Collection of Administrative Debts; Collection of Debts Arising From Enforcement and Other Regulatory Activity, 15502-15505 [2019-07537]

Agencies

• FEDERAL RESERVE SYSTEM

[Federal Register Volume 84, Number 73 (Tuesday, April 16, 2019)]
[Rules and Regulations]
[Pages 15502-15505]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-07537]



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FEDERAL RESERVE SYSTEM

12 CFR Part 267

[Docket No. R-1657; RIN 7100 AF-44]


Collection of Administrative Debts; Collection of Debts Arising 
From Enforcement and Other Regulatory Activity

AGENCY: Board of Governors of the Federal Reserve System (Board).

ACTION: Final rule.

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SUMMARY: The Board is issuing new regulations to provide for the 
collection of debts owing to the United States arising out of the 
Board's operations or its enforcement and other regulatory activities.

DATES: The rule is effective April 16, 2019.

FOR FURTHER INFORMATION CONTACT: Yonatan Gelblum, Senior Counsel (202) 
452-2046, Legal Division, Board of Governors of the Federal Reserve 
System, 20th Street and Constitution Avenue NW, Washington, DC 20551. 
For users of Telecommunication Device for Deaf (TDD) contact (202) 263-
4869.

SUPPLEMENTARY INFORMATION:

I. Background

    The Board is promulgating new regulations to implement the Debt 
Collection Improvement Act of 1996 (``DCIA''), Public Law 104-134, 110 
Stat. 1321-358. The DCIA generally governs the federal government's 
debt collection activities. Although the DCIA does not apply directly 
to the Board, these regulations are adopted pursuant to the Board's 
authority under Section 10(4) and 11 of the Federal Reserve Act, 12 
U.S.C. 244, 248(i), to adopt rules and regulations governing its 
operations. The Board is adopting these regulations in order to improve 
the effectiveness of its debt collection efforts, primarily by allowing 
it to refer debts for collection to the U.S. Department of the Treasury 
(``Treasury''). In accordance with the DCIA, Treasury and the U.S. 
Department of Justice jointly promulgated Federal Claims Collection 
Standards (``FCCS''), 31 CFR parts 900-904. Agencies may adopt the FCCS 
without change, or may prescribe agency regulations for collecting 
debts by administrative offset that are consistent with the FCCS. 31 
U.S.C. 3716. The U.S. Department of the Treasury has issued additional 
regulations applicable to collection under the DCIA at 31 CFR part 285. 
This rule generally adopts these regulations and the FCCS by cross-
reference, except for purposes of establishing the general scope of 
these regulations or in limited instances where these authorities 
expressly require the Board to issue its own regulations.

