The commenter
submitted that when this occurs, it is
appropriate for Treasury to suspend all
collection efforts, including offset.
Accordingly, the commenter requested
that HHS add a provision to the
regulation authorizing suspension of all
collection activities by Treasury or a
private collection agency when Treasury
seeks guidance from HHS regarding the
validity of a particular debt in dispute.
Response: We are making no changes
to the final rule based on this comment.
This comment addresses current
Treasury procedures and is outside the
scope of the Claims Collection
regulations.
Comment: One commenter supported
HHS’s proposed modifications of the
regulations which would authorize HHS
to compromise, suspend or terminate
collection activity on a debt under
$100,000 in principal amount without
the concurrence of Justice. See Proposed
§§ 30.21 and 30.28. The commenter also
supports amendments set forth in
proposed § 30.36 which raise the
minimum amount of debt necessary for
referral for litigation.
Response: No response to this
comment is necessary.
Comment: One commenter supported
proposed § 30.22(a)(3)(i) which
authorizes the Secretary to compromise
a debt where the cost of collecting the
debt does not justify the enforced
collection of the full amount, but
requested that the regulation be
amended to state that ‘‘[t]he amount
accepted in compromise of such cases
may reflect an appropriate discount for
the administrative and litigation costs of
collection, with consideration given to
the time it will take to effect collection
and the age of the delinquent debt.’’
Likewise, the commenter requested that
proposed § 30.19 be amended to direct
that the age of delinquent debt be
considered in developing data on costs
and corresponding recovery rates to be
used (among other things) in
establishing guidelines with respect to
points at which costs of further
collection efforts are likely to exceed
recoveries. The commenter believed the
age of alleged MSP debt directly affects
the demand letter processing and
collection costs for both the government
and the alleged debtors and should be
expressly considered in establishing
collection guidelines. The commenter
requested that HHS amend the Claims
Collection regulation to expressly
recognize that it is appropriate for
agencies to (1) Take the age of a debt
into account when determining what
documentation must be provided by the
alleged debtor to mount a defense, and
(2) exercise flexibility in determining
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whether additional collection efforts are
appropriate or justified concerning old
debt.
Response: We are making no changes
to the final rule based on this comment.
We do not agree that it is necessary or
appropriate to specifically require
consideration of the age of the
delinquent debt as a factor in pursuing
or compromising a debt.
Comment: There were several
comments related to the rule’s impact
on state collection activities when states
seek to collect debts due under a
program authorized under the Social
Security Act for which Federal funds
were provided (i.e., Temporary
Assistance to Needy Families (TANF),
State Children’s Health Insurance
Program (SCHIP) and Medicaid). Certain
commenters explained the difficulties
and increased burdens on states in
following the proposed rule. For
example, one commenter offered that
the particular state would need to
change its computer system and the
current way it did business. Other
commenters explained the benefits of
interpreting the rule to allow TANF
debts to be collected pursuant to the
rule and strongly recommended the rule
be interpreted to include state debts and
authorize states to submit TANF debts
to the Treasury Offset Program.
Response: We are making no changes
to the final rule based on these
comments, but draw the commenters’
attention to several points. In the TANF
program, there is no direct Federal share
in recipient overpayments because
TANF is a block grant program.
Therefore, these regulations would not
affect state collection activities with
respect to recipient families. In
addition, states are not subject to the
FCCS when seeking to collect state
overpayments made to providers in the
Medicaid and SCHIP programs. Because
we do not believe that this regulation
imposes any new requirement related to
state collection activities in the
referenced Social Security Act programs
that are related to overpayments or other
debts to or on behalf of individual
recipients, we do not find any burden
on states related to such collection
activities.
Comment: One commenter
recommended that many mandates in
the regulation be made permissive (i.e.,
changing ‘‘shall’’ to ‘‘may’’ in certain
places in the regulation text) so as not
to mandate certain state action.
Response: We are making no changes
to the final rule based on this comment
because, as explained in the response to
the previous comments (directly above),
the HHS regulation does not place these
mandates on states.
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Comment: One commenter asked
whether states administering TANF,
SCHIP or Medicaid should refer cases to
the HHS Office of the Inspector General.
Response: The proposed rule was not
intended to change the current way
states refer to law enforcement entities
claims that are suspected to involve
fraud, false information, or
misrepresentation on the part of the
debtor. States should continue to refer
such claims to the appropriate
governmental entity pursuant to
applicable Federal and State laws and
agency guidance.
Other Changes Made to the Final Rule
We have also changed § 30.18(b)(2),
regarding the percentage of interest to be
charged on debts. The NPRM
requirement that the Department
document in writing the reasons for
charging a higher rate was omitted and
the following language was added: ‘‘Any
such higher rate of interest charged will
be based on Treasury’s quarterly rate
certification to the U.S. Public Health
Service for delinquencies in the
National Research Services Awards and
the National Health Services Corps
Scholarship Program. The Department
publishes this rate in the Federal
Register quarterly.’’
Federalism
We have analyzed this final rule in
accordance with the principles set forth
in Executive Order (EO) 13132
(Federalism). We have determined that
the rule does not contain policies that
have substantial direct effects on the
States, on the relationship between
National Government and the States, or
on the distribution of power and
responsibilities among the various
levels of government. Accordingly, we
have concluded that the rule does not
contain policies that have federalism
implications as defined in the EO and,
consequently, a federalism summary
impact statement is not required.
Analysis of Impacts
For purposes of the Paperwork
Reduction Act, 44 U.S.C. chapter 35,
this proposed rule will impose no new
reporting or recordkeeping requirements
on any member of the public.
Economic Impact
We have examined the impact of this
rule as required by EO 12866
(Regulatory Planning and Review), the
Regulatory Flexibility Act (RFA)
(September 19, 1980; Pub. L. No. 96–
354); the Unfunded Mandates Reform
Act of 1995 (UMRA, Pub. L. No. 104–
4); and the Truth in Regulating Act of
2000 (5 U.S.C. 801 note). EO 12866
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directs agencies to assess all costs and
benefits of available regulatory
alternatives and, if regulation is
necessary, to select regulatory
approaches that maximize the benefits
(including potential economic,
environmental, public health and safety
effects, distributive impacts, and
equity). A regulatory impact analysis
(RIA) must be prepared for major rules
with economically significant effects
($100 million or more in 1 year). We
have determined that the rule is
consistent with the principles set forth
in EO 12866, and we find that the rule
would not have an effect on the
economy that exceeds $100 million in
any one year. In addition, this rule is
not a major rule as defined at 5 U.S.C.
804(2). In accordance with the
provisions of the EO 12866, the rule was
reviewed by the Office of Management
and Budget.
Under the RFA, 5 U.S.C. 605(b), if a
rule has a significant impact on a
substantial number of small entities, an
agency must analyze regulatory options
that would minimize any significant
impact of the rule on small entities. The
agency has considered the effect that
this rule would have on small entities.
I hereby certify, under 5 U.S.C. 605(b),
that the rule will not have a significant
economic impact on a substantial
number of small entities, including
small businesses, small organizations
and small local governments. Therefore,
a regulatory flexibility analysis is not
required by 5 U.S.C. 603. Section 202 of
the UMRA also requires that agencies
assess anticipated costs and benefits
before issuing any rule that may result
in expenditure in any one year by State,
local, or tribal governments, in the
aggregate, or by the private sector, of
$100 million. As noted above, we find
that the rule would not have an effect
of this magnitude on the economy.
Therefore, no further analysis is
required under the UMRA.
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Plain Language
EO 12866 and the President’s
memorandum of June 1, 1998, require
all rules to be written in plain language.
We believe we have done so.
List of Subjects in 45 CFR Part 30
Administrative practice and
procedure, Claims, Debts, Appeals,
Government employees, Privacy.
xxxxxxxxxxxxxxxxxxxxxxxxxx
I HHS revises 45 CFR part 30 to read as
follows:
PART 30—CLAIMS COLLECTION
Subpart A—General Provisions
Sec.
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30.1
30.2
30.3
Purpose, authority, and scope.
Definitions.
Antitrust, fraud, exception in the
account of an accountable official, and
interagency claims excluded.
30.4 Compromise, waiver, or disposition
under other statutes not precluded.
30.5 Other administrative remedies.
30.6 Form of payment.
30.7 Subdivision of claims.
30.8 Required administrative proceedings.
30.9 No private rights created.
Subpart B—Standards for the
Administrative Collection of Debts
30.10 Collection activities.
30.11 Demand for payment.
30.12 Administrative offset.
30.13 Debt reporting and the use of credit
reporting agencies.
30.14 Contracting with private collection
contractors and with entities that locate
and recover unclaimed assets.
30.15 Suspension or revocation of
eligibility for loans and loan guarantees,
licenses, permits or privileges.
30.16 Liquidation of collateral.
30.17 Collection in installments.
30.18 Interest, penalties, and administrative
costs.
30.19 Review of cost effectiveness of
collection.
30.20 Taxpayer information.
Subpart C—Debt Compromise
30.21 Scope and application.
30.22 Basis for compromise.
30.23 Enforcement policy.
30.24 Joint and several liability.
30.25 Further review of compromise offers.
30.26 Consideration of tax consequences to
the Government.
30.27 Mutual release of the debtor and the
Government.
Subpart D—Suspending and Terminating
Collection Activities
30.28 Scope and application.
30.29 Suspension of collection activity.
30.30 Termination of collection activity.
30.31 Exception to termination.
30.32 Discharge of indebtedness; reporting
requirements.
Subpart E—Referrals to the Department of
Justice
30.33 Prompt referral.
30.34 Claims Collection Litigation Report.
30.35 Preservation of evidence.
30.36 Minimum amount of referrals.
Authority: 31 U.S.C. 3711(d).
Subpart A—General Provisions
§ 30.1
Purpose, authority, and scope.
(a) Purpose. This part prescribes the
standards and procedures for the
Department’s use in the administrative
collection, offset, compromise, and
suspension or termination of collection
activity for claims for funds or property,
as defined by 31 U.S.C. 3701(b) and this
part. Covered activities include the
collection of debts in any amount; the
compromise and suspension or
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termination of collection activity of
debts that do not exceed $100,000, or
such higher amount as the Attorney
General may prescribe, exclusive of
interest, penalties, and administrative
costs; and the referral of debts to the
Department of the Treasury (Treasury),
the Treasury-designated debt collection
centers, or the Department of Justice
(Justice) for collection by further
administrative action or litigation, as
applicable.
(b) Authority. The Secretary is issuing
the regulations in this part under the
authority contained in 31 U.S.C.
3711(d). The standards and procedures
prescribed in this part are authorized
under the Federal Claims Collection
Act, as amended, Public Law No. 89–
508, 80 Stat. 308 (July 19, 1966), the
Debt Collection Act of 1982, Public Law
No. 97–365, 96 Stat. 1749 (October 25,
1982), the Debt Collection Improvement
Act of 1996, Public Law No. 104–134,
110 Stat. 1321, 1358 (April 26, 1996)
and the Federal Claims Collection
Standards at 31 CFR parts 900 through
904.
(c) Scope. (1) The standards and
procedures prescribed in this part apply
to all officers and employees of the
Department, including officers and
employees of the various Operating
Divisions and Regional Offices of the
Department, charged with the collection
and disposition of debts owed to the
United States.
(2) The standards and procedures set
forth in this part will be applied except
where specifically excluded herein or
where a statute, regulation or contract
prescribes different standards or
procedures.
(3) Regulations governing the use of
certain debt collection procedures
created under the Debt Collection
Improvement Act of 1996, including tax
refund offset, administrative wage
garnishment, and Federal salary offset,
are contained in parts 31 through 33 of
this chapter.
§ 30.2.
Definitions.
In this part—
Administrative offset means
withholding funds payable by the
United States to, or held by the United
States for, a person to satisfy a debt.
Agency means a department, agency,
court, court administrative office, or
instrumentality in the executive,
judicial, or legislative branch of the
Government, including Government
corporations.
Appropriate official means the
Department official who, by statute or
delegation of authority, determines the
existence and amount of debt.
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Business day means Monday through
Friday. For purposes of computation,
the last day of the period will be
included unless it is a Federal holiday,
in which case the next business day
following the holiday will be considered
the last day of the period.
Claim see the definition for the term
‘‘debt.’’ The terms ‘‘claim’’ and ‘‘debt’’
are synonymous and interchangeable.
Creditor agency means an agency to
which a debt is owed, including a debt
collection center acting on behalf of a
creditor agency.
Day means calendar day. For
purposes of computation, the last day of
the period will be included unless it is
a Saturday, Sunday, or a Federal
holiday, in which case the next business
day will be considered the last day of
the period.
Debt or claim means an amount of
funds or other property determined by
an appropriate official of the Federal
Government to be owed to the United
States from any person, organization, or
entity, except another Federal agency.
For the purpose of administrative offset,
the term includes an amount owed by
an individual to 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. Debts include, but are not limited
to, amounts owed pursuant to: Loans
insured or guaranteed by the United
States; fees; leases; rents; royalties;
services; sales of real or personal
property; Federal salary overpayments;
overpayments to program beneficiaries,
contractors, providers, suppliers, and
grantees; audit disallowance
determinations; civil penalties and
assessments; theft or loss; interest; fines
and forfeitures (except those arising
under the Uniform Code of Military
Justice); and all other similar sources.
Debt collection center means the
Department of the Treasury, or other
Federal agency, subagency, unit, or
division designated by the Secretary of
the Treasury to collect debts owed to the
United States.
Debtor means an individual,
organization, association, partnership,
corporation, or State or local
government or subdivision indebted to
the Government, or the person or entity
with legal responsibility for assuming
the debtor’s obligation.
Debts arising under the Social
Security Act are overpayments to, or
contributions, reimbursements,
penalties or assessments owed by, any
entity, individual, or State under the
Social Security Act. Such amounts
include amounts owed to the Medicare
program under section 1862(b) of the
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Social Security Act. Salary
overpayments and other debts that
result from the administration of the
provisions of the Social Security Act are
not deemed to ‘‘arise under’’ the Social
Security Act for purposes of this part.
Delinquent debt means a debt which
the debtor does not pay or otherwise
resolve by the date specified in the
initial demand for payment, or in an
applicable written repayment agreement
or other instrument, including a postdelinquency repayment agreement.
