[House Hearing, 116 Congress]
[From the U.S. Government Publishing Office]




 
   PREVENTING HARM TO VETERANS: EXAMINING VA'S OVERPAYMENTS AND DEBT 
                          COLLECTION PRACTICES

=======================================================================

                                HEARING

                               before the

              SUBCOMMITTEE ON OVERSIGHT AND INVESTIGATIONS

                                 of the

                     COMMITTEE ON VETERANS' AFFAIRS
                     U.S. HOUSE OF REPRESENTATIVES

                     ONE HUNDRED SIXTEENTH CONGRESS

                             FIRST SESSION

                               __________

                      THURSDAY, SEPTEMBER 19, 2019

                               __________

                           Serial No. 116-35

                               __________

       Printed for the use of the Committee on Veterans' Affairs
       
       
       
       
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             U.S. GOVERNMENT PUBLISHING OFFICE 
 40-991               WASHINGTON : 2021       
        
        
                     COMMITTEE ON VETERANS' AFFAIRS

                   MARK TAKANO, California, Chairman

JULIA BROWNLEY, California           DAVID P. ROE, Tenessee, Ranking 
KATHLEEN M. RICE, New York               Member
CONOR LAMB, Pennsylvania, Vice-      GUS M. BILIRAKIS, Florida
    Chairman                         AUMUA AMATA COLEMAN RADEWAGEN, 
MIKE LEVIN, California                   American Samoa
MAX ROSE, New York                   MIKE BOST, Illinois
CHRIS PAPPAS, New Hampshire          NEAL P. DUNN, Florida
ELAINE G. LURIA, Virginia            JACK BERGMAN, Michigan
SUSIE LEE, Nevada                    JIM BANKS, Indiana
JOE CUNNINGHAM, South Carolina       ANDY BARR, Kentucky
GILBERT RAY CISNEROS, JR.,           DANIEL MEUSER, Pennsylvania
    California                       STEVE WATKINS, Kansas
COLLIN C. PETERSON, Minnesota        CHIP ROY, Texas
GREGORIO KILILI CAMACHO SABLAN,      W. GREGORY STEUBE, Florida
    Northern Mariana Islands
COLIN Z. ALLRED, Texas
LAUREN UNDERWOOD, Illinois
ANTHONY BRINDISI, New York
                 Ray Kelley, Democratic Staff Director
                 Jon Towers, Republican Staff Director

              SUBCOMMITTEE ON OVERSIGHT AND INVESTIGATIONS

                 CHRIS PAPPAS, New Hampshire, Chairman

KATHLEEN M. RICE, New York           JACK BERGMAN, Michigan, Ranking 
MAX ROSE, New York                       Member
GILBERT RAY CISNEROS, JR.,           AUMUA AMATA COLEMAN RADEWAGEN, 
    California                           American Samoa
COLLIN C. PETERSON, Minnesota        MIKE BOST, Illinois
                                     CHIP ROY, Texas

Pursuant to clause 2(e)(4) of Rule XI of the Rules of the House, public 
hearing records of the Committee on Veterans' Affairs are also 
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                            C O N T E N T S

                              ----------                              

                      Thursday, September 19, 2019

                                                                   Page

Preventing Harm To Veterans: Examining VA's Overpayments And Debt 
  Collection Practices...........................................     1

                           OPENING STATEMENTS

Honorable Chris Pappas, Chairman.................................     1
Honorable Jack Bergman, Ranking Member...........................     3

                               WITNESSES

The Honorable Jon J. Rychalski, Assistant Secretary for 
  Management and Chief Financial Officer, U.S. Department of 
  Veterans Affairs...............................................     4
    Prepared Statement...........................................    31

        Accompanied by:

    Mr. Joseph Schmitt, Director, Debt Management Center, U.S. 
        Department of Veterans Affairs

    Mr. Charles Tapp, Chief Financial Officer, Veterans Benefits 
        Administration

    Ms. Susan Reed, Executive Director - Revenue Operations, 
        Office of Community Care, Veterans Health Administration

Mr. Shane Liermann, Deputy National Legislative Director for 
  Benefits, Disabled American Veterans...........................    18
    Prepared Statement...........................................    34

Mr. Carlos Fuentes, Director of National Legislative Service, 
  Veterans of Foreign Wars.......................................    19
    Prepared Statement...........................................    39

Mr. Mike Saunders, Director of Military & Consumer Policy, 
  Veterans Education Success.....................................    21
    Prepared Statement...........................................    41

