Collection of Administrative Debts, 61733-61750 [2015-25544]

Agencies

• Social Security Administration

[Federal Register Volume 80, Number 198 (Wednesday, October 14, 2015)]
[Rules and Regulations]
[Pages 61733-61750]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-25544]


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SOCIAL SECURITY ADMINISTRATION

20 CFR Parts 422

[Docket No. SSA-2011-0053]
RIN 0960-AH36


Collection of Administrative Debts

AGENCY: Social Security Administration.

ACTION: Final rule.

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SUMMARY: This final rule adopts the notice of proposed rulemaking 
(NPRM) that we published in the Federal Register on March 24, 2014. 
This final rule creates our own administrative debt collection 
regulations, and it improves our authorities to pursue collection of 
administrative debts from current and separated employees and non-
employee debtors as authorized by the Debt Collection Act (DCA) of 
1982, amended by the Debt Collection Improvement Act (DCIA) of 1996 and 
other existing debt collection statutes. We expect that this final rule 
will have no impact on the public.

DATES: This final rule is effective November 13, 2015.

FOR FURTHER INFORMATION CONTACT: Jennifer C. Pendleton, Office of 
Payment and Recovery Policy, Social Security Administration, 6401 
Security Boulevard, Baltimore, MD 21235-6401, (410) 965-5652. For 
information on eligibility or filing for benefits, call our national 
toll-free number, 1-800-772-1213 or TTY 1-800-325-0778, or visit our 
Internet site, Social Security Online, at https://www.socialsecurity.gov.

SUPPLEMENTARY INFORMATION: This final rule adopts the notice of 
proposed rulemaking (NPRM) that we published in the Federal Register on 
March 24, 2014.\1\
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    \1\ The NPRM is available at: https://www.federalregister.gov/articles/2014/03/24/2014-06182/collection-of-administrative-debts.
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Background

    This final rule creates our own administrative debt collection 
regulations. This final rule will improve our authorities to pursue 
collection of administrative debts from current and separated employees 
and non-employee debtors as authorized by the DCA of 1982, amended by 
the DCIA of 1996 and other existing debt collection statutes.
    Employee debts include, but are not limited to, salary 
overpayments, advanced travel pay, and debts resulting from 
overpayments of benefit premiums. Non-employee debts include, but are 
not limited to, vendor overpayments and reimbursable agreements.
    This change will authorize us to pursue collection of 
administrative debts under the authorities prescribed in the following 
statutes and legislations:

 Debt Collection Act (DCA) 1982, Public Law 97-365 (5 U.S.C. 
5514; 31 U.S.C. 3701 et seq.)
 Debt Collection Improvement Act (DCIA) 1996, Public Law 104-
134 (5 U.S.C. 5514; 31 U.S.C. 3701 et seq.)
 5 U.S.C. 5512--Withholding pay; individuals in arrears
 5 U.S.C. 5514--Installment deduction for indebtedness to the 
United States
 31 U.S.C. 3711--Collection and compromise
 31 U.S.C. 3716--Administrative offset
 31 U.S.C. 3717--Interest and penalty on claims
 31 U.S.C. 3720A--Reduction of tax refund by amount of debt
 31 U.S.C. 3720B--Barring delinquent federal debtors from 
obtaining federal loans or loan insurance guarantees
 31 U.S.C. 3720C--Debt Collection Improvement Account
 31 U.S.C. 3720D--Garnishment
 31 U.S.C. 3720E--Dissemination of information regarding 
identity of delinquent debtors
 Office of Personnel Management (OPM) Regulations (5 CFR part 
550--Salary Offset)
 Federal Claims Collection Standards (31 CFR parts 901-904)
 Department of the Treasury Regulations (31 CFR part 285)

Digital Accountability and Transparency Act of 2014 (Data Act)

    We updated this final rule in accordance with the Data Act (Pub. L. 
113-101), which was enacted on May 9, 2014. Section five of the Data 
Act requires Federal agencies to refer all debts 120 or more days 
delinquent to the Department of the Treasury for offset. Prior to the 
Data Act, Federal agencies were required to refer all debts 180 or more 
days delinquent.

Public Comments on the NPRM

    In the notice of proposed rulemaking, we provided a 60-day comment 
period, which ended on May 23, 2014. We carefully considered the one 
public comment we received. We present a summary of that comment below, 
and respond to the significant issues relevant to this rulemaking.
    Comment: The one commenter stated that he agreed with our efforts 
to collect debts. However, the commenter was concerned that the 
proposed rule's ``minimum amount of referrals'' exception in Sec.  
422.850(d)(2)(i) ``is so broad, subjective, and vague that it could 
apply to anything.'' The commenter suggested that we focus the 
exception on specific situations or remove it.
    Response: We are unable to adopt the commenter's suggestion to 
change or remove the language in Sec.  422.850 (d)(2)(i). This section 
follows the Federal Claims Collection Standards as set forth by 
Treasury and the Department of Justice (DOJ) that all Federal Agencies 
must follow to complete debt collection activities. Since 
administrative debts include debts from employees, vendors, and States, 
as well as other debts listed in Sec.  422.801(c), we handle each case 
individually, following the guidelines in Sec.  422.850(d)(2)(i), to 
determine if referring a debt to the DOJ for civil suit is necessary.

Regulatory Procedures

Executive Order 12866 as Supplemented by Executive Order 13563

    We consulted with the Office of Management and Budget (OMB) and 
determined that this final rule does not meet the criteria for a 
significant regulatory action under Executive Order 12866 as 
supplemented by Executive Order 13563. Thus, OMB did not review the 
final rule.

Regulatory Flexibility Act

    We certify that this final rule will not have a significant 
economic impact on a substantial number of small entities because it 
applies to individuals only. Thus, a regulatory flexibility analysis is 
not required under the Regulatory Flexibility Act, as amended.

Paperwork Reduction Act

    This final rule does not contain information collection 
requirements. Therefore, we need not submit the rule to Office of 
Management and Budget for review under the Paperwork Reduction Act.

List of Subjects in 20 CFR Part 422

    Administrative practice and procedure, Organization and functions 
(Government agencies), Reporting and recordkeeping requirements, Social 
Security.


[[Page 61734]]


    Dated: July 1, 2015.
Carolyn W. Colvin,
Acting Commissioner of Social Security.

    For the reasons set out in the preamble, we add subpart I of part 
422 of chapter III of title 20 of the Code of Federal Regulations as 
set forth below:

PART 422--ORGANIZATION AND PROCEDURES

0
1. Add subpart I to part 422 to read as follows:

Subpart I--Administrative Claims Collection

Part 422, Subpart I: Administrative Claims Collection
Sec.
422.801 Scope of this subpart.
422.803 Collection activities.
422.805 Demand for payment.
422.807 Interest, penalties, and administrative costs.
422.809 Collection in installments.
422.810 Salary offset for current employees.
422.811 Discretionary referral for cross-servicing.
422.813 Mandatory referral for cross-servicing.
422.815 Referral of administrative debts to the Department of the 
Treasury.
422.817 Required certification.
422.819 Fees.
422.821 Administrative offset.
422.822 Notification of intent to collect by administrative offset.
422.823 Debtor rights to review or copy records, submit repayment 
proposals, or request administrative review.
422.824 Non-centralized administrative offset.
422.825 Centralized administrative offset.
422.827 Offset against tax refunds.
422.829 Federal salary offset.
422.833 Administrative wage garnishment for administrative debts.
422.835 Debt reporting and use of credit reporting agencies.
422.837 Contracting with private collection contractors and with 
entities that locate and recover unclaimed assets.
422.839 Offset against amounts payable from civil service retirement 
and disability fund and the Federal employees' retirement system.
422.842 Liquidation of collateral.
422.846 Bases for compromise.
422.848 Suspension and termination of collection activities.
422.850 Referrals to the Department of Justice.

Subpart I--Administrative Claims Collection

    Authority: Sec. 97, Pub. L. 97-365, 96 Stat. 1749; Sec. 104, 
Pub. L. 104-134, 110 Stat. 1321; 5 U.S.C. 552; 5 U.S.C. 553; 31 
U.S.C. 3711; 31 U.S.C. 3716; 31 U.S.C. 3717; 31 U.S.C. 3720A; 31 
U.S.C. 3720B; 31 U.S.C. 3720C; 31 U.S.C. 3720D; 31 U.S.C. 3720E; 31 
CFR parts 901-904; 31 CFR part 285; 5 U.S.C. 5514; 5 CFR part 550; 
42 U.S.C. 902(a)(5).


Sec.  422.801  Scope of this subpart.

    (a) The regulations in this part are issued under the Debt 
Collection Act of 1982, as amended by the Debt Collection Improvement 
Act of (DCIA) 1996 (31 U.S.C. 3701, et seq.) and the Federal Claims 
Collection Standards (31 CFR parts 901-904) issued pursuant to the DCIA 
by the Department of the Treasury (Treasury) and the Department of 
Justice (DOJ). These authorities 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 the DOJ for litigation to 
collect debts owed the Government. The regulations under this part also 
are issued under the Commissioner's general rule-making authority in 
the Social Security Act at section 702(a)(5), 42 U.S.C. 902(a)(5), the 
Treasury's regulations implementing the DCIA (31 CFR part 285), and 
related statutes and regulations governing the offset of Federal 
salaries (5 U.S.C. 5512, 5514; 5 CFR part 550, subpart K) and the 
administrative offset of tax refunds (31 U.S.C. 3720A).
    (b) This subpart describes the procedures relating to the 
collection, compromise, and suspension of administrative debts owed to 
us, the Social Security Administration (SSA).
    (c) Administrative debts include claims against current employees, 
separated employees, and non-employee debtors.
    (1) Employee debts include salary overpayments; advanced sick and 
annual leave, advanced religious compensatory time, overpayments of 
health benefit premiums, leave buy back, emergency employee payments, 
travel, and transit subsidies.
    (2) Non-employee debts include vendor overpayments, reimbursable 
agreements, Supplemental Security Income Medicaid determinations, and 
economic recovery payments.
    (d) This subpart does not apply to programmatic overpayments 
described in subparts D and E of this part, and Sec.  Sec.  404.527 and 
Sec.  416.590 of this title.
    (e) This subpart does not apply to civil monetary penalties arising 
from sections 1129 and 1140 of the Social Security Act and collected 
pursuant to part 498 of this title.


Sec.  422.803  Collection activities.

    (a) We will collect all administrative debts arising out of our 
activities or that are referred or transferred to us, the Social 
Security Administration, for collection actions. We will send an 
initial written demand for payment no later than 30 days after an 
appropriate official determines that a debt exists.
    (b) In accordance with 31 CFR 285.12(c) and (g), we transfer 
legally enforceable administrative debts that are 120 calendar days or 
more delinquent to Treasury for debt collection services (i.e., cross-
servicing). This requirement does not apply to any debt that:
    (1) Is in litigation or foreclosure;
    (2) Will be disposed of under an approved asset sale program within 
one year of becoming eligible for sale;
    (3) Has been referred to a private collection contractor for a 
period acceptable to the Secretary of the Treasury;
    (4) Is at a debt collection center for a period of time acceptable 
to Treasury (see paragraph (c) of this section);
    (5) Will be collected under internal offset procedures within three 
years after the debt first became delinquent; or
    (6) Is exempt from this requirement based on a determination by 
Treasury that exemption for a certain class of debt is in the best 
interest of the United States.
    (c) Pursuant to 31 CFR 285.12(h), we may refer debts less than 120 
calendar days delinquent to Treasury or, with the consent of Treasury, 
to a Treasury-designated debt collection center to accomplish 
efficient, cost effective debt collection. Referrals to debt collection 
centers will be at the discretion of, and for a period acceptable to, 
the Secretary of the Treasury. Referrals may be for servicing, 
collection, compromise, suspension, or termination of collection 
action.
    (d) We may refer delinquent administrative debts to Treasury for 
offset through the Treasury Offset Program (TOP). Administered by 
Treasury, TOP's centralized offset process permits Treasury to withhold 
funds payable by the United States to a person to collect and satisfy 
delinquent debts the person owes Federal agencies and States.
    (e) We may collect an administrative debt by using Administrative 
Wage Garnishment.
    (f) We may collect an administrative debt by using Federal Salary 
Offset.