Department means the Department of
Health and Human Services, and its
Operating Divisions and Regional
Offices.
Disbursing official means an officer or
employee who has authority to disburse
public money pursuant to 31 U.S.C.
3321 or another law.
Disposable pay means that part of the
debtor’s current basic, special,
incentive, retired, and retainer pay, or
other authorized pay, remaining after
deduction of amounts required by law
to be withheld. For purposes of
calculating disposable pay, legally
required deductions that must be
applied first include: Tax levies
pursuant to the Internal Revenue Code
(title 26, United States Code); properly
withheld taxes, FICA, Medicare; health
and life insurance premiums; and
retirement contributions. Amounts
deducted under garnishment orders,
including child support garnishment
orders, are not legally required
deductions for calculating disposable
pay.
Evidence of service means
information retained by the Department
indicating the nature of the document to
which it pertains, the date of mailing of
the document, and the address and
name of the debtor to whom it is being
sent. A copy of the dated and signed
written notice provided to the debtor
pursuant to this part may be considered
evidence of service for purposes of this
part. Evidence of service may be
retained electronically so long as the
manner of retention is sufficient for
evidentiary purposes.
FMS means the Financial
Management Service, a bureau of the
Department of the Treasury.
Hearing means a review of the
documentary evidence to confirm the
existence or amount of a debt or the
terms of a repayment schedule. If the
Secretary determines that the issues in
dispute cannot be resolved by such a
review, such as when the validity of the
claim turns on the issue of credibility or
veracity, the Secretary may provide an
oral hearing. (See 45 CFR 33.6(c)(2) for
oral hearing procedures that may be
provided by the Secretary).
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IRS means the Internal Revenue
Service, a bureau of the Department of
the Treasury.
Late charges means interest, penalties,
and administrative costs required or
permitted to be assessed on delinquent
debts.
Legally enforceable means that there
has been a final agency determination
that the debt, in the amount stated, is
due and there are no legal bars to
collection action.
Local government means a political
subdivision, instrumentality, or
authority of any 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, or an Indian tribe, band or nation.
Operating Division means each
separate component, agency, subagency,
and unit within the Department of
Health and Human Services, including,
but not limited to, the Administration
for Children and Families, the
Administration on Aging, the Centers
for Disease Control and Prevention, the
Centers for Medicare & Medicaid
Services, the Food and Drug
Administration, the National Institutes
of Health, Substance Abuse and Mental
Health Services Administration, Indian
Health Service, Health Resources and
Services Administration, Agency for
Toxic Substances and Disease Registry,
Agency for Healthcare Research and
Quality, and the Office of the Secretary.
OPM means the Office of Personnel
Management.
Payment authorizing agency means an
agency that transmits a voucher to a
disbursing official for the disbursement
of public money.
Payments made under the Social
Security Act means payments by this
Department or other agencies to
beneficiaries, providers, intermediaries,
physicians, suppliers, carriers, States, or
other contractors or grantees under a
Social Security Act program, including:
Title I (Grants to States for Old-Age
Assistance for the Aged); Title II
(Federal Old-Age, Survivors, and
Disability Insurance Benefits); Title III
(Grants to States for Unemployment
Compensation Administration); Title IV
(Grants to States for Aid and Services to
Needy Families with Children and for
Child-Welfare Services); Title V
(Maternal and Child Health Services
Block Grant); Title IX (Miscellaneous
Provisions Relating to Employment
Security); Title X (Grants to States for
Aid to the Blind); Title XI, Part B (Peer
Review of the Utilization and Quality of
Health Care Services); Title XII
(Advances to State Unemployment
Funds); Title XIV (Grants to States for
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Aid to Permanently and Totally
Disabled); Title XVI (Grants to States for
Aid to the Aged, Blind, and Disabled);
Title XVII (Grants for Planning
Comprehensive Action to Combat
Mental Retardation); Title XVIII (Health
Insurance for the Aged and Disabled);
Title XIX (Grants to States for Medical
Assistance Programs); Title XX (Block
Grants to States for Social Services); and
Title XXI (State Children’s Health
Insurance Program). Federal employee
salaries and other payments made by
the Department or other agencies in the
course of administering the provisions
of the Social Security Act are not
deemed to be ‘‘payable under’’ the
Social Security Act for purposes of this
part.
Private collection contractors means
private debt collection under contract
with the Department to collect a nontax
debt or claim owed to the Department.
The term includes private debt
collectors, collection agencies, and
commercial attorneys.
Salary offset means an administrative
offset to collect a debt owed by a
Federal employee through deductions at
one or more officially established pay
intervals from the current pay account
of the employee without his or her
consent.
Secretary means the Secretary of
Health and Human Services, or the
Secretary’s designee.
Taxpayer identification number
means the identifying number described
under section 6109 of the Internal
Revenue Code of 1986 (26 U.S.C. 6109).
For an individual, the taxpayer
identifying number is the individual’s
Social Security Number.
Tax refund offset means withholding
or reducing a tax refund payment by an
amount necessary to satisfy a debt.
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§ 30.3 Antitrust, fraud, exception in the
account of an accountable official, and
interagency claims excluded.
(a) Claims involving antitrust
violations or fraud. (1) The standards in
this part 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 antitrust laws, or
to any debt involving fraud,
presentation of a false claim, or
misrepresentation on the part of the
debtor or any party having an interest in
the claim, unless the Department of
Justice returns a referred claim to the
Department for further handling in
accordance with parts 31 CFR 900
through 904 and this part.
(2) Upon identification of a debt
suspected of involving an antitrust
violation or fraud, a false claim,
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misrepresentation, or other criminal
activity or misconduct, the Secretary
shall refer the debt to the Office of the
Inspector General for review.
(3) Upon the determination of the
Office of the Inspector General that a
claim is based in whole or in part on
conduct in violation of the antitrust
laws, or involves fraud, the presentation
of a false claim, or misrepresentation on
the part of the debtor or any party
having an interest in the claim, the
Secretary shall promptly refer the case
to the Department of Justice for action.
(b) Exception in the account of an
accountable official. The standards in
this part do not apply to compromise of
an exception in the account of an
accountable official.
(c) Interagency claims. This part does
not apply to claims between Federal
agencies. The Department will attempt
to resolve interagency claims by
negotiation in accordance with
EO 12146.
§ 30.4 Compromise, waiver, or disposition
under other statutes not precluded.
Nothing in this part precludes the
Department from disposing of any claim
under statutes and implementing
regulations other than subchapter II of
chapter 37 of Title 31 of the United
States Code and the Federal Claims
Collection Standards, 31 CFR parts 900
through 904. Any statute and
implementing regulation specifically
applicable to the claims collection
activities of the Department will take
precedence over this part.
§ 30.5
Other administrative remedies.
The remedies and sanctions available
under this part for collecting debts are
not intended to be exclusive. Nothing
contained in this part precludes using
any other administrative remedy which
may be available for collecting debts
owed to the Department, such as
converting the method of payment
under a grant from an advancement to
a reimbursement method or revoking a
grantee’s letter-of-credit.
§ 30.6
Form of payment.
Claims may be paid in the form of
money or, when a contractual basis
exists, the Department may demand the
return of specific property or the
performance of specific services.
§ 30.7
Subdivision of claims.
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,
exclusive of interest, penalties and
administrative costs, does not exceed
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$100,000, or such higher amount as
prescribed by the Attorney General for
purposes of compromise, or suspension
or termination of collection activity.
§ 30.8 Required administrative
proceedings.
This part does not supersede, or
require omission or duplication of
administrative proceedings required by
contract, or other laws or regulations.
See for example, 42 CFR part 50 (Public
Health Service), 45 CFR part 16
(Departmental Grant Appeals Board),
and 48 CFR part 33 (Federal Acquisition
Regulation) and part 333 (HHS
Acquisition Regulation).
§ 30.9
No private rights created.
The standards in this part do not
create any right or benefit, substantive
or procedural, enforceable at law or in
equity by a party against the United
States, the Department, its officers, or
any other person, nor shall the failure of
the Department to comply with any of
the provisions of this part be available
to any debtor as a defense.
Subpart B—Standards for the
Administrative Collection of Debts
§ 30.10
Collection activities.
(a) General rule. The Secretary shall
aggressively and timely collect all debts
arising out of activities of, or referred or
transferred for collection actions to, the
Department. Normally, an initial written
demand for payment shall be made no
later than 30 days after a determination
by an appropriate official that a debt
exists.
(b) Cooperation with other agencies.
The Department shall cooperate with
other agencies in their debt collection
activities.
(c) Transfer of delinquent debts. (1)
Mandatory transfer. The Department
shall transfer legally enforceable debts
180 days or more delinquent to Treasury
in accordance with the requirements of
31 CFR 285.12. This requirement does
not apply to any debt that:
(i) Is in litigation or foreclosure;
(ii) Will be disposed of under an
approved asset sale program within one
year of becoming eligible for sale;
(iii) Has been referred to a private
collection contractor for a period of time
acceptable to the Secretary of the
Treasury;
(iv) Is at a debt collection center for
a period of time acceptable to the
Secretary of the Treasury (see paragraph
(c)(2) of this section);
(v) Will be collected under internal
offset procedures within three years
after the debt first became delinquent; or
(vi) Is exempt from this requirement
based on a determination by the
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Secretary of the Treasury that
exemption for a certain class of debt is
in the best interest of the United States.
(2) Permissive transfer. The Secretary
may refer debts less than 180 days
delinquent, including debts referred to
the Department by another agency, to
the Treasury in accordance with the
requirements of 31 CFR 285.12, or with
the consent of the Treasury, to a
Treasury-designated debt collection
center to accomplish efficient, cost
effective debt collection. Referrals to
debt collection centers shall be at the
discretion of, and for a time period
acceptable to, the Secretary of the
Treasury. Referrals may be for servicing,
collection, compromise, suspension, or
termination of collection action.
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§ 30.11
Demand for payment.
(a) Written demand for payment. (1)
Written demand, as described in
paragraph (b) of this section, shall be
made promptly upon a debtor in terms
that inform the debtor of the
consequences of failing to cooperate
with the Department to resolve the debt.
(2) Normally, the demand letter will
be sent no later than 30 days after the
appropriate official determines that the
debt exists. The demand letter shall be
sent by first class mail to the debtor’s
last known address.
(3) When necessary to protect the
Government’s interest, for example to
prevent the running of a statute of
limitations, the written demand for
payment may be preceded by other
appropriate action under this part,
including immediate referral to Justice
for litigation.
(b) Demand letters. 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 Department’s
letters or telephone calls. Generally, one
demand letter should suffice; however,
more may be used.
(1) The written demand for payment
shall include the following information:
(i) The nature and amount of the debt,
including the basis for the indebtedness;
(ii) The date by which payment
should be made to avoid late charges
and enforced collection, which
generally shall be no later than 30 days
from the date the demand letter is
mailed;
(iii) The applicable standards for
imposing any interest, penalties, or
administrative costs (see § 30.18);
(iv) The rights, if any, the debtor may
have to:
(A) Seek review of the Department’s
determination of the debt, and for
purposes of administrative wage
garnishment or salary offset, to request
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a hearing (see 45 CFR parts 32 and 33);
and
(B) Enter into a reasonable repayment
agreement.
(v) An explanation of how the debtor
may exercise any of the rights described
in paragraph (b)(1)(iv) of this section;
(vi) The name, address, and phone
number of a contact person or office
within the Department to address any
debt-related matters; and
(vii) The Department’s remedies to
enforce payment of the debt, which may
include:
(A) Garnishing the debtor’s wages
through administrative wage
garnishment;
(B) Offsetting any Federal payments
due the debtor, including income tax
refunds, salary, certain benefit payments
such as Social Security, retirement, and
travel reimbursements and advances;
(C) Referring the debt to a private
collection contractor;
(D) Reporting the debt to a credit
bureau or other automated database;
(E) Referring the debt to Justice for
litigation; and
(F) Referring the debt to Treasury for
any of the collection actions described
in paragraphs (b)(1)(vii)(A) through (E)
of this section, advising the debtor that
such referral is mandatory if the debt is
180 or more days delinquent.
(2) The written demand for payment
should also include the following
information:
(i) The debtor’s right to inspect and
copy all records of the Department
pertaining to the debt, or if the debtor
or the debtor’s representative cannot
personally inspect the records, to
request and receive copies of such
records;
(ii) The Department’s willingness to
discuss with the debtor alternative
methods of payment;
(iii) A debtor delinquent on a debt is
ineligible for Government loans, loan
guarantees, or loan insurance until the
debtor resolves the debt;
(iv) When seeking to collect statutory
penalties, forfeiture or other similar
types of claim, the debtor’s licenses,
permits, or other privileges may be
suspended or revoked if failure to pay
the debt is inexcusable or willful. Such
suspension or revocation shall extend to
programs or activities 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;
(v) Knowingly making false
statements or bringing frivolous actions
may subject the debtor to civil or
criminal penalties under 31 U.S.C.
3729–3731, 18 U.S.C. 286, 287, 1001,
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and 1002, or any other applicable
statutory authority, and, if the debtor is
a Federal employee, to disciplinary
action under 5 CFR part 752 or other
applicable authority;
(vi) Any amounts collected and
ultimately found not to have been owed
by the debtor will be refunded;
(vii) For salary offset, up to 15% of
the debtor’s current disposable pay may
be deducted every pay period until the
debt is paid in full; and
(viii) Dependent upon applicable
statutory authority, the debtor may be
entitled to consideration for a waiver.
(c) The Secretary will retain evidence
of service indicating the date of mailing
of the demand letter. The evidence of
service, which may include a certificate
of service, may be retained
electronically so long as the manner of
retention is sufficient for evidentiary
purposes.
(d) Prior to, during, or after the
completion of the demand process, if
the Secretary determines to pursue, or is
required to pursue offset, the procedures
applicable to offset should be followed
(see § 30.12). The availability of funds
for debt satisfaction by offset and the
Secretary’s determination to pursue
collection by offset shall release the
Secretary from the necessity of further
compliance with paragraphs (a), (b), and
(c) of this section.