Mr. Gerardo Avila, Deputy Director, Military Boards and Memorial 
  Benefits, The American Legion..................................    23
    Prepared Statement...........................................    49



   PREVENTING HARM TO VETERANS: EXAMINING VA'S OVERPAYMENTS AND DEBT 
                          COLLECTION PRACTICES

                              ----------                              


                      Thursday, September 19, 2019

            Committee on Veterans' Affairs,
                    U. S. House of Representatives,
                                                   Washington, D.C.
    The Subcommittee met, pursuant to notice, at 2:23 p.m., in 
Room 210, House Visitors Center, Hon. Chris Pappas [Chairman of 
the Subcommittee] presiding.
    Present: Representatives Pappas, Rice, Rose, Cisneros, 
Peterson, Bergman, Radewagen, Bost, and Roy.

          OPENING STATEMENT OF CHRIS PAPPAS, CHAIRMAN

    Mr. Pappas. The hearing will come to order. Without 
objection, the chair is authorized to declare a recess at any 
time.
    This afternoon's hearing of the Oversight and 
Investigations Subcommittee is entitled ``Preventing Harm to 
Veterans: Examining VA's Overpayments and Debt Collection 
Practices.''
    The Department of Veterans Affairs provides an array of 
important benefits to millions of veterans who have valiantly 
served our country. At times, the Department makes overpayments 
in administering these programs. Unfortunately, this 
Subcommittee has heard of too many cases in which VA's efforts 
to recover overpayments result in confusion, frustration, and 
significant financial hardship for veterans, and VA makes a lot 
of overpayments.
    In some cases, overpayments have accumulated over years and 
can total thousands of dollars for individuals. The VA 
overpayments regularly create debts in excess of $2500. For 
example, the Department has over 150,000 cases of such debts in 
its disability compensation program alone.
    In fiscal year 2018, VA's Debt Management Center sent out 
over 600,000 debt notices for veteran benefits overpayments 
alone. These notices relate to $1.6 billion of overpayments 
that VA is attempting to recover. Let me repeat that: $1.6 
billion in a single year.
    These numbers clearly show that VA has a lot of work ahead 
to reduce the number of overpayments sent to veterans. Of 
course, receiving a notice of payment due can prove 
particularly burdensome for veterans on fixed incomes, 
recovering from a disability, or for those who are supporting 
families. For almost all veterans, receiving a surprise letter 
saying thousands of dollars are due in 30 days will be quite a 
shock to them. Working through a confusing bureaucracy to 
figure out why and how to make repayments is just frustrating, 
and it is also a major challenge for anyone who is trying to 
make ends meet.
    The causes of VA's overpayments are many. Life events such 
as the death or divorce of a spouse can affect a veteran's 
benefit. If the veteran's account is not updated accordingly, 
for instance, if VA doesn't process the change on a timely 
basis, an overpayment will be made each month until the record 
is updated. That's right, VA's own internal delays or mistakes 
can cause overpayments to veterans and trigger collections.
    When VA identifies an overpayment, its Debt Management 
Center is responsible for working with veterans and other 
beneficiaries to recover funds. However, two other parts of the 
VA, the Veterans Benefits Administration and the Veterans 
Health Administration, also play a direct role in identifying 
and notifying veterans about overpayments and debts. As with 
many issues that the Department faces, the siloed nature of VA 
is a challenge in this instance.
    Unfortunately, for many veteran's debt collection doesn't 
stop with the VA. The Department will ultimately transfer 
overpayments that it has not recovered to the Department of the 
Treasury, which may pursue more aggressive collection methods, 
and charge interest and fees on top of that debt.
    All of these many steps and the number of players both in 
and outside the VA show why communication with veterans needs 
to be clear and effective. Yet veterans who have been overpaid 
will generally receive letters from multiple VA offices; these 
letters are often confusing and none of these letters give a 
complete explanation as to why the overpayment occurred and 
what the veteran can do about it.
    I have heard this message loud and clear from my own 
veteran constituents, and my fellow Subcommittee Members have 
heard the same. Veterans themselves must piece together the 
full picture.
    Veterans service organizations offer free support and help 
to veterans who receive overpayment notices from the VA, but 
even with this support it can be difficult to navigate the VA's 
debt collection processes. I look forward to hearing from many 
of these organizations and advocates during the second panel of 
this afternoon's hearing.
    One point I want to explore is the Department's requirement 
in law to waive recovery of overpayments if the collection 
would be against, quote, ``equity and good conscience.'' 
Obviously, if the collection of an overpayment would bring harm 
to a veteran on a fixed income receiving disability payments, 
something is wrong. The law was intended to ensure that 
collections only happen in an appropriate manner; however, as 
we will hear, there are many cases where the VA falls short of 
this goal. Of course, I think we can all agree that the fewer 
veterans that face collection from the Department the better. 
But even with efforts that are underway, the level of 
overpayment that VA makes and then attempts to recover from 
veterans continues to be staggering.
    I look forward to a constructive discussion on the steps 
the Department will take to stop these overpayments in the 
first place, ensuring that no veterans are harmed by confusing 
collection processes.
    With that, I would like to recognize our Ranking Member, 
General Bergman, for 5 minutes for any opening remarks he may 
wish to make.