Sec.  422.805  Demand for payment.

    (a) Written demand for payment. (1) We will make a written demand, 
as described in paragraph (b) of this section, promptly to a debtor in 
terms that inform the debtor of the consequences of failing to 
cooperate with us to resolve the debt.
    (2) We will send a demand letter no later than 30 days after the 
appropriate official determines that the debt exists.

[[Page 61735]]

We will send the demand letter to the debtor's last known address.
    (3) When necessary to protect the Government's interest, we may 
take appropriate action under this part, including immediate referral 
to DOJ for litigation, before sending the written demand for payment.
    (b) Demand letters. The specific content, timing, and number of 
demand letters will depend upon the type and amount of the debt and the 
debtor's response, if any, to our letters or telephone calls.
    (1) The written demand for payment will 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 must be no later than 30 days from the 
date the demand letter is mailed;
    (iii) Where applicable, the standards for imposing any interest, 
penalties, or administrative costs as specified under Sec.  422.807;
    (iv) The rights, if any, the debtor may have to:
    (A) Seek review of our determination of the debt, and for purposes 
of salary offset or Administrative Wage Garnishment, request a hearing. 
To request a hearing see Sec. Sec.  422.810(h) and 422.833(f)); and
    (B) Enter into a reasonable repayment agreement when necessary and 
authorized.
    (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 to address any debt-related matters; and
    (vii) Our remedies to enforce payment of the debt, which may 
include:
    (A) Garnishing the debtor's wages through Administrative Wage 
Garnishment;
    (B) Offsetting any Federal or State payments due the debtor, 
including income tax refunds, salary, certain benefit payments;
    (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 the DOJ for litigation; and
    (F) Referring the debt to the Department of the Treasury for any of 
the collection actions described in paragraphs (b)(1)(vii)(A) through 
(E) of this section.
    (2) The written demand for payment should also include the 
following information:
    (i) The debtor's right to review our records pertaining to the 
debt, or, if the debtor or the debtor's representative cannot 
personally review the records, to request and receive copies of such 
records;
    (ii) Our willingness to discuss alternative methods of payment with 
the debtor;
    (iii) If a Federal employee, the debtor may be subject to 
disciplinary action under 5 CFR part 752 or other applicable authority;
    (iv) Any amounts collected and ultimately found to not be owed by 
the debtor will be refunded;
    (v) For salary offset, up to 15 percent of the debtor's current 
disposable pay may be deducted every pay period until the debt is paid 
in full; and
    (vi) Dependent upon applicable statutory authority, the debtor may 
be entitled to consideration for a waiver.
    (c) Evidence retention. We will retain evidence of service 
indicating the date of mailing of the demand letter. The evidence of 
service may be retained electronically so long as the manner of 
retention is sufficient for evidentiary purposes.
    (d) Pursue offset. Prior to, during, or after the completion of the 
demand process, if we determine to pursue, or are required to pursue 
offset, the procedures applicable to offset should be followed (see 
Sec.  422.821). The availability of funds for debt satisfaction by 
offset and our determination to pursue collection by offset will 
release us from the necessity of further compliance with paragraphs 
(a), (b), and (c) of this section.
    (e) Communications from debtors. Where feasible, we will respond 
promptly to communications from debtors within 30 days, and will advise 
debtors who dispute debts to furnish available evidence to support 
their contentions.
    (f) 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.


Sec.  422.807  Interest, penalties, and administrative costs.

    (a) Except as provided in paragraphs (g), (h), and (i) of this 
section, we will charge interest, penalties, and administrative costs 
on delinquent debts owed to the United States. These charges will 
continue to accrue until the debtor pays the debt in full or otherwise 
resolves the debt through compromise, termination, or an approved 
waiver.
    (b) Interest. We will charge interest on delinquent administrative 
debts owed the agency as follows:
    (1) Interest will 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 Sec.  422.805, 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.
    (2) Unless a different rate is prescribed by statute, contract, or 
a repayment agreement, the rate of interest charged will be the rate 
established annually by the Treasury pursuant to 31 U.S.C. 3717. We may 
charge a higher rate if necessary to protect the rights of the United 
States, and the Commissioner has determined and documented a higher 
rate for delinquent debt is required to protect the Government's 
interests.
    (3) Unless prescribed by statute or contract, the initial rate of 
interest charged will remain fixed for the duration of the 
indebtedness. A debtor who defaults on a repayment agreement may seek 
to enter into a new agreement. If we agree to a new agreement, we may 
require additional financial information and payment of interest at a 
new rate that reflects the Treasury rate in effect at the time the new 
agreement is executed or at a higher rate consistent with paragraph 
(b)(2) of this section. Interest will not be compounded. That is, we 
will not charge interest on the interest, penalties, or administrative 
costs required by this section, except as permitted by statute or 
contract. If, however, the debtor defaults on a previous repayment 
agreement, we will add charges that accrued but were not collected 
under the defaulted agreement to the principal of any new repayment 
agreement.
    (c) Penalty. Unless otherwise established by contract, repayment 
agreement, or statute, we will charge a penalty pursuant to 31 U.S.C. 
3717(e)(2) and 31 CFR 901.9 on the amount due on a debt that is 
delinquent for more than 90 days. This charge will accrue from the date 
of delinquency.
    (d) Administrative costs. We will assess administrative costs 
incurred for processing and handling delinquent debts. We will base the 
calculation of administrative costs on actual costs incurred or a valid 
estimate of the actual costs. Calculation of administrative costs will 
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 Sec.  422.837. We will assess these charges 
monthly or per payment period throughout the period that the debt is 
overdue. Such costs may also be in addition to other

[[Page 61736]]

administrative costs if collection is being made for another Federal 
agency or unit.
    (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, we may increase 
an administrative debt by the cost of living adjustment in lieu of 
charging interest and penalties under this section. 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. We will manually 
compute such increases to administrative debts.
    (f) Priority. When a debt is paid in partial or installment 
payments, amounts received will be applied first to outstanding 
penalties, second to administrative charges, third to interest, and 
last to principal.
    (g) Waiver. (1) We will waive the collection of interest and 
administrative costs 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. Excepting debt affected by fraud or other misconduct, 
we may extend this 30-day period on a case-by-case basis if we 
determine that such action is in the best interest of the Government or 
is otherwise warranted by equity and good conscience.
    (2) We 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 Sec.  422.846 (b)(1) for the 
compromise of debts; or
    (ii) A determination by the agency 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 may either pay the debt 
or be liable for interest and related charges on the uncollected debt. 
When agency review results in a final determination that any amount was 
properly a debt and the debtor failed to pay the full amount of the 
disputed debt, we will collect from the debtor the amount determined to 
be due, and interest, penalties and administrative costs on the debt 
amount. We will calculate and assess interest, penalties, and 
administrative costs 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 Sec.  422.848(c)(1) pending agency 
review or consideration of waiver, if a statute prohibits collection of 
the debt during this period. This exception does not apply to interest, 
penalties, and administrative cost charges on debts affected by fraud 
or other misconduct unless a statute so requires.
    (i) Common law or other statutory authority. We 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.


Sec.  422.809  Collection in installments.

    Whenever feasible, we will collect the total amount of a debt in 
one lump sum payment. If a debtor claims a financial inability to pay a 
debt in one lump sum, by funds or Administrative Offset, we may accept 
payment in regular installments provided the debtor establishes the 
financial need and no evidence indicates that fraud or similar fault 
affected the debt. We will request financial statements from debtors 
who represent that they are unable to pay in one lump sum and 
independently verify such representations as described in Sec.  
422.846.
    (a) When we agree to accept payments in regular installments, we 
will obtain a legally enforceable written agreement from the debtor 
that specifies all the terms and conditions of the agreement and 
includes a provision accelerating the debt in the event of a default.
    (b) The size and frequency of the payments will 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.
    (c) When appropriate, the agreement will include a provision 
identifying security obtained from the debtor for the deferred 
payments, such as a surety bond or confession of judgment supporting a 
lien on any property of the debtor.
    (d) An approved installment agreement does not prevent the use of 
Administrative Wage Garnishment or other collection tools in this 
subpart.


Sec.  422.810  Salary offset for current employees.

    (a) Purpose. This part prescribes the Social Security 
Administration's (SSA) standards and procedures for the collection of 
debts owed by current SSA employees to SSA through involuntary salary 
offset.
    (b) Authority. 5 U.S.C. 5514; 5 CFR part 550.
    (c) Scope. (1) This part applies to internal collections of debt by 
Administrative Offset from the current pay accounts of SSA employees 
without his or her consent. The part does not apply to current SSA 
employees indebted to another Federal agency or employees who separate 
from SSA.
    (2) The procedures contained in this part do not apply to any case 
where an employee consents to collection through deduction(s) from the 
employee's pay account, or to debts arising under the Internal Revenue 
Code or the tariff laws of the United States, or where another statute 
explicitly provides for or prohibits collection of a debt by salary 
offset (e.g., travel advances in 5 U.S.C. 5705 and employee training 
expenses in 5 U.S.C. 4108).
    (3) This part does not preclude an employee from requesting a 
waiver of an erroneous payment under 5 U.S.C. 5584, 10 U.S.C. 2774, or 
32 U.S.C. 716, or in any way questioning the amount or validity of a 
debt. Similarly, this part does not preclude an employee from 
requesting waiver of the collection of a debt under any other 
applicable statutory authority.
    (4) Provided a debt is not affected by fraud and does not exceed 
$100,000, nothing in this part precludes the compromise of the debt or 
the suspension or termination of collection actions in accordance with 
Sec. Sec.  422.846 and 422.848 of this title.
    (d) Definitions.
    Administrative Offset means withholding funds payable by the United 
States to, or held by the United States for, a person to satisfy a debt 
owed by the payee.
    Agency means an executive department or agency, a military 
department, the United States Postal Service, the Postal Rate 
Commission, the United States Senate, the United States House of 
Representatives, a court, court administrative office, or 
instrumentality in the judicial or legislative branches of the 
Government, or a Government Corporation.
    Creditor agency means the agency to which the debt is owed or SSA, 
including a debt collection center when acting on behalf of a creditor 
agency in matters pertaining to the collection of a debt.

[[Page 61737]]