II. Description of the Final Rule

    The regulations set forth the procedures the Board will follow in 
collecting debts owed to the United States to which part 267 applies. 
The regulations describe procedures with respect to referral of debts 
to Treasury or another agency for collection by administrative offset 
or other means, collection by administrative wage garnishment or salary 
offset, and the assessment of interest and other charges on debts.
    Section 267.1--Purpose and scope. This part establishes procedures 
for collection of debts owed to the United States. It does not apply if 
another statute or regulation, or a rule, regulation, or policy adopted 
by the Board under authority granted to it by the Federal Reserve Act, 
governs or prohibits collection. For example, the Board has a debt 
collection policy that provides separate procedures for collecting 
debts from current employees. These regulations do not apply to the 
collection of any debts that the Board chooses to collect solely under 
its debt collection policy rather than these regulations. Thus, the 
Board is not creating any right to individuals to use the process 
offered under this regulation for any debt the Board chooses to collect 
solely under its debt collection policy. In collecting debts under this 
part, the Board will also follow the procedures set forth in 5 CFR part 
550, subpart K, 31 CFR part 285, and the FCCS.
    Section 267.2--Definitions. The definitions in this section are 
generally based on the FCCS, the DCIA, and related authorities. For 
purposes of this part, a debt or claim owed to the United States is 
defined as including a debt owed to the Board, including a debt or 
claim for repayment of Board-funded benefits administered through the 
Office of Employee Benefits of the Federal Reserve System, but does not 
include any debt the Board chooses to collect solely under its debt 
collection policy.
    Section 267.3--Referral of debts for collection action, including 
offset. This section indicates which debts may be referred to the U.S. 
Department of the Treasury for collection, including by centralized 
offset and offset of tax refunds, and adopts procedural protections 
provided under the FCCS and DCIA prior to such referrals. The Board is 
not required to duplicate any prior notice or review opportunities 
already afforded to the debtor prior to referral. The Board may request 
that an agency other than the U.S. Department of the Treasury conduct 
non-centralized offset.
    Section 267.4--Administrative wage garnishment. This section 
provides that the Board may collect debts from the wages of persons 
employed outside of the federal government through administrative wage 
garnishment. Before doing so, the debtor will be provided an 
opportunity for a hearing in accordance with the procedures described 
at 31 CFR 285.11(f).
    Section 267.5--Salary offset. This section provides that the Board 
may collect debts from the wages of person employed at a federal agency 
(other than the Board) through offset of the person's federal agency 
salary. It adopts the basic requirements set forth under 5 CFR 550.1104 
for the content of agency regulations governing salary offset. It also 
establishes detailed procedures for a hearing prior to salary offset.
    Section 267.6--Interest, penalties, and administrative costs. This 
section follows the guidelines in the FCCS for charges on delinquent 
debts and, as required by the FCCS, clarifies when the Board will waive 
such charges during the pendency of any review.

III. Administrative Law Matters

Administrative Procedure Act

    This rule is not subject to the provisions of the Administrative 
Procedure Act (APA), 5 U.S.C. 553, requiring notice, public 
participation, and deferred effective date, because it relates solely 
to agency procedure and practice. 5 U.S.C. 553(b).

Regulatory Flexibility Act

    The Regulatory Flexibility Act, 5 U.S.C. 601 et seq., applies only 
to rules for which an agency publishes a notice of proposed rulemaking. 
Because a notice of proposed rulemaking for this rule is unnecessary, 
the Regulatory Flexibility Act does not apply to this final rule.

Paperwork Reduction Act Analysis

    There is no collection of information required by this final rule 
that would be subject to the Paperwork Reduction Act of 1995, 44 U.S.C. 
3501 et seq.

Plain Language

    Section 722 of the Gramm-Leach-Bliley Act requires each federal 
banking agency to use plain language in all rules published after 
January 1, 2000. In light of this requirement, the Board believes this 
final rule is presented in a simple and straightforward manner and is 
consistent with this ``plain language'' directive.

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Review by the Office of Personnel Management

    Because the proposed rule provides for salary offset pursuant to 5 
U.S.C. 5514, in accordance with that section and with 5 CFR 
550.1105(a), the Board submitted the proposed rule to the Office of 
Personnel Management, which approved the rule.

List of Subjects in 12 CFR Part 267

    Administrative practice and procedure, Claims, Collection, 
Government employees, Hearing procedures, Wages.

Authority and Issuance

0
For the reasons set forth in the preamble, the Board adds part 267 to 
Chapter II, in Title 12 of the Code of Federal Regulations to read as 
follows:

PART 267--PROCEDURES FOR DEBT COLLECTION

Sec.
267.1 Purpose and scope.
267.2 Definitions.
267.3 Referral of debts for collection action, including offset.
267.4 Administrative wage garnishment.
267.5 Salary offset.
267.6 Interest, penalties, and administrative costs.

    Authority: 5 U.S.C. 5514; 12 U.S.C. 244, 248; 31 U.S.C. 3711, 
3716, 3717, 3720A, 3720D.


Sec.  267.1  Purpose and scope.

