Debt Management, 1-17 [E7-25388]

Agencies

• Office of the Secretary
• DEPARTMENT OF AGRICULTURE

[Federal Register Volume 73, Number 1 (Wednesday, January 2, 2008)]
[Rules and Regulations]
[Pages 1-17]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E7-25388]



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Rules and Regulations
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Federal Register / Vol. 73, No. 1 / Wednesday, January 2, 2008 / 
Rules and Regulations

[[Page 1]]



DEPARTMENT OF AGRICULTURE

Office of the Secretary

7 CFR Part 3


Debt Management

AGENCY: Office of the Secretary, USDA.

ACTION: Final Rule.

-----------------------------------------------------------------------

SUMMARY: The United States Department of Agriculture (USDA) amends its 
regulations that govern the management of debts owed to it by program 
participants and other debtors to implement the Debt Collection 
Improvement Act of 1996 (DCIA) and the revised Federal Claims 
Collection Standards. The changes will affect USDA requirements for 
collection and settlement of debts, including administrative offset of 
eligible payments, and referral to the Department of the Treasury 
(Treasury) for collection.

DATES: This rule is effective February 1, 2008.

FOR FURTHER INFORMATION CONTACT: Dale Theurer, Credit, Travel, and 
Grants Policy Division, Office of the Chief Financial Officer, 
Department of Agriculture, Mail Stop 9010, Room 3417 South, 1400 
Independence Avenue, SW., Washington, DC 20250, (202) 720-1167. Persons 
with disabilities who require alternative means for communication 
(Braille, large print, audio tape, etc.) should contact the USDA Target 
Center at (202) 720-2600 (voice and TDD).

SUPPLEMENTARY INFORMATION:

Executive Order 12866

    This rule is not a significant regulatory action as defined in 
Executive Order 12866.

Regulatory Flexibility Act

    USDA certifies that this rule will not have a significant impact on 
a substantial number of small entities as defined in the Regulatory 
Flexibility Act, Public Law 96-354, as amended (5 U.S.C. 601 et seq.). 
No comments from small entities were received on the proposed rule. 
This regulation will not impose significant costs on small entities 
because this regulation only impacts small entities who receive 
payments from USDA agencies and who are delinquent on debts owed to 
USDA agencies.

Executive Order 12988

    The rule has been reviewed in accordance with Executive Order 
12988. This rule preempts State laws that are inconsistent with its 
provisions. Before a judicial action may be brought concerning this 
rule or action taken under this rule, all administrative remedies must 
be exhausted.

Unfunded Mandates

    Title II of the Unfunded Mandates Reform Act of 1995 (UMRA), Public 
Law 104-4, requires Federal agencies to assess the effects of their 
regulatory actions on State, local, and tribal governments or the 
private sector. This rule contains no Federal mandates, as defined by 
Title II of the UMRA, for State, local, and tribal governments or the 
private sector. Therefore, this rule is not subject to the requirements 
of sections 202 and 205 of UMRA.

Paperwork Reduction Act

    USDA has determined that the provisions of the Paperwork Reduction 
Act of 1995, as amended, 44 U.S.C. 3501, et seq., do not apply to any 
collections of information contained in this rule because any such 
collections of information are made during the conduct of 
administrative action taken by an agency against specific individuals 
or entities. 5 CFR 1320.4(a)(2).

Background and Purpose

    On November 7, 2001, USDA published an advanced notice of proposed 
rulemaking (66 FR 56247) for revision of the USDA debt management 
regulations, 7 CFR part 3, to reflect promulgation of the revised 
Federal Claims Collection Standards (FCCS) and to incorporate other 
USDA specific changes with respect to collection of debt by 
administrative offset. No comments were received on this notice. On May 
30, 2003, USDA published a proposed rule to revise 7 CFR part 3.
    USDA received comments from four groups in response to the proposed 
rule: two from USDA agencies, one from a State, and one from an 
organization representing grassroots farm and rural advocacy 
organizations. Changes made to the proposed rule reflected in the final 
rule and responses to the comments are as follows.

Section 3.1

    A new paragraph (c) is added to section 3.1 to cover two types of 
debts the collection of which are not subject to these regulations. The 
first is the collection of debts owed by USDA employees for delinquent 
or improper charges under their government travel card accounts. 
Collection of these debts is provided for by separate statutory 
procedures. The Travel and Transportation Reform Act provides 
guidelines for deduction of disposable pay from a USDA employee to 
satisfy a debt owed by the employee to a private contractor, in this 
instance the travel card contractor. However, if the employee disputes 
the debt, the procedures for commercial garnishment of Federal 
employees specified in 5 U.S.C. 5520a, as implemented at 5 CFR part 
582, must be followed.
    The second type is collection of debts under the Food Stamp 
Program. One commenter, a state Department of Health and Welfare, noted 
the difficulties in applying these debt collection procedures to debts 
owed by individuals under the Food Stamp Program for overpayments. 
While debts owed under the Food Stamp Program are subject to collection 
under the DCIA, additional provisions of the Food Stamp Act govern the 
collection of these debts. The collection of Food Stamp Program debts 
owed by individual recipients is not covered by this rule and instead 
will be covered by the regulations at 7 CFR 273.18.
    However, the commenter cast its question in terms of whether the 
proposed regulations would apply to State agencies, while the substance 
of its comments noted the problems of applying these regulations to 
collection of debts owed by individual Food Stamp Program recipients. 
While the final rule is revised to reflect that it does not apply to 
individual Food Stamp Program recipients, it will continue to apply to 
States for debts otherwise owed

[[Page 2]]

by the States as States under the Food Stamp Program, as States are 
included in the definition of ``debtor'' in section 3.3(h). These 
procedures, as applicable to States, will be complementary to any 
specific procedures for the collection of State debts (as well as those 
of Food Stamp retailers) provided in the Food Stamp Act, as permitted 
by Sec.  3.1(a)(2) and 3.1(b)(2).
    One commenter objected to the removal from 7 CFR part 3 of the debt 
collection procedures under the Act of December 20, 1944 (12 U.S.C. 
1150, et seq.) (1944 Act). As indicated in the preamble to the proposed 
rule, it is unlikely that collection under that Act will ever be 
initiated.
    The 1944 Act authorizes the Secretary to compromise certain debts 
of $1,000 or less if certain factors are not met, including that ``the 
debtor is unable to pay said indebtedness in full and has no reasonable 
prospect of being able to do so'' (12 U.S.C. 1150(2)). This criterion 
is similar to that in the FCCS provisions that allow an agency to 
compromise a claim of $100,000 or less: ``[t]he debtor is unable to pay 
the full amount in a reasonable time'' (31 CFR 902.2(a)(1)). 
Accordingly, USDA has determined that the minimum requirement of the 
1944 Act will be met by application of the FCCS standards in any event 
and thus redundant regulations for the small debts covered by the 1944 
Act are not required.
    The 1944 Act further authorizes the Secretary to cancel debts of 
less than ten dollars in certain limited circumstances. See 12 U.S.C. 
1150. Again, USDA has determined that application of the FCCS standards 
for compromise of debt at 31 CFR 902.2 would cover the same 
circumstances as set forth in the statute.
    In any event, as noted in the preamble to the proposed rule, the 
authority to take action under the 1944 Act is reserved by the language 
of Sec.  3.1(a)(2).