    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 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 or any other debt that 
meets the definition of ``claim'' or ``debt'' under 31 U.S.C. 3701(b), 
excluding program overpayments made under title II or title XVI of the 
Social Security Act.
    Debt collection center means the Department of the Treasury 
(Treasury) or other Government agency or division designated by the 
Secretary of the Treasury with authority to collect debts on behalf of 
creditor agencies in accordance with 31 U.S.C. 3711(g).
    Debtor means an employee currently employed by SSA who owes a 
delinquent non-tax debt to the United States.
    Delinquent debt means a debt that 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.
    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 we are required by law to 
withhold. 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; Federal Insurance Contributions Act (FICA); Medicare; 
health, dental, vision, and life insurance premiums; and Thrift Savings 
Plan and retirement contributions. Amounts deducted under garnishment 
orders, including child support garnishment orders, are not legally 
permissible deductions when calculating disposable pay as specified in 
5 CFR 550.1103.
    Employee means any individual currently employed by SSA, as defined 
in this section, including seasonal and temporary employees and current 
members of the Armed Forces or a Reserve of the Armed Forces 
(Reserves).
    Evidence of service means information retained by the agency 
indicating the nature of the document to which it pertains, the date of 
mailing the document, and the address and name of the debtor to whom it 
is being sent. A copy of the dated and signed notice provided to the 
debtor pursuant to this part may be considered evidence of service for 
purposes of this part. We may retain evidence of service electronically 
so long as the manner of retention is sufficient for evidentiary 
purposes.
    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 
we determine 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, we may provide an oral hearing.
    Hearing official means an administrative law judge or appropriate 
alternate.
    Paying agency means the agency employing the employee and 
authorizing the payment of his or her current pay.
    Salary offset means an Administrative Offset to collect a debt 
under 5 U.S.C. 5514 owed by a current SSA employee through deductions 
at one or more officially established pay intervals from the current 
pay account of the current SSA employee without his or her consent.
    Waiver means the cancellation, remission, forgiveness, or non-
recovery of a debt owed by an employee to the agency or another agency 
as required or permitted by 5 U.S.C. 5584, 8346(b), 10 U.S.C. 2774, 32 
U.S.C. 716, or any other law.
    (e) General rule. (1) Whenever an employee owes us a delinquent 
debt, we may, subject to paragraph (e)(3) of this section, 
involuntarily offset the amount of the debt from the employee's 
disposable pay.
    (2) Except as provided in paragraph (e)(3) of this section, prior 
to initiating collection through salary offset under this part, we will 
first provide the employee with the following:
    (i) A notice as described in paragraph (f) of this section; and
    (ii) An opportunity to petition for a hearing, and, if a hearing is 
provided, to receive a written decision from the hearing official 
within 60 days on the following issues:
    (A) The determination concerning the existence or amount of the 
debt; and
    (B) The repayment schedule, unless it was established by written 
agreement between the employee and us.
    (3) The provisions of paragraph (e)(2) of this section do not apply 
to:
    (i) Any adjustment to pay arising out of an employee's election of 
coverage or a change in coverage under a federal benefits program 
requiring periodic deduction from pay, if the amount to be recovered 
was accumulated over four pay periods or less;
    (ii) A routine intra-agency adjustment of pay that is made to 
correct an overpayment of pay attributable to clerical or 
administrative errors or delays in processing pay documents, if the 
overpayment occurred within four pay periods preceding the adjustment 
and, at the time of such adjustment, or as soon thereafter as 
practical, the individual is provided a notice of the nature and the 
amount of the adjustment and point of contact for contesting such 
adjustment; or
    (iii) Any adjustment to collect a debt amount in accordance with 
the amount stated in 5 U.S.C. 5514 as amended by the DCIA, if, at the 
time of such adjustment, or as soon thereafter as practical, the 
individual is provided a notice of the nature and the amount of the 
adjustment and a point of contact for contesting such adjustment.
    (f) Notice requirements before offset. (1) At least 30 days before 
the initiation of salary offset under this part, we will send a notice 
to the employee's last known address, informing the debtor of the 
following:
    (i) We have reviewed the records relating to the debt and have 
determined that a debt is owed, the amount of the debt, and the facts 
giving rise to the debt;
    (ii) Our intention to collect the debt by means of deduction from 
the employee's current disposable pay until the debt and all 
accumulated interest, penalties, and administrative costs are paid in 
full;
    (iii) The amount, stated either as a fixed dollar amount or as a 
percentage of pay not to exceed 15 percent of disposable pay, the 
frequency, the commencement date, and the duration of the intended 
deductions;
    (iv) An explanation of our policies concerning the assessment of 
interest, penalties, and administrative costs, stating that such 
assessments must be made unless waived in accordance with 31 CFR 901.9 
and Sec.  422.807 of this part;
    (v) The employee's right to review and copy all of our records 
pertaining to the debt or, if the employee or the employee's 
representative cannot personally review the records, to request and 
receive copies of such records;
    (vi) If not previously provided, the opportunity to establish a 
schedule for the voluntary repayment of the debt through offset or to 
enter into an agreement to establish a schedule for repayment of the 
debt in lieu of offset provided the agreement is in writing, signed by 
both the employee and us, and documented in our files;

[[Page 61738]]

    (vii) The right to a hearing conducted by an impartial hearing 
official with respect to the existence and amount of the debt, or the 
repayment schedule, so long as a petition is filed by the employee as 
prescribed in paragraph (h) of this section;
    (viii) Time limits and other procedures or conditions for reviewing 
our records pertaining to the debt, establishing an alternative 
repayment agreement, and requesting a hearing;
    (ix) The name, address, and telephone number of the person or 
office who may be contacted concerning the procedures for reviewing our 
records, establishing an alternative repayment agreement, and 
requesting a hearing;
    (x) The name and address of the office to send the petition for a 
hearing;
    (xi) A timely and properly filed petition for a hearing will 
suspend the commencement of the collection proceeding;
    (xii) We will initiate action to effect salary offset not less than 
30 days from the date of mailing the notice, unless the employee 
properly files a timely petition for a hearing,
    (xiii) A final decision on a hearing, if one is requested, will be 
issued at the earliest practical date, but not later than 60 days after 
the filing of the petition requesting the hearing unless the employee 
requests and the hearing official grants a delay in the proceeding;
    (xiv) Notice that an employee who knowingly makes false or 
frivolous statements or submits false or frivolous representations or 
evidence may be subject to disciplinary procedures under chapter 75 of 
title 5, United States Code, Part 752 of title 5, CFR, or any other 
applicable statutes or regulations;
    (xv) Any other rights and remedies available to the employee under 
statutes or regulations governing the program for which the collection 
is being made;
    (xvi) Unless there are applicable contractual or statutory 
provisions to the contrary, amounts paid on or deducted for the debt 
that are later waived or found not owed to the United States will be 
promptly refunded to the employee; and
    (xvii) Proceedings with respect to such debt are governed by 5 
U.S.C. 5514.
    (2) We will retain evidence of service indicating the date of 
mailing of the notice.
    (g) Review of records relating to the debt. (1) To review or copy 
our records relating to the debt, the employee must send a written 
request stating his or her intention. We must receive the written 
request within 15 days from the employee's receipt of the notice.
    (2) In response to a timely request as described in paragraph (1) 
of this section, we will notify the employee of the location and time 
when the employee may review and copy such records. If the employee or 
employee's representative is unable to review personally such records 
as the result of geographical or other constraints, we will arrange to 
send copies of such records to the employee.
    (h) Hearings--(1) Petitions for hearing. (i) To request a hearing 
concerning the existence or amount of the debt or the offset schedule 
established by us, the employee must send a written petition to the 
office we identified in the notice (see paragraph (f)(1)(x) of this 
section) within 15 days of receipt of the notice.
    (ii) The petition must:
    (A) Be signed by the employee;
    (B) Fully identify and explain with reasonable specificity all the 
facts, evidence, and witnesses, if any, that the employee believes 
support his or her position; and
    (C) Specify whether an oral or paper hearing is requested. If an 
oral hearing is requested, the request should explain why the matter 
cannot be resolved by a paper hearing, which is a determination of the 
request for reconsideration based upon a review of the written record.
    (iii) The timely filing of a petition for hearing will suspend any 
further collection proceedings.
    (2) Failure to timely request a hearing. (i) If the petition for 
hearing is filed after the 15-day period provided in paragraph 
(h)(1)(i) of this section, we may grant the request if the employee can 
establish either that the delay was the result of circumstances beyond 
the employee's control or that the employee failed to receive actual 
notice of the filing deadline.
    (ii) An employee waives the right to a hearing and will have his or 
her disposable pay offset in accordance with the offset schedule 
established by us, if the employee:
    (A) Fails to file a timely request for a hearing unless such 
failure is excused; or
    (B) Fails to appear at an oral hearing of which the employee was 
notified unless the hearing official determines that the failure to 
appear was due to circumstances beyond the employee's control.
    (3) Form of hearings--(i) General. After the employee requests a 
hearing, the hearing official must notify the employee of the type of 
hearing that will occur. If an oral hearing will occur, the notice will 
state the date, time, and location of the hearing. If a paper hearing 
will occur, the employee will be notified and required to submit 
evidence and arguments in writing to the hearing official by the date 
specified in the notice, after which the record will be closed.
    (ii) Oral hearing. An employee who requests an oral hearing will be 
provided an oral hearing if the hearing official determines that the 
matter cannot be resolved by review of documentary evidence alone 
because an issue of credibility or veracity is involved. Where an oral 
hearing is appropriate, the hearing is not an adversarial adjudication 
and need not take the form of an evidentiary hearing (e.g., the formal 
rules of evidence need not apply). Oral hearings may take the form of, 
but are not limited to:
    (A) Informal conferences with the hearing official in which the 
employee and agency representative will be given full opportunities to 
present evidence, witnesses, and arguments;
    (B) Informal meetings in which the hearing official interviews the 
employee by phone or videoconferencing; or
    (C) Formal written submissions with an opportunity for oral 
presentations.
    (iii) Paper hearing. If the hearing official determines that an 
oral hearing is not necessary, the hearing official will make the 
determination based upon a review of the available written record.
    (iv) Record. The hearing official will maintain a summary record of 
any hearing conducted under this part. Witnesses who testify in oral 
hearings will do so under oath or affirmation.
    (4) Written decision--(i) Date of decision. The hearing officer 
will issue a written opinion stating his or her decision. This opinion 
is based upon documentary evidence and information developed at the 
hearing, as soon as practicable after the hearing, but not later than 
60 days after the date on which the hearing petition was received by 
the creditor agency. This is dependent upon whether the employee 
requested a delay in the proceedings and the hearing official grants 
it, in which case the 60-day decision period will be extended by the 
number of days by which the hearing was postponed. The recipient of an 
employee's request for a hearing must forward the request expeditiously 
to the hearing official to avoid jeopardizing the hearing official's 
ability to issue a decision within this 60-day period.
    (ii) Content of decision. The written decision will include:
    (A) A statement of the facts presented to support the origin, 
nature, and amount of the debt;
    (B) The hearing official's findings, analysis, and conclusions, 
including a determination whether the employee's

[[Page 61739]]