(e) Finding debtors. The Secretary will
use every reasonable effort to locate
debtors, using such sources as telephone
directories, city directories, postmasters,
drivers license records, automobile title
and license records in State and local
government agencies, the IRS, credit
reporting agencies and skip locator
services. Referral of a confess-judgment
note to the appropriate United States
Attorney’s Office for entry of judgment
will not be delayed because the debtor
cannot be located.
(f) Communications from debtors. The
Secretary should respond promptly to
communications from debtor, within 30
days where feasible, and should advise
debtors who dispute debts to furnish
available evidence to support their
contentions.
(g) Exception. This section does not
require duplication of any notice
already contained in a written
agreement, letter or other document
signed by, or provided to, the debtor.
§ 30.12
Administrative offset.
(a) Scope. (1) Administrative offset is
the withholding of funds payable by the
United States to, or held by the United
States for, a person to satisfy a debt.
(2) This section does not apply to:
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(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), and implementing
regulation at 31 CFR 285.4;
(iii) Debts arising under, or payments
made under, the Internal Revenue Code
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; 31 CFR 285.7;
and part 33 of this chapter);
(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 for 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,
collection by administrative offset under
the authority of 31 U.S.C. 3716 may not
be conducted more than 10 years after
the Department’s right to collect the
debt first accrued, unless facts material
to the Department’s right to collect the
debt were not known and could not
reasonably have been known by the
Secretary. This limitation does not
apply to debts reduced to judgment.
(5) Where there is reason to believe
that a bankruptcy petition has been filed
with respect to a debtor, the Office of
the General Counsel should be
contacted for legal advice concerning
the impact of the Bankruptcy Code,
particularly 11 U.S.C. 106, 362 and 553,
on pending or contemplated collections
by offset.
(b) Centralized administrative offset.
(1) Except as provided in the exceptions
listed in § 30.10(c)(1), legally
enforceable debts which are 180 days
delinquent shall be referred to the
Secretary of the Treasury for collection
by centralized administrative offset
pursuant to and in accordance with 31
CFR 901.3(b). Debts which are less than
180 days delinquent, including debts
referred to the Department by another
agency, also may be referred to the
Secretary of the Treasury for collection
by centralized administrative offset.
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(2) When referring delinquent debts to
the Secretary of the Treasury for
centralized administrative offset, the
Department must certify, in a form
acceptable to the Secretary of the
Treasury, that:
(i) The debt is past due and legally
enforceable; and
(ii) The Department has complied
with all due process requirements under
31 U.S.C. 3716(a) and paragraph (c)(2) of
this section.
(3) Payments that are prohibited by
law from being offset are exempt from
centralized administrative offset. The
Secretary of the Treasury 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 of the
Treasury may exempt other classes of
payments from centralized offset upon
the written request of the head of the
payment certifying or authorizing
agency.
(c) Non-centralized administrative
offset. (1) Unless otherwise prohibited
by law, when centralized administrative
offset under paragraph (b) of this section
is not available or appropriate, the
Secretary may collect a delinquent debt
by conducting non-centralized
administrative offset internally or in
cooperation with the agency certifying
or authorizing payments to the debtor.
(2) Except as provided in paragraph
(c)(3) of this section, administrative
offset may be initiated only after:
(i) The debtor has been sent written
notice of the type and amount of the
debt, the intention of the Department to
initiate administrative offset to collect
the debt, and an explanation of the
debtor’s rights under 31 U.S.C. 3716;
and
(ii) The debtor has been given:
(A) The opportunity to inspect and
copy Department records related to the
debt;
(B) The opportunity for a review
within the Department of the
determination of indebtedness; and
(C) The opportunity to make a written
agreement to repay the debt.
(3) The due process requirements
under paragraph (c)(2) of this section
may be omitted when:
(i) Offset is in the nature of a
recoupment, i.e., the debt and the
payment to be offset arise out of the
same transaction or occurrence;
(ii) 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
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covered by the Contracts Disputes Act);
or
(iii) In the case of non-centralized
administrative offset conducted under
paragraph (c)(1) of this section, the
Department 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 Secretary shall give the
debtor such notice and an opportunity
for review as soon as practical and shall
promptly refund any money ultimately
found not to have been owed to the
Government.
(4) When the debtor previously has
been given any of the required notice
and review opportunities with respect
to a particular debt, such as under
§ 30.11 of this part, the Department need
not duplicate such notice and review
opportunities before administrative
offset may be initiated.
(5) Before requesting that a payment
authorizing agency to conduct noncentralized administrative offset, the
Department shall:
(i) Provide the debtor with due
process as set forth in paragraph (c)(2)
of this section; and
(ii) Provide the payment authorizing
agency written certification that the
debtor owes the past due, legally
enforceable delinquent debt in the
amount stated, and that the Department
has fully complied with this section.
(6) When a creditor agency requests
that the Department, as the payment
authorizing agency, conduct noncentralized administrative offset, the
Secretary shall comply with the request,
unless the offset would not be in the
best interest of the United States with
respect to the program of the
Department, 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, including salary
offset.
(7) When collecting multiple debts by
non-centralized administrative offset,
the Department will 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 and the
Federal Employee Retirement System.
Upon providing OPM written
certification that a debtor has been
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afforded the procedures provided in
paragraph (c)(2) of this section, the
Department 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 5 CFR part 831,
subpart R, or under the Federal
Employee Retirement System (FERS) in
accordance with 5 CFR part 845, subpart
D. 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 or under FERS. This will satisfy
any requirement that offset be initiated
prior to the expiration of the time
limitations referenced in 31 CFR
901.3(b)(4).
(e) Review requirements. (1) For
purposes of this section, whenever the
Secretary is required to afford a debtor
a review within the Department, the
debtor shall be provided with a
reasonable opportunity for an oral
hearing when the debtor requests
reconsideration of the debt and the
Secretary 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 Department will
carefully document all significant
matters discussed at the hearing.
(3) An oral hearing is not required
with respect to debt collection systems
where determinations of indebtedness
rarely involve issues of credibility or
veracity, and the Secretary has
determined that a review of the written
record is adequate to correct prior
mistakes.
(4) In those cases when an oral
hearing is not required by this section,
the Secretary shall accord the debtor a
‘‘paper hearing,’’ that is, a determination
of the request for reconsideration based
upon a review of the written record.
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§ 30.13 Debt reporting and use of credit
reporting agencies.
(a) Reporting delinquent debts. (1)
The Secretary will report delinquent
debts over $100 to credit bureaus or
other automated databases. Debts arising
under the Social Security Act are
excluded from paragraph (a).
(2) Debts owed by individuals will be
reported to consumer reporting agencies
pursuant to 5 U.S.C. 552a(b)(12).
(3) Once a debt has been referred to
Treasury for collection, any subsequent
reporting to or updating of a credit
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bureau or other automated database may
be handled by the Treasury.
(4) Where there is reason to believe
that a bankruptcy petition has been filed
with respect to a debtor, the Office of
the General Counsel should be
contacted for legal advice concerning
the impact of the Bankruptcy Code,
particularly with respect to the
applicability of the automatic stay, 11
U.S.C. 362, and the procedures for
obtaining relief from such stay prior to
proceeding under paragraph (a) of this
section.
(5) If the debtor has not received prior
written notice under § 30.11(b), before
reporting a delinquent debt under this
section, the Secretary shall provide the
debtor at least 60 days written notice of
the amount and nature of the debt; that
the debt is delinquent and the
Department intends to report the debt to
a credit bureau (including the specific
information that will be disclosed); that
the debtor has the right to dispute the
accuracy and validity of the information
being disclosed; and, if a previous
opportunity was not provided, that the
debtor may request review within the
Department of the debt or rescheduling
of payment. The Secretary may disclose
only the individual’s name, address,
and social security number and the
nature, amount, status and history of the
debt.
(b) Use of credit reporting agencies.
The Secretary may also use credit
reporting agencies to obtain credit
reports to evaluate the financial status of
loan applicants, potential contractors
and grantees; to determine a debtor’s
ability to repay a debt; and to locate
debtors. In the case of an individual, the
Secretary may disclose, as a routine use
under 5 U.S.C 552a(b)(3), only the
individual’s name, address, and Social
Security number and the purpose for
which the information will be used.
§ 30.14 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, the
Secretary may contract with private
collection contractors to recover
delinquent debts, provided that:
(1) The Secretary retains the authority
to resolve disputes, compromise debts,
suspend or terminate collection action,
and refer debts to Justice 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
Secretary has granted such authority
prior to the offer;
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(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) The Secretary shall use
government-wide debt collection
contracts to obtain debt collection
services provided by private collection
contractors. However, the Secretary may
refer debts to private collection
contractors pursuant to a contract
between the Department and the private
collection contractor only if such debts
are not subject to the requirement to
transfer debts to the Department of the
Treasury for debt collection under 31
U.S.C. 3711(g) and 31 CFR 285.12(e).
(c) Debts arising under the Social
Security Act (which can be collected by
private collection contractors only by
Treasury after the debt has been referred
to Treasury for collection) are excluded
from this section.
(d) The Secretary may fund private
collection contractor contracts in
accordance with 31 U.S.C. 3718(d), or as
otherwise permitted by law. A contract
under paragraph (a) of this section may
provide that the fee a private collection
contractor charges the Department for
collecting the debt is payable from the
amounts collected.
(e) The Department may enter into
contracts for locating and recovering
assets of the United States including
unclaimed assets. However, before
entering into a contract to recover assets
of the United States that may be held by
a State government or financial
institution, the Department must
establish procedures that are acceptable
to the Secretary of Treasury.
(f) The Secretary 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 Department for such services may be
payable from the amounts recovered,
unless otherwise prohibited by statute.
§ 30.15 Suspension or revocation of
eligibility for loans and loan guarantees,
licenses, permits, or privileges.
(a)(1) Unless waived by the Secretary,
financial assistance in the form of loans,
loan guarantees, or loan insurance shall
not be extended to any person
delinquent on a non-tax debt owed to
the United States. This prohibition does
not apply to disaster loans. Grants,
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cooperative agreements, and contracts
are not considered to be loans.
(2) The authority to waive the
application of this section may be
delegated to the Chief Financial Officer
and re-delegated only to the Deputy
Chief Financial Officer.
(3) States that manage Federal
activities, pursuant to approval from the
Secretary, should ensure that
appropriate steps are taken to safeguard
against issuing licences, permits, or
other privileges to debtors who fail to
pay their debts to the Federal
Government.
(b) The Secretary will report to
Treasury any surety that fails to honor
its obligations under 31 U.S.C. 9305.
(c) In non-bankruptcy cases, when
seeking to collect statutory penalties,
forfeitures, or other types of claims, the
Secretary may suspend or revoke
licenses, permits, or other privileges of
a delinquent debtor if the failure to pay
the debt is found to be inexcusable or
willful. Such suspension or revocation
will extend to programs or activities
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.
(d) Where there is reason to believe
that a bankruptcy petition has been filed
with respect to a debtor, before taking
any action to suspend or revoke under
paragraph (c) of this section, the Office
of the General Counsel should be
contacted for legal advice concerning
the impact of the Bankruptcy Code,
particularly 11 U.S.C. 362 and 525,
which may restrict such action.
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§ 30.16
Liquidation of collateral.
(a)(1) The Secretary will liquidate
security or collateral through the
exercise of a power of sale in the
security instrument or a non-judicial
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 interests of the United States.
(2) 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.
(3) The Secretary will give the debtor
reasonable notice of the sale and an
accounting of any surplus proceeds and
will comply with other requirements
under law or contract.
(b) Where there is reason to believe
that a bankruptcy petition has been filed
with respect to a debtor, the Office of
the General Counsel should be
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contacted for legal advice concerning
the impact of the Bankruptcy Code,
particularly with respect to the
applicability of the automatic stay, 11
U.S.C. 362, and the procedures for
obtaining relief from such stay prior to
proceeding under paragraph (a) of this
section.
§ 30.17
Collection in installments.
(a) Whenever feasible, the total
amount of a debt shall be collected in
one lump sum payment. If a debtor is
financially unable to pay a debt in one
lump sum, either by funds or
administrative offset, the Secretary may
accept payment in regular installments.
The Secretary will obtain financial
statements from debtors who represent
that they are unable to pay in one lump
sum and independently verify such
representations as described in
§ 30.22(a)(1).
(b)(1) When the Secretary agrees to
accept payments in regular installments,
a legally enforceable written agreement
should be obtained from the debtor that
specifies all the terms and conditions of
the agreement, and that includes a
provision accelerating the debt in the
event of a default.
(2) The size and frequency of the
payments should reasonably relate to
the size of the debt and the debtor’s
ability to pay. Whenever feasible, the
installment agreement will provide for
full payment of the debt, including
interest and charges, in three years or
less.
(3) In appropriate cases, the
agreement should include a provision
identifying security obtained from the
debtor for the deferred payments.
§ 30.18 Interest, penalties, and
administrative costs.
(a) Generally. Except as provided in
paragraphs (g), (h), and (i) of this
section, the Department shall charge
interest, penalties, and administrative
costs on delinquent debts owed to the
United States. These charges shall
continue to accrue until the debt is paid
in full or otherwise resolved through
compromise, termination, or waiver of
the charges.
(b) Interest. The Department shall
charge interest on delinquent debts
owed the United States as follows:
(1) Interest shall accrue from the date
of delinquency, or as otherwise
provided by law. For debts not paid by
the date specified in the written demand
for payment made under § 30.11, the
date of delinquency is the date of
mailing of the notice. The date of
delinquency for an installment payment
is the due date specified in the payment
agreement.
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(2) Unless a different rate is
prescribed by statute, contract, or a
repayment agreement, the rate of
interest charged shall be the rate
established annually by the Secretary of
the Treasury pursuant to 31 U.S.C. 3717.
The Department may charge a higher
rate if necessary to protect the rights of
the United States and the Secretary has
determined and documented a higher
rate for delinquent debt is required to
protect the Government’s interests. Any
such higher rate of interest charged will
be based on Treasury’s quarterly rate
certification to the U.S. Public Health
Service for delinquencies in the
National Research Services Awards and
the National Health Services Corps
Scholarship Program. The Department
publishes this rate in the Federal
Register quarterly.
(3) Unless prescribed by statute or
contract, the rate of interest, as initially
charged, shall remain fixed for the
duration of the indebtedness. When a
debtor defaults on a repayment
agreement and seeks to enter into a new
agreement, the Department may require
payment of interest at a new rate that
reflects the Treasury rate in effect at the
time the new agreement is executed.