Section 3.2

    One commenter suggested that the terms ``commercial debt'' and 
``consumer debt'' should be defined with respect to reporting to 
credit-reporting bureaus. The commenter also suggested that commercial 
debt reporting also should be subject to due process requirements, 
which is addressed below. With respect to the definitions, USDA has 
relied upon the Financial Management Service, Department of Treasury 
``Guide to the Federal Credit Bureau Program'' to define ``commercial 
debt'' as a debt arising from a business activity and a ``consumer 
debt'' as a debt arising from a personal activity. For example, a loan 
to a farmer to obtain additional land or equipment is considered a 
commercial loan whereas a loan to the same farmer to purchase a 
personal residence would be a consumer loan.
    Two commenters urged USDA to use consistent deadlines and 
definition of ``day'' for purposes of calculating deadlines. The issue 
of consistent deadlines is addressed below, however ``day'' has been 
defined as a calendar day unless otherwise specified.
    One commenter noted that the Farm Service Agency (FSA) has for many 
years defined a debt as ``delinquent'' as payments that have not been 
made 30 days after the due date. The commenter also noted that the 
preamble to the FCCS specifically provided that agencies may further 
define ``delinquency'' depending on specific agency program 
requirements and particular types of debt. Accordingly, the definition 
of ``delinquent'' has been amended to provide USDA agencies the 
flexibility to define ``delinquency'' as required by statute or 
regulation by adding the phrase ``or as otherwise defined by program 
specific statutes or regulations'' to the definition.
    One commenter noted that a definition of an ``offset'' itself had 
been omitted. Accordingly, a definition of ``offset'' has been added, 
which necessitated the addition of definitions for the terms ``payee'' 
and ``person,'' and a revision of the definition of the term 
``debtor.'' These definitions are drawn from the Treasury offset 
regulation definitions at 31 CFR 285.5.
    One commenter suggested that a definition for ``cross-servicing'' 
be added to the regulation. ``Cross-servicing'' refers to the mandatory 
requirement in the DCIA to transfer to Treasury all debts that have 
been delinquent for 180 days or more so that Treasury can take action 
to collect the debt. It is a separate and distinct process from 
transfer to Treasury for collection pursuant to centralized 
administrative offset under Treasury Offset Program (TOP), and there 
are separate statutory requirements in the DCIA for transfer of 
delinquent debts to Treasury generally and transfer of debts for 
administrative offset. Treasury regulations cover the two mandatory 
transfer requirements in separate provisions. See 31 CFR 285.12 (cross-
servicing) and 31 CFR 285.5 (centralized offset through TOP).
    USDA understands that existence of two separate Treasury transfer 
mechanisms is confusing but it is required by law. Since ``cross-
servicing'' is a description of a process, USDA declines to add a 
definition that would be nothing more than restating the cross-
servicing process as already set out in Sec.  3.31 of the proposed 
rule.

Section 3.11

    Paragraph (b) has been reformatted to clarify when OGC consultation 
should be sought in determining whether to remove an item from a demand 
letter.

Section 3.31

    Paragraph (a) is revised to delete the words ``or more'' after 
``180 days'' because the statutory requirement is that debts be 
transferred after 180 days.

Section 3.41

    Paragraph (b)(3) is revised to clarify that the authority for an 
agency to offset payments prior to notice and an opportunity to review 
applies only in the cases of non-centralized administrative offsets.
    Paragraph (b)(4) provided that only one chance would be given for 
notice and review opportunities ``with respect to a particular debt.'' 
One commenter suggested that this be revised to state ``with respect to 
a particular delinquency'' so that if a borrower became delinquent on a 
debt once, received the notice, and became current on payments in 
response, and later then became delinquent again, the borrower would 
receive notice and opportunity for review again for the second 
delinquency. The language ``with respect to a particular debt'' comes 
directly from the FCCS; therefore, USDA declines to make the 
recommended change.
    ``Debt'' as defined in these regulations is not synonymous with 
``loan.'' This comment, however, does suggest the need to clarify the 
USDA position with respect to due process procedures for delinquencies 
on loans paid on an installment basis, which is done with the addition 
of a new language in paragraph (b)(4). With respect to loans that are 
repaid on an installment basis, the borrower may go in and out of being 
current or delinquent on the loan many times over the life of the loan. 
Based on its consultation with the Financial Management Service of the 
Department of the Treasury regarding such installment loans, USDA takes 
the position that, at a minimum, only one opportunity for review need 
be provided for the first delinquent installment payment. For credit 
reporting, this means that the first notice may provide that the 
borrower will be reported as delinquent and provide due process review 
rights, but once the account is set up at the credit reporting agency, 
then USDA in the future simply may update the status of the account as 
to its current or delinquent status without further notice to the 
borrower. For referral to TOP, the

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first notice may advise the borrower of referral of the delinquency, 
and all future delinquencies to TOP, with an opportunity for review but 
thereafter the borrower may be notified only that a delinquency has 
been referred to TOP without further opportunity for review. Any 
interest accrued or any installments coming due after the offset is 
initiated also would not require a new notice and opportunity to 
review. Program specific regulations may provide for more opportunities 
for due process review.

Section 3.44

    Paragraph (d) generally is amended to reflect, in cases of 
centralized administrative offset, the additional warning notices 
required for offset of debts against recurring payments as required by 
31 CFR 285.5(g)(1) and (2) and the priorities for collecting multiple 
debts owed by a payee, as required by 31 CFR 285.5(f)(3). Since these 
changes incorporate already applicable requirements in the Treasury 
regulations, no further comment is required.
    Finally, there were a number of comments of a general nature about 
the proposed rule for which general modifications were made or for 
which the agency declined to modify the rule.

Words of Authority

    One commenter noted that the proposed rule in many instances used 
the term ``should'' which was ambiguous as to its binding effect in 
contrast to the mandatory terms ``shall'' and ``must'' and the 
permissive term ``may.'' The final rule is modified accordingly to 
convert ``should'' into either mandatory or permissive terms, except 
where use of the term ``should'' is appropriate as encouraging agency 
action but not requiring it.