petition for hearing was baseless and resulted from an intent to delay 
the creditor agency's collection activity; and
    (C) The terms of any repayment schedule, if applicable.
    (5) Failure to appear. In the absence of good cause shown, an 
employee who fails to appear at a hearing will be deemed, for the 
purpose of this part, to admit the existence and amount of the debt as 
described in the notice. If the representative of the creditor agency 
fails to appear, the hearing official will proceed with the hearing as 
scheduled and make a determination based upon oral testimony presented 
and the documentary evidence submitted by both parties. With the 
agreement of both parties, the hearing official will schedule a new 
hearing date, and both parties will be given notice of the time and 
place of the new hearing.
    (i) Obtaining the services of a hearing official. The office 
designated in paragraph (f)(1)(x) of this section will schedule a 
hearing, if one is requested by an employee, before a hearing official.
    (1) When we cannot provide a prompt and appropriate hearing before 
an administrative law judge or a hearing official furnished pursuant to 
another lawful arrangement, the office designated in paragraph 
(f)(1)(x) of this section may contact an agent of any agency designated 
in 5 CFR part 581, appendix A to arrange for a hearing official.
    (2)(i) When another agency is the creditor agency, not SSA, it is 
the responsibility of that agency to arrange for a hearing if one is 
requested. We will provide a hearing official upon the request of a 
creditor agency when the debtor is employed by us and the creditor 
agency cannot provide a prompt and appropriate hearing before a hearing 
official furnished pursuant to another lawful arrangement.
    (ii) Services rendered to a creditor agency under paragraph 
(i)(2)(i) of this section will be provided on a fully reimbursable 
basis pursuant to the Economy Act of 1932, as amended by 31 U.S.C. 
1535.
    (3) The determination of a hearing official designated under this 
section is considered an official certification regarding the existence 
and amount of the debt for purposes of executing salary offset under 5 
U.S.C. 5514 and this part. A creditor agency may make a certification 
to the Secretary of the Treasury under 5 CFR 550.1108 or a paying 
agency under 5 CFR 550.1109 regarding the existence and amount of the 
debt based on the certification of a hearing official. If a hearing 
official determines that a debt may not be collected via salary offset, 
but we find that the debt is still valid, we may still seek collection 
of the debt through other means, such as offset of other Federal 
payments or litigation.
    (j) Voluntary repayment agreement in lieu of salary offset. (1)(i) 
In response to the notice, the employee may propose to establish an 
alternative schedule for the voluntary repayment of the debt by 
submitting a written request. An employee who wishes to repay the debt 
without salary offset will also submit a proposed written repayment 
agreement. The proposal will admit the existence of the debt, and the 
agreement must be in such form that it is legally enforceable. The 
agreement must:
    (A) Be in writing;
    (B) Be signed by both the employee and the agency;
    (C) Specify all the terms of the arrangement for payment; and
    (D) Contain a provision accelerating the debt in the event of 
default by the employee, but such an increase may not result in a 
deduction that exceeds 15 percent of the employee's disposable pay 
unless the employee has agreed in writing to a deduction of a greater 
amount.
    (ii) Any proposal under paragraph (j)(1)(i) of this section must be 
received within 30 days of the date of the notice.
    (2) In response to a timely request as described in paragraph 
(j)(1) of this section, we will notify the employee whether the 
proposed repayment schedule is acceptable. It is within our discretion 
to accept a proposed alternative repayment schedule and to set the 
necessary terms of a voluntary repayment agreement.
    (3) No voluntary repayment agreement will be binding on us unless 
it is in writing and signed by the employee and us.
    (k) Special review. (1) At any time, an employee subject to salary 
offset or a voluntary repayment agreement may request a special review 
by the agency of the amount of the salary offset or voluntary repayment 
installments based on materially changed circumstances, such as, but 
not limited to, catastrophic illness, divorce, death, or disability.
    (2)(i) In determining whether an offset would prevent the employee 
from meeting essential subsistence expenses (e.g., food, housing, 
clothing, transportation, and medical care), the employee must submit a 
detailed statement and supporting documents for the employee, his or 
her spouse, and dependents indicating:
    (A) Income from all sources;
    (B) Assets and liabilities;
    (C) Number of dependents;
    (D) Food, housing, clothing, transportation, and medical expenses; 
and
    (E) Exceptional and unusual expenses, if any.
    (ii) When requesting a special review under this section, the 
employee must file an alternative proposed offset or payment schedule 
and a statement, with supporting documents as described in paragraph 
(k)(2)(i) of this section, stating why the current salary offset or 
payments result in an extreme financial hardship to the employee.
    (3)(i) We will evaluate the statement and supporting documents and 
determine whether the original offset or repayment schedule impose 
extreme financial hardship on the employee.
    (ii) Within 30 calendar days of the receipt of the request and 
supporting documents, we will notify the employee in writing of such 
determination, including, if appropriate, a revised offset or repayment 
schedule.
    (4) If the special review results in a revised offset or repayment 
schedule, we will do a new certification based on the result of the 
review.
    (l) Procedures for salary offset--(1) Method and source of 
deductions. Unless the employee and the agency have agreed to an 
alternative repayment arrangement under paragraph (j) of this section, 
the agency will collect a debt in a lump sum or by installment 
deductions at officially established pay intervals from an employee's 
current pay account.
    (2) Limitation on amount of deduction. Ordinarily, the size of 
installment deductions must bear a reasonable relationship to the size 
of the debt and the employee's ability to pay. However, the amount 
deducted for any pay period must not exceed 15 percent of the 
disposable pay from which the deduction is made unless the employee has 
agreed in writing to the deduction of a greater amount, as outlined in 
paragraph (j) of this seciton.
    (3) Duration of deductions--(i) Lump sum. If the amount of the debt 
is equal to or less than 15 percent of the employee's disposable pay 
for an officially established pay interval, the agency will collect the 
debt in one lump-sum deduction including lump-sum annual leave amounts.
    (ii) If the employee is deemed financially unable to pay in one 
lump sum or the amount of the debt exceeds 15 percent of the employee's 
disposable pay for an officially established pay interval, the agency 
will collect the debt in installments. Except as provided in paragraphs 
(k)(5) and (6) of this section, installment deductions must be made 
over a period no longer than the

[[Page 61740]]

anticipated period of active duty or employment.
    (4) When deductions may begin. (i) Deductions will begin on the 
date stated in the notice, unless the agency and individual have agreed 
to an alternative repayment agreement under paragraph (j) of this 
section or the employee has filed a timely request for a hearing.
    (ii) If the employee files a timely petition for hearing as 
provided in paragraph (h) of this section, the agency will begin 
deductions after the hearing official has provided the employee with a 
hearing and a final written decision has been rendered in favor of the 
agency.
    (5) Liquidation from final check. If an employee retires, resigns, 
or the period of employment ends before collection of the debt is 
completed, the agency will offset the remainder under 31 U.S.C. 3716 
from subsequent agency payments of any nature (e.g., final salary 
payment or lump-sum leave) due the employee as of the date of 
separation.
    (6) Recovery from other payments due a separated employee. If the 
debt cannot be satisfied by offset from any final payment due the 
employee on the date of separation, we will liquidate the debt, where 
appropriate, by Administrative Offset under 31 U.S.C. 3716 from later 
payments of any kind due the former employee (e.g., lump-sum leave 
payment).
    (m) Exception to internal salary offset. SSA may follow 
Administrative Offset notification requirements when attempting the 
collection of delinquent travel advances and training expenses, not 
those associated with Federal employee salary offset. Once the 
notification procedures have been followed, SSA has the authority to 
withhold all or part of an employee's salary, retirement benefits, or 
other amount due the employee including lump-sum payments to recover 
the amounts owed. No statutory or regulatory limits exist on the amount 
that can be withheld or offset.
    (n) Salary offset when we are the paying agency but not the 
creditor agency. When we are the paying agency and another agency is 
the creditor agency, the creditor agency must provide written 
certification to Treasury that the employee owes the debt, the amount 
and basis of the debt, the date on which payment(s) is due, the date 
the Government's right to collect the debt first accrued, and that the 
Office of Personnel Management has approved the creditor agency's 
regulations implementing 5 U.S.C. 5514. We are not required or 
authorized to review the merits of the determination with respect to 
the amount or validity of the debt certified by the creditor agency.
    (o) Interest, penalties, and administrative costs. Debts owed will 
be assessed interest, penalties, and administrative costs in accordance 
with Sec.  422.807.
    (p) Non-waiver of rights. An employee's involuntary payment of all 
or any portion of a debt collected under this part will not be 
construed as a waiver of any rights the employee may have under 5 
U.S.C. 5514 or any other provision of law or contract unless there are 
statutory or contractual provisions to the contrary.
    (q) Refunds. (1) We will promptly refund any amounts paid or 
deducted under this part when:
    (i) A debt is waived or otherwise found not owed to us; or
    (ii) We are directed by administrative or judicial order to refund 
amount deducted from the employee's current pay.
    (2) Unless required or permitted by law or contract, refunds will 
not bear interest.
    (r) Additional administrative collection action. Nothing contained 
in this part is intended to preclude the use of any other appropriate 
administrative remedy.


Sec.  422.811  Discretionary referral for cross-servicing.

    We may refer legally enforceable non-tax administrative debts that 
are less than 120 calendar days delinquent to the Department of the 
Treasury (Treasury) or to Treasury-designated ``debt collection 
centers'' in accordance with 31 CFR 285.12 to accomplish efficient, 
cost effective debt collection.


Sec.  422.813  Mandatory referral for cross-servicing.

    (a) Pursuant to the cross-servicing process, creditor agencies must 
transfer any eligible debt more than 120 calendar days delinquent to 
the Department of the Treasury (Treasury) for debt collection services. 
As one such agency, pursuant to 31 CFR 285.12, we are required to 
transfer to Treasury any legally enforceable nontax debt in excess of 
$25. We may transfer to Treasury any combination of legally enforceable 
nontax 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 120 
calendar days. Treasury will take appropriate action on behalf of the 
creditor agency to collect, compromise, 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) Debts not eligible for mandatory referral of paragraph (a) of 
this section include:
    (1) Debts owed by a Federal agency;
    (2) Debts owed by a deceased debtor;
    (3) Debts not legally enforceable: A debt is considered legally 
enforceable for purposes of referral to the Treasury's Bureau of the 
Fiscal Service if there has been a final agency determination that the 
debt is due and there are no legal bars to collection;
    (4) Debts that are the subject of an administrative appeal until 
the appeal is concluded and the amount of the debt is fixed;
    (5) Debts owed by a debtor who has filed for bankruptcy protection 
or the debt has been discharged in bankruptcy proceeding; or
    (6) Debts that are less than $25 (including interest, penalties, 
and administrative costs).
    (c) A debt is considered delinquent for purposes of this section if 
it is 120 calendar 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 payment or applicable agreement or 
instrument (including a post-delinquency payment agreement) unless 
other satisfactory payment arrangements have been made. A debt is 
legally enforceable if 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. Where, for example, a debt is the subject of a 
pending administrative review process required by statute or regulation 
and collection action during the review process is prohibited, the debt 
is not considered legally enforceable for purposes of mandatory 
transfer to the Treasury and is not to be transferred even if the debt 
is more than 120 calendar days past due. When a final agency 
determination is made after an administrative appeal or review process, 
the creditor agency must transfer such debt to Treasury, if more than 
120 calendar days delinquent, within 30 days after the date of the 
final decision.
    (d) We may also refer debts owed by a foreign country upon 
consultation with our Office of the General Counsel.


Sec.  422.815  Referral of administrative debts to the Department of 
the Treasury.

    (a) Agencies are required by law to transfer delinquent, nontax, 
and legally enforceable debts to Department of the Treasury (Treasury) 
for collection through cross-servicing and through centralized 
Administrative Offset.

[[Page 61741]]

Additionally, we may transfer debts to the Treasury for collection 
through Administrative Wage Garnishment. Agencies need not make 
duplicate referrals to Treasury for all these purposes; we may refer a 
debt to Treasury for purposes of simultaneous collection by cross-
servicing, centralized Administrative Offset, and Administrative Wage 
Garnishment where applicable. However, in some instances a debt exempt 
from cross-servicing collection may be subject to collection by 
centralized Administrative Offset, so simultaneous referrals are not 
always appropriate.
    (b) When we refer or transfer administrative debts to Treasury, or 
Treasury-designated debt collection centers under the authority of 31 
U.S.C. 3711(g), Treasury will 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.
    (c) Debts that are not required for referral include:
    (1) Debts delinquent for 120 calendar days or less;
    (2) Debts less than $100 and we are unable to obtain the debtor's 
taxpayer identification number;
    (3) Debts in litigation or foreclosure as defined in 31 CFR 
285.12(d)(2);
    (4) Debts that have been referred to a private collection 
contractor for a period acceptable to Treasury;
    (5) Debts that will be disposed of under an approved asset sale 
program as defined in 31 CFR 285.12(d)(3)(i);
    (6) Debts that will be collected under internal offset procedures 
within three years after the debt first became delinquent;
    (7) Debts at a debt collection center for a period of time 
acceptable to Treasury; or
    (8) Debts 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 agency's Chief Financial 
Officer.


Sec.  422.817  Required certification.

    Before referring delinquent administrative debts to the Department 
of the Treasury (Treasury) for collection, we will certify, in writing, 
that:
    (a) The debts we are transferring are valid and legally 
enforceable;
    (b) There are no legal bars to collection; and
    (c) We have complied with all prerequisites to a particular 
collection action under the laws, regulations, or policies applicable 
to us, unless we agree that Treasury will do so on our behalf.


Sec.  422.819  Fees.

    Federal agencies operating Department of the Treasury-designated 
debt collection centers are authorized to charge a fee for services 
rendered regarding referred or transferred debts. The fee may be paid 
out of amounts collected and may be added to the debt as an 
administrative cost.


Sec.  422.821  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. We will use Administrative Offset to recover 
administrative debts.
    (2) This section does not apply to:
    (i) Debts arising under the Social Security Act;
    (ii) Payments made under the Social Security Act, except as 
provided for in 31 U.S.C. 3716(c), and 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; Sec. Sec.  422.810 and 422.829 of this part);
    (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) In bankruptcy cases, the agency may seek legal advice from the 
Office of the General Counsel concerning the impact of the Bankruptcy 
Code, particularly 11 U.S.C. 106, 362, and 553, on pending or 
contemplated collections by offset.
    (b) [Reserved]


Sec.  422.822  Notification of intent to collect by administrative 
offset.