    This part establishes Board procedures for the collection of 
certain debts owed to the United States.
    (a) Except as provided in paragraph (b) of this section, this part 
applies to collections by the Board from persons, organizations, or 
entities indebted to the United States.
    (b) This part does not apply to any debts whose collection is 
exclusively provided for or prohibited by another statute or applicable 
regulation, or to any debt of a current Board employee or other debtor 
where the Board has chosen to proceed solely under its existing 
internal debt collection policy. This part does not in any way limit or 
affect the Board's authority under 12 U.S.C. 244 and 12 U.S.C. 248. 
Nothing in this part precludes the collection of debts through any 
other legally-available means, or precludes the Board from engaging in 
litigation as provided under 12 U.S.C. 248(p), 1818(i), or any other 
applicable law.
    (c) When the Board determines to collect a debt using the 
procedures under these regulations, in addition to the procedures set 
forth in this part and subject to paragraph (b) of this section, the 
Board shall also follow, as applicable, the procedures set forth in 31 
CFR part 285 and the Federal Claims Collection Standards (FCCS) (31 CFR 
chapter IX and parts 900 through 904) for the collection of debts owed 
to the United States.
    (d) Nothing in this part precludes the compromise, suspension, or 
termination of collection actions, where appropriate, under standards 
implementing the Debt Collection Improvement Act (DCIA) (31 U.S.C. 3711 
et seq.), the FCCS, or any other applicable law, including rules, 
regulations, and policies adopted by the Board pursuant to authority 
granted to it under the Federal Reserve Act.
    (e) Nothing in this part shall create any right or benefit, 
substantive or procedural, enforceable at law or in equity by a party 
against the United States, its agencies, its officers, or any other 
person, nor shall the Board's failure to comply with any of the 
provisions of this part be available to any debtor as a defense. 
Nothing in this part shall permit a debtor to collaterally attack a 
final administrative decision rendered under any other applicable 
statute or regulation, or a judgment by a competent court.


Sec.  267.2  Definitions.

    Except where the context clearly indicates otherwise, the following 
definitions shall apply to this part.
    Administrative offset means withholding funds payable by the United 
States to, or held by the United States for, a person to satisfy a 
claim.
    Agency incudes all executive departments and agencies or 
instrumentalities in the executive branch, and any other entity 
referenced in 5 U.S.C. 5514(a)(5)(B).
    Board means the Board of Governors of the Federal Reserve System.
    Centralized offset is an offset initiated by referral to the 
Secretary of the Treasury (including a debt collection center 
designated by the Department of the Treasury) by a creditor agency of a 
debt for purposes of collection under the Treasury's centralized offset 
program.
    Debt or claim means an amount of money, funds, or property that has 
been determined by a Board official, in connection with the operational 
or regulatory activities of the Board, to be owed to the United States 
from any person, organization or entity (except another Federal 
entity), including any type of debt referenced in 31 U.S.C. 3701(b). 
For purposes of this part, a debt or claim owed to the Board, including 
a debt or claim for repayment of Board-funded benefits administered 
through the Office of Employee Benefits of the Federal Reserve System, 
is a debt owed to the United States. A debt does not include any 
amounts owed by a current Board employee that the Board chooses to 
collect solely under its debt collection policy.
    Debtor means a person who owes a debt, and includes any individual, 
organization, or entity except another agency.
    Delinquent, with respect to a debt or claim, shall have the meaning 
given to such term at 31 CFR 900.2(b).
    Eligible, with respect to a debt or claim, means that referral of 
the debt or claim for collection is not precluded by any statute or 
regulation, or by any guidance issued by the U.S. Department of the 
Treasury.
    Garnishment means the process of withholding amounts from the 
disposable pay of a person employed outside the Federal Government, and 
the paying of those amounts to a creditor in satisfaction of a 
withholding order.
    Salary offset means an administrative offset to collect a debt 
under 5 U.S.C. 5514 by deduction(s) at one or more officially 
established pay intervals from the current pay account of a Federal 
employee without his or her consent.