Consistent Deadlines

    As noted above, the term ``day'' has been defined to be a calendar 
day and references to ``working'' days have been removed. The reference 
to ``working'' days was incorporated from the prior 7 CFR part 3, but 
there is no statutory or regulatory requirement for the term, therefore 
USDA has opted for consistent use of calendar days.
    Two commenters noted that in some cases, deadlines were calculated 
from the date of a notice or request, and in others, from date of 
receipt of a notice or request. One commenter in particular questioned 
how USDA would determine the date of receipt. Accordingly, all 
deadlines have been changed to reflect calculation from the date of the 
notice or request except where the regulations of other agencies 
require calculation from the date of receipt of a notice or request. 
This is consistent with the position taken by the Departments of 
Justice and Treasury which concluded in promulgating the final FCCS 
that calculating the date from when the notice was sent met statutory 
and constitutional requirements.
    The same two commenters also noted that there were 10, 20, 30, and 
60 day deadlines used throughout the proposed rule which was confusing, 
and suggested that a consistent deadline should be used for simplicity.
    A particular objection was raised to the difference between the 30-
day deadline to seek review for noncentralized offset and the 60-day 
deadline set for centralized offset through referral to the TOP. This 
difference is necessitated by the different statutory and regulatory 
requirements that apply to these offsets. Any debt referred to TOP for 
administrative offset may be collected through a variety of tools, 
including offset of tax refunds. The tax refund statute requires that 
60 days be allowed for a debtor to seek review of a tax refund offset. 
See 31 U.S.C. 3720A. On the other hand, the FCCS and the DCIA only 
require that agencies provide an opportunity for a debtor to seek 
administrative review, an opportunity to review records related to the 
debt, and an opportunity to enter into a written repayment agreement 
prior to centralized offset, without specifying any specific time 
period for such. See 31 CFR 901.3(b)(4)(ii)(B). Further, for 
noncentralized offset, the offset may even be initiated in certain 
circumstances prior to the review. See 31 CFR 901.3(b)(4)(iii)(C).
    Without a mandatory prescribed time period for these opportunities, 
USDA simply incorporated the existing timelines from the current 7 CFR 
part 3 for these procedures. However, in light of the comment, USDA has 
changed the period for seeking inspection of records or proposing a 
repayment plan to 30 days from the date of the Notice of Intent to 
Collect by Administrative Offset to be consistent with the 30-day 
deadline for seeking administrative review of the proposed offset. 
However, USDA has retained the 60-day deadline for centralized offset 
and 30-day deadline for noncentralized offset. USDA does not see the 
need to extend the deadline for the internal offset of payments to its 
debtors to 60 days. The longer time period likely only would result in 
more payments being offset prior to the due process review in 
accordance with 31 CFR 901.3(b)(4)(iii)(C).
    One commenter also noted that the proposed regulation presents a 
debtor with the dilemma of either seeking administrative review or 
filing a repayment plan, or doing both simultaneously. USDA has revised 
the final rule to allow a debtor 15 days to file a proposed repayment 
plan in the event of a decision adverse to a debtor or employee under 
subpart F or Sec.  3.78.
    Finally, USDA has retained the timelines for various actions in 
administrative hearings conducted under Sec.  3.62. Those deadlines 
come from the existing provisions of part 3, have not proven 
problematic in the past, and preserve flexibility for the hearing 
official in conducting these information proceedings.

Statute of Limitations

    One commenter requested that USDA clarify the application of the 
statute of limitations to collection by administrative offset by 
eliminating the qualifying language in Sec.  3.40(e) and the reference 
to the Office of Personnel Management ``flagging'' civil service 
retirement and disability accounts prior to time those benefits begin. 
USDA declines to modify this language which is taken directly from the 
FCCS.

Review of Reporting of Commercial Debts

    One commenter suggested that if agencies are going to report 
commercial debts to credit reporting agencies as recommended in Sec.  
3.12(e), then the pre-reporting requirements applicable to reporting of 
consumer debts as set forth in Sec.  3.12 also should apply to 
commercial debt. These protections for consumer debt reporting are 
required by statute. USDA declines to apply those protections to 
commercial debts in the absence of any statute or regulation requiring 
Federal agencies to do so.

Loan Servicing Timetables

    With respect to farm loan programs, one commenter contended that 
the primary purpose of the Farm Loan Program to serve as a lender of 
last resort and keep family farmers on the land was inconsistent with 
the increased general government interest in debt collection 
activities, and that the debt collection activities of USDA with 
respect to the Farm Loan Program should be secondary to that primary 
purpose. The commenter suggested that this did not require according 
complete precedence to loan making and loan servicing, but rather only 
coordination of debt collection with loan making and servicing 
activities. To that extent, the commenter suggested that the provisions 
of the proposed rule present

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certain inefficiencies in its requirements for referral of debts to 
Treasury and reporting of delinquent debts (Sec. Sec.  3.11(b)(7) and 
3.31(c)) in light of the requirement for FSA issuance of a ``Notice of 
Availability of Loan Servicing Programs'' when a borrower is 90 days 
past due on scheduled loan payments or FSA finds the borrower in non-
monetary default, to which the borrower has 60 days to respond. The 
commenter noted similar inefficiencies with respect to the reporting to 
credit reporting agencies (where applicable) (Sec.  3.12(a)(1)) and the 
charging of a 6 percent penalty on delinquent debts. Given that 
successful resolution of an application for loan servicing could moot 
these referrals, reports, and penalties, the commenter suggests that 
these provisions of the proposed rule be amended to state that 
implementation of these provisions will occur only after resolution of 
all pending loan servicing applications.
    USDA declines to revise the rule as suggested. First, this rule is 
intended as a general rule for debt collection for the entire 
Department, not only farm loan programs. As noted in Sec.  3.1(b)(2), 
USDA agencies may issue regulations to supplement these Department 
regulations in order to meet the specific requirements of individual 
programs. Second, Sec.  3.31(b)(1) provides that referrals to Treasury 
for cross-servicing are not applicable to debts in litigation and 
foreclosure, and only legally enforceable debts may be referred to 
Treasury for centralized offset (see Sec.  3.41(c) and 31 CFR 
285.5(d)(1)). Third, FSA farm loan debt is commercial debt, not 
consumer debt, so the commenter's comments on Sec.  3.12(a)(1) are 
inapplicable. Finally, the up to 6 percent penalty can be avoided if 
borrowers take action to bring their accounts current in a timely 
manner, or making necessary financial arrangements to avoid becoming 
delinquent.

Installment Loans

    One commenter suggested, with particular reference to Sec.  3.16, 
that the proposed rule's emphasis on collection of the entirety of a 
debt failed to distinguish between collecting the total amount of the 
debt from the collection of a missed installment payment. The comment 
apparently assumes that use of the word ``debt'' in the proposed 
regulation equates to an entire loan held by a borrower. As the 
definitions make clear, the term ``debt'' only refers to amounts 
determined to be due the United States, e.g., the amount of any given 
installment payment or payments due on a loan or loans at a given time, 
not the entire amount of a loan or loans. Further, the proposed 
regulation also covers debts owed USDA other than debts arising under 
loans, for example, civil penalties owed for program violations, 
disallowed costs under grants, etc. Accordingly, USDA declines to make 
the commenter's suggested change to the proposed rule to specify ``the 
debt or missed installment payment.''

