Current through Register Vol. 50, No. 9, March 1, 2024
RELATES TO:
KRS
13B.020, 45.237-45.241,
45.260,
45.345,
360.040
NECESSITY, FUNCTION, AND CONFORMITY:
KRS
45.238(6) and
KRS
45.241(5) require the
Finance and Administration Cabinet to promulgate administrative regulations for
those agencies without statutory procedures for collecting debts and to
prescribe standards and procedures for effective administration regarding
collection of debts, notices to persons (all individuals and business entities)
owing debt, information to be monitored concerning the debts, an appeals
process, and the writing off of debts. This administrative regulation
establishes the above requirements, guidelines for collecting accounts
receivable, and the minimum collection actions required for collecting
debts.
Section 1. Definitions.
(1) "Agency" is defined by
KRS
45.237(1)(a) and
45.241(1)(c).
(2) "Debt" is defined by
KRS
45.237(1)(e) and
45.241(1)(a).
Section 2. Invoicing and Letter Collections.
(1) Each agency's mailing practices shall
provide for written notification that is sufficient to insure that the debtor
understands the nature of the debt and instructions for researching returned
mail in order to obtain a more current address.
(2) Invoices shall be mailed to the debtor
within five (5) working days after the debt becomes due and contain clear and
detailed information regarding the debt, who to contact with questions, and
where to send the payment.
(3) The
invoice shall contain the following components so that adequate information is
provided:
(a) A header that identifies the
name and address of the billing agency, the debtor, invoice number, invoice
date, customer number, due date, and the total amount due;
(b) A body section that contains:
1. Any specialized contract or agreement
numbers and the billing period covered by the invoice.
2. Detail specifically identifying the debt,
and if more than one (1) item is listed, the total amount due;
3. A statement indicating if any interest or
other charges may be imposed on late payments, insufficiently funded checks,
collection actions, etc.; and
4.
Instructions regarding the appeals process; and
(c) A contact person or organizational unit,
including address and phone number, with whom the debtor can correspond if the
debtor has questions regarding the invoice.
(4) The agency shall keep a copy or an
electronic record of letters sent to a debtor.
(5) The agency shall maintain a file, in an
electronic medium if available, on each past-due account, including
documentation of all correspondence and all telephone contacts or
meetings.
(6) The agency shall
establish a system to ensure that it reviews the debt if it receives no
response by the date specified.
(7)
If the debtor does not respond to the original invoice, the agency shall send
an additional letter notifying the debtor that the account may be forwarded to
the Department of Revenue for collection action.
Section 3. Debtor Appeal Rights. Unless an
agency is exempt from the provisions of KRS Chapter 13B, as specifically
provided in
KRS
13B.020, any debtor of an agency shall have
all the rights contained in that chapter to appeal the finality of its
debt.
Section 4. Telephone
Collections.
(1) If the debtor does not
respond satisfactorily to the written notification of the debt, the agency
shall attempt to contact the debtor by telephone.
(2) While engaged in a telephonic discussion
with a debtor for payment, the agency shall:
(a) Attempt to secure a commitment for full
payment of the debt;
(b) Negotiate
an agreement with the shortest possible payment time frame as provided in
Section 6 of this administrative regulation, if the debtor is unable to pay the
debt in full;
(c) Document the
debtor's file with the date and with whom the negotiations were made;
(d) Document any new agreements reached;
and
(e) If the debtor has filed a
bankruptcy proceeding, the agency shall obtain from the debtor the bankruptcy
court and case number. Upon verification of the bankruptcy proceeding, the
agency shall discontinue further collection action.
(3) During any telephone conversation with
the debtor, representatives of the agency shall not:
(a) Threaten violence, use obscene language,
or make harassing phone calls;
(b)
Call the debtor at work, if the debtor objects;
(c) Misrepresent the identity of the
collector;
(d) Reveal the past due
debt to a third party, such as a neighbor or employer. However, collection
personnel may report the debt to the agency's attorney;
(e) Call at unusual times (after 8 a.m. and
before 9 p.m. is assumed convenient); and
(f) Initiate a conversation with a debtor, if
it is known that the debtor is represented by an attorney, without first
obtaining permission from the attorney.
Section 5. Interest, Late Fees, and Other
Penalties.
(1) To determine the interest rate
to charge, the agency shall first look to the source of the debt. If it arises
from a promissory note or contract, the note or contract may state the amount
of interest that applies and when it begins to accrue. An agency may have
specific statutes regulating interest rates. If no statute specifically
regulates the interest rate on debts owed to the agency, and a criminal or
civil judgment has been obtained, the judgment interest rate contained in
KRS 360.040
shall be applicable.
(2) The agency
shall calculate accrued interest as follows: Unpaid principal (only) multiplied
by the interest rate divided by 365 multiplied by the number of days delinquent
or since the last interest calculation.