    (a) Prior to initiation of collection by Administrative Offset, we 
will:
    (1) Send the debtor a notice by mail or hand-delivery. The notice 
will include the type and amount of the debt, the intention of the 
agency using internal offset or non-centralized Administrative Offset 
to collect the debt 30 days after the date of the notice, and the name 
of the Federal agency from which the creditor agency wishes to collect 
in the case of a non-centralized Administrative Offset. Additionally, 
if the debt is not satisfied by offset within the Social Security 
Administration or by agreement with another Federal agency, the notice 
will include the intent to refer the debt to the Department of the 
Treasury (Treasury) for collection through centralized Administrative 
Offset, including offset of tax refunds 60 days after the date of the 
notice as well as an explanation of the debtor's rights under 31 U.S.C. 
3716.
    (2) Give the debtor the opportunity:
    (i) To make a voluntary payment;
    (ii) To review and copy agency records related to the debt;
    (iii) For a review within the agency of the determination of 
indebtedness;
    (iv) To make a written agreement to repay the debt.
    (b) The procedures set forth in paragraph (a) of this section are 
not required when:
    (1) The offset is in the nature of a recoupment;
    (2) The debt arises under a contract subject to the Contracts 
Disputes Act or Federal Acquisition Regulations;
    (3) In the case of a non-centralized Administrative Offset (see 
Sec.  422.824), the agency first learns of the existence of the amount 
owed by the debtor when there is insufficient time before payment would 
be made to the debtor/payee to allow for prior notice and an 
opportunity for review. When prior notice and an opportunity for review 
are omitted, we will give the debtor such notice and an opportunity for 
review as soon as practicable and will promptly refund any money 
ultimately found not to have been owed to the agency; or
    (4) The agency previously has given a debtor any of the notice and 
review opportunities required under this part, with respect to a 
particular debt. Subsequently, any interest accrued or any installments 
coming due after we initiate an offset would not require a new notice 
and opportunity to review.
    (c) The notice will be included as part of a demand letter issued 
under Sec.  422.805 to advise the debtor of all debt collection 
possibilities that the agency will seek to employ.

[[Page 61742]]

Sec.  422.823  Debtor rights to review or copy records, submit 
repayment proposals, or request administrative review.

    (a) A debtor who intends to review or copy our records with respect 
to the debt must notify us in writing within 30 days of the date of the 
notice as described in section Sec.  422.822. In response, we will 
notify the debtor of the location, time, and any other conditions for 
reviewing and copying. The debtor may be liable for reasonable copying 
expenses.
    (b) In response to the notice as described in section Sec.  
422.822, the debtor may propose a written agreement to repay the debt 
as an alternative to Administrative Offset. Any debtor who wishes to do 
this must submit a written proposal for repayment of the debt, which we 
must receive within 30 days of the date of the notice as described in 
section Sec.  422.822 or 15 days after the date of a decision adverse 
to the debtor. In response, we will notify the debtor whether we need 
additional information, for example, financial status information. We 
will obtain any necessary authorization required to approve the 
agreement, and we will issue a written determination whether the 
proposed agreement is acceptable. In exercising our discretion, we will 
balance the Government's interest in collecting the debt against 
fairness to the debtor.
    (c) A debtor must request an administrative review of the debt 
within 30 days of the date of the notice as described in section Sec.  
422.822 for purposes of a proposed collection by non-centralized 
Administrative Offset pursuant to Sec.  422.824. A debtor must request 
an administrative review of the debt within 60 days of the date of the 
notice as described in section Sec.  422.822 for purposes of a proposed 
collection by centralized Administrative Offset for offset against 
other Federal payments that would include tax refunds pursuant to Sec.  
422.825.
    (1) For purposes of this section, whenever we are required to 
provide a debtor a review within the agency, we will give the debtor a 
reasonable opportunity for an oral hearing, either by telephone or in 
person, when the debtor requests reconsideration of the debt and we 
determine that the question of the indebtedness cannot be resolved by 
review of the documentary evidence.
    (2) Unless otherwise required by law, an oral hearing under this 
section is not required to be a formal evidentiary hearing, although we 
will carefully document all significant matters discussed at the 
hearing.
    (3) An oral hearing is not required with respect to debts where 
determinations of indebtedness rarely involve issues of credibility or 
veracity, and we have 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, we will provide the debtor a paper hearing, that is, a 
determination of the request for reconsideration based upon a review of 
the written record.


Sec.  422.824  Non-centralized administrative offset.

    (a) Unless otherwise prohibited by law, when centralized 
Administrative Offset under Sec.  422.825 is not available or 
appropriate, we may collect a past due, legally enforceable, nontax 
delinquent debt by conducting non-centralized Administrative Offset 
internally or in cooperation with the agency certifying or authorizing 
payments to the debtor. Generally, non-centralized Administrative 
Offsets are ad hoc case-by-case offsets that an agency conducts at its 
own discretion, internally or in cooperation with a second agency 
certifying or authorizing payments to the debtor. In these cases, we 
may make a request directly to a payment-authorizing agency to offset a 
payment due a debtor to collect a delinquent debt. We adopt the 
procedures in 31 CFR 901.3(c) so that we may request the Department of 
the Treasury or any other payment-authorizing agency to conduct a non-
centralized Administrative Offset.
    (b) Administrative Offset may be initiated only after:
    (1) The debtor has been sent a notice of the type and amount of the 
debt, the intention to initiate Administrative Offset to collect the 
debt, and an explanation of the debtor's rights under 31 U.S.C. 3716; 
and
    (2) The debtor has been given:
    (i) The opportunity to review and copy records related to the debt;
    (ii) The opportunity for a review within the department of the 
determination of indebtedness; and
    (iii) The opportunity to make a written agreement to repay the 
debt.
    (c) The agency may omit the requirements under paragraph (b) of 
this section when:
    (1) 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);
    (2) 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 
covered by the Contracts Disputes Act); or
    (3) In the case of non-centralized Administrative Offset conducted 
under paragraph (a) of this section, the agency first learns of the 
existence of the amount owed by the debtor when there is insufficient 
time before payment would be made to the debtor to allow for prior 
notice and an opportunity for review. When prior notice and an 
opportunity for review are omitted, we will give the debtor such notice 
and an opportunity for review as soon as practical and will promptly 
refund any money ultimately found not to have been owed to the 
Government.
    (d) When the debtor previously has been given any of the required 
notice and review opportunities with respect to a particular debt, such 
as under Sec.  422.805, we need not duplicate such notice and review 
opportunities before Administrative Offset may be initiated.
    (e) Before requesting that a payment-authorizing agency conduct 
non-centralized Administrative Offset, we will:
    (1) Provide the debtor with due process as set forth in paragraph 
(b) of this section; and
    (2) Provide the payment-authorizing agency written certification 
that the debtor owes the past due, legally enforceable delinquent debt 
in the amount stated and that we have fully complied with this section.
    (f) When a creditor agency requests that we, as the payment 
authorizing agency, conduct non-centralized Administrative Offset, we 
will 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 
agency, or would otherwise be contrary to law. Appropriate use should 
be made of the cooperative efforts of other agencies in effecting 
collection by Administrative Offset, including salary offset.
    (g) When collecting multiple debts by non-centralized 
Administrative Offset, we 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.


Sec.  422.825  Centralized administrative offset.

    (a) Mandatory referral. After we provide and meet the notice and 
review opportunity requirements of Sec.  422.822, we will refer debts 
that are over 120 calendar days delinquent to the Department of the 
Treasury (Treasury) for collection through centralized

[[Page 61743]]

Administrative Offset 61 days after the date of the notice provided in 
accordance with Sec.  422.822. If the debtor seeks review, referral of 
the debt must occur within 30 days of the final decision upholding our 
decision to offset the debt if the debt is more than 120 calendar days 
delinquent.
    (b) Discretionary referral. After we provide and meet the notice 
and review opportunity requirements of Sec.  422.822, and the debtor 
does not request administrative review or the result of the review is 
unsuccessful for the debtor, we may refer a debt that is less than 120 
calendar days delinquent.
    (c) Procedures for referral. We will refer debts to Treasury for 
collection in accordance with Treasury procedures set forth in 31 CFR 
285.5 and 31 CFR 901.3(b).


Sec.  422.827  Offset against tax refunds.

    We will take action to effect Administrative Offset against tax 
refunds due to debtors in accordance with the provisions of 31 U.S.C. 
3720A through referral for centralized Administrative Offset under 
Sec.  422.825.


Sec.  422.829  Federal salary offset.

    (a) Referral to the Department of the Treasury for offset. (1) The 
Department of the Treasury (Treasury) will recover overdue 
administrative debts by offsetting Federal payments due the debtor 
through the Treasury Offset Program (TOP). TOP is a government-wide 
delinquent debt matching and payment offset process operated by 
Treasury, whereby debts owed to the Federal Government are collected by 
offsetting them against Federal payments owed the debtor. Federal 
payments owed the debtor include current ``disposable pay,'' defined in 
5 CFR 550.1103, owed by the Federal Government to a debtor who is an 
employee of the Federal Government. Deducting from such disposable pay 
to collect an overdue debt owed by the employee is called ``Federal 
Salary Offset'' in this subpart.
    (2) Treasury will use Federal Salary Offset to collect overdue 
administrative debts from Federal employees, including employees of the 
Social Security Administration. A Federal employee's involuntary 
payment of all or part of a debt collected by Federal Salary Offset 
does not amount to a waiver of any rights that the employee may have 
under any statute or contract, unless a statute or contract provides 
for waiver of such rights.
    (b) Debts we will refer. We will refer all qualifying 
administrative debts that meet or exceed the threshold amounts used by 
Treasury for collection from Federal payments, including Federal 
salaries.
    (c) Notice to debtor. Before we refer any administrative debt for 
collection by Administrative Offset, we will send the debtor a notice 
that explains all of the following:
    (1) The nature and amount of the debt;
    (2) That we have determined that payment of the debt is overdue; 
and
    (3) That we will refer the debt for Administrative Offset (except 
as provided in paragraph (c)(9) of this section) at the expiration of 
not less than 60 calendar days after the date of the notice unless, 
within that 60-day period:
    (i) The debtor pays the full amount of the debt, or
    (ii) The debtor takes any of the actions described in paragraphs 
(c)(6) or (c)(7) of this section.
    (4) The frequency and amount of any Federal Salary Offset deduction 
(the payment schedule) expressed as a fixed dollar amount or percentage 
of disposable pay.
    (5) The debtor may review or copy our records relating to the debt. 
If the debtor or his or her representative cannot personally review the 
records, the debtor may request and receive a copy of such records.
    (6) The debtor may request a review of the debt by giving us 
evidence showing that the debtor does not owe all or part of the amount 
of the debt or that we do not have the right to collect it. The debtor 
may also request review of any payment schedule for Federal Salary 
Offset stated in the notice. If the debtor is an employee of the 
Federal Government and Federal Salary Offset is proposed, an official 
designated in accordance with 5 U.S.C. 5514(a)(2) will conduct the 
review.
    (7) The debtor may request to repay the debt voluntarily through an 
installment payment plan.
    (8) If the debtor knowingly furnishes any false or frivolous 
statements, representations, or evidence, the debtor may be subject to 
appropriate disciplinary procedures under applicable statutes or 
regulations when the debtor is a Federal employee.
    (9) We will refer the debt for Federal Salary Offset at the 
expiration of not less than 60 calendar days after the date of the 
notice unless, within that 60 day period, the debtor takes any actions 
described in paragraphs (c)(3)(i), (c)(6), or (c)(7) of this section.
    (d) Federal Salary Offset: amount, frequency and duration of 
deductions. (1) Treasury may collect the overdue debt from an employee 
of the Federal Government through the deduction of an amount not to 
exceed 15 percent of the debtor's current disposable pay each payday.
    (2) Federal Salary Offset will begin not less than 60 calendar days 
after the date of the notice to the debtor described in paragraph (c) 
of this section.
    (3) Once begun, Federal Salary Offset will continue until Treasury 
recovers the full amount of the debt, the debt is otherwise resolved, 
or the debtor's Federal employment ceases, whichever occurs first.
    (4) After Federal Salary Offset begins, the debtor may request a 
reduction in the amount deducted from disposable pay each payday. When 
Treasury determines that the amount deducted causes financial harm 
under the rules in Sec.  422.833(j), they will reduce that amount. 
Treasury will not reduce the amount from the debtor's disposable pay if 
the debt was caused by:
    (A) An intentional false statement by the debtor, or
    (B) The debtor's willful concealment of, or failure to furnish, 
material information.
    (2) ``Willful concealment'' means an intentional, knowing and 
purposeful delay in providing, or failure to reveal, material 
information.
    (e) Refunds. Treasury will promptly refund to the debtor any 
amounts collected that the debtor does not owe. Refunds do not bear 
interest unless required or permitted by law or contract.