3.16(c)--Additional Security

    One commenter noted that most farm program loan debts already are 
secured, and thus no extra security would be needed to assure the 
government of adequate protection. Accordingly, the commenter 
recommended that the regulation should include guidance with respect to 
the types of cases in which taking additional security would be 
appropriate.
    If a debt already is secured, then additional security would not be 
warranted. However, USDA declines to add further guidance as to when 
security should be obtained for unsecured deferred payments under an 
installment repayment plan in order to afford agencies maximum 
flexibility to require, or not require, such security in appropriate 
cases.

Review of Rejection of Repayment Plan

    One commenter stated that the rejection by the agency of a 
repayment plan offered under Sec.  3.42(b) seems to be a ``denial'' 
constituting an adverse agency decision appealable to the National 
Appeals Division (NAD), and that this should be stated in the final 
rule.
    USDA disagrees with this comment. An offer of a repayment plan is 
an offer to the agency which the agency is not required to accept; it 
is not a request for a decision of the agency under agency program 
statutes and regulations that the agency has denied. Further, Sec.  
3.42(a) requires that agency decisions with respect to inspection or 
copying of records be consistent with 7 CFR part 1, subpart A, 
decisions under which expressly are not appealable to NAD. See 7 CFR 
11.1 (definition of ``participant'').

Exempt Farm Program Payments

    One commenter requested that the Secretary of Agriculture exempt 
all farm disaster payments from both referral to Treasury for cross-
servicing and administrative offset, and that the final rule include a 
provision recognizing the authority of the Secretary of Agriculture to 
exempt other payments from administrative offset.
    The commenter misinterprets the DCIA and fails to understand that 
offset and cross-servicing are two distinct processes. The Secretary of 
Agriculture has no authority to exempt debts from the statutory 
requirements for referral for cross-servicing or administrative offset 
or to exempt certain payments from offset. Only the Secretary of the 
Treasury has the authority to exempt certain payments from offset if 
offset would ``tend to interfere substantially with or defeat the 
purposes of the payment certifying agency's program.'' 7 U.S.C. 
3716(c)(3). The Secretary of the Treasury exempts classes of payments 
for programs upon request by a payment agency only if the standards set 
by Treasury for such exemptions are met. See 31 CFR 285.5(e)(7). This 
trumps the current USDA debt collection regulations that allow USDA to 
make that determination. See 7 CFR 3.23(b)(3) (2005). Similarly, the 
Secretary of the Treasury may exempt any class of debt from referral 
for cross-servicing upon request of an executive agency (31 U.S.C. 
3711(g)(2)(B)) in accordance with the criteria specified in 31 CFR 
285.12(d)(5)).

List of Subjects in 7 CFR Part 3

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

0
For the reasons stated in the preamble, USDA amends 7 CFR part 3 as 
follows:

PART 3--DEBT MANAGEMENT

0
1. The authority citation for 7 CFR part 3 is revised to read as 
follows:

    Authority: 5 U.S.C. 301; 31 U.S.C. 3701, 3711, 3716-18, 3720B; 
31 CFR parts 285 and 901-904.


0
2. Subpart E is redesignated as subpart I.


0
3. Subparts A through D are revised, and subparts E through H are 
added, to read as follows:

PART 3--DEBT MANAGEMENT

Subpart A--General
Sec.
3.1 Purpose and scope.
3.2 Authority.
3.3 Definitions.
3.4 Delegations of authority.
Subpart B--Standards for the Administrative Collection and Compromise 
of Claims
3.10 Aggressive agency collection activity.
3.11 Demand for payment.
3.12 Reporting of consumer debts.

[[Page 5]]

3.13 Contracting with private collection contractors and with 
entities that locate and recover unclaimed assets. [Reserved]
3.14 Suspension or revocation of eligibility for loans and loan 
guarantees, licenses, permits, or privileges.
3.15 Liquidation of collateral.
3.16 Collection in installments.
3.17 Interest, penalties, and administrative costs.
3.18 Use and disclosure of mailing addresses.
3.19 Standards for the compromise of claims.
3.20 Standards for suspending or terminating collection activities.
3.21 Referrals of Debts to Justice.
Subpart C--Referral of Debts to Treasury
3.30 General requirements.
3.31 Mandatory referral for cross-servicing.
3.32 Discretionary referral for cross-servicing.
3.33 Required certification.
3.34 Fees.
Subpart D--Administrative Offset
3.40 Scope.
3.41 Procedures for notification of intent to collect by 
administrative offset.
3.42 Debtor rights to inspect or copy records, submit repayment 
proposals, or request administrative review.
3.43 Non-centralized administrative offset.
3.44 Centralized administrative offset.
3.45 USDA payment authorizing agency offset of pro rata share of 
payments due entity in which debtor participates.
3.46 Offset against tax refunds.
3.47 Offset against amounts payable from Civil Service Retirement 
and Disability Fund.
Subpart E--Administrative Wage Garnishment
3.50 Purpose.
3.51 Scope.
3.52 Definitions.
3.53 Procedures.
Subpart F--Administrative Reviews for Administrative Offset, 
Administrative Wage Garnishment, and Disclosure to Credit Reporting 
Agencies
3.60 Applicability.
3.61 Presiding employee.
3.62 Procedures.
Subpart G--Federal Salary Offset
3.70 Scope.
3.71 Definitions.
3.72 Coordinating offset with another Federal agency.
3.73 Determination of indebtedness.
3.74 Notice requirements before offset.
3.75 Request for a hearing.
3.76 Result if employee fails to meet deadlines.
3.77 Hearing.
3.78 Written decision following a hearing.
3.79 Review of USDA records related to the debt.
3.80 Written agreement to repay debts as alternative to salary 
offset.
3.81 Procedures for salary offset: when deductions may begin.
3.82 Procedures for salary offset: types of collection.
3.83 Procedures for salary offset: methods of collection.
3.84 Procedures for salary offset: imposition of interest, 
penalties, and administrative costs.
3.85 Non-waiver of rights.
3.86 Refunds.
3.87 Agency regulations.
Subpart H--Cooperation with the Internal Revenue Service
3.90 Reporting discharged debts to the Internal Revenue Service.
Subpart I--Adjusted Civil Monetary Penalties
3.91 Adjusted civil monetary penalties.

    Authority: 5 U.S.C. 301; 31 U.S.C. 3701, 3711, 3716-18, 3720B; 
31 CFR parts 285 and 901-904.

Subpart A--General


Sec.  3.1  Purpose and scope.