Interest shall not be compounded, that
is, interest shall not be charged on
interest, penalties, or administrative
costs required by this section, unless
prescribed by statute or contract. If,
however, the debtor defaults on a
previous repayment agreement, charges
that accrued but were not collected
under the defaulted agreement shall be
added to the principal under the new
repayment agreement.
(c) Administrative costs. The
Department shall assess administrative
costs incurred for processing and
handling delinquent debts. The
calculation of administrative costs
should be based on actual costs incurred
or a valid estimate of the actual costs.
Calculation of administrative costs shall
include all direct (personnel, supplies,
etc.) and indirect collection costs,
including the cost of providing a
hearing or any other form of
administrative review requested by a
debtor, and any costs charged by a
collection agency under § 30.14. These
charges will be assessed monthly, or per
payment period, throughout the period
that the debt is overdue. Such costs may
also be in addition to other
administrative costs if collection is
being made for another Federal agency
or unit.
(d) Penalty. Unless otherwise
established by contract, repayment
agreement, or statute, the Secretary will
charge a penalty of six percent a year on
the amount due on a debt that is
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delinquent for more than 90 days. This
charge shall accrue from the date of
delinquency.
(e) Cost of living adjustment. When
there is a legitimate reason to do so,
such as when calculating interest and
penalties on a debt would be extremely
difficult because of the age of the debt,
an administrative debt may be increased
by the cost of living adjustment in lieu
of charging interest and penalties under
this section. Administrative debt
includes, but is not limited to, a debt
based on fines, penalties, and
overpayments, but does not include a
debt based on the extension of
Government credit, such as those arising
from loans and loan guaranties. The cost
of living adjustment is the percentage by
which the Consumer Price Index for the
month of June of the calendar year
preceding the adjustment exceeds the
Consumer Price Index for the month of
June of the calendar year in which the
debt was determined or last adjusted.
Such increases to administrative debts
shall be computed annually.
(f) Priority. When a debt is paid in
partial or installment payments,
amounts received shall be applied first
to outstanding penalties, second to
administrative charges, third to interest,
and last to principal.
(g) Waiver. (1) The Secretary shall
waive the collection of interest and
administrative charges imposed
pursuant to this section on the portion
of the debt that is paid within 30 days
after the date on which interest began to
accrue. The Secretary may extend this
30-day period on a case-by-case basis if
the Secretary determines that such
action is in the best interest of the
Government, or otherwise warranted by
equity and good conscience.
(2) The Secretary also may waive
interest, penalties, and administrative
charges charged under this section, in
whole or in part, without regard to the
amount of the debt, based on:
(i) The criteria set forth at § 30.22(a)(1)
through (4) for the compromise of debts;
or
(ii) A determination by the Secretary
that collection of these charges is:
(A) Against equity and good
conscience; or
(B) Not in the best interest of the
United States.
(h) Review. (1) Except as provided in
paragraph (h)(2) of this section,
administrative review of a debt will not
suspend the assessment of interest,
penalties, and administrative costs.
While agency review of a debt is
pending, the debtor either may pay the
debt or be liable for interest and related
charges on the uncollected debt. When
agency review results in a final
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determination that any amount was
properly a debt and the debtor chose to
retain the amount in dispute, the
Secretary shall collect from the debtor
the amount determined to be due, plus
interest, penalties and administrative
costs on such debt amount, as
calculated under this section, starting
from the date the debtor was first made
aware of the debt and ending when the
debt is repaid.
(2) Exception. Interest, penalties, and
administrative cost charges will not be
imposed on a debt for periods during
which collection activity has been
suspended under § 30.29(c)(1) pending
agency review or consideration of
waiver if statute prohibits collection of
the debt during this period.
(i) Common law or other statutory
authority. The Department may impose
and waive interest and related charges
on debts not subject to 31 U.S.C. 3717
in accordance with the common law or
other statutory authority.
§ 30.19 Review of cost effectiveness of
collection.
Periodically, the Secretary will
compare costs incurred and amounts
collected. Data on costs and
corresponding recovery rates for debts
of different types and in various dollar
ranges will 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.
§ 30.20
Taxpayer information.
(a) When attempting to locate a debtor
in order to collect or compromise a debt
under this part or any other authority,
the Secretary may send a request to
Treasury in accordance with 31 CFR
901.11 to obtain a debtor’s mailing
address from the records of the IRS.
(b) Mailing addresses obtained under
paragraph (a) of this section may be
used to enforce collection of a
delinquent debt and may be disclosed to
other agencies and to collection
agencies for collection purposes.
Subpart C—Debt Compromise
§ 30.21
Scope and application.
(a) Scope. The standards set forth in
this subpart apply to the compromise of
debts pursuant to 31 U.S.C. 3711. The
Secretary may exercise such
compromise authority for debts arising
out of activities of, or referred or
transferred for collection services to, the
Department when the amount of the
debt then due, exclusive of interest,
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penalties, and administrative costs, does
not exceed $100,000, or any higher
amount authorized by the Attorney
General.
(b) Application. 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 a compromise rests
with Justice. The Secretary shall
evaluate the compromise offer, using the
factors set forth in this subpart. If an
offer to compromise any debt in excess
of $100,000 is acceptable to the
Department, the Secretary shall refer the
debt to the Civil Division or other
appropriate litigating division in Justice
using a Claims Collection Litigation
Report (CCLR), which may be obtained
from Justice’s National Central Intake
Facility. The referral shall include
appropriate financial information and a
recommendation for the acceptance of
the compromise offer. Justice approval
is not required if the Secretary rejects a
compromise offer.
§ 30.22
Bases for compromise.
(a) Compromise. The Secretary may
compromise a debt if the full amount
cannot be collected based upon inability
to pay, inability to collect the full debt,
cost of collection, or doubt debt can be
proven in court.
(1) Inability to pay. The debtor is
unable to pay the full amount in a
reasonable time, as verified through
credit reports or other financial
information. In determining a debtor’s
inability to pay the full amount of the
debt within a reasonable time, the
Secretary will obtain and verify the
debtor’s claim of inability to pay by
using credit reports or a current
financial Statement from the debtor,
executed under penalty of perjury,
showing the debtor’s assets, liabilities,
income, and expenses. The Secretary
may use a Departmental financial
information form or may request
suitable forms from Justice or the local
United States Attorney’s Office. The
Secretary also may consider other
relevant factors such as:
(i) Age and health of the debtor;
(ii) Present and potential income;
(iii) Inheritance prospects;
(iv) The possibility that assets have
been concealed or improperly
transferred by the debtor; and
(v) The availability of assets or
income that may be realized by enforced
collection proceedings.
(2) Inability to collect full debt. The
Government is unable to collect the debt
in full within a reasonable time by
enforced collection proceedings.
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(i) In determining the Government’s
ability to enforce collection, the
Secretary will consider the applicable
exemptions available to the debtor
under State and Federal law, and may
also consider uncertainty as to the price
the collateral or other property will
bring at a forced sale.
(ii) 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.
(3) Cost of collection. The cost of
collecting the debt does not justify the
enforced collection of the full amount.
(i) The Secretary 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 of such cases
may reflect an appropriate discount for
the administrative and litigation 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.
(ii) In determining whether the costs
of collection justify enforced collection
of the full amount, the Secretary will
consider whether continued collection
of the debt, regardless of cost, is
necessary to further an enforcement
principal, such as the Government’s
willingness to pursue aggressively
defaulting and uncooperative debtors.
(4) Doubt debt can be proven in court.
There is significant doubt concerning
the Government’s ability to prove its
case in court.
(i) 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 to the
availability of witnesses and other
evidentiary support for the
Government’s claim.
(ii) In determining the litigation risks
involved, the Secretary will 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.
(b) Installments. The Secretary
generally will not accept compromises
payable in installments. This is not an
advantageous form of compromise in
terms of time and administrative
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expense. If, however, payment of a
compromise in installments is
necessary, the Secretary shall, except in
the case of compromises based on
paragraph (a)(4) of this section, 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. The Office of
the General Counsel should be
consulted concerning the
appropriateness of including such a
requirement in the case of compromises
based on paragraph (a)(4) of this section.
Whenever possible, the Secretary will
obtain security for repayment in the
manner set forth in subpart B of this
part.
§ 30.23
Enforcement policy.
The Secretary may compromise
statutory penalties, forfeitures, or claims
established as an aid to enforcement and
to compel compliance if the
Department’s enforcement policy, in
terms of deterrence and securing
compliance, present and future, will be
adequately served by the Secretary’s
acceptance of the sum to be agreed
upon.
§ 30.24
Joint and several liability.
(a) When two or more debtors are
jointly and severally liable, the
Secretary will pursue collection against
all debtors, as appropriate. The
Secretary will not attempt to allocate the
burden of payment between the debtors
but will proceed to liquidate the
indebtedness as quickly as possible.
(b) The Secretary will ensure that a
compromise agreement with one debtor
does not automatically release the
Department’s claim against the
remaining debtor(s). 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.
§ 30.25
offers.
Further review of compromise
If the Secretary is uncertain whether
to accept a firm, written, substantive
compromise offer on a debt that is
within the Secretary’s delegated
compromise authority, the Secretary
may refer the offer to the Civil Division
or other appropriate litigating division
in Justice, using a CCLR accompanied
by supporting data and particulars
concerning the debt. Justice may act
upon such an offer or return it to the
Secretary with instructions or advice.
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§ 30.26 Consideration of tax
consequences to the Government.
In negotiating a compromise, the
Secretary will consider the tax
consequences to the Government. In
particular, the Secretary will consider
requiring a waiver of tax-loss-carryforward and tax-loss-carry-back rights of
the debtor. For information on discharge
of indebtedness reporting requirements
see § 30.32.
§ 30.27 Mutual release of the debtor and
the Government.
In all appropriate instances, a
compromise that is accepted by the
Secretary will be implemented by
means of a mutual release. The terms of
such mutual release shall provide that
the debtor is released from further nontax 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.
Subpart D—Suspending and
Terminating Collection Activities
§ 30.28
Scope and application.
(a) Scope. The standards set forth in
this subpart 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 Justice for litigation,
the Secretary may suspend or terminate
collection under this subpart with
respect to debts arising out of activities
of, or referred or transferred for
collection services to, the Department.
(b) Application. (1) If, after deducting
the amount of partial payments or
collections, the principal amount of the
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
Justice.
(2) If the Secretary believes that
suspension or termination of any debt in
excess of $100,000 may be appropriate,
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the Secretary shall refer the debt to the
Civil Division or other appropriate
litigating division in Justice, using the
CCLR. The referral will specify the
reasons for the Secretary’s
recommendation. If, prior to referral to
Justice, the Secretary determines that a
debt is plainly erroneous or clearly
without merit, the Secretary may
terminate collection activity regardless
of the amount involved without
obtaining Justice concurrence.
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§ 30.29
Suspension of collection activity.
(a) Generally. The Secretary may
suspend collection activity on a debt
when:
(1) The Department 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) Financial condition. Based on the
current financial condition of a debtor,
the Secretary 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;
(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) Waiver or review. (1) The Secretary
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 Secretary from
collecting the debt during that time.
(2) If the statute under which the
waiver or administrative review request
is sought does not prohibit collection
activity pending consideration of the
request, the Secretary may use
discretion, on a case-by-case basis, to
suspend collection. Collection action
ordinarily will be suspended upon a
request for waiver or review if the
Secretary is prohibited by statute or
regulation from issuing a refund of
amounts collected prior to agency
consideration of the debtor’s request.
However, collection will not be
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suspended when the Secretary
determines that the request for waiver or
review is frivolous or was made
primarily to delay collection.
(d) Bankruptcy. Upon learning that a
bankruptcy petition has been filed with
respect to a debtor, in most cases the
Secretary must suspend collection
activity on the debt, pursuant to the
provisions of 11 U.S.C. 362, 1201, and
1301, unless the Secretary can clearly
establish that the automatic stay has
been lifted or is no longer in effect. The
Office of the General Counsel should be
contacted immediately for legal advice,
and the Secretary will take the
necessary legal steps to ensure that no
funds or money are paid by the
Department to the debtor until relief
from the automatic stay is obtained.
§ 30.30
Termination of collection activity.
(a) The Secretary may terminate
collection activity when:
(1) The Department is unable to
collect any substantial amount through
its own efforts or through the efforts of
others;
(2) The Department 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)(1) Collection activity will not be
terminated before the Secretary has
pursued all appropriate means of
collection and determined, based upon
the results of the collection activity, that
the debt is uncollectible.
(2) Termination of collection activity
ceases active collection of the debt. The
termination of collection activity does
not preclude the Secretary from
retaining a record of the account for
purposes of:
(i) Selling the debt, if the Secretary of
the Treasury determines that such sale
is in the best interest of the United
States;
(ii) 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;
(iii) Offsetting against future income
or assets not available at the time of
termination of collection activity; or
(iv) Screening future applicants for
prior indebtedness.
(c) Generally, the Secretary shall
terminate collection activity on a debt
that has been discharged in bankruptcy,
regardless of the amount. The Secretary
may continue collection activity,
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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, when the
Department is a known creditor of a
debtor the claims of the Department
may survive a discharge if the
Department did not receive formal
notice of the bankruptcy proceedings.
When the Department believes that it
has claims or offsets that may have
survived the discharge of the debtor, the
Office of the General Counsel should be
contacted for legal advice.
§ 30.31
Exception to termination.
When a significant enforcement
policy is involved, or recovery of a
judgment is a prerequisite to the
imposition of administrative sanctions,
the Secretary may refer debts to Justice
for litigation even though termination of
collection activity may otherwise be
appropriate.
§ 30.32 Discharge of indebtedness;
reporting requirements.
(a)(1) Before discharging a delinquent
debt, also referred to as close out of the
debt, the Secretary shall take all
appropriate steps to collect the debt in
accordance with 31 U.S.C. 3711(g)(9),
and parts 30 through 33 of this chapter,
including, as applicable, administrative
offset; tax refund offset; Federal salary
offset; credit bureau reporting;
administrative wage garnishment;
litigation; foreclosure; and referral to
Treasury, Treasury-designated debt
collection centers, or private collection
contractors.