Sec.  422.833  Administrative wage garnishment for administrative 
debts.

    (a) Purpose. This part prescribes the standards and procedures for 
collecting money from a debtor's disposable pay by means of 
Administrative Wage Garnishment to satisfy delinquent non-tax debts 
owed to us, the Social Security Administration.
    (b) Authority. These standards and procedures are authorized under 
the wage garnishment provisions of the Debt Collection Improvement Act 
of 1996, codified at 31 U.S.C. 3720D, and the Department of the 
Treasury's (Treasury) Administrative Wage Garnishment regulation at 31 
CFR 285.11.
    (1) This part will apply notwithstanding any provision of State 
law.
    (2) Nothing in this part precludes the compromise of a debt or the 
suspension or termination of collection action in accordance with Sec.  
422.803 of this title or other applicable law or regulation, and the 
Commissioner has retained the authority. The Department of Justice has 
exclusive authority to suspend or

[[Page 61744]]

terminate collection action on a debt affected by fraud.
    (3) The receipt of payments pursuant to this part does not preclude 
us from pursuing other debt collection remedies, including the offset 
of Federal or State payments to satisfy delinquent non-tax debt owed to 
the United States. We will pursue such debt collection remedies 
separately or in conjunction with Administrative Wage Garnishment.
    (4) This section does not apply to the collection of delinquent 
non-tax debts owed to the United States from the wages of Federal 
employees from their Federal employment. Federal pay is subject to the 
Federal Salary Offset procedures set forth in 5 U.S.C. 5514 and other 
applicable laws.
    (5) Nothing in this section requires us to duplicate notices or 
administrative proceedings required by contract or other laws or 
regulations.
    (c) Definitions. In this section, the following definitions will 
apply:
    (1) Business day means Monday through Friday. For purposes of 
computation, the last day of the period will be included unless it is a 
Federal legal holiday, in which case the next business day following 
the holiday will be considered the last day of the period.
    (2) 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 legal holiday, in which case the next business day will be 
considered the last day of the period.
    (3) Debt 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 or any other 
debt that meets the definition of ``claim'' or ``debt'' under 31 U.S.C. 
3701(b), excluding program overpayments made under title II or title 
XVI of the Social Security Act.
    (4) Debtor means an individual who owes a delinquent non-tax debt 
to the United States.
    (5) Delinquent debt means any non-tax debt that has not been paid 
by the date specified in the agency's initial written demand for 
payment, or applicable payment agreement or instrument, unless other 
satisfactory payment arrangements have been made. For purposes of this 
part, ``delinquent'' and ``overdue'' have the same meaning.
    (6) Disposable pay means that part of the debtor's compensation 
(including, but not limited to, salary, bonuses, commissions, and 
vacation pay) from an employer remaining after the deduction of health 
insurance premiums and any amounts required by law to be withheld. For 
purposes of this part, ``amounts required by law to be withheld'' 
include amounts for deductions such as social security taxes and 
withholding taxes, but do not include any amount withheld pursuant to a 
court order.
    (7) Employer means a person or entity that employs the services of 
others and that pays their wages or salaries. The term employer 
includes, but is not limited to, State and local Governments, but does 
not include an agency of the Federal Government as defined by 31 CFR 
285.11(c).
    (8) Garnishment means the process of withholding amounts from an 
employee's disposable pay and paying those amounts to a creditor in 
satisfaction of a withholding order.
    (9) Hearing means a review of the documentary evidence concerning 
the existence or amount of a debt or the terms of a repayment schedule, 
provided such repayment schedule is established other than by a written 
agreement entered into pursuant to this part. If the hearing official 
determines that the issues in dispute cannot be resolved solely by 
review of the written record, such as when the validity of the debt 
turns on the issue of credibility or veracity, an oral hearing may be 
provided.
    (10) Hearing official means an administrative law judge or 
appropriate alternate.
    (11) Treasury means the Department of the Treasury.
    (12) Withholding order for purposes of this part means ``Wage 
Garnishment Order (SF329B).'' Also for purposes of this part, the terms 
``wage garnishment order'' and ``garnishment order'' have the same 
meaning as ``withholding order.''
    (d) General rule. (1) Except as provided in paragraph (d)(2) of 
this section, whenever an individual owes a delinquent debt, the agency 
or another Federal agency collecting a debt on our behalf (see Sec.  
422.803) may initiate administrative proceedings to garnish the wages 
of the delinquent debtor.
    (2) Treasury will not garnish the wages of a debtor who we know has 
been involuntarily separated from employment until the debtor has been 
re-employed continuously for at least 12 months. The debtor has the 
burden to inform the agency of the circumstances surrounding an 
involuntary separation from employment.
    (e) Notice--(1) Notice requirements. At least 30 days before the 
initiation of garnishment proceedings, Treasury will mail, by first 
class mail, to the debtor's last known address, a notice informing the 
debtor of:
    (i) The nature and amount of the debt;
    (ii) The intention to initiate proceedings to collect the debt 
through deductions from pay until the debt and all accumulated 
interest, penalties, and administrative costs are paid in full;
    (iii) The debtor's right:
    (A) To review and copy our records related to the debt;
    (B) To enter into a written repayment which is agreeable to the 
agency;
    (C) To a hearing, in accordance with paragraph (f) of this section, 
concerning the existence or the amount of the debt or the terms of the 
proposed repayment schedule under the garnishment order, except that 
the debtor is not entitled to a hearing concerning the proposed 
repayment schedule if the terms were established by written agreement 
pursuant to paragraph (1)(iii)(B) of this section; and
    (iv) The periods within which the debtor may exercise his or her 
rights.
    (2) Treasury will keep a copy of the dated notice. The notice may 
be retained electronically so long as the manner of retention is 
sufficient for evidentiary purposes.
    (f) Hearing--(1) In general. Upon timely written request of the 
debtor, Treasury will provide a paper or oral hearing concerning the 
existence or amount of the debt, or the terms of a repayment schedule 
established other than by written agreement under paragraph 
(e)(1)(iii)(B) of this section.
    (2) Request for hearing. (i) The request for a hearing must be 
signed by the debtor, state each issue being disputed, and identify and 
explain with reasonable specificity all facts and evidence that the 
debtor believes support the debtor's position. Supporting documentation 
identified by the debtor should be attached to the request.
    (ii) Effect of timely request: Subject to paragraph (e)(10) of this 
section, if the debtor's written request is received on or before the 
15 business days following the mailing of the notice required under 
this part, a withholding order will not be issued under paragraph (g) 
of this section until the debtor has been provided the requested 
hearing, and a decision in accordance with paragraphs (e)(7) and (8) of 
this section has been rendered.
    (iii) Failure to timely request a hearing: If the debtor's written 
request is received after the 15th business day following the mailing 
of the notice required under this part, Treasury will provide a hearing 
to the debtor. However, Treasury may not delay the issuance of a 
withholding order unless they determine that the delay in submitting 
such request was caused by factors beyond the control of the debtor,

[[Page 61745]]

or receive information that they determine justifies a delay or 
cancellation of the withholding order.
    (3) Oral hearing. (i) For purposes of this section, a debtor will 
be provided a reasonable opportunity for an oral hearing when the 
hearing official determines that the issues in dispute cannot be 
resolved by review of the documentary evidence, such as when the 
validity of the claim turns on the issue of credibility or veracity.
    (ii) If the hearing official decides to have a hearing, a debtor 
can specify to Treasury whether he or she wants to appear in person or 
by telephone. At the debtor's option, the oral hearing may be conducted 
in person or by telephone conference. The hearing official will notify 
the debtor of the date, time, and in the case of an in-person hearing, 
the location of the hearing. All travel expenses incurred by the debtor 
in connection with an in-person hearing will be borne by the debtor.
    (4) Paper hearing. (i) If the hearing official determines an oral 
hearing is not required by this section, the hearing official will 
afford the debtor a paper hearing, that is, the issues in dispute will 
be decided based upon a review of the written record.
    (ii) The hearing official will notify the debtor of the deadline 
for the submission of additional evidence if necessary for a review of 
the record.
    (5) Burden of proof. (i) Treasury has the initial burden of proving 
the existence or amount of the debt.
    (ii) Thereafter, if the debtor disputes the existence or amount of 
the debt, the debtor must present Treasury preponderant evidence that 
no debt exists or that the amount is incorrect. Debtors challenging the 
terms of a repayment schedule must provide preponderant evidence to 
Treasury that the terms of the repayment schedule are unlawful, would 
cause the debtor financial hardship, or that operation of law prohibits 
collection of the debt.
    (6) Record. The hearing official will maintain a summary record of 
any hearing provided under this part. A hearing is not required to be a 
formal evidentiary-type hearing, but witnesses who testify in an oral 
hearing must do so under oath or affirmation.
    (7) Date of decision. (i) The hearing official will issue a written 
decision, as soon as practicable, but no later than 60 days after the 
date on which the request for the hearing was received by the agency.
    (ii) If the hearing official is unable to provide the debtor with a 
hearing and render a decision within 60 days after the receipt of the 
request for such hearing:
    (A) A withholding order may not be issued until the hearing is held 
and a decision is rendered; or
    (B) A withholding order previously issued to the debtor's employer 
must be suspended beginning on the 61st day after the receipt of the 
hearing request and continuing until a hearing is held and a decision 
is rendered.
    (8) Content of decision. The written decision will include:
    (i) A summary of the facts presented;
    (ii) The hearing official's findings, analysis, and conclusions; 
and
    (iii) The terms of any repayment schedule, if applicable.
    (9) Final agency action. The hearing official's decision will be 
the final agency action for the purposes of judicial review under the 
Administrative Procedure Act. 5 U.S.C. 701 et seq.
    (10) Failure to appear. In the absence of good cause shown, a 
debtor who fails to appear at a hearing will be deemed as not having 
timely filed a request for a hearing.
    (g) Withholding order. Unless Treasury receives information that 
determines a justified delay or cancellation of a withholding order, 
Treasury will send, by first class mail, an SF-329A ``Letter to 
Employer & Important Notice to Employer,'' an SF-329B ``Wage 
Garnishment Order,'' an SF-329C ``Wage Garnishment Worksheet,'' and an 
SF-329D ``Employer Certification'' to the debtor's employer within 30 
days after the debtor fails to make a timely request for a hearing or, 
if the timely request for a hearing is made by the debtor, within 30 
days after a final decision is made by the agency to proceed with 
garnishment.
    (h) Certification by employer. The employer must complete and 
return the SF-329D ``Employer Certification'' within 20 days of 
receipt.
    (i) Amounts withheld. (1) After receipt of a withholding order 
issued under this part, the employer will deduct from all disposable 
pay paid to the debtor during each pay period the amount of garnishment 
described in paragraph (h)(2) of this section. The employer may use the 
SF-329C ``Wage Garnishment Worksheet'' to calculate the amount to be 
deducted from the debtor's disposable pay.
    (2) Subject to paragraphs (h)(3)(i) and (h)(4) of this section, the 
amount of garnishment will be the lesser of:
    (i) The amount indicated on the garnishment order up to 15 percent 
of the debtor's disposable pay; or
    (ii) The amount set forth in 15 U.S.C. 1673(a)(2) (Maximum 
allowable garnishment). The amount set forth at 15 U.S.C. 1673(a)(2) is 
the amount by which a debtor's disposable pay exceeds an amount 
equivalent to thirty times the minimum wage. See 29 CFR 870.10.
    (3)(i) Except as provided in paragraph (h)(3)(ii) of this section, 
when a debtor's pay is subject to multiple withholding orders, unless 
otherwise provided by Federal law, withholding orders issued pursuant 
to this part will have priority over other withholding orders that are 
served later.
    (ii) Notwithstanding the foregoing, withholding orders for family 
support will have priority over withholding orders issued under this 
part.
    (iii) If amounts are being withheld from a debtor's pay pursuant to 
a withholding order served on an employer before a withholding order 
issued pursuant to this part, or if a withholding order for family 
support is served on an employer at any time, the amounts withheld 
pursuant to a withholding order issued under this part will be the 
lesser of:
    (A) The amount calculated under paragraph (h)(3)(iii)(B) of this 
section; or
    (B) An amount equal to 25 percent of the debtor's disposable pay 
less the amount(s) withheld under the withholding order(s) with 
priority.
    (4) If the debtor owes more than one debt to the agency, Treasury 
will issue multiple withholding orders provided that the total amount 
garnished from the debtor's pay for such orders does not exceed the 
amount set forth in paragraph (h)(2) of this section.
    (5) An amount greater than that set forth in paragraphs (h)(2) or 
(3) of this section may be withheld with the debtor's written consent.
    (6) The employer will promptly pay all amounts withheld in 
accordance with the withholding order issued pursuant to this part.
    (7) The employer is not required to vary its normal pay and 
disbursement cycles in order to comply with the withholding order.
    (8) Any assignment or allotment by an employee will be void to the 
extent it interferes with or prohibits execution of the withholding 
order issued under this part, except for any assignment or allotment 
made pursuant to a family support judgment or order.
    (9) The employer will withhold the appropriate amount from the 
debtor's wages for each pay period until the employer receives 
notification from the agency to discontinue wage withholding.
    (10) The withholding order, SF-329B ``Wage Garnishment Order,'' 
sent to the employer under paragraph (g) of this section, requires the 
employer to commence wage withholding on the first payday after the 
employer receives