    (a) In general. (1) The regulations in this part prescribe 
standards and procedures for use by USDA agencies in the collection, 
compromise, suspension, or termination of debts owed to the United 
States.
    (2) The regulations in this part apply to all debts of the United 
States subject to collection by USDA agencies, except as otherwise 
specified in this part or by statute.
    (3) The regulations in this part do not preclude the Secretary from 
collection, compromise, suspension, or termination of debts as 
otherwise authorized by law. In such cases the laws and implementing 
regulations that are specifically applicable to claims collection 
activities of a particular agency generally shall take precedence over 
this part.
    (b) Agency specific regulations. (1) The regulations of this part 
shall apply to the Commodity Credit Corporation to the extent specified 
in 7 CFR part 1403.
    (2) USDA agencies may issue regulations to supplement this part in 
order to meet the specific requirements of individual programs.
    (c) Inapplicability. The regulations of this part shall not apply 
to:
    (1) Collection of debts owed government travel card contractors by 
USDA employees;
    (2) Collection of debts owed by individual Food Stamp Program 
recipients for whom debt collection procedures are provided under 7 CFR 
273.18.


Sec.  3.2  Authority.

    The regulations in this part are issued under the Debt Collection 
Act of 1982, as amended by the Debt Collection Improvement Act of 1996 
(DCIA) (31 U.S.C. 3701 et seq.) and the Federal Claims Collection 
Standards issued pursuant to the DCIA by Treasury and Justice (31 CFR 
parts 901-904) that prescribe government-wide standards for 
administrative collection, compromise, suspension, or termination of 
agency collection action, disclosure of debt information to credit 
reporting agencies, referral of claims to private collection 
contractors for resolution, and referral to Justice for litigation to 
collect debts owed the government. The regulations under this part also 
are issued under Treasury regulations implementing DCIA (31 CFR part 
285) and related statutes and regulations governing the offset of 
Federal salaries (5 U.S.C. 5512 and 5514; 5 CFR part 550, subpart K) 
and administrative offset of tax refunds (31 U.S.C. 3720A).


Sec.  3.3  Definitions.

    For the purpose of this part, except as where otherwise 
specifically provided, the term or terms:
    Agency means a subagency, office, or corporation within USDA 
subject to the authority or general supervision of the Secretary.
    Centralized administrative offset means referral of a debt to the 
Treasury Offset Program (TOP) for offset of payments made to a debtor 
by Federal agencies other than USDA.
    Claim and debt are synonymous and interchangeable, and refer to an 
amount of money, funds, or property that has been determined by an 
agency official to be due the United States from any person, 
organization, or entity, except another Federal agency.
    Commercial debt means a debt arising out of a business activity.
    Consumer debt means a debt arising out of a personal activity.
    Contracting officer has the same meaning as in 41 U.S.C. 601.
    Credit reporting agencies (also known as credit bureaus) means 
major consumer credit reporting agencies that have signed agreements 
with agencies to receive and integrate credit information (data) from 
voluntary subscribers (Federal agencies and private sector entities) 
into their respective databases for the purpose of generating credit 
reports for sale to purchasers of credit data.
    Creditor agency means a Federal agency or USDA agency to which a 
debtor owes a debt, including a debt collection center when acting on 
behalf of a creditor agency in matters pertaining to collection of the 
debt.
    Day means calendar day unless otherwise specified.
    Debt collection center means Treasury or other government agency or 
division,

[[Page 6]]

designated by the Secretary of the Treasury with authority to collect 
debt on behalf of creditor agencies in accordance with 31 U.S.C. 
3711(g).
    Debtor means a person who owes a delinquent, nontax debt to the 
United States.
    Delinquent means a debt that has not been paid by the date 
specified in the agency's initial written demand for payment or 
applicable agreement or instrument (including a post-delinquency 
payment agreement), unless other satisfactory payment arrangements have 
been made, or as otherwise defined by program specific statutes or 
regulations.
    Federal agency means any other Department or entity within the 
Executive branch of the government.
    Government or Federal government means the government of the United 
States, unless otherwise specified.
    Internal administrative offset means a non-centralized 
administrative offset between a USDA creditor agency and a USDA payment 
authorizing agency.
    Justice means the United States Department of Justice.
    NAD means the USDA National Appeals Division.
    Non-centralized administrative offset means an agreement between a 
USDA creditor agency and a payment authorizing agency to offset the 
payments made by the payment authorizing agency to satisfy a USDA debt. 
An internal administrative offset is a type of non-centralized 
administrative offset.
    Offset means withholding funds payable by the United States to, or 
held by the United States for, a person to satisfy a debt owed by the 
payee.
    OGC means the USDA Office of the General Counsel.
    Payee means a person who is due a payment from a payment 
authorizing agency, and includes a person who is entitled to all or 
part of a payment.
    Payment authorizing agency means a Federal agency or USDA agency 
that is authorized to disburse payments to a recipient.
    Person means an individual, corporation, partnership, association, 
organization, State or local government, or any other type of public or 
private entity other than a Federal agency.
    Recoupment means a special method for adjusting debts arising under 
the same transaction or occurrence, such as obligations arising under 
the same contract.
    Reviewing officer means a person designated by a creditor agency as 
responsible for conducting a hearing or providing documentary review on 
the existence of the debt and the propriety of an administrative 
collection action.
    Secretary means the Secretary of Agriculture, unless otherwise 
specified.
    Treasury means the United States Department of the Treasury.
    USDA means the United States Department of Agriculture.


Sec.  3.4  Delegations of authority.

    The head of an agency is authorized to exercise any or all of the 
functions provided by this part with respect to programs for which the 
head of the agency has delegated responsibility, and may delegate and 
authorize the redelegation of any of the functions vested in the head 
of the agency by this part, except as otherwise provided by this part.

Subpart B--Standards for the Administrative Collection and 
Compromise of Claims


Sec.  3.10  Aggressive agency collection activity.

    An agency shall aggressively collect all debts arising out of 
activities of, or referred or transferred for collection services to, 
that agency. Collection activities shall be undertaken promptly with 
follow-up action taken as necessary.


Sec.  3.11  Demand for payment.