(2) Discharge of indebtedness is
distinct from termination or suspension
of collection activity under this subpart,
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 part and 31
CFR parts 900 through 904.
(3) When the Department discharges a
debt in full or in part, further collection
action is prohibited. Therefore, before
discharging a debt, the Secretary must:
(i) Make the determination that
collection action is no longer warranted;
and
(ii) Terminate debt collection action.
(b) In accordance with 31 U.S.C.
3711(i), the Secretary shall use
competitive procedures to sell a
delinquent debt upon termination of
collection action if the Secretary of the
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Treasury 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, the
Secretary may not discharge a debt until
the requirements of 31 U.S.C. 3711(i)
have been meet.
(c) Upon discharge of an
indebtedness, the Secretary must report
the discharge to the IRS in accordance
with the requirements of 26 U.S.C.
6050P and 26 CFR 1.6050P–1. The
Secretary may request that Treasury or
Treasury-designated debt collection
centers file such a discharge report to
the IRS on the Department’s behalf.
(d) When discharging a debt, the
Secretary must request that litigation
counsel release any liens of record
securing the debt.
Subpart E—Referrals to the
Department of Justice
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§ 30.33
Prompt referral.
(a)(1) The Secretary promptly shall
refer to Justice for litigation debts on
which aggressive collection activity has
been taken in accordance with subpart
B of this part, and that cannot be
compromised, or on which collection
activity cannot be suspended or
terminated, in accordance with subpart
D of this part.
(2) The Secretary may refer to Justice
for litigation those debts arising out of
activities of, or referred or transferred
for collection services to, the
Department.
(b)(1) Debts for which the principal
amount is over $1,000,000, or such
other amount as the Attorney General
may direct, exclusive of interest,
penalties, and administrative costs shall
be referred to the Civil Division or other
division responsible for litigating such
debts at the Department of Justice,
Washington DC.
(2) 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,
penalties, and administrative costs shall
be referred to the Nationwide Central
Intake Facility at Justice as required by
the CCLR instructions.
(c)(1) Consistent with aggressive
agency collection activity and the
standards contained in this part and 31
CFR parts 900 through 904, debts shall
be referred to Justice as early as
possible, and, in any event, well within
the period for initiating timely lawsuits
against the debtors.
(2) The Secretary shall make every
effort to refer delinquent debts to Justice
for litigation within one year of the date
such debts last became delinquent. In
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the case of guaranteed or insured loans,
the Secretary will make every effort to
refer these delinquent debts to Justice
for litigation within one year from the
date the loan was presented to the
Department for payment or reinsurance.
(d) Justice has exclusive jurisdiction
over debts referred to it pursuant to this
subpart. Upon referral of a debt to
Justice, the Secretary shall:
(1) Immediately terminate the use of
any administrative collection activities
to collect the debt;
(2) Advise Justice of the collection
activities utilized to date, and their
result; and
(3) Refrain from having any contact
with the debtor and direct all debtor
inquiries concerning the debt to Justice.
(e) After referral of a debt under this
subpart, the Secretary shall immediately
notify the Department of Justice of any
payments credited by the Department to
the debtor’s account. Pursuant to 31
CFR 904.1(b), after referral of the debt
under this subpart, Justice shall notify
the Secretary of any payment received
from the debtor.
§ 30.34 Claims Collection Litigation
Report.
(a)(1) Unless excepted by Justice, the
Secretary will complete the CCLR,
accompanied by a signed Certificate of
Indebtedness, to refer all
administratively uncollectible claims to
the Department of Justice for litigation.
(2) The Secretary shall complete all of
the sections of the CCLR appropriate to
each debt as required by the CCLR
instructions, and furnish such other
information as may be required in
specific cases.
(b) The Secretary shall indicate
clearly on the CCLR the actions that the
Department wishes Justice to take with
respect to the referred debt. The
Secretary may indicate specifically any
of a number of litigation activities
which Justice may pursue, including
enforced collection, judgement lien
only, renew judgement lien only, renew
judgement lien and enforced collection,
program enforcement, foreclosure only,
and foreclosure and deficiency
judgment.
(c) The Secretary also shall use the
CCLR to refer a debt to Justice for the
purpose of obtaining approval of a
proposal to compromise the debt, or to
suspend or terminate administrative
collection activity of the debt.
§ 30.35
Preservation of evidence.
The Secretary will maintain and
preserve all files and records that may
be needed by Justice to prove the
Department’s claim in court. When
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referring debts to Justice for litigation,
certified copies of the documents that
form the basis for the claim should be
provided along with the CCLR. Upon its
request, the original documents will be
provided to Justice.
§ 30.36
Minimum amount of referrals.
(a) Except as in paragraph (b) of this
section, claims of less than $2,500
exclusive of interest, penalties, and
administrative costs, or such other
amount as the Attorney General may
prescribe, shall not be referred for
litigation.
(b) The Secretary shall not refer
claims of less than the minimum
amount unless:
(1) Litigation to collect such smaller
amount is important to ensure
compliance with the policies and
programs of the Department;
(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 Department 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) The Secretary should consult with
the Financial Litigation Staff of the
Executive Office for United States
Attorneys in Justice prior to referring
claims valued at less than the minimum
amount.
Dated: November 27, 2006.
Michael O. Leavitt,
Secretary.
Editorial Note: This document was
received at the Office of the Federal Register
on March 2, 2007.
[FR Doc. E7–4002 Filed 3–7–07; 8:45 am]
BILLING CODE 4150–26–P
DEPARTMENT OF HEALTH AND
HUMAN SERVICES
Office of the Secretary
45 CFR Part 33
RIN 0991–AB19
Salary Offset
Department of Health and
Human Services.
ACTION: Final rule.
AGENCY:
SUMMARY: The Department of Health and
Human Services (HHS) adds specific
rules concerning involuntary salary
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Agencies
[Federal Register Volume 72, Number 45 (Thursday, March 8, 2007)]
[Rules and Regulations]
[Pages 10404-10419]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E7-4002]
=======================================================================
-----------------------------------------------------------------------
DEPARTMENT OF HEALTH AND HUMAN SERVICES
Office of the Secretary
45 CFR Part 30
RIN 0991-AB18
Claims Collection
AGENCY: Department of Health and Human Services.
ACTION: Final rule.
-----------------------------------------------------------------------
SUMMARY: This final rule amends the Department of Health and Human
Services' (HHS) regulations to implement the provisions of the Debt
Collection Improvement Act of 1996 (DCIA), as implemented by the
Department of Justice (Justice) and the Department of the Treasury
(Treasury) as the Federal Claims Collection Standards (FCCS). This
final rule implements the final rule promulgated by Justice and
Treasury, and amends the process by which HHS can administratively
collect, offset, compromise, suspend and terminate collection activity
for civil claims for money, funds, or property, and the rules and
process by which HHS can refer civil claims to Treasury, Treasury-
designated debt collection centers, or Justice for collection by
further administrative action or litigation, as applicable.
DATES: Effective Date: March 8, 2007.
FOR FURTHER INFORMATION CONTACT: Jeffrey S. Davis, Associate General
Counsel, General Law Division, Office of the General Counsel,
Department of Health and Human Services, Room 4760 Cohen Building, 330
Independence Avenue SW., Washington, DC 20201.
SUPPLEMENTARY INFORMATION:
Background
The Debt Collection Act of 1982 (DCA), Public Law No. 97-365, was
implemented on a government-wide basis by the FCCS, set forth at 4 CFR
part 101 et seq., issued by Justice and the General Accounting Office
on March 9, 1984. See 49 FR 8889 (1984). HHS implemented the FCCS at 45
CFR part 30. As mandated by the DCIA, Justice and Treasury jointly
promulgated the revised FCCS at 31 CFR parts 900-904 to reflect the
legislative changes to the Federal debt collection procedures enacted
by the DCIA. The revised FCCS superseded the current FCCS, and removed
the Comptroller General as promulgator of the FCCS. HHS is required to
implement regulations, consistent with the DCIA and the regulations
promulgated by Justice and Treasury. The following changes to the
Department's current debt collection regulation are incorporated in the
proposed regulation to reflect the DCIA and the implementing final
rule:
1. Demand Letter. One demand should be sufficient. It will include
the applicable standards for imposing any interest, penalties, or
administrative costs; use of collection agencies, Federal salary
offset, tax refund offset, administrative offset, and litigation; any
rights the debtor may have to seek review of the Department's
determination of the debt and to enter into a reasonable repayment
agreement; and information regarding the Department's remedies to
enforce payment of the debt.
2. Mutual Releases. HHS and debtors will exchange mutual releases
of non-tax liabilities, in all appropriate instances, when a claim is
compromised.
3. Increase in Amounts. The principal claim amount that HHS is
authorized to compromise or to suspend or terminate collection activity
thereon, without concurrence by Justice, is increased from $20,000 to
$100,000. In addition, the minimum amount of a claim that may be
referred to Justice for litigation is increased from $600 to $2,500.
4. Transferring or Referring Delinquent Debt. There are new debt
collection procedures for transferring or referring delinquent debt to
Treasury or a Treasury-designated debt collection center for
collection.
5. Centralized Administrative Offset. There are new debt collection
procedures for mandatory, centralized administrative offset by
disbursing officials.
6. Mandatory Credit Bureau Reporting. There are new debt collection
procedures for mandatory credit bureau reporting.
7. Prohibition Against Federal Financial Assistance. There are new
debt collection procedures prohibiting Federal financial assistance in
the form of loans, loan guarantees, or loan insurance to debtors,
unless waived by the Secretary. Disaster loans are exempt from this
prohibition.
8. Army Hold-up List. The use of the Army hold-up list to report
indebted contractors to the Department of the Army has been
discontinued.
Additionally, we note that the current HHS claims collection
regulations at 45 CFR 30.13(d) provided: ``[u]nless specifically
authorized by statute, regulation or written agreement, or unless the
debts arise from, or involve, fraud or criminal activity, the Secretary
will not charge interest on debts arising from payments to
beneficiaries under Titles II, XVI, and XVIII of the Social Security
Act.'' This rule will not change this Departmental practice. For debts
arising from payments to beneficiaries under Titles XVI and XVIII of
the Social Security Act (Title II is now administered by the Social
Security Administration), the Secretary will not assess interest unless
specifically required to do so by statute, regulation or written
agreement, or unless the debts arise from, or involve, fraud or
criminal activity.
To the extent any provision of this rule is inconsistent with a
more specific provision (e.g., certain provisions in 45 CFR parts 31,
32, and 33 and 42 CFR parts 401 and 405), the more specific provision
shall apply.
Basic Provisions
In accordance with the requirements of the DCIA and the
implementing regulations promulgated by Justice and Treasury at 31 CFR
parts 900-904, this final rule establishes the procedures for the
administrative collection, offset, compromise, suspension and
termination of collection activity for civil claims for money, funds,
or property, as defined by 31 U.S.C. 3701(b), and the process by which
HHS can refer civil claims to Treasury, Treasury-designated debt
collection centers, or Justice for collection by further administrative
action or litigation, as applicable. The rule does not apply to claims
between Federal agencies. The rule affects HHS's debtors. This rule
revises the current Department regulation in accordance with the
substantive and procedural requirements of the DCIA and the
implementing final rule.
(Authority: 31 U.S.C. 3711.)
Public Comments
We received the following comments on the proposed rule.
Comment: One commenter asserted that the mandatory demand letter
statements required by Sec. 30.11 of the proposed rule potentially
conflicted with validation disclosures of Sec. 809 of the Fair Debt
Collection Practices Act (FDCPA) that private collection contractors
are required to deliver in their initial demand letters.
[[Page 10405]]
Response: We do not agree that the requirements of Sec. 30.11 of
the final rule conflict with the FDCPA and have made no changes to the
final rule based on this comment. Section 30.11(b)(1) provides a
listing of the information that must be included in a demand letter.
The specific clauses that concerned the commenter are found in Sec.
30.11(b)(2) which provides the listing of the information which should
be included in a demand letter, including the statements of fact that:
(1) A debtor delinquent on a debt is ineligible for Government loans,
loan guarantees, or loan insurance until the debtor resolves the debt;
(2) when seeking to collect statutory penalties, forfeiture or other
similar types of claims, the debtor's licenses, permits, or other
privileges may be suspended or revoked if failure to pay the debt is
inexcusable or willful; and (3) knowingly making false statements or
bringing frivolous actions may subject the debtor to civil or criminal
penalties under 31 U.S.C. 3729-3731, 18 U.S.C. 286, 287, 1001, and
1002, or any other applicable statutory authority, and, if the debtor
is a Federal employee, to disciplinary action under 5 CFR part 752 or
other applicable authority.
Comment: One commenter noted that in the Medicare Secondary Payer
(MSP) context, the Centers for Medicare & Medicaid Services (CMS)
currently utilizes two demand letters and requested either the section
30.11(b) statement, ``[g]enerally one demand letter should suffice * *
*'' be deleted or recognize that in the MSP context two demand letters
are generally appropriate.
Response: We are making no changes to the final rule based on this
comment. Under the FCCS, agencies are permitted to use more than one
demand letter to meet the requirements at 31 CFR 901.2. Therefore,
there is no need to change the current language of Sec. 30.11(b) to
accommodate the use of more than one demand letter.
Comment: One commenter stated that in the MSP context, initial
demand letters and intent to refer letters are not often directed to
the appropriate, responsible party. As a result, the entity bearing
responsibility for the debt may not have an opportunity to respond
prior to the referral of the debt to Treasury for collection. The
commenter recommended HHS:
(1) Amend proposed Sec. 30.11(a)(2) to state that demand letters
``shall be sent by first class mail to the debtor's last known address,
as confirmed through reasonable efforts'';
(2) Add a new sentence stating that if a letter is returned as
undeliverable, the Secretary shall take reasonable steps to determine
the appropriate address of the alleged debtor and send a second letter;
and
(3) Add a new provision stating that the Secretary shall provide
alleged debtors (generally employers, insurers or third party
administrators) with the opportunity to designate a central agent (at a
specific location) to receive MSP demand letters.