Sec.  267.3  Referral of debts for collection action, including offset.

    (a) In general. To the extent not inconsistent with any applicable 
law or with any rule, regulation, or policy adopted by the Board in the 
exercise of authority granted to it under the Federal Reserve Act, the 
Board will refer debts covered by this regulation and which are 
eligible debts over 120 days delinquent to which this part applies to 
the U.S. Department of the Treasury for appropriate debt collection 
action, including but not limited to centralized offset, and offset of 
tax refunds. The Board may also refer any eligible debt less than 120 
days delinquent to the U.S. Department of the Treasury for appropriate 
collection action.
    (b) Proceedings prior to referral. At least 60 days prior to 
referring a debt in accordance with paragraph (a) of this section, the 
Board will send the debtor the notice described in 31 CFR 
901.3(b)(4)(ii)(A), and afford the debtor the procedural protections 
described in 31 CFR 901.3(b)(4)(ii)(B) and 31 U.S.C. 3720A(b). However, 
the Board is not required to duplicate any prior notice or review 
opportunities that it has already afforded the debtor prior to 
referral.
    (c) Non-centralized offset. The Board may request an agency other 
than the U.S. Department of the Treasury to conduct non-centralized 
offset. Except in the situations described in 31 CFR 
901.3(b)(4)(iii)(A)-(C), the Board will

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follow the procedures described in paragraph (b) of this section prior 
to making such a request. When making the request, the Board will 
certify in writing to the paying agency that the debtor owes the past 
due, legally enforceable delinquent debt in the amount stated, and that 
the Board has fully complied with these regulations.


Sec.  267.4  Administrative wage garnishment.

    The Board may collect debts, or refer debts for collection, from 
the wages of persons employed outside of the Federal Government by 
administrative wage garnishment in accordance with the requirements of 
31 U.S.C. 3720D.
    Prior to such garnishment, the debtor will be provided a hearing in 
accordance with the procedures described at 31 CFR 285.11(f).


Sec.  267.5  Salary offset.