    (a) Demand Letters. Generally, debt collection is initiated with a 
written demand for payment to the debtor unless an applicable agreement 
or instrument (including a post-delinquency payment agreement) provides 
otherwise (such as providing USDA an immediate right to collect upon 
delinquency). Written demand as described in paragraph (b) of this 
section shall be made promptly upon a debtor of the United States in 
terms that inform the debtor of the consequences of failing to 
cooperate with the agency to resolve the debt. The specific content, 
timing, and number of demand letters shall depend upon the type and 
amount of the debt and the debtor's response, if any, to the agency's 
letters or telephone calls. Where statutes or agency regulations are 
specific as to the requirements for demand letters, an agency shall 
follow its own procedures in formulating demand letters. Generally, one 
demand letter should suffice. In determining the timing of the demand 
letter(s), an agency shall give due regard to the need to refer debts 
promptly to Justice for litigation, in accordance with 31 CFR 904.1 or 
otherwise. When necessary to protect the government's interest (for 
example, to prevent the running of a statute of limitations), written 
demand may be preceded by other appropriate actions under this part, 
including immediate referral for litigation.
    (b) Required notices. In demand letters, the USDA creditor agency 
shall inform the debtor:
    (1) The nature and amount of the debt; and the facts giving rise to 
the debt;
    (2) How interest, penalties, and administrative costs are added to 
the debt, the date by which payment must be made to avoid such charges, 
and that such assessments must be made unless excused in accordance 
with Sec.  3.17;
    (3) The date by which payment should be made to avoid the enforced 
collection actions described in paragraph (b)(6) of this section;
    (4) The willingness of the creditor agency to discuss alternative 
payment arrangements and how the debtor may enter into a written 
agreement to repay the debt under terms acceptable to the agency (see 
Sec.  3.16);
    (5) The name, address, telephone number and email address 
(optional) of a contact person or office within the creditor agency;
    (6) The intention of the creditor agency to enforce collection if 
the debtor fails to pay or otherwise resolve the debt, by taking one or 
more of the following actions:
    (i) Offset. Offset the debtor's USDA payments and refer the 
debtor's debt to TOP for offset against other Federal payments, 
including income tax refunds, in accordance with subpart D;
    (ii) Private collection agency. [Reserved].
    (iii) Credit reporting agency reporting. Report the debt to a 
credit reporting agency in accordance with Sec.  3.12;
    (iv) Administrative wage garnishment. Refer the debt to Treasury in 
accordance with subpart E for possible collection by garnishing the 
debtor's wages through administrative wage garnishment;
    (v) Litigation. Refer the debt to Justice in accordance with Sec.  
3.21 to initiate litigation to collect the debt;
    (vi) Referral to Treasury. Referral of the debt to Treasury for 
collection in accordance with subpart C of this part;
    (7) That USDA debts over 180 days delinquent must be referred to 
Treasury for the collection actions described in paragraph (b)(6) of 
this section;
    (8) How the debtor may inspect and copy records related to the 
debt;
    (9) How the debtor may request a review of the USDA creditor 
agency's determination that the debtor owes a debt and present evidence 
that the debt is not delinquent or legally enforceable (see subpart F 
of this part);
    (10) [Reserved].
    (11) How a debtor who is a Federal employee subject to Federal 
salary offset

[[Page 7]]

may request a hearing (see subpart G of this part);
    (12) How a debtor may request a waiver of the debt, if applicable;
    (13) How the debtor's spouse may claim his or her share of a joint 
income tax refund by filing Form 8379 with the Internal Revenue Service 
(see https://www.irs.gov);
    (14) How the debtor may exercise other statutory or regulatory 
rights and remedies available to the debtor;
    (15) That certain debtors may be ineligible for government loans, 
guarantees, and insurance (see Sec.  3.14);
    (16) If applicable, the creditor agency's intention to suspend or 
revoke licenses, permits, or privileges (see Sec.  3.14); and
    (17) That the debtor must advise the creditor agency of the filing 
of any bankruptcy proceedings of the debtor or of another person liable 
for the debt being collected.
    (c) Exceptions to notice requirements. A USDA creditor agency may 
omit from a demand letter one or more of the provisions contained in 
paragraphs (b)(6) through (b)(17) if the USDA creditor agency, in 
consultation with OGC, determines that any provision is not legally 
required given the collection remedies to be applied to a particular 
debt.
    (d) Agencies shall exercise care to ensure that demand letters are 
mailed or hand-delivered on the same day that they are dated. There is 
no prescribed format for demand letters. Agencies shall utilize demand 
letters and procedures that will lead to the earliest practicable 
determination of whether the debt can be resolved administratively or 
must be referred for litigation.
    (e) Agencies shall respond promptly to communications from debtors, 
within 30 days of receipt whenever feasible, and shall advise debtors 
who dispute debts to furnish available evidence to support their 
contentions.
    (f) Prior to the initiation of the demand process or at any time 
during or after completion of the demand process, if an agency 
determines to pursue, or is required to pursue, internal administrative 
offset, the procedures applicable to offset must be followed (see 
subpart D). The availability of funds or money for debt satisfaction by 
internal administrative offset, and the agency's determination to 
pursue collection by internal administrative offset, shall release the 
agency from the necessity of further compliance with paragraphs (a), 
(b), and (c) of this section.
    (g) Prior to referring a debt for litigation under 31 CFR part 904, 
agencies shall advise each debtor determined to be liable for the debt 
that, unless the debt can be collected administratively, litigation may 
be initiated. This notification shall comply with Executive Order 12988 
(3 CFR, 1996 Comp., pp. 157-163) and may be given as part of a demand 
letter under paragraph (b) of this section or in a separate document. 
Litigation counsel for the government shall be advised that this notice 
has been given.
    (h) When an agency learns that a bankruptcy petition has been filed 
with respect to a debtor, before proceeding with further collection 
action, the agency shall immediately seek legal advice from OGC 
concerning the impact of the Bankruptcy Code on any pending or 
contemplated collection activities. Unless the agency is advised that 
the automatic stay imposed at the time of filing pursuant to 11 U.S.C. 
362 has been lifted or is no longer in effect, in most cases collection 
activity against the debtor must stop immediately. The agency should 
take the following steps:
    (1) After seeking legal advice, a proof of claim must be filed in 
most cases with the bankruptcy court or the Trustee. Agencies shall 
refer to the provisions of 11 U.S.C. 106 relating to the consequences 
on sovereign immunity of filing a proof of claim.
    (2) If the agency is a secured creditor, it may seek relief from 
the automatic stay regarding its security, subject to the provisions 
and requirements of 11 U.S.C. 362.
    (3) Offset is stayed in most cases by the automatic stay. However, 
agencies may seek legal advice from OGC to determine whether their 
payments to the debtor and payments of other agencies available for 
offset may be frozen by the agency until relief from the automatic stay 
can be obtained from the bankruptcy court. Agencies also may seek legal 
advice from OGC to determine whether recoupment is available.


Sec.  3.12  Reporting of consumer debts.

    (a) Notice. In demand letters to debtors sent in accordance with 
Sec.  3.11, agencies shall inform debtors:
    (1) The intent of the agency to report the delinquent consumer debt 
to credit reporting agencies after 60 days;
    (2) The specific information to be transmitted (i.e., name, 
address, and taxpayer identification number, information about the 
debt);
    (3) The actions which may be taken by the debtor to prevent the 
reporting (i.e., repayment in full or a repayment agreement); and
    (4) The rights of the debtor to seek review of the existence of the 
debt in accordance with subpart F.
    (b) Disclosure. Disclosure of delinquent consumer debts must be 
consistent with the requirements of 31 U.S.C. 3711(e), the Privacy Act 
of 1974 (5 U.S.C. 552a), the Bankruptcy Code, and 31 CFR 901.4.
    (c) Non-duplication of hearings. When an agency has given a debtor 
any of the notices required by this part and an opportunity for 
administrative review under subpart F, the agency need not duplicate 
such notice and review opportunities before reporting the delinquent 
debt to credit bureaus.
    (d) Stay of disclosure. Agencies shall not disclose a delinquent 
debt to a credit reporting agency if a debtor requests review under 
subpart F until a final determination is made by a reviewing official 
that upholds the agency intent to disclose.
    (e) Commercial debt. The requirement of this section does not apply 
to commercial debts, although agencies should report commercial debts 
to commercial credit bureaus.