Response: We are making no changes to the final rule based on this
comment. As to the first two suggestions, CMS uses the most recent
address information in its system specific to a particular debt. As to
the third suggestion, the final rule would not prohibit an employer,
insurer, or third party administrator from reaching an agreement with
CMS on a designated agent for the receipt of MSP demand letters to the
extent that CMS systems can handle the request and the specific debtor
information can be appropriately matched. Employers, insurers, and
third party administrators should have internal procedures which ensure
correct internal routing of such letters if the letter is received at
any address of the entity.
Comment: In another comment relating to MSP debts, a commenter
urged HHS to amend proposed Sec. 30.11(b)(1) to state that the written
demand for payment ``shall include sufficient information to allow the
recipient to identify the specific debt involved.'' The commenter noted
in the MSP context, sufficient information includes: beneficiary name,
HIC number, basis for Medicare eligibility, policy number, services
included in the claim, dates of service, provider type, amount due, and
member name/company.
Response: We are making no changes to the final rule based on this
comment. The current CMS process is adequate because most of the
information listed is already included in the demand letter package.
The demand package contains sufficient information to allow the
recipient to identify the specific debt involved. The intent to refer
letter package includes the initial demand letter (including
attachments) when it is issued. However, the content of the initial
demand letter is dependent on the debtor responding to CMS's requests,
if any, for additional information. Finally, CMS has no control over
what information Treasury includes in its first letter to the debtor
and the information Treasury instructs the private collection agency to
include in its collection letter.
Comment: One commenter requested HHS to modify proposed Sec. 30.11
to add new text (modeled directly on the FCCS at 31 CFR 901.2(e)) that
reads ``the Secretary 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.''
Response: We have made this change requested by the commenter and
have added a new 30.11(f) providing: Communications from debtors. The
Secretary should respond promptly to communications from debtor, within
30 days where feasible, and should advise debtors who dispute debts to
furnish available evidence to support their contentions.
Comment: One commenter noted that Sec. 30.11(b)(1)(ii) would
require that demand letters state ``[t]he date by which payment should
be made to avoid late charges and enforced collection, which generally
shall be no later than 30 days from the date the demand letter is
mailed.'' The commenter sought confirmation that the proposed
regulation will not (1) Require CMS to shorten the period allowed by
the MSP statute for entities to respond to demands for payment before
the imposition of interest or (2) prohibit the Secretary from
exercising discretion to waive interest, where appropriate.
Response: We are making no changes to the final rule based on this
comment. We confirm that the regulation does not require CMS to shorten
the period allowed by the MSP statute for MSP debtors to respond to
demands for payment before the imposition of interest, or prohibit the
Secretary from exercising discretion to waive interest, where
appropriate (see Sec. 30.18(g), Waiver). Proposed Sec.
30.11(b)(1)(ii) is not intended to alter any existing CMS policies and
procedures on when entities must respond to demands for payment to
avoid interest in the MSP context (currently, 60 days), nor is it
intended to limit the Secretary from waiving interest where appropriate
and where consistent with government-wide and agency-specific debt
collection standards. The language in proposed 30.11(b)(1)(ii) states
payment ``should'' be made ``generally'' no later than 30 days to avoid
late charges and enforced collection. Based on this language, CMS may
exercise discretion in extending the time frame for entities to respond
for specific types of debt such as MSP debts.
Comment: Proposed Sec. 30.10(c)(1) states that ``[t]he Secretary
shall transfer debts 180 days or more delinquent to the Treasury in
accordance with the requirements of 31 CFR 285.12.'' A commenter
requested that the regulation
[[Page 10406]]
be amended, consistent with the Treasury regulations, to make clear
that debt is not required to be transferred to Treasury unless and
until a final agency determination has been made. Accordingly, the
commenter requested that HHS amend section 30.10 to read: ``(c) The
Secretary shall transfer debts 180 days or more delinquent to Treasury,
where appropriate, in accordance with the requirements of 31 CFR 285.12
when there is a final agency determination that the debt, in the amount
stated, is due and there are no legal bars to collection action.'' The
commenter believed that premature referral of debt would not only
violate the terms of the Treasury regulation, but also undermine
efficient administration of debt collection since alleged MSP debtors,
whom the commenter incorrectly asserted do not receive final agency
determinations prior to referral, generally seek reconsideration at the
Treasury level. The commenter contended that this adds an unnecessary
level of complication to the debt collection process and typically
results in claims being sent back to CMS for further review and
verification of the validity of the debt.
Response: We are making no changes to the final rule based on this
comment. It is implicit in the regulatory language that, before
transfer to Treasury, there will have been a final agency determination
that the debt, in the amount stated, is due.
Comment: One commenter urged HHS to modify the proposed regulation
to clearly state the specific process with which CMS must comply before
transferring MSP debt to Treasury for administrative offset and/or
other cross-servicing. The commenter believed that the proposed
regulations do not include all of the criteria set forth in the
Treasury regulations as prerequisites to transfer, and recommended that
HHS amend proposed Sec. 30.12(b)(2) to state: ``When referring
delinquent debt to the Secretary of the Treasury for centralized
administrative offset or other debt collection activity, the
appropriate agency official must certify, in written form acceptable to
the Secretary of the Treasury, that (i) The debt is valid, past due and
legally enforceable; and (ii) the Department has complied with all due
process requirements under 31 U.S.C. 3716(a) and paragraph (c)(2) of
this section and all prerequisites to a particular collection action
under the laws, regulations or policies applicable to the agency
(unless the Secretary of the Treasury has agreed to comply with such
requirements on the Department's behalf).''
Response: We are making three changes to the final rule based on
this comment. First, we are changing the definition of ``Legally
enforceable'' in Sec. 30.2 to add on to the end ``(for example, the
debt is not the subject of a pending administrative review required by
statute or regulation and collection action during the review process
is prohibited.)'' Second, we are adding ``legally enforceable'' before
the word ``debts'' in 30.10(c)(1). While we believe the requirement
that the debt not be transferred, under mandatory transfer, if it is
the subject of a pending administrative review required by statute or
regulation and collection action during the review process is
prohibited was clear, as previously drafted, since this is a
requirement of 31 CFR 285.12(c)(3)(i) and 30.10(c)(1) specified that
transfers to Treasury would be made in accordance with the requirements
of 31 CFR 285.12, the regulation is more complete with this
clarification. Related to the part of the comment that 30.10(c)(2) did
not include all of the criteria set forth in the Treasury regulations
as prerequisites to transfer, we are also amending 30.10(c)(2) to
include ``in accordance with the requirements of 31 CFR 285.12.''
Therefore, the requirements of Treasury's regulations are clearly
included.
Comment: One commenter suggested that the Claims Collection
regulations be amended to state that the Secretary may, where
appropriate, in the MSP debt context, explore the use of alternative
dispute resolution to resolve disputed debt.
Response: We are making no changes to the final rule based on this
comment because we believe that CMS's current regulations and processes
provide adequate opportunity for the debtor to dispute a debt.
Comment: One commenter recommended that HHS define the term ``valid
debt'' under Sec. 30.2 to mean debt where the government has a
reasonable expectation of being able to prove the existence of the debt
in court, based on the legal issues and the facts.
Response: We are making no changes to the Final Rule based on this
comment. We do not agree that it is necessary to define ``valid debt.''
Comment: One commenter noted the proposed Claims Collection
regulations state that the term ``legally enforceable'' means ``there
has been a final agency determination that the debt, in the amount
stated, is due and there are no legal bars to collection action.''
Proposed Sec. 30.2, Definitions. The commenter requested HHS amend the
proposed regulations to expressly state that, when an alleged debtor
has disputed a debt, the appropriate agency official may not refer the
debt to Treasury unless and until a written determination explaining
the basis for the decision has been issued (and a copy provided to the
alleged debtor) concerning the validity of the alleged debt.
Response: We are making no changes to the final rule based on this
comment. First, in response to a previously discussed comment, we are
changing the definition of ``Legally enforceable'' in Sec. 30.2 to add
on to the end ``(for example, the debt is not the subject of a pending
administrative review required by statute or regulation and collection
action during the review process is prohibited.)'' Also, a final
determination that a debt, in the amount stated, is due and there are
no legal bars to collection action does not require issuing a formal
written determination, separate from and in addition to the demand
letter, explaining the basis for such decision. Also, the regulations
provide, in the definition of a debt (Sec. 30.2, Definitions) that an
appropriate official of the Federal Government determined an amount of
funds or other property is owed to the Government. Such a
determination, therefore, is needed before a demand letter would be
sent and before the debt would be referred to Treasury for collection.
Comment: One commenter noted that proposed section 30.12(b) states
that when referring delinquent debts to the Secretary of Treasury for
centralized administrative offset, the Department must certify that the
Department has complied with all due process requirements under 31
U.S.C. 3716(a) and Sec. 30.12(c)(2) of the proposed rule. 31 U.S.C.
3716(a)(3) states that the head of an administrative agency may collect
by offset only after, among other things, giving the debtor ``an
opportunity for a review within the agency of the decision of the
agency related to the claim.'' The commenter noted that the proposed
HHS regulations state that where review is required, the Secretary must
afford the alleged debtor an oral or paper hearing. See Proposed Sec.
30.12(e). The commenter supported this provision of the regulation, but
noted the need for clarification regarding the specific due process
rights that will be afforded to employers/unions and health plans/
insurers disputing alleged MSP debt. The commenter noted that CMS has
published proposed Medicare claims appeal regulations which expressly
allow beneficiaries and providers/suppliers to appeal Medicare
contractor determinations that they owe the government monies under the
MSP
[[Page 10407]]
statute, but has not provided any specific due process appeal rights to
employers/unions or health plans/insurers in similar circumstances. See
67 FR 69311, 69317-20 (Nov. 15, 2003). The commenter asserted that, as
a matter of law, employers/unions and health plans/insurers are
entitled to independent review of an alleged MSP debt determination by
a Medicare contractor prior to referral of the debt to Treasury for
offset. The commenter strongly urged HHS to identify the specific due
process rights to be afforded such entities challenging the existence
of MSP debt, particularly the nature of any associated appeal rights.
The commenter noted that the FCCS encourages agencies to use ``all
authorized remedies, including alternative dispute resolution,'' for
claims collection, 31 CFR 900.1(c), and requested HHS to amend the
Claims Collection regulation to state that the Secretary may, in
appropriate circumstances, explore the use of alternative dispute
resolution mechanisms to resolve disputed debt. While the commenter
does not request that CMS be required to use such alternative dispute
resolution mechanisms, the commenter believes CMS should be granted the
flexibility through regulation to develop creative and cost-effective
ways of resolving disputed claims short of transfer to Treasury (and
without incurring the significant costs associated with use of private
collection agencies).
Response: We are making no changes to the final rule based on this
comment. We believe that current CMS procedures provide adequate
opportunity for the non-beneficiary or non-provider/supplier MSP debtor
(e.g., employers/unions or health plans/insurers) to dispute a debt.
Employers, insurers, third party administrators, plans, or other plan
sponsors that are issued a demand letter are provided adequate notice
of the debt and an opportunity to rebut the debt prior to CMS referring
the MSP debt to Treasury.
Comment: One commenter stated that it is aware of numerous
situations in which offset of a claim occurred after CMS had determined
that monies were not in fact due with respect to the particular claim.
Accordingly, the commenter recommended HHS amend the Claims Collection
regulations to include the following language adapted from 31 CFR
285.12 of the Treasury regulations: ``Once a debt is referred to
Treasury, the Secretary must promptly notify Treasury of any change in
the status of the debt, including any decision that the debt is not in
fact owed.''
Response: We are making no changes to the final rule based on this
comment. As noted by the commenter, Treasury's current regulations
already provide for notification to Treasury of changes in the status
of the legal enforceability of a debt. Since 30.10(c) states that the
transfer of debts be in accordance with 31 CFR 285.12, and 31 CFR
285.12(i) includes this notification of status requirement, it is
unnecessary to restate that requirement here.
Comment: One commenter noted that proposed Sec. 30.18 requires the
Department to assess administrative costs incurred for processing and
handling delinquent debts and, ``[u]nless otherwise established by
contract, repayment agreement, or statute,'' to impose a penalty of six
percent a year on the amount due on a debt that is delinquent for more
than 90 days. The commenter asserted that the mandatory imposition of
administrative costs and penalties is not appropriate for MSP debt
since the interest and penalty provision of the Debt Collection
Improvement Act, 31 U.S.C. 3717, does not (with limited exceptions not
here relevant) apply to ``a claim or debt under, or an amount payable
under * * * the Social Security Act,'' 31 U.S.C. 3701(d). Accordingly,
commenter requested that HHS amend Sec. 30.18 to incorporate language
from the current HHS Claims Collection regulations which states:
``[t]he Secretary will charge administrative costs or late payment
penalties on debts arising under the Social Security Act where
authorized by statute, regulations, or written agreement.'' See 45 CFR
30.13(d)(2).
Response: We are making no changes to the final rule based on this
comment. The proposed regulation did not change the current CMS process
for assessing administrative fees. As to comments on MSP debts not
being subject to the interest and penalties provisions of the DCIA, the
MSP provisions of the Medicare statute (section 1862(b) of the Social
Security Act) and implementing regulations (42 CFR 411.24(m)) provide
CMS separate, independent authority for assessing interest on
delinquent MSP debts.
Comment: One commenter noted that proposed Sec. 30.24(b) states
``[t]he Secretary will ensure that a compromise agreement with one
debtor does not release the Department's claim against the remaining
debtors.'' The commenter requested that given the unique nature of MSP
claims, HHS delete or modify the text of the proposed regulation to
expressly authorize the Secretary to release all potential debtors,
where appropriate with respect to a particular debt. The commenter
expressed a belief that historically, MSP settlements with the
government have released claims against all potential debtors. The
commenter urged HHS to amend the regulations to allow the Secretary to
retain the flexibility to execute similar agreements in the future. The
commenter believed that such comprehensive settlements are particularly
appropriate in the MSP context where it is not cost-effective to
adjudicate claims twice and health plans/insurers will have
significantly less incentive to enter into MSP settlement agreements if
potential claims against their group health plan customers are not
released.
Response: The proposed regulation is intended to govern situations
where agency (in this case, CMS) regulations are silent or fail to
govern a specific debt situation. The proposed language in Sec.