    (a) Applicability. (1) This section covers government-wide 
collection of a delinquent debt by administrative offset under 5 U.S.C. 
5514 from salary payments of federal government employees other than 
current Board employees.
    (2) This section does not apply where an employee consents to the 
recovery of a debt from his or her federal government salary.
    (b) Notice. A Federal Government employee from whom the Board 
proposes to collect a debt under this section will be provided written 
notice from the Board at least 30 days before any deductions begin. 
Such notice will state:
    (1) The Board's determination that a debt is owed, including the 
origin, nature, and amount of that debt;
    (2) The Board's intention to collect the debt by means of deduction 
from the employee's disposable pay (as defined in 5 CFR 550.1103);
    (3) The frequency and amount of the intended deduction (stated as a 
fixed dollar amount or as a percentage of pay), and the Board's 
intention to continue the deductions until the debt is paid in full or 
otherwise resolved;
    (4) An explanation of the Board's policy concerning interest, 
penalties, and administrative costs, including a statement that such 
assessments must be made unless excused in accordance with the Federal 
Claims Collections Standards published in 31 CFR parts 900 through 904;
    (5) The employee's right to inspect and copy Government records 
relating to the debt or, if the employee or his or her representative 
cannot personally inspect the records, to request and receive a copy of 
such records;
    (6) If not previously provided, the opportunity (under terms 
agreeable to Board) to establish a schedule for the voluntary repayment 
of the debt or to enter into a written agreement to establish a 
schedule for repayment of the debt in lieu of offset;
    (7) The employee's right to a hearing conducted by an official 
arranged by the Board if a petition is filed as prescribed by the 
Board;
    (8) The method and time period for petitioning for a hearing, 
including the contact information of the official to whom such a 
petition should be sent;
    (9) That the timely filing of a petition for a hearing will stay 
the commencement of collection proceedings;
    (10) That a final decision on the 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 
proceedings;
    (11) That any knowingly false or frivolous statements, 
representations, or evidence may subject the employee to:
    (i) Disciplinary procedures appropriate under chapter 75 of title 
5, United States Code, part 752 of title 5, Code of Federal 
Regulations, or any other applicable statutes or regulations;
    (ii) Penalties under the False Claims Act, sections 3729 through 
3731 of title 31, United States Code, or any other applicable statutory 
authority; or
    (iii) Criminal penalties under sections 286, 287, 1001, and 1002 of 
title 18, United States Code or any other applicable statutory 
authority.
    (12) Any other rights and remedies available to the employee under 
statutes or regulations governing the program for which the collection 
is being made; and
    (13) Unless there are applicable contractual or statutory 
provisions to the contrary, that amounts paid on or deducted for the 
debt which are later waived or found not owed to the United States will 
be promptly refunded to the employee.
    (c) Petitions for hearing--(1) Time to petition. A Federal 
Government employee from whom the Board proposes to collect a debt 
under this section may request a hearing concerning the existence or 
amount of the debt or the offset schedule established by the Board by 
sending a written petition addressed to the official designated in the 
notice described in paragraph (b) of this section on or before the 
fifteenth day following receipt of such notice. A hearing will be 
granted on a petition that is not filed within such period only if the 
petitioner shows that the delay was because of circumstances beyond his 
or her control or because of failure to receive notice of the time 
limit (unless otherwise aware of it). In all other cases of late or 
non-filing of such a petition, the employee will be deemed to have 
waived the right to a hearing and will be subject to salary offset 
under this section.
    (2) Contents of petition. The petition must:
    (i) Be signed by the employee;
    (ii) State why the employee believes the Board's determination 
concerning the existence of amount of the debt is in error;
    (iii) Fully identify and explain with reasonable specificity all 
the facts, evidence and witnesses, if any, which the employee believes 
support his or her position.
    (iv) Specify, if the employee desires an oral hearing, why the 
matter cannot be resolved by a paper hearing, which is a determination 
based upon a review of a written record, for example, because the 
existence or amount of the debt depends on the hearing official's 
determination of the credibility of witnesses.
    (d) Form of hearings--(1) Hearing official. A hearing under this 
section will be conducted by an administrative law judge or another 
individual not under the supervision or control of the Board.
    (2) Notice of hearing. After the employee requests a hearing, the 
hearing official must issue a notice to the employee and the Board 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 and the Board 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. The employee's failure to appear for an oral hearing or 
timely submit evidence and arguments as provided for in the notice will 
be deemed a waiver of the right to a hearing unless the hearing 
official determines that the failure was due to good cause shown.
    (3) Oral hearing. An employee who requests an oral hearing under 
this section will be provided such a 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 need not take the 
form of an evidentiary hearing, as long as both the employee and the 
Board are afforded a reasonable opportunity to present their case. Oral