Sec.  3.13  Contracting with private collection contractors and with 
entities that locate and recover unclaimed assets. [Reserved.]


Sec.  3.14  Suspension or revocation of eligibility for loans and loan 
guarantees, licenses, permits, or privileges.

    (a) Agencies are not permitted to extend financial assistance in 
the form of a loan, loan guarantee, or loan insurance to any person 
delinquent on a nontax debt owed to a Federal agency, except as 
otherwise authorized by law or upon waiver of application of this 
section by the USDA Chief Financial Officer (CFO) or Deputy CFO. This 
prohibition does not apply to disaster loans. Agencies may extend 
credit after the delinquency has been resolved. The Secretary of the 
Treasury may exempt classes of debts from this prohibition and has 
prescribed standards defining when a ``delinquency'' is ``resolved'' 
for purposes of this prohibition. See 31 CFR 285.13 (Barring Delinquent 
Debtors From Obtaining Federal Loans or Loan Insurance or Guarantees).
    (b) Similarly, agencies also are not permitted to extend financial 
assistance (either directly or indirectly) in the form of grants, 
loans, or loan guarantees to judgment debtors who have a judgment lien 
placed against their property until the judgment is satisfied, unless 
the agency grants a waiver in accordance with agency regulations. See 
31 U.S.C. 3201(e).
    (c) In non-bankruptcy cases, agencies seeking the collection of 
statutory penalties, forfeitures, or other types of

[[Page 8]]

claims must consider the suspension or revocation of licenses, permits, 
or other privileges for any inexcusable or willful failure of a debtor 
to pay such a debt in accordance with the agency's regulations or 
governing procedures. The debtor shall be advised in the agency's 
written demand for payment of the agency's ability to suspend or revoke 
licenses, permits, or privileges.
    (d) Any agency making, guaranteeing, insuring, acquiring, or 
participating in, loans must consider suspending or disqualifying any 
lender, contractor, or broker from doing further business with the 
agency or engaging in programs sponsored by the agency if such lender, 
contractor, or broker fails to pay its debts to the government within a 
reasonable time or if such lender, contractor, or broker has been 
suspended, debarred, or disqualified from participation in a program or 
activity by another Federal agency. Failure to pay a single substantial 
debt, or a number of outstanding debts (including disallowed costs and 
overrun payments, but not including sums owed to the government under 
the Internal Revenue Code) owed to any Federal agency or 
instrumentality is grounds for nonprocurement suspension or debarment 
if the debt is uncontested and the debtor's legal administrative 
remedies for review of the debt are exhausted. See 7 CFR 3017.305(c)(3) 
and 405(a)(2).
    (e) The failure of any surety to honor its obligations in 
accordance with 31 U.S.C. 9305 shall be reported to Treasury. Treasury 
will forward to all interested agencies notification that a surety's 
certificate of authority to do business with the government has been 
revoked.
    (f) The suspension or revocation of licenses, permits, or 
privileges also may extend to USDA programs or activities that are 
administered by the States on behalf of the government, to the extent 
that they affect the government's ability to collect money or funds 
owed by debtors. Therefore, States that manage USDA activities, 
pursuant to approval from the agencies, shall ensure that appropriate 
steps are taken to safeguard against issuing licenses, permits, or 
privileges to debtors who fail to pay their debts to the government.
    (e) In bankruptcy cases, before advising the debtor of an agency's 
intention to suspend or revoke licenses, permits, or privileges, 
agencies may seek legal advice from OGC concerning the impact of the 
Bankruptcy Code, particularly 11 U.S.C. 362 and 525, which may restrict 
such action.


Sec.  3.15  Liquidation of collateral.

    (a) In accordance with applicable statutes and regulations, 
agencies may liquidate security or collateral through a sale or a 
nonjudicial foreclosure, and apply the proceeds to the applicable 
debt(s), if the debtor fails to pay the debt(s) within a reasonable 
time after demand and if such action is in the best interest of the 
United States. Collection from other sources, including liquidation of 
security or collateral, is not a prerequisite to requiring payment by a 
surety, insurer, or guarantor unless such action is expressly required 
by statute or contract.
    (b) When an agency learns that a bankruptcy petition has been filed 
with respect to a debtor, the agency may seek legal advice from OGC 
concerning the impact of the Bankruptcy Code, including, but not 
limited to, 11 U.S.C. 362, to determine the applicability of the 
automatic stay and the procedures for obtaining relief from such stay 
prior to proceeding under paragraph (a) of this section.


Sec.  3.16  Collection in installments.

    (a) Whenever feasible, agencies shall collect the total amount of a 
debt in one lump sum. If a debtor is financially unable to pay a debt 
in one lump sum, agencies may accept payment in regular installments. 
Agencies shall obtain financial statements from debtors who represent 
that they are unable to pay in one lump sum and independently verify 
such representations whenever possible (see 31 CFR 902.2(g) for methods 
of verification). Agencies that agree to accept payments in regular 
installments shall obtain a legally enforceable written agreement from 
the debtor that specifies all terms of the arrangement and that 
contains a provision accelerating the debt in the event of default.
    (b) The size and frequency of installment payments shall bear a 
reasonable relation to the size of the debt and the debtor's ability to 
pay. If possible, the installment payments shall be sufficient in size 
and frequency to liquidate the debt in three years or less.
    (c) Security for deferred payments shall be obtained in appropriate 
cases. Agencies may accept installment payments notwithstanding the 
refusal of the debtor to execute a written agreement or to give 
security, at the agency's option.


Sec.  3.17  Interest, penalties, and administrative costs.