30.24(b) would not prohibit the Secretary from executing a compromise
of selected debts where an insurer is negotiating on its own behalf and
on behalf of others as authorized. However, HHS will insert the word
``automatically'' before the word ``release'' to make clear that some
action could take place which would release all parties.
Comment: A commenter requested that HHS amend proposed Sec.
30.11(b)(2)(vi) to provide that ``[a]ny amounts collected and
ultimately found not to have been owed by the debtor will be refunded
promptly.'' The commenter explained the proposed modification is fair
and appropriate where monies are not in fact due. In addition, the
commenter requested that HHS modify the proposed regulation to require
individual agencies, including CMS, to establish clearly publicized
processes for debtors to request reimbursement of disputed amounts that
were paid in order to avoid the imposition of interest or were taken by
offset and specific timelines for prompt adjudication of the amounts in
dispute.
Response: We are making no changes to the final rule based on this
comment. Applicable statutes and regulations do not mandate that the
above quoted language be included in demand letters, nor do they
mandate a specific time frame or published process for debtors to
request reimbursement of disputed amounts or for refunding amounts
previously collected. HHS will revisit this suggestion if it is
problematic in practice.
Comment: One commenter stated that, when a debt is contested at the
Treasury/private collection agency level, Treasury will often seek
input from CMS concerning the validity of the
[[Page 10408]]
underlying debt. The commenter submitted that when this occurs, it is
appropriate for Treasury to suspend all collection efforts, including
offset. Accordingly, the commenter requested that HHS add a provision
to the regulation authorizing suspension of all collection activities
by Treasury or a private collection agency when Treasury seeks guidance
from HHS regarding the validity of a particular debt in dispute.
Response: We are making no changes to the final rule based on this
comment. This comment addresses current Treasury procedures and is
outside the scope of the Claims Collection regulations.
Comment: One commenter supported HHS's proposed modifications of
the regulations which would authorize HHS to compromise, suspend or
terminate collection activity on a debt under $100,000 in principal
amount without the concurrence of Justice. See Proposed Sec. Sec.
30.21 and 30.28. The commenter also supports amendments set forth in
proposed Sec. 30.36 which raise the minimum amount of debt necessary
for referral for litigation.
Response: No response to this comment is necessary.
Comment: One commenter supported proposed Sec. 30.22(a)(3)(i)
which authorizes the Secretary to compromise a debt where the cost of
collecting the debt does not justify the enforced collection of the
full amount, but requested that the regulation be amended to state that
``[t]he amount accepted in compromise of such cases may reflect an
appropriate discount for the administrative and litigation costs of
collection, with consideration given to the time it will take to effect
collection and the age of the delinquent debt.'' Likewise, the
commenter requested that proposed Sec. 30.19 be amended to direct that
the age of delinquent debt be considered in developing data on costs
and corresponding recovery rates to be used (among other things) in
establishing guidelines with respect to points at which costs of
further collection efforts are likely to exceed recoveries. The
commenter believed the age of alleged MSP debt directly affects the
demand letter processing and collection costs for both the government
and the alleged debtors and should be expressly considered in
establishing collection guidelines. The commenter requested that HHS
amend the Claims Collection regulation to expressly recognize that it
is appropriate for agencies to (1) Take the age of a debt into account
when determining what documentation must be provided by the alleged
debtor to mount a defense, and (2) exercise flexibility in determining
whether additional collection efforts are appropriate or justified
concerning old debt.
Response: We are making no changes to the final rule based on this
comment. We do not agree that it is necessary or appropriate to
specifically require consideration of the age of the delinquent debt as
a factor in pursuing or compromising a debt.
Comment: There were several comments related to the rule's impact
on state collection activities when states seek to collect debts due
under a program authorized under the Social Security Act for which
Federal funds were provided (i.e., Temporary Assistance to Needy
Families (TANF), State Children's Health Insurance Program (SCHIP) and
Medicaid). Certain commenters explained the difficulties and increased
burdens on states in following the proposed rule. For example, one
commenter offered that the particular state would need to change its
computer system and the current way it did business. Other commenters
explained the benefits of interpreting the rule to allow TANF debts to
be collected pursuant to the rule and strongly recommended the rule be
interpreted to include state debts and authorize states to submit TANF
debts to the Treasury Offset Program.
Response: We are making no changes to the final rule based on these
comments, but draw the commenters' attention to several points. In the
TANF program, there is no direct Federal share in recipient
overpayments because TANF is a block grant program. Therefore, these
regulations would not affect state collection activities with respect
to recipient families. In addition, states are not subject to the FCCS
when seeking to collect state overpayments made to providers in the
Medicaid and SCHIP programs. Because we do not believe that this
regulation imposes any new requirement related to state collection
activities in the referenced Social Security Act programs that are
related to overpayments or other debts to or on behalf of individual
recipients, we do not find any burden on states related to such
collection activities.
Comment: One commenter recommended that many mandates in the
regulation be made permissive (i.e., changing ``shall'' to ``may'' in
certain places in the regulation text) so as not to mandate certain
state action.
Response: We are making no changes to the final rule based on this
comment because, as explained in the response to the previous comments
(directly above), the HHS regulation does not place these mandates on
states.
Comment: One commenter asked whether states administering TANF,
SCHIP or Medicaid should refer cases to the HHS Office of the Inspector
General.
Response: The proposed rule was not intended to change the current
way states refer to law enforcement entities claims that are suspected
to involve fraud, false information, or misrepresentation on the part
of the debtor. States should continue to refer such claims to the
appropriate governmental entity pursuant to applicable Federal and
State laws and agency guidance.
Other Changes Made to the Final Rule
We have also changed Sec. 30.18(b)(2), regarding the percentage of
interest to be charged on debts. The NPRM requirement that the
Department document in writing the reasons for charging a higher rate
was omitted and the following language was added: ``Any such higher
rate of interest charged will be based on Treasury's quarterly rate
certification to the U.S. Public Health Service for delinquencies in
the National Research Services Awards and the National Health Services
Corps Scholarship Program. The Department publishes this rate in the
Federal Register quarterly.''
Federalism
We have analyzed this final rule in accordance with the principles
set forth in Executive Order (EO) 13132 (Federalism). We have
determined that the rule does not contain policies that have
substantial direct effects on the States, on the relationship between
National Government and the States, or on the distribution of power and
responsibilities among the various levels of government. Accordingly,
we have concluded that the rule does not contain policies that have
federalism implications as defined in the EO and, consequently, a
federalism summary impact statement is not required.
Analysis of Impacts
For purposes of the Paperwork Reduction Act, 44 U.S.C. chapter 35,
this proposed rule will impose no new reporting or recordkeeping
requirements on any member of the public.
Economic Impact
We have examined the impact of this rule as required by EO 12866
(Regulatory Planning and Review), the Regulatory Flexibility Act (RFA)
(September 19, 1980; Pub. L. No. 96-354); the Unfunded Mandates Reform
Act of 1995 (UMRA, Pub. L. No. 104-4); and the Truth in Regulating Act
of 2000 (5 U.S.C. 801 note). EO 12866
[[Page 10409]]
directs agencies to assess all costs and benefits of available
regulatory alternatives and, if regulation is necessary, to select
regulatory approaches that maximize the benefits (including potential
economic, environmental, public health and safety effects, distributive
impacts, and equity). A regulatory impact analysis (RIA) must be
prepared for major rules with economically significant effects ($100
million or more in 1 year). We have determined that the rule is
consistent with the principles set forth in EO 12866, and we find that
the rule would not have an effect on the economy that exceeds $100
million in any one year. In addition, this rule is not a major rule as
defined at 5 U.S.C. 804(2). In accordance with the provisions of the EO
12866, the rule was reviewed by the Office of Management and Budget.
Under the RFA, 5 U.S.C. 605(b), if a rule has a significant impact
on a substantial number of small entities, an agency must analyze
regulatory options that would minimize any significant impact of the
rule on small entities. The agency has considered the effect that this
rule would have on small entities. I hereby certify, under 5 U.S.C.
605(b), that the rule will not have a significant economic impact on a
substantial number of small entities, including small businesses, small
organizations and small local governments. Therefore, a regulatory
flexibility analysis is not required by 5 U.S.C. 603. Section 202 of
the UMRA also requires that agencies assess anticipated costs and
benefits before issuing any rule that may result in expenditure in any
one year by State, local, or tribal governments, in the aggregate, or
by the private sector, of $100 million. As noted above, we find that
the rule would not have an effect of this magnitude on the economy.
Therefore, no further analysis is required under the UMRA.
Plain Language
EO 12866 and the President's memorandum of June 1, 1998, require
all rules to be written in plain language. We believe we have done so.
List of Subjects in 45 CFR Part 30
Administrative practice and procedure, Claims, Debts, Appeals,
Government employees, Privacy. xxxxxxxxxxxxxxxxxxxxxxxxxx
0
HHS revises 45 CFR part 30 to read as follows:
PART 30--CLAIMS COLLECTION
Subpart A--General Provisions
Sec.
30.1 Purpose, authority, and scope.
30.2 Definitions.
30.3 Antitrust, fraud, exception in the account of an accountable
official, and interagency claims excluded.
30.4 Compromise, waiver, or disposition under other statutes not
precluded.
30.5 Other administrative remedies.
30.6 Form of payment.
30.7 Subdivision of claims.
30.8 Required administrative proceedings.
30.9 No private rights created.
Subpart B--Standards for the Administrative Collection of Debts
30.10 Collection activities.
30.11 Demand for payment.
30.12 Administrative offset.
30.13 Debt reporting and the use of credit reporting agencies.
30.14 Contracting with private collection contractors and with
entities that locate and recover unclaimed assets.
30.15 Suspension or revocation of eligibility for loans and loan
guarantees, licenses, permits or privileges.
30.16 Liquidation of collateral.
30.17 Collection in installments.
30.18 Interest, penalties, and administrative costs.
30.19 Review of cost effectiveness of collection.
30.20 Taxpayer information.
Subpart C--Debt Compromise
30.21 Scope and application.
30.22 Basis for compromise.
30.23 Enforcement policy.
30.24 Joint and several liability.
30.25 Further review of compromise offers.
30.26 Consideration of tax consequences to the Government.
30.27 Mutual release of the debtor and the Government.
Subpart D--Suspending and Terminating Collection Activities
30.28 Scope and application.
30.29 Suspension of collection activity.
30.30 Termination of collection activity.
30.31 Exception to termination.
30.32 Discharge of indebtedness; reporting requirements.
Subpart E--Referrals to the Department of Justice
30.33 Prompt referral.
30.34 Claims Collection Litigation Report.
30.35 Preservation of evidence.
30.36 Minimum amount of referrals.
Authority: 31 U.S.C. 3711(d).
Subpart A--General Provisions
Sec. 30.1 Purpose, authority, and scope.
(a) Purpose. This part prescribes the standards and procedures for
the Department's use in the administrative collection, offset,
compromise, and suspension or termination of collection activity for
claims for funds or property, as defined by 31 U.S.C. 3701(b) and this
part. Covered activities include the collection of debts in any amount;
the compromise and suspension or termination of collection activity of
debts that do not exceed $100,000, or such higher amount as the
Attorney General may prescribe, exclusive of interest, penalties, and
administrative costs; and the referral of debts to the Department of
the Treasury (Treasury), the Treasury-designated debt collection
centers, or the Department of Justice (Justice) for collection by
further administrative action or litigation, as applicable.
(b) Authority. The Secretary is issuing the regulations in this
part under the authority contained in 31 U.S.C. 3711(d). The standards
and procedures prescribed in this part are authorized under the Federal
Claims Collection Act, as amended, Public Law No. 89-508, 80 Stat. 308
(July 19, 1966), the Debt Collection Act of 1982, Public Law No. 97-
365, 96 Stat. 1749 (October 25, 1982), the Debt Collection Improvement
Act of 1996, Public Law No. 104-134, 110 Stat. 1321, 1358 (April 26,
1996) and the Federal Claims Collection Standards at 31 CFR parts 900
through 904.
(c) Scope. (1) The standards and procedures prescribed in this part
apply to all officers and employees of the Department, including
officers and employees of the various Operating Divisions and Regional
Offices of the Department, charged with the collection and disposition
of debts owed to the United States.
(2) The standards and procedures set forth in this part will be
applied except where specifically excluded herein or where a statute,
regulation or contract prescribes different standards or procedures.
(3) Regulations governing the use of certain debt collection
procedures created under the Debt Collection Improvement Act of 1996,
including tax refund offset, administrative wage garnishment, and
Federal salary offset, are contained in parts 31 through 33 of this
chapter.
Sec. 30.2. Definitions.
In this part--
Administrative offset means withholding funds payable by the United
States to, or held by the United States for, a person to satisfy a
debt.
Agency means a department, agency, court, court administrative
office, or instrumentality in the executive, judicial, or legislative
branch of the Government, including Government corporations.
Appropriate official means the Department official who, by statute
or delegation of authority, determines the existence and amount of
debt.
[[Page 10410]]
Business day means Monday through Friday. For purposes of
computation, the last day of the period will be included unless it is a
Federal holiday, in which case the next business day following the
holiday will be considered the last day of the period.
Claim see the definition for the term ``debt.'' The terms ``claim''
and ``debt'' are synonymous and interchangeable.
Creditor agency means an agency to which a debt is owed, including
a debt collection center acting on behalf of a creditor agency.
Day means calendar day. For purposes of computation, the last day
of the period will be included unless it is a Saturday, Sunday, or a
Federal holiday, in which case the next business day will be considered
the last day of the period.
Debt or claim means an amount of funds or other property determined
by an appropriate official of the Federal Government to be owed to the
United States from any person, organization, or entity, except another
Federal agency. For the purpose of administrative offset, the term
includes an amount owed by an individual to 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. Debts include, but are not limited to, amounts owed
pursuant to: Loans insured or guaranteed by the United States; fees;
leases; rents; royalties; services; sales of real or personal property;
Federal salary overpayments; overpayments to program beneficiaries,
contractors, providers, suppliers, and grantees; audit disallowance
determinations; civil penalties and assessments; theft or loss;
interest; fines and forfeitures (except those arising under the Uniform
Code of Military Justice); and all other similar sources.
Debt collection center means the Department of the Treasury, or
other Federal agency, subagency, unit, or division designated by the
Secretary of the Treasury to collect debts owed to the United States.