(3) The agency shall add other late fees or
penalties if these types of fees and penalties are addressed in a written
agreement or applicable by statute.
Section 6. Payment Agreements.
(1) The agency shall develop payment schedule
guidelines for collection staff to use if making a payment agreement with a
debtor.
(2) The agency shall, as
nearly as practicable, use the following concepts in all payment guidelines:
(a) Debtors may make payments by credit
cards, debit cards, electronic checks, or automated clearinghouse debit (See
KRS
45.345);
(b) If a minimum payment has not already been
established, the agency shall use the following payment schedule to determine a
minimum payment amount:
Amount Due
|
Monthly Payment
|
Minimum Payment
|
$0 - $50
|
Pay in Full
|
N/A
|
$51 - $500
|
$50
|
$25
|
$501 - $1,000
|
$75
|
$40
|
$1,001 -$2,000
|
$100
|
$50
|
$2,001 -$3,000
|
$200
|
$75
|
$3,001 -$5,000
|
$300
|
$100
|
Over $5,000
|
The debtor's financial statements shall be reviewed
to determine a minimum payment.
|
(c) The
agency may waive the minimum standards listed above if the debtor demonstrates
to the agency that imposition of the minimum standards would cause an undue
hardship on the debtor or the debtor's dependents;
(d) If a payment agreement extends for more
than six (6) months, the agency shall send the debtor a confirmation
letter;
(e) The agency shall verify
information regarding the debtor and request additional asset information for
enforcement purposes if the debtor's promise is not kept or the arrangements
are not followed;
(f) The agency
shall inform the debtor that any tax refund or other amounts due or that become
due during the tenure of the agreement from any other agency will be offset to
the debt; and
(g) If the debtor
defaults on a payment agreement, the case shall be referred through normal
referral procedures to the Department of Revenue for further enforced
collection activity.
Section
7. Debtor Information.
(1) An
agency shall collect and record sufficient information when a transaction for
goods and services is initiated in order to facilitate effective collection
measures. This information shall include:
(a)
Current address;
(b) Current
telephone number;
(c) Social
Security number or federal employer identification number (FEIN); and
(d) The name of any bank where they have an
account and the account numbers, if available.
(2) The agency shall maintain current
information regarding the debtor on all active accounts.
(3) The agency may obtain debtor information
with a written application form, an interview, or both. The minimum information
to be contained on any application form or acquired in any interview shall be
defined in the agency's policies and shall be sufficient to ensure collection
of the account. If obtaining information from a business, the agency shall
specify the type of business entity involved and obtain a list of owners with
their Social Security numbers or FEINs, if applicable, and their phone
numbers.
(4) If specifically
authorized to do so, an agency may develop written policies to address when to
delay or withhold services to a delinquent debtor.
(5) An agency shall explore new technologies
and collection practices that can be integrated with its current policies,
procedures, and information systems that will improve efficiencies in its
collection practices.
Section
8. Determining Ability to Pay.
(1) Each state agency has a duty to make all
reasonable efforts to collect the full amount of monies owed to it or otherwise
charged to it for collection (Section 52 of the Kentucky Constitution and
KRS
45.260). An agency shall employ all available
legal, and cost-effective means that are appropriate to the circumstances in
its collection efforts. A means of collection may be considered cost effective
if it is reasonable to expect the costs of collection to be less than the
debt.
(2) The agency may consider
any debt, including interest and penalties or any portion of the debt,
uncollectible if the debtor has no money or other thing of value owing or held
by any other state agency that has not been credited to the debt, and it is
reasonable to conclude, after all reasonable efforts to collect the debt have
been made, that one (1) or more of the following is true:
(a) The debtor does not, and will not for the
foreseeable future, own or have the right to own assets from which the state
agency can collect the debt;
(b) It
is reasonably estimated that the cost of collecting the debt would equal or
exceed the amount of the debt;
(c)
The debtor is deceased and there are no assets in the debtor's estate from
which the state agency can collect the debt;
(d) The debtor is a corporation that is not,
and for the foreseeable future will not, be engaged in any income-producing
activity, and no assets exist from which the agency can collect the
debt;
(e) The debtor's estate is
subject to a pending bankruptcy proceeding in which it is reasonable to
conclude that the debt will be discharged and that the state agency will
receive none or an insubstantial share of the assets of the bankruptcy estate;
or
(f) The agency is, and will be
for the foreseeable future, unable to collect the debt from the debtor or from
anyone owing the debtor money or holding assets of or from the
debtor.
(3) If an agency
determines that one (1) or more of the circumstances listed in subsection (2)
of this section exists after the appropriate collection steps listed in this
administrative regulation have been taken or if the Department of Revenue has
returned the debts, because it has determined that the collection of the debt
is not feasible or cost effective, the debt may be charged off as
uncollectible.
STATUTORY AUTHORITY:
KRS
45.238(6),
45.241(5)