    (a) Except as provided in paragraphs (g) and (i) of this section, 
agencies shall charge interest, penalties, and administrative costs on 
debts owed to the United States pursuant to 31 U.S.C. 3717. If not 
included in the agency's demand notice, an agency shall mail or hand-
deliver a written notice to the debtor, at the debtor's most recent 
address available to the agency, explaining the agency's requirements 
concerning these charges except where these requirements are included 
in a contractual or repayment agreement. 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) Agencies shall charge interest on debts owed the United States 
as follows, except as otherwise required by law:
    (1) Interest shall accrue from the date of delinquency, or as 
otherwise provided by law.
    (2) Unless otherwise established in a contract, repayment 
agreement, or by statute, the rate of interest charged shall be the 
rate established annually by the Secretary of the Treasury in 
accordance with 31 U.S.C. 3717. Pursuant to 31 U.S.C. 3717, an agency 
may charge a higher rate of interest if it reasonably determines that a 
higher rate is necessary to protect the rights of the United States. 
The agency must document the reason(s) for its determination that the 
higher rate is necessary.
    (3) 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 agency 
may require payment of interest at a new rate that reflects the current 
value of funds to the Treasury 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. If, however, a 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) Agencies shall assess administrative costs incurred for 
processing and handling delinquent debts. The calculation of 
administrative costs shall be based on actual costs incurred or upon 
estimated costs as determined by the assessing agency.
    (d) Unless otherwise established in a contract, repayment 
agreement, or by statute, agencies shall charge a penalty, pursuant to 
31 U.S.C. 3717(e)(2), not to exceed six percent a year on the amount 
due on a debt that is delinquent for more than 90 days. This charge 
shall accrue from the date of delinquency.

[[Page 9]]

    (e) Agencies may increase an ``administrative debt'' 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 guarantees. 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. Increases to administrative debts 
shall be computed annually. Agencies may use this alternative only 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.
    (f) When a debt is paid in partial or installment payments, amounts 
received by the agency shall be applied first to outstanding penalties, 
second to administrative charges, third to interest, and last to 
principal, except as otherwise required by law.
    (g) Agencies shall waive the collection of interest and 
administrative charges imposed pursuant to this section (i.e., this 
does not apply to interest or administrative penalties determined by an 
applicable agreement or instrument such as a loan contract) on the 
portion of the debt that is paid within 30 days after the date on which 
interest began to accrue. Agencies may extend this 30-day period on a 
case-by-case basis. In addition, agencies may waive interest, 
penalties, and administrative costs charged under this section, in 
whole or in part, without regard to the amount of the debt, either 
under the criteria set forth in the Federal standards for the 
compromise of debts (31 CFR part 902), or if the agency determines that 
collection of these charges is against equity and good conscience or is 
not in the best interest of the United States.
    (h) [Reserved]
    (i) Agencies are authorized to impose interest and related charges 
on debts not subject to 31 U.S.C. 3717, in accordance with the common 
law. Agencies shall consult OGC before imposing interest and related 
charges under common law for any debt.


Sec.  3.18  Use and disclosure of mailing addresses.

    (a) When attempting to locate a debtor in order to collect or 
compromise a debt under this part or parts 902-904 of title 31 or other 
authority, agencies may send a request to Treasury to obtain a debtor's 
mailing address from the records of the Internal Revenue Service (IRS).
    (b) Agencies are authorized to use mailing addresses obtained under 
paragraph (a) of this section to enforce collection of a delinquent 
debt and may disclose such mailing addresses to other agencies and to 
collection agencies for collection purposes.


Sec.  3.19  Standards for the compromise of claims.

    An agency shall follow the standards set forth in 31 CFR part 902 
for the compromise of debts pursuant to 31 U.S.C. 3711 arising out of 
the activities of, or referred or transferred for collection services 
to, that agency, except where otherwise authorized or required by law.


Sec.  3.20  Standards for suspending or terminating collection 
activities.

    An agency shall follow the standards set forth in 31 CFR part 903 
for the suspension or termination of collection activity pursuant to 31 
U.S.C. 3711, except where otherwise authorized or required by law.


Sec.  3.21  Referrals of Debts to Justice.

    An agency shall promptly refer to Justice for litigation debts on 
which aggressive collection activity has been taken in accordance with 
this part, and that cannot be compromised by the agency or on which 
collection activity cannot be suspended or terminated in accordance 
with 31 CFR parts 902 and 903. Agencies shall follow the procedures set 
forth in 31 CFR part 904 in making such referrals.

Subpart C--Referral of Debts to Treasury


Sec.  3.30  General requirements.

    (a) Agencies are required by law to transfer delinquent, nontax, 
legally enforceable debts to Treasury for collection through cross-
servicing and through centralized administrative offset. Additionally, 
USDA has chosen to transfer debts to Treasury for collection through 
administrative wage garnishment. Agencies need not make duplicate 
referrals to Treasury for all these purposes; a debt may be referred 
simultaneously for purposes of collection by cross-servicing, 
centralized administrative offset, and administrative wage garnishment 
where applicable. However, in some instances a debt exempt from 
collection via cross-servicing may be subject to collection by 
centralized administrative offset so simultaneous referrals are not 
always the norm. This subpart sets forth rules applicable to the 
transfer of debts to Treasury for collection by cross-servicing. Rules 
for transfer to Treasury for centralized administrative offset are set 
forth in subpart D, and for administrative wage garnishment in subpart 
E.
    (b) When debts are referred or transferred to Treasury, or 
Treasury-designated debt collection centers under the authority of 31 
U.S.C. 3711(g), Treasury shall service, collect, or compromise the 
debts, or Treasury will suspend or terminate the collection action, in 
accordance with the statutory requirements and authorities applicable 
to the collection of such debts.


Sec.  3.31  Mandatory referral for cross-servicing.

    (a) Agencies shall transfer to Treasury any legally enforceable 
nontax debt in excess of $25, or combination of debts less than $25 
that exceeds $25 (in the case of a debtor whose taxpayer identification 
number (TIN) is unknown the applicable threshold is $100), that has or 
have been delinquent for a period of 180 days in accordance with 31 CFR 
285.12 so that Treasury may take appropriate action on behalf of the 
creditor agency to collect or compromise, or to suspend or terminate 
collection, of the debt, including use of debt collection centers and 
private collection contractors to collect the debt or terminate 
collection action.
    (b) The requirement of paragraph (a) of this section does not apply 
to any debt that:
    (1) Is in litigation or foreclosure (see 31 CFR 385.12 (d)(2) for 
definition);
    (2) Will be disposed of under an approved asset sale program (see 
31 CFR 285.12(d)(3)(i) for definition);
    (3) Has been referred to a private collection contractor for a 
period of time acceptable to Treasury;
    (4) Is at a debt collection center for a period of time acceptable 
to Treasury;
    (5) Will be collected under internal offset procedures within three 
years after the debt first became delinquent;
    (6) Is exempt from this requirement based on a determination by the 
Secretary of the Treasury that exemption for a certain class of debt is 
in the best interest of the United States. Federal agencies may request 
that the Secretary of the Treasury exempt specific classes of debts. 
Any such request by an agency must be sent to the Fiscal Assistant 
Secretary of the Treasury by the USDA CFO.
    (c) A debt is considered 180 days delinquent for purposes of this 
section if it is 180 days past due and is legally enforceable. A debt 
is past due if it has not been paid by the date specified in the 
agency's initial written demand for

[[Page 10]]

payment or applicable agreement or instrument (including a post-
delinq