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hearings may take the form of, but are not limited to:
    (i) Informal meetings in which the employee and Board 
representative are given full opportunity to present evidence, 
witnesses, and argument;
    (ii) Informal meetings in which the hearing official interviews the 
employee and Board representative; or
    (iii) Formal written submissions with an opportunity for oral 
presentation.
    (4) Paper hearing. If the hearing official determines that an oral 
hearing is not necessary, he or she will make the determination based 
upon a review of the formal written record, including any documentation 
submitted by the employee or the Board.
    (5) Record. The hearing official shall maintain a summary record of 
any hearing conducted under this section.
    (e) Decision on hearing. Unless the employee requests and the 
hearing official grants a delay in the proceedings, at the earliest 
practicable date, but in any event no later than 60 days after the 
filing of the petition requesting the hearing, the hearing official 
will issue a written decision to the employee. The decision will state 
the Board's position concerning the existence and amount of the debt, 
facts purporting to evidence the nature and origin of the alleged debt, 
the hearing official's analysis, findings and conclusions, in light of 
the hearing, as to the employee's and/or Board's grounds, the amount 
and validity of the debt as determined by the hearing official, and the 
repayment schedule, if not established by written agreement between the 
employee and the Board. If the hearing official determines that a debt 
may not be collected under this section, but the Board finds that the 
debt is still valid, the Board may still seek collection of the debt 
through other means, including but not limited to offset of other 
Federal payments.
    (f) Deductions under this section. The method of collection under 
this section is salary offset from disposable pay (as defined in 5 CFR 
550.1103), except as described in this paragraph. The size of 
installment deductions shall ordinarily bear a reasonable relationship 
to the size of the debt and the employee's ability to pay. However, the 
amount deducted for any period under this section may not exceed 15 
percent of disposable pay, unless the employee has agreed in writing to 
the deduction of a greater amount or a higher deduction has been 
ordered by a court under section 124 of Public Law 97-276 (97 stat. 
1195). Ordinarily, debts must be collected in one lump sum where 
possible. However, if the employee is financially unable to pay in one 
lump sum or the amount of the debt exceeds 15 percent of disposable pay 
(or other applicable limitation as provided in this paragraph) for an 
officially established pay interval, collection must be made in 
installments. Such installment deductions must be made over a period 
not greater than the anticipated period of active duty or employment, 
as the case may be, except as provided in paragraph (g) of this 
section.
    (g) Separating or separated employees. If the employee retires or 
resigns or if his or her employment or period of active duty ends 
before collection of the debt is completed, offset may be performed 
under 31 U.S.C. 3716 from subsequent payments of any nature (e.g. final 
salary payment, lump-sum leave, etc.) due the employee from the paying 
agency as of the date of separation to the extent necessary to 
liquidate the debt. Such offset may also be performed where appropriate 
against later payments of any kind due the former employee from the 
United States if the debt cannot be liquidated by offset from any final 
payment due the former employee as of the date of separation. Nothing 
in this section shall affect any limitation on alienation of benefits 
administered by the Federal Reserve System's Office of Employee 
Benefits.
    (h) Non-waiver and refunds of payments. An employee's involuntary 
payment of all or any portion of a debt being collected under 5 U.S.C. 
5514 must not be construed as a waiver of any rights which the employee 
may have under 5 U.S.C. 5514 or any other provision of contract or law, 
unless there are statutory or contractual provisions to the contrary. 
Any amounts paid or deducted under this section will be promptly 
refunded when a debt is waived or otherwise found not owing to the 
United States (unless expressly prohibited by statute or regulation), 
or the employee's paying agency is directed by an administrative or 
judicial order to refund amounts deducted from his or her current pay. 
Refunds do not bear interest unless required or permitted by law or 
contract.


Sec.  267.6  Interest, penalties, and administrative costs.

    Except with respect to debts referenced in 31 U.S.C. 3717(g), the 
Board will charge interest, costs, and a six percent penalty on debts 
covered by this regulation in accordance with 31 CFR 901.9. The Board 
will not impose interest charges on the portion of the debt that is 
paid within 30 days after the date on which interest began to accrue, 
nor impose penalty charges on the portion of the debt that is paid 
within 90 days after the date on which penalty began to accrue. The 
Board will not impose any charges during periods during which 
collection activity has been suspended pending any review provided for 
in this part if the reviewing official determines that collection of 
such charges is against equity and good conscience or is not in the 
best interest of the United States. The Board may, in its discretion, 
also waive interest, penalties, and cost charges for good cause shown 
by the debtor (for example, the debtor is unable to pay any significant 
portion of the debt within a reasonable period of time, or collection 
of these charges will jeopardize collection of the principal of the 
debt) or otherwise as authorized in 31 CFR 901.9(g) and 902.2.

    By order of the Board of Governors of the Federal Reserve 
System, April 11, 2019.
Ann Misback,
Secretary of the Board.
[FR Doc. 2019-07537 Filed 4-15-19; 8:45 am]
BILLING CODE 6210-01-P