[[Page 61746]]

the order. However, if the first payday is within 10 days after receipt 
of the order, the employer may elect to begin deductions on the second 
payday.
    (11) An employer may not discharge, refuse to employ, or take 
disciplinary action against any debtor because of the issuance of a 
withholding order under this part.
    (j) Financial hardship. (1) A debtor whose wages are subject to a 
withholding order may, at any time, request a review by Treasury of the 
amount garnished, based on materially changed circumstances, such as 
disability, divorce, or catastrophic illness, which result in financial 
hardship.
    (2) A debtor requesting review under paragraph (i)(1) of this 
section will submit the basis for the claim that the current amount of 
garnishment results in a financial hardship to the debtor, along with 
supporting documentation. Treasury will consider any information 
submitted in accordance with this part.
    (3) If Treasury finds financial hardship, to reflect the debtor's 
financial condition, Treasury will downwardly adjust the amount 
garnished by an amount and for a period established by the agency. 
Treasury will notify the employer of any adjustments in the amount to 
be withheld.
    (k) Fraud and willful concealment or failure to furnish 
information. Treasury will not reduce the amount that the employer 
withholds from disposable pay if the debt was caused by an intentional 
false statement.
    (l) Refunds. (1) If the hearing official, pursuant to a hearing 
under this part, determines that a debt is not legally due and owing to 
the United States, Treasury will promptly refund any amount collected 
by means of Administrative Wage Garnishment.
    (2) Unless required by Federal law or contract, refunds under this 
part will not bear interest.
    (m) Ending garnishment. (1) Once Treasury has fully recovered the 
amounts owed by the debtor, including interest, penalties, and 
administrative costs assessed pursuant to and in accordance with Sec.  
422.803 of this title, Treasury will send the debtor's employer 
notification to discontinue wage withholding.
    (2) At least annually, Treasury will review debtors' accounts to 
ensure that garnishment has ended for accounts that have been paid in 
full.
    (n) Employers' responsibilities and right of action. (1) The 
employer of a debtor subject to wage withholding pursuant to this part 
will pay the agency as directed in a withholding order issued under 
this part.
    (2) Treasury may bring suit against an employer for any amount that 
the employer fails to withhold from wages owed and payable to a debtor 
in accordance with paragraphs (g) and (i) of this section, plus 
attorney's fees, costs, and, if applicable, punitive damages.
    (3) A suit under this section may not be filed before the end of 
the collection action involving a particular debtor, unless earlier 
filing is necessary to avoid expiration of any applicable statute of 
limitations period. For purposes of this section, ``end of collection 
action'' occurs when we have completed taking collection action in 
accordance with part 422, subpart I of this title or other applicable 
law or regulation.
    (4) Notwithstanding any other provision or action referred to in 
this section, the end of the collection action will be deemed to occur 
one (1) year after the agency does not receive any payment of wages 
that were subject to a garnishment order issued under this part.


Sec.  422.835  Debt reporting and use of credit reporting agencies.

    (a) Reporting delinquent debts. (1) We may report delinquent debts 
over $25 to credit bureaus or other automated databases.
    (2) We will report administrative debts owed by individuals to 
consumer reporting agencies pursuant to 5 U.S.C. 552a(b)(12). We may 
disclose only the individual's name, address, and Social Security 
number and the nature, amount, status, and history of the debt.
    (3) Once we refer a debt to the Department of the Treasury 
(Treasury) for collection, Treasury may handle any subsequent reporting 
to or updating of a credit bureau or other automated database.
    (4) Where there is reason to believe that a debtor has filed a 
bankruptcy petition, prior to proceeding under this paragraph (a), we 
will contact the Office of the General Counsel 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.
    (5) If the debtor has not received prior notice under Sec.  
422.805, before reporting a delinquent debt under this section, we will 
provide the debtor at least 60 days notice including:
    (i) The amount and nature of the debt;
    (ii) That the debt is delinquent and that we intend to report the 
debt to a credit bureau;
    (iii) The specific information that we will disclose;
    (iv) The right to dispute the accuracy and validity of the 
information being disclosed; and
    (v) If a previous opportunity was not provided, the right to 
request review of the debt or rescheduling of payment.
    (b) Use of credit reporting agencies. We may use credit-reporting 
agencies to determine a debtor's ability to repay a debt and to locate 
debtors. In the case of an individual, we 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.


Sec.  422.837  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, we 
may contract with private collection contractors to recover delinquent 
debts, if:
    (1) We retain the authority to resolve disputes, compromise debts, 
suspend or terminate collection action, and, as appropriate, to refer 
debts to the Department of Justice for review and 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 we have granted 
such authority prior to the offer;
    (3) The contract provides that the private collection contractor is 
subject to the Privacy Act of 1974 to the extent specified in 5 U.S.C. 
552a(m) and to applicable Federal and State laws and regulations 
pertaining to debt collection practices, including, but not limited, to 
the Fair Debt Collection Practices Act, 15 U.S.C. 1692; and
    (4) The private collection contractor is required to account for 
all amounts collected.
    (b) We will use government-wide debt collection contracts to obtain 
debt collection services provided by private collection contractors. 
However, we may refer debts to private collection contractors pursuant 
to a contract between the agency and the private collection contractor 
only if such debts are not subject to the requirement to transfer debts 
to 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 Department of the 
Treasury (Treasury) after the debt has been referred to Treasury for 
collection) are excluded from this section.

[[Page 61747]]

    (d) We 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 agency for collecting the 
debt is payable from the amounts collected.
    (e) We 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, we must 
establish procedures that are acceptable to the Secretary of the 
Treasury.
    (f) We enter into contracts for debtor asset and income search 
reports. In accordance with 31 U.S.C. 3718(d), such contracts may 
provide that the fee a contractor charges the agency for such services 
may be payable from the amounts recovered unless otherwise prohibited 
by statute.


Sec.  422.839  Offset against amounts payable from civil service 
retirement and disability fund and the Federal employees' retirement 
system.

    Upon providing the Office of Personnel Management (OPM) written 
certification that a debtor has been afforded the procedures provided 
in Sec.  422.823 of this part, we may request OPM to offset a debtor's 
anticipated or future benefit payments under the Civil Service 
Retirement and Disability Fund (Fund) and the Federal Employees' 
Retirement System (FERS) in accordance with regulations codified at 5 
CFR 831.1801 through 831.1808, and 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 FERS.


Sec.  422.842  Liquidation of collateral.

    (a)(1) 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, we 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).
    (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) We 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, we will contact the Office of the 
General Counsel 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.


Sec.  422.846  Bases for compromise.

    (a) Scope and application--(1) Scope. The standards set forth in 
this subpart apply to the compromise of administrative debts pursuant 
to 31 U.S.C. 3711. We may exercise such compromise authority for debts 
arising out of activities of, or referred or transferred for collection 
services to, the agency when the amount of the debt then due, exclusive 
of interest, penalties, and administrative costs, does not exceed 
$100,000 or any higher amount authorized by the Attorney General.
    (2) 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 the Department of Justice (DOJ). We will 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 agency, 
we will refer the debt to the Civil Division or other appropriate 
litigating division in the DOJ using a Claims Collection Litigation 
Report (CCLR). A CCLR may be obtained from the DOJ's National Central 
Intake Facility. The referral will include appropriate financial 
information and a recommendation for the acceptance of the compromise 
offer. DOJ approval is not required if we reject a compromise offer.
    (b) Bases for compromise--(1) Compromise. We may compromise a debt 
if the agency cannot collect the full amount based upon the debtor's 
inability to pay, inability to collect the full debt, the cost of 
collection, or if we are doubtful that the debt can be proven in court.
    (i) Inability to pay. We may compromise a debt if 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, we will obtain and verify the debtor's claim of 
inability to pay by using credit reports and/or a current financial 
statement from the debtor, executed under penalty of perjury, showing 
the debtor's assets, liabilities, income, and expenses. We may use a 
financial information form used in connection with the agency's 
programs or may request suitable forms from the DOJ or the local United 
States Attorney's Office. We also may consider other relevant factors 
such as:
    (A) Age and health of the debtor;
    (B) Present and potential income;
    (C) Inheritance prospects;
    (D) The possibility that assets have been concealed or improperly 
transferred by the debtor; and
    (E) The availability of assets or income that may be realized by 
enforced collection proceedings.
    (ii) Inability to collect full debt. We may compromise a debt if 
the Government is unable to collect the debt in full within a 
reasonable time by enforced collection proceedings.
    (A) In determining the Government's ability to enforce collection, 
we will consider the applicable exemptions available to the debtor 
under State and Federal law, and we may also consider uncertainty as to 
the price any collateral or other property will bring at a forced sale.
    (B) A compromise affected 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 any 
exemptions available to the debtor and the time that collection will 
take.
    (iii) Cost of collection. We may compromise a debt if the cost of 
collecting the debt does not justify the enforced collection of the 
full amount.
    (A) The amount accepted in compromise of such debts 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.
    (B) In determining whether the costs of collection justify enforced 
collection of the full amount, we 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.
    (iv) Doubtful debt can be proven in court. We may compromise a debt 
if there is significant doubt concerning the Government's ability to 
prove its case in court.

[[Page 61748]]

    (A) If significant doubt exists 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 legitimate dispute as to 
the facts, then the amount accepted in compromise 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.
    (B) In determining the litigation risks involved, we will consider 
the probable amount of court costs and attorney fees a court may impose 
pursuant to the Equal Access to Justice Act, 28 U.S.C. 2412, if the 
Government is unsuccessful in litigation.
    (2) Installments. We may not accept compromises payable in 
installments. This is not an advantageous form of compromise in terms 
of time and administrative expense. If, however, payment in 
installments is necessary in cases of compromise based on paragraphs 
(b)(1)(i) through (iii) of this section, we will 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. In cases of compromise based on 
paragraph (b)(1)(iv) of this section, we will consult with the Office 
of the General Counsel concerning the appropriateness of including such 
a requirement in the legally enforceable written agreement. Whenever 
possible, we will obtain security for repayment in the manner set forth 
in Sec.  422.809.
    (c) Enforcement policy. Subject to the Commissioner's approval, we 
may compromise statutory penalties, forfeitures, or claims established 
as an aid to enforcement and to compel compliance if our enforcement 
policy, in terms of deterrence and securing compliance, present, and 
future, will be adequately served by the agency's acceptance of the sum 
to be agreed upon.
    (d) Joint and several liability. (1) When two or more debtors are 
jointly and severally liable, we will pursue collection against all 
debtors, as appropriate. We will not attempt to allocate the burden of 
payment between the debtors but will proceed to liquidate the 
indebtedness as quickly as possible.
    (2) We will ensure that a compromise agreement with one debtor does 
not automatically release the agency's claim against the remaining 
debtor(s). The amount of a compromise with one debtor will 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.
    (e) Further review of compromise offers. If we are uncertain 
whether to accept a firm, written, substantive compromise offer on a 
debt that is within the agency's statutory compromise authority, we may 
use a CCLR with supporting data and particulars concerning the debt to 
refer the offer to the DOJ's Civil Division or other appropriate 
litigating division. The DOJ may act upon such an offer or return it to 
the agency with instructions or advice.
    (f) Consideration of tax consequences to the Government. In 
negotiating a compromise, we will consider the tax consequences to the 
Government. In particular, we will consider requiring a waiver of tax-
loss-carry-forward and tax-loss-carry-back rights of the debtor. For 
information on discharge of indebtedness reporting requirements, see 
Sec.  422.848(e).
    (g) Mutual release of the debtor and the Government. In all 
appropriate instances, a compromise that is accepted will be 
implemented by means of a mutual release. The terms of such mutual 
release will provide that the debtor is released from further non-tax 
liability on the compromised debt in consideration of payment in full 
of the compromise amount, and the Government and its officials, past 
and present, are released and discharged from any and all claims and 
causes of action arising from the same transaction that the debtor may 
have. In the event a mutual release is not executed when a debt is 
compromised, unless prohibited by law, the debtor is still deemed to 
have waived any and all claims and causes of action against the 
Government and its officials related to the transaction giving rise to 
the compromised debt.