       OPENING STATEMENT OF JACK BERGMAN, RANKING MEMBER

    Mr. Bergman. Thank you, Mr. Chairman, and thank you for 
holding another hearing on this very important topic.
    Mr. Chairman, I do not need to tell you the dramatic impact 
debt can have on an individual. As a military commander, I saw 
troops who were ineligible to deploy because they were deeply 
in debt. An unexpected trip to the doctor or an emergency car 
repair can be very stressful for many families. Financial 
problems can also lead to professional problems and increase a 
person's risk of suicide.
    To that point, Mr. Chairman, particularly since September 
is National Suicide Prevention Month, I want to note that I 
have along with Chrissy Houlahan introduced H.R. 3495, the 
Improve Act, that would expand the Department of Veterans 
Affairs' suicide prevention programs by supporting entities 
that provide and coordinate suicide prevention services for 
veterans and their families. I appreciate you cosponsoring the 
bill with me and hope that this Committee can consider it as 
soon as possible.
    Today, however, we are here to talk about veteran debt that 
is owed to the VA, the agency's methods for collecting on the 
debt, and the impact of VA's collection efforts have on 
veterans. This is not a new issue for this Committee.
    As the chair of this Subcommittee the last Congress, I held 
an oversight hearing in May of 2017 to review the VA's 
financial management program, including VA's debt collection 
practices. In addition, Representative Bost, former chair and 
current Ranking Member of the Subcommittee on Disability 
Assistance and Memorial Affairs, also held a hearing last 
Congress to examine how the Veterans Benefits Administration 
could effectively prevent and manage overpayments.
    I sat on Mr. Bost's Subcommittee last Congress and what I 
learned was that VBA creates benefit debt in excess of $1 
billion, much of which is traceable to benefits processing 
errors or failure to process changes such as a dependency 
change in a timely manner. When processing delays result in a 
veteran being overpaid, VA creates a debt to recover the 
overpayment. Ensuring the dependency changes are processed 
appropriately and quickly seems like a straightforward way to 
avoid creating debt. However, when I asked the VA if they had a 
plan to get better, the response was that they were trying. 
Well, trying is not good enough.
    I hope to hear VA has taken ownership of this issue and can 
point to concrete steps that it has implemented to reduce 
avoidable benefit-related debt.
    It is important to recognize that not all veteran debt is 
due to VA processing errors. For example, medical debt owed by 
veterans is often debt created to collect copays from higher-
priority group veterans who receive medical care and 
prescriptions for non-service-connected conditions. VA is also 
authorized to recover costs for treatment and prescriptions 
from third party insurers related to a non-service-connected 
medical condition. In fact, VA anticipates recovering $3.9 
billion in fiscal year 2020. Third party debt collected by VA 
stays with VA and is used to provide medical care and services. 
I assume we agree that VA should continue aggressively 
collecting the third-party debt.
    Mr. Rychalski, as the Assistant Secretary for Management 
and Chief Financial Officer, you oversee the Department's 
finances, including its debt-collection activities, it seems 
that you have made honest efforts to address the underlying 
problems making this process so onerous and burdensome for all 
parties involved. For example, I understand the VA is working 
on fixing the IT issues that prevent a myriad of VA legacy IT 
systems from communicating basic data with each other, such as 
changes to a dependency information or benefit eligibility 
adjustments, both of which could alter the amount of 
compensation the beneficiary is entitled to, and result in 
overpayment and subsequently debt.
    Mr. Rychalski, I understand that your staff is put in a 
difficult place every day. They are charged with striking a 
balance between making compassionate consideration of a 
veteran's financial circumstances and a policy requirement for 
aggressive collection of debt owed to VA. I look forward to 
hearing how VA balances those interests. I also look forward to 
hearing the efforts your office has taken to identify trends in 
creation of veteran debt and to explore the strategies in place 
to reduce the amount of veteran debt that is the result of 
errors or untimely processing of claims.
    Finally, I appreciate the expertise of our VSO partners. 
The front-line perspective they bring to this discussion, 
gleaned through decades of service to veterans and their 
families, is invaluable, and I thank them all for their candid 
testimony.
    With that, Mr. Chairman, I yield back.
    Mr. Pappas. Thank you.
    I will now recognize our first panel. This afternoon, we 
have Mr. Jon Rychalski, Assistant Secretary for Management and 
Chief Financial Officer of the Department of Veterans Affairs. 
Mr. Rychalski has served in this role since December of 2017. 
Accompanying him this afternoon will be three additional 
representatives from offices across the Department. First, we 
have Mr. Joseph Schmitt, Executive Director of the Department's 
Debt Management Center. We also have Mr. Charles Tapp, Chief 
Financial Officer of the Veterans Benefits Administration. We 
also have Ms. Susan Reed, Executive Director of Revenue 
Operations in the Office of Community Care at the Veterans 
Health Administration.
    Mr. Rychalski will provide testimony for the Department and 
all of the VA witnesses will respond to questions.
    The Subcommittee thanks you for appearing today, Mr. 
Rychalski, and you have 5 minutes for your opening comments.

