[Title 44 CFR 11.48] [Code of Federal Regulations (annual edition) - October 1, 1996 Edition] [Title 44 - EMERGENCY MANAGEMENT AND ASSISTANCE] [Chapter I - FEDERAL EMERGENCY MANAGEMENT AGENCY] [Subchapter A - GENERAL] [Part 11 - CLAIMS] [Subpart C - Collection of Debts by the Government Under the Debt] [Sec. 11.48 - Interest and penalties.] [From the U.S. Government Publishing Office]44 EMERGENCY MANAGEMENT AND ASSISTANCE 1 1996-10-01 1996-10-01 false Interest and penalties. 11.48 Sec. 11.48 EMERGENCY MANAGEMENT AND ASSISTANCE FEDERAL EMERGENCY MANAGEMENT AGENCY GENERAL CLAIMS Collection of Debts by the Government Under the Debt Sec. 11.48 Interest and penalties. (a) Interest. Interest shall be charged on the outstanding principal balance due on debts owed the United States at the rate published by the Secretary of the Treasury under provisions of 31 U.S.C. 3717(a). Interest shall be assessed on debts owed by States and units of general local government at rates equivalent to rates paid by the United States Treasury to borrow money on the open financial markets. The interest rate in effect at the time that FEMA first mailed or hand delivered to the debtor written notice, stating that the debt was due and that interest would be assessed on the debt, shall be the rate applied throughout the duration of the debt until the debt is paid in full. Interest shall accrue either from the date that the debtor was first informed that interest would be assessed or some subsequent date specified in the written notice given by FEMA to the debtor stating that interest would be assessed. Interest shall run from the following dates: (1) If the initial demand for the debt was mailed on or after October 25, 1982, then the date of mailing to the debtor (using the most current address available to the ACO), or (2) If the initial demand for the debt was mailed before October 25, 1982, then from the date that a demand letter was mailed after October 25, 1982. (b) Exceptions to interest charges. However, no interest, described in paragraph (a) of this section, shall be charged if: (1) The amount due is paid within 30 days of the mailing of the demand. However, the ACO for good cause shown, as documented by a memorandum in the debt collection file, may extend this 30 day period, or (2) The applicable statute, regulation required by statute, loan agreement or contract either prohibit the charging of interest or explicitly fix interest or charges which apply to the debt involved. (c) Penalty charges. Except in the situation described in paragraph (b) of this section, a penalty of 6 per centum per annum shall be charged on the unpaid principal balance due if the debtor fails to pay the debt in full within 120 days of the date of the first written notice by FEMA that penalty charges would be assessed. However, if the debtor enters into a repayment agreement, satisfactory to FEMA, within the 120 day period, then penalty will not be assessed. Penalty will accrue starting on and including the 31st day following the first written notice about penalty. Penalty will not be assessed [[Page 123]] against Federal agencies, States, or units of general local government. (d) Administrative costs for processing delinquent debts. The debtor shall pay administrative costs of processing delinquent debts in accordance with 31 U.S.C. 3717(e)(1). Costs of preparing and mailing follow-up debt collection letters shall also be included. Administrative costs are deemed to include, but not be limited to, costs of employing commercial firms to locate the debtor, costs of employing contractors for collection services, costs of selling collateral or property to satisfy the debt, etc. States and units of general local government shall be liable for administrative costs to the extent authorized under the common law or other statutory or contractual authority. A debt is deemed to be delinquent if it remains unpaid for 30 days after the initial demand for payment and if the debtor has not entered into a repayment agreement satisfactory to FEMA. A debt is also deemed delinquent if payment is not made by the date specified in FEMA's initial written notification or in the applicable contractual agreement. (e) Standards for waiver of interest, penalties and charges. (1) Interest, penalties and delinquent debts charges may be waived, either in whole or in part, if the ACO or his designee finds that: (i) The debtor is financially unable to pay, (ii) the Agency's enforcement policy will be adequately served if there is a waiver in whole or in part or (iii) the debtor has shown good cause, satisfactory to the ACO, that the claim was not timely paid. If waiver is granted, the administrative claims file shall be adequately documented. (2) The ACO, with the concurrence of the General Counsel, may waive interest, penalties and administrative costs based on criteria set forth in paragraphs (e) (3) through (5) of this section. When such charges are waived, the Agency Collections Officer shall prepare a memorandum for the file stating the reasons for not collecting such charges. (3) If the costs of collection exceed the projected recovery then interest, penalties and administrative costs may be waived. (4) If the debtor has a bona fide dispute as to facts or has raised valid legal issues, then charges may be waived. (5) If it is determined that the debtor is unable to pay, as shown by complete and sworn statements as to his or her assets and projected income, then interest, penalties and charges may be waived in whole or in part. If the principal outstanding amount of the debt exceeds $2,500, the determination shall be made by the ACO. If the principal outstanding amount of the debt is $2,500 or less, the determination may be made by the DCO or the ACO. (f) Nonapplicability. The provisions of this section do not apply to debts owned by Federal agencies and State and local governments. Interest on such debts owed by such entities shall be charged in accordance with applicable statute or, if nonexistent, then in accordance with principles of common law. (g) Installment collections or partial payments. When a debtor pays a debt either partially or in installments, the payments shall first be applied to administrative costs and penalty charges, second to accrued interest, and third to principal. Partial payments shall be deemed to be made when received at the FEMA office designated to receive the payments. (h) Collection of interest and penalties while an appeal is pending. If the debtor notes an appeal either as to the existence or the amount of the debt, interest and penalties may be waived or suspended by the ACO under the following circumstances: (1) In the case of a State or a unit of general local government, interest shall be assessed on those amounts found due after the appeal process is completed and shall run from the time that the debtor government was first provided written notice by FEMA that interest would be assessed. However, the ACO may waive interest in whole or in part if the State or unit of general local government: (i) Shows that its taxes or revenues will be insufficient to enable the government to meet essential government expenses. (ii) Substantially prevails in its appeal, and pays the entire balance found [[Page 124]] to be due within 90 days of the decision on the appeal being transmitted to the appellant government. If the State or unit of general local government is to be considered for waiver of interest due to governmental hardship, the ACO may demand that such government provide such economic, financial, or demographic data that the ACO believes to be necessary to assist her to him in determining the existence of such hardship. (2) In the case of an individual or a non-governmental entity which is noting an appeal which is mandated by law, then the imposition of interest and penalties is waived while the appeal is pending from the time that the appeal is noted until the Agency has taken final action on the appeal. (3) When an individual or a non-governmental entity notes an appeal which is permissive under statute or regulation, then interest and penalties may be waived under the following circumstances: (i) If the amount of the debt, exclusive of interest and penalties, is less than $5,000, then interest and penalties shall be waived from the time that the appeal is noted until the Agency takes final action on the appeal. (ii) If the amount of the debt, exclusive of interest and penalties, is $5,000 or more then the imposition of penalties and interest may be waived if there is no fault or lack of good faith on the part of the debtor and if the amount of interest is so high, in relation to affordable installments repayments that the debt would never be repaid. In determining whether interest and penalties should be waived, the ACO or DCO may demand that the debtor provide such financial data as he or she may demand. [49 FR 38267, Sept. 28, 1988, as amended at 53 FR 47212, Nov. 22, 1988; 57 FR 54715, Nov. 20, 1992]