Debtor means an individual, organization, association, partnership,
corporation, or State or local government or subdivision indebted to
the Government, or the person or entity with legal responsibility for
assuming the debtor's obligation.
Debts arising under the Social Security Act are overpayments to, or
contributions, reimbursements, penalties or assessments owed by, any
entity, individual, or State under the Social Security Act. Such
amounts include amounts owed to the Medicare program under section
1862(b) of the Social Security Act. Salary overpayments and other debts
that result from the administration of the provisions of the Social
Security Act are not deemed to ``arise under'' the Social Security Act
for purposes of this part.
Delinquent debt means a debt which the debtor does not pay or
otherwise resolve by the date specified in the initial demand for
payment, or in an applicable written repayment agreement or other
instrument, including a post-delinquency repayment agreement.
Department means the Department of Health and Human Services, and
its Operating Divisions and Regional Offices.
Disbursing official means an officer or employee who has authority
to disburse public money pursuant to 31 U.S.C. 3321 or another law.
Disposable pay means that part of the debtor's current basic,
special, incentive, retired, and retainer pay, or other authorized pay,
remaining after deduction of amounts required by law to be withheld.
For purposes of calculating disposable pay, legally required deductions
that must be applied first include: Tax levies pursuant to the Internal
Revenue Code (title 26, United States Code); properly withheld taxes,
FICA, Medicare; health and life insurance premiums; and retirement
contributions. Amounts deducted under garnishment orders, including
child support garnishment orders, are not legally required deductions
for calculating disposable pay.
Evidence of service means information retained by the Department
indicating the nature of the document to which it pertains, the date of
mailing of the document, and the address and name of the debtor to whom
it is being sent. A copy of the dated and signed written notice
provided to the debtor pursuant to this part may be considered evidence
of service for purposes of this part. Evidence of service may be
retained electronically so long as the manner of retention is
sufficient for evidentiary purposes.
FMS means the Financial Management Service, a bureau of the
Department of the Treasury.
Hearing means a review of the documentary evidence to confirm the
existence or amount of a debt or the terms of a repayment schedule. If
the Secretary determines that the issues in dispute cannot be resolved
by such a review, such as when the validity of the claim turns on the
issue of credibility or veracity, the Secretary may provide an oral
hearing. (See 45 CFR 33.6(c)(2) for oral hearing procedures that may be
provided by the Secretary).
IRS means the Internal Revenue Service, a bureau of the Department
of the Treasury.
Late charges means interest, penalties, and administrative costs
required or permitted to be assessed on delinquent debts.
Legally enforceable means that there has been a final agency
determination that the debt, in the amount stated, is due and there are
no legal bars to collection action.
Local government means a political subdivision, instrumentality, or
authority of any 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, or an Indian
tribe, band or nation.
Operating Division means each separate component, agency,
subagency, and unit within the Department of Health and Human Services,
including, but not limited to, the Administration for Children and
Families, the Administration on Aging, the Centers for Disease Control
and Prevention, the Centers for Medicare & Medicaid Services, the Food
and Drug Administration, the National Institutes of Health, Substance
Abuse and Mental Health Services Administration, Indian Health Service,
Health Resources and Services Administration, Agency for Toxic
Substances and Disease Registry, Agency for Healthcare Research and
Quality, and the Office of the Secretary.
OPM means the Office of Personnel Management.
Payment authorizing agency means an agency that transmits a voucher
to a disbursing official for the disbursement of public money.
Payments made under the Social Security Act means payments by this
Department or other agencies to beneficiaries, providers,
intermediaries, physicians, suppliers, carriers, States, or other
contractors or grantees under a Social Security Act program, including:
Title I (Grants to States for Old-Age Assistance for the Aged); Title
II (Federal Old-Age, Survivors, and Disability Insurance Benefits);
Title III (Grants to States for Unemployment Compensation
Administration); Title IV (Grants to States for Aid and Services to
Needy Families with Children and for Child-Welfare Services); Title V
(Maternal and Child Health Services Block Grant); Title IX
(Miscellaneous Provisions Relating to Employment Security); Title X
(Grants to States for Aid to the Blind); Title XI, Part B (Peer Review
of the Utilization and Quality of Health Care Services); Title XII
(Advances to State Unemployment Funds); Title XIV (Grants to States for
[[Page 10411]]
Aid to Permanently and Totally Disabled); Title XVI (Grants to States
for Aid to the Aged, Blind, and Disabled); Title XVII (Grants for
Planning Comprehensive Action to Combat Mental Retardation); Title
XVIII (Health Insurance for the Aged and Disabled); Title XIX (Grants
to States for Medical Assistance Programs); Title XX (Block Grants to
States for Social Services); and Title XXI (State Children's Health
Insurance Program). Federal employee salaries and other payments made
by the Department or other agencies in the course of administering the
provisions of the Social Security Act are not deemed to be ``payable
under'' the Social Security Act for purposes of this part.
Private collection contractors means private debt collection under
contract with the Department to collect a nontax debt or claim owed to
the Department. The term includes private debt collectors, collection
agencies, and commercial attorneys.
Salary offset means an administrative offset to collect a debt owed
by a Federal employee through deductions at one or more officially
established pay intervals from the current pay account of the employee
without his or her consent.
Secretary means the Secretary of Health and Human Services, or the
Secretary's designee.
Taxpayer identification number means the identifying number
described under section 6109 of the Internal Revenue Code of 1986 (26
U.S.C. 6109). For an individual, the taxpayer identifying number is the
individual's Social Security Number.
Tax refund offset means withholding or reducing a tax refund
payment by an amount necessary to satisfy a debt.
Sec. 30.3 Antitrust, fraud, exception in the account of an
accountable official, and interagency claims excluded.
(a) Claims involving antitrust violations or fraud. (1) The
standards in this part 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 antitrust laws, or to any
debt involving fraud, presentation of a false claim, or
misrepresentation on the part of the debtor or any party having an
interest in the claim, unless the Department of Justice returns a
referred claim to the Department for further handling in accordance
with parts 31 CFR 900 through 904 and this part.
(2) Upon identification of a debt suspected of involving an
antitrust violation or fraud, a false claim, misrepresentation, or
other criminal activity or misconduct, the Secretary shall refer the
debt to the Office of the Inspector General for review.
(3) Upon the determination of the Office of the Inspector General
that a claim is based in whole or in part on conduct in violation of
the antitrust laws, or involves fraud, the presentation of a false
claim, or misrepresentation on the part of the debtor or any party
having an interest in the claim, the Secretary shall promptly refer the
case to the Department of Justice for action.
(b) Exception in the account of an accountable official. The
standards in this part do not apply to compromise of an exception in
the account of an accountable official.
(c) Interagency claims. This part does not apply to claims between
Federal agencies. The Department will attempt to resolve interagency
claims by negotiation in accordance with EO 12146.
Sec. 30.4 Compromise, waiver, or disposition under other statutes not
precluded.
Nothing in this part precludes the Department from disposing of any
claim under statutes and implementing regulations other than subchapter
II of chapter 37 of Title 31 of the United States Code and the Federal
Claims Collection Standards, 31 CFR parts 900 through 904. Any statute
and implementing regulation specifically applicable to the claims
collection activities of the Department will take precedence over this
part.
Sec. 30.5 Other administrative remedies.
The remedies and sanctions available under this part for collecting
debts are not intended to be exclusive. Nothing contained in this part
precludes using any other administrative remedy which may be available
for collecting debts owed to the Department, such as converting the
method of payment under a grant from an advancement to a reimbursement
method or revoking a grantee's letter-of-credit.
Sec. 30.6 Form of payment.
Claims may be paid in the form of money or, when a contractual
basis exists, the Department may demand the return of specific property
or the performance of specific services.
Sec. 30.7 Subdivision of claims.
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, exclusive of interest, penalties and
administrative costs, does not exceed $100,000, or such higher amount
as prescribed by the Attorney General for purposes of compromise, or
suspension or termination of collection activity.
Sec. 30.8 Required administrative proceedings.
This part does not supersede, or require omission or duplication of
administrative proceedings required by contract, or other laws or
regulations. See for example, 42 CFR part 50 (Public Health Service),
45 CFR part 16 (Departmental Grant Appeals Board), and 48 CFR part 33
(Federal Acquisition Regulation) and part 333 (HHS Acquisition
Regulation).
Sec. 30.9 No private rights created.
The standards in this part do not create any right or benefit,
substantive or procedural, enforceable at law or in equity by a party
against the United States, the Department, its officers, or any other
person, nor shall the failure of the Department to comply with any of
the provisions of this part be available to any debtor as a defense.
Subpart B--Standards for the Administrative Collection of Debts
Sec. 30.10 Collection activities.
(a) General rule. The Secretary shall aggressively and timely
collect all debts arising out of activities of, or referred or
transferred for collection actions to, the Department. Normally, an
initial written demand for payment shall be made no later than 30 days
after a determination by an appropriate official that a debt exists.
(b) Cooperation with other agencies. The Department shall cooperate
with other agencies in their debt collection activities.
(c) Transfer of delinquent debts. (1) Mandatory transfer. The
Department shall transfer legally enforceable debts 180 days or more
delinquent to Treasury in accordance with the requirements of 31 CFR
285.12. This requirement does not apply to any debt that:
(i) Is in litigation or foreclosure;
(ii) Will be disposed of under an approved asset sale program
within one year of becoming eligible for sale;
(iii) Has been referred to a private collection contractor for a
period of time acceptable to the Secretary of the Treasury;
(iv) Is at a debt collection center for a period of time acceptable
to the Secretary of the Treasury (see paragraph (c)(2) of this
section);
(v) Will be collected under internal offset procedures within three
years after the debt first became delinquent; or
(vi) Is exempt from this requirement based on a determination by
the
[[Page 10412]]
Secretary of the Treasury that exemption for a certain class of debt is
in the best interest of the United States.
(2) Permissive transfer. The Secretary may refer debts less than
180 days delinquent, including debts referred to the Department by
another agency, to the Treasury in accordance with the requirements of
31 CFR 285.12, or with the consent of the Treasury, to a Treasury-
designated debt collection center to accomplish efficient, cost
effective debt collection. Referrals to debt collection centers shall
be at the discretion of, and for a time period acceptable to, the
Secretary of the Treasury. Referrals may be for servicing, collection,
compromise, suspension, or termination of collection action.
Sec. 30.11 Demand for payment.
(a) Written demand for payment. (1) Written demand, as described in
paragraph (b) of this section, shall be made promptly upon a debtor in
terms that inform the debtor of the consequences of failing to
cooperate with the Department to resolve the debt.
(2) Normally, the demand letter will be sent no later than 30 days
after the appropriate official determines that the debt exists. The
demand letter shall be sent by first class mail to the debtor's last
known address.
(3) When necessary to protect the Government's interest, for
example to prevent the running of a statute of limitations, the written
demand for payment may be preceded by other appropriate action under
this part, including immediate referral to Justice for litigation.
(b) Demand letters. 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 Department's letters or telephone
calls. Generally, one demand letter should suffice; however, more may
be used.
(1) The written demand for payment shall include the following
information:
(i) The nature and amount of the debt, including the basis for the
indebtedness;
(ii) The date by which payment should be made to avoid late charges
and enforced collection, which generally shall be no later than 30 days
from the date the demand letter is mailed;
(iii) The applicable standards for imposing any interest,
penalties, or administrative costs (see Sec. 30.18);
(iv) The rights, if any, the debtor may have to:
(A) Seek review of the Department's determination of the debt, and
for purposes of administrative wage garnishment or salary offset, to
request a hearing (see 45 CFR parts 32 and 33); and
(B) Enter into a reasonable repayment agreement.
(v) An explanation of how the debtor may exercise any of the rights
described in paragraph (b)(1)(iv) of this section;
(vi) The name, address, and phone number of a contact person or
office within the Department to address any debt-related matters; and
(vii) The Department's remedies to enforce payment of the debt,
which may include:
(A) Garnishing the debtor's wages through administrative wage
garnishment;
(B) Offsetting any Federal payments due the debtor, including
income tax refunds, salary, certain benefit payments such as Social
Security, retirement, and travel reimbursements and advances;
(C) Referring the debt to a private collection contractor;
(D) Reporting the debt to a credit bureau or other automated
database;
(E) Referring the debt to Justice for litigation; and
(F) Referring the debt to Treasury for any of the collection
actions described in paragraphs (b)(1)(vii)(A) through (E) of this
section, advising the debtor that such referral is mandatory if the
debt is 180 or more days delinquent.
(2) The written demand for payment should also include the
following information:
(i) The debtor's right to inspect and copy all records of the
Department pertaining to the debt, or if the debtor or the debtor's
representative cannot personally inspect the records, to request and
receive copies of such records;
(ii) The Department's willingness to discuss with the debtor
alternative methods of payment;
(iii) A debtor delinquent on a debt is ineligible for Government
loans, loan guarantees, or loan insurance until the debtor resolves the
debt;
(iv) When seeking to collect statutory penalties, forfeiture or
other similar types of claim, the debtor's licenses, permits, or other
privileges may be suspended or revoked if failure to pay the debt is
inexcusable or willful. Such suspension or revocation shall extend to
programs or activities 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;
(v) Knowingly making false statements or bringing frivolous actions
may subject the debtor to civil or criminal penalties under 31 U.S.C.
3729-3731, 18 U.S.C. 286, 287, 1001, and 1002, or any other applicable
statutory authority, and, if the debtor is a Federal employee, to
disciplinary action under 5 CFR part 752 or other applicable authority;
(vi) Any amounts collected and ultimately found not to have been
owed by the debtor will be refunded;
(vii) For salary offset, up to 15% of the debtor's current
disposable pay may be deducted every pay period until the debt is paid
in full; and
(viii) Dependent upon applicable statutory authority, the debtor
may be entitled to consideration for a waiver.
(c) The Secretary will retain evidence of service indicating the
date of mailing of the demand letter. The evidence of service, which
may include a certificate of service, may be retained electronically so
long as the manner of retention is sufficient for evidentiary purposes.
(d) Prior to, during, or after the completion of the demand
process, if the Secretary determines to pursue, or is required to
pursue offset, the procedures applicable to offset should be followed
(see Sec. 30.12). The availability of funds for debt satisfaction by
offset and the Secretary's determination to p