Sec.  422.848  Suspension and termination of collection activities.

    (a) Scope and application--(1) 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 appear to be 
fraudulent or that do not exceed $100,000, or such other amount as the 
Attorney General may direct, exclusive of interest, penalties, and 
administrative costs, after deducting the amount of partial payments or 
collections, if any. Prior to referring a debt to the Department of 
Justice (DOJ) for litigation, we may suspend or terminate collection 
under this subpart with respect to such debts that arise out of the 
activities of, or are referred or transferred for collection services 
to, the agency.
    (2) Application. (i) If the debt stems from a claim that appears to 
be fraudulent, false, or misrepresented by a party with an interest in 
the claim or 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 the DOJ.
    (ii) If we believe that suspension or termination of any debt that 
relates to a claim that appears to be fraudulent, false, or 
misrepresented by a party with an interest in the claim or that exceeds 
$100,000 may be appropriate, we will use the Claims Collection 
Litigation Report to refer the debt to the Civil Division or other 
appropriate litigating division in the DOJ. The referral will specify 
the reasons for our recommendation. If, prior to referral to the DOJ, 
we determine that a debt is plainly erroneous or clearly without merit, 
we may terminate collection activity regardless of the suspected fraud 
or amount involved without obtaining the DOJ's concurrence.
    (b) Suspension of collection activity. (1) We may suspend 
collection activity on a debt when:
    (i) The debtor cannot be located;
    (ii) The debtor's financial condition is not expected to improve; 
or
    (iii) The debtor has requested a legally permissible waiver or 
review of the debt.
    (2) Financial condition. Based on the current financial condition 
of a debtor, we 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:
    (i) No applicable statute of limitations has expired; or
    (ii) 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 any statute of limitation 
for Administrative Offset prescribed by 31 U.S.C. 3716(e)(1); or
    (iii) The debtor agrees to pay interest on the amount of the debt 
on which collection will be suspended and 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.
    (3) Waiver or review. (i) We will suspend collection activity 
during the time required for consideration of the debtor's request for 
waiver or

[[Page 61749]]

administrative review of the debt if the statute under which the 
request is sought prohibits us from collecting the debt during that 
time.
    (ii) If the statute under which the waiver or administrative review 
request is sought does not prohibit collection activity pending 
consideration of the request, we may use discretion, on a case-by-case 
basis, to suspend collection. We will ordinarily suspend collection 
action upon a request for waiver or review if we are prohibited by 
statute or regulation from issuing a refund of amounts collected prior 
to agency consideration of the debtor's request. However, we will not 
suspend collection when we determine that the request for waiver or 
review is frivolous or was made primarily to delay collection.
    (4) Bankruptcy. Upon learning that a bankruptcy petition has been 
filed with respect to a debtor, we must suspend collection activity on 
the debt, pursuant to the provisions of 11 U.S.C. 362, 1201, and 1301, 
unless we can clearly establish that the automatic stay has been lifted 
or is no longer in effect. In such cases, we will consult our Office of 
the General Counsel for advice. When appropriate, the Offices of the 
Regional Chief Counsel will take the necessary legal steps to ensure 
that no funds or money are paid by the agency to the debtor until 
relief from the automatic stay is obtained.
    (c) Termination of collection activity. (1) We may terminate 
collection activity when:
    (i) We are unable to collect any substantial amount through our own 
efforts or through the efforts of others;
    (ii) We are unable to locate the debtor;
    (iii) Costs of collection are anticipated to exceed the amount 
recoverable;
    (iv) The debt is legally without merit or enforcement of the debt 
is barred by any applicable statute of limitations;
    (v) The debt cannot be substantiated; or
    (vi) The debt against the debtor has been discharged in bankruptcy.
    (2)(i) Collection activity will not be terminated before we have 
pursued all appropriate means of collection and determined, based upon 
the results of the collection activity, that the debt is uncollectible.
    (ii) Termination of collection activity ceases active collection of 
the debt. The termination of collection activity does not preclude us 
from retaining a record of the account for purposes of:
    (A) Selling the debt, if the Secretary of the Department of the 
Treasury (Treasury) determines that such sale is in the best interest 
of the United States;
    (B) 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;
    (C) Offsetting against future income or assets not available at the 
time of termination of collection activity; or
    (D) Screening future applicants for prior indebtedness.
    (3) We will terminate collection activity on a debt that has been 
discharged in bankruptcy, regardless of the amount. We may continue 
collection activity, however, subject to the provisions of the 
Bankruptcy Code, for any payments provided under a plan of 
reorganization. Offset and recoupment rights may survive the discharge 
of the debtor in bankruptcy and, under some circumstances, claims also 
may survive the discharge. For example, when we are a known creditor of 
a debtor, the claims of the agency may survive a discharge if we did 
not receive notice of the bankruptcy proceeding or the debt was 
affected by fraud. When we believe that the agency has claims or 
offsets that may have survived the discharge of the debtor, we will 
contact the Office of the General Counsel for legal advice.
    (d) Exception to termination. When a significant enforcement policy 
is involved or recovery of a judgment is a prerequisite to the 
imposition of administrative sanctions, we may refer debts to the DOJ 
for litigation even though termination of collection activity may 
otherwise be appropriate.
    (e) Discharge of indebtedness; reporting requirements. (1)(i) 
Before discharging a delinquent debt, also referred to as close out of 
the debt, we will take all appropriate steps to collect the debt in 
accordance with 31 U.S.C. 3711(g)(9), and Sec. Sec.  422.803 and 
422.810 of this part, including, as applicable, Administrative Offset; 
tax refund offset; Federal Salary Offset; credit bureau reporting; 
Administrative Wage Garnishment; litigation; foreclosure; and referral 
to the Treasury, Treasury-designated debt collection centers, or 
private collection contractors.
    (ii) 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.
    (iii) When we discharge a debt in full or in part, further 
collection action is prohibited. Therefore, before discharging a debt, 
we must:
    (A) Make the determination that collection action is no longer 
warranted; and
    (B) Terminate debt collection action.
    (2) In accordance with 31 U.S.C. 3711(i), we will use competitive 
procedures to sell a delinquent debt upon termination of collection 
action if the Secretary of the 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, we may not discharge a debt until the requirements of 
31 U.S.C. 3711(i) have been met.
    (3) Upon discharge of indebtedness, we must report the discharge to 
the Internal Revenue Service (IRS) in accordance with the requirements 
of 26 U.S.C. 6050P and 26 CFR 1.6050P-1. We may request that Treasury 
or Treasury-designated debt collection centers file such a discharge 
report to the IRS on our behalf.
    (4) When discharging a debt, we must request that litigation 
counsel release any liens of record securing the debt.


Sec.  422.850  Referrals to the Department of Justice.

    (a) Prompt referral. (1)(i) We will promptly refer to the 
Department of Justice (DOJ) for litigation debts on which aggressive 
collection activity has been taken in accordance with Sec.  422.803, 
and that cannot be compromised, or on which collection activity cannot 
be suspended or terminated, in accordance with Sec.  422.848.
    (ii) We may refer debts arising out of activities of, or referred 
or transferred for collection services to, the agency to DOJ for 
litigation.
    (2)(i) Debts for which the principal amount is over $100,000 or 
such other amount as the Attorney General may direct, exclusive of 
interest, penalties, and administrative costs will be referred to the 
Civil Division or other division responsible for litigating such debts 
at the DOJ.
    (ii) 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 will be referred to the 
Nationwide Central Intake Facility at the DOJ as required by the Claims 
Collections Litigation Report (CCLR) instructions.
    (3)(i) Consistent with aggressive agency collection activity and 
the standards contained in this part and 31 CFR parts 900 through 904, 
debts will be referred to the DOJ as early as possible and, in any 
event, well within

[[Page 61750]]

the period for initiating timely lawsuits against the debtors.
    (ii) We will make every effort to refer delinquent debts to the DOJ 
for litigation within one year of the date such debts last became 
delinquent. In the case of guaranteed or insured loans, we will make 
every effort to refer these delinquent debts to the DOJ for litigation 
within one year from the date the debt was known to the agency.
    (4) The DOJ has exclusive jurisdiction over debts referred to it 
pursuant to this subpart. Upon referral of a debt to the DOJ, we will:
    (i) Immediately terminate the use of any administrative collection 
activities to collect the debt;
    (ii) Advise the DOJ of the collection tools utilized and the 
results of activities to date; and
    (iii) Refrain from having any contact with the debtor and direct 
all debtor inquiries concerning the debt to the DOJ.
    (5) After referral of a debt under this subpart, we will 
immediately notify the DOJ of any payments credited by the agency to 
the debtor's account. Pursuant to 31 CFR 904.1(b), after referral of 
the debt under this subpart, the DOJ will notify the agency of any 
payment received from the debtor.
    (b) Claims Collection Litigation Report. (1)(i) Unless excepted by 
the DOJ, we will complete a CCLR and associated signed Certificate of 
Indebtedness to refer all administratively uncollectible claims to the 
DOJ for litigation.
    (ii) We will complete all 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.
    (2) We will indicate clearly on the CCLR the actions that we wish 
the DOJ to take with respect to the referred debt. We may indicate 
specifically any of a number of litigation activities the DOJ may 
choose to pursue, including enforced collection, judgment lien only, 
renew judgment lien only, renew judgment lien and enforced collection, 
program enforcement, foreclosure only, and foreclosure and deficiency 
judgment.
    (3) We will also use the CCLR to refer a debt to the DOJ for the 
purpose of obtaining any necessary approval of a proposal to compromise 
a debt or to suspend or terminate administrative collection activity on 
a debt.
    (c) Preservation of evidence. We will maintain and preserve all 
files and records that may be needed by the DOJ to prove our claim in 
court. When referring debts to the DOJ 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 the DOJ.
    (d) Minimum amount of referrals. (1) Except as provided in 
paragraph (d)(2) of this section, we will not refer for litigation 
claims of less than $2,500 exclusive of interest, penalties, and 
administrative costs, or such other amount as the Attorney General may 
prescribe.
    (2) We will not refer claims of less than the minimum amount 
unless:
    (i) Litigation to collect such smaller amount is important to 
ensure compliance with the agency's policies and programs;
    (ii) The agency is referring the claim 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 agency for enforcement; or
    (iii) The debtor has the clear ability to pay the claim and the 
Government can enforce payment effectively, with due regard for the 
exemptions available to the debtor under State and Federal law and the 
judicial remedies available to the Government.
    (3) We will consult with the Financial Litigation Staff of the 
Executive Office for United States Attorneys at DOJ prior to referring 
claims valued at less than the minimum amount.

[FR Doc. 2015-25544 Filed 10-13-15; 8:45 am]
BILLING CODE 4191-02-P