                 STATEMENT OF JON J. RYCHALSKI

    Mr. Rychalski. Thank you very much. Chairman Pappas, 
Ranking Member Bergman, distinguished Members of the 
Subcommittee, thank you for the opportunity to discuss VA's 
overpayments and collection processes. Because you have 
introduced my colleagues, I will not go through a second round 
of introductions; I will get right into my testimony.
    Overpayments or debt can have a devastating impact on the 
lives of veterans, and this can be exacerbated by poor 
management practices that work against rather than for the 
veteran. From my oral statement, I am going to give you my 
candid assessment of where we are with debt management, the 
good and the bad, and what you can expect in the future.
    My assessment is that the VA's debt management structure 
processes evolved over many years in a fragmented manner that 
was designed for VA convenience and to comport with antiquated 
VA systems as opposed to minimizing the negative impact on 
veterans. At times, debt workload has been set aside while 
resources were redeployed to higher priorities like processing 
original claims for compensation and pension. No one disagrees 
that legitimate overpayments must be collected, but the 
mechanics of how that happens make all the difference, and we 
are too often fragmented, uncoordinated, and highly variable in 
our processes. Frankly, we have a way to go before we can 
declare success.
    Fortunately, we have a highly motivated Secretary who has 
made customer service a top priority, so I have the mandate.
    First, I want to highlight where I see our greatest 
deficiencies. Debt management is still very fragmented by 
administration and even within the administrations. Veterans 
cannot get one site-picture of their debt and they still 
receive multiple communications, too clunky and too confusing. 
Despite computer matching agreements, we are not anywhere near 
preventing veteran debt. Processing time lags exacerbate the 
situation. Our mission must be to prevent debt creation.
    We don't have robust online customer relationship 
management capabilities; we have some, but nothing close to the 
extent that we need.
    Acknowledging our frailties, I would like to highlight 
where we have made progress, and I believe that we have made 
some good progress.
    First, VBA has used the National Work Queue and 
establishment of non-rating resource teams to dramatically 
reduce and manage debt-related workload inventory. The Office 
of Community Care now has special programs to help high-risk 
veterans who may be struggling to pay VA medical copayments. 
They work with facility suicide prevention coordinators to 
offer high-risk veterans financial assistance that best meets 
their needs.
    We are using computer matching agreements more effectively, 
like Social Security death matches weekly, and taking steps to 
increase DoD data feeds for Reserve duty drill pay from 
annually to monthly by mid-2020. We prospectively notify 
veterans from these matches to let them know there is a 
potential overpayment, and we take action as soon as possible 
to minimize the size of the overpayment.
    We have made notable progress on an electronic solution for 
dependency changes. Veterans changed their dependency over 
400,000 times in fiscal year 2019 and about 80 percent, or 
320,000 transactions, were completed via an electronic means 
that resulted in an immediate system update.
    We worked with industry professionals to overhaul a number 
of debt notification letters, so they are more user-friendly 
and easy to understand, and we are in the process of working 
with VSOs and others to rewrite even more.
    The Debt Management Center instituted important changes, 
like automatically defaulting to a 12-month repayment plan for 
compensation and pension debts, including drill pay-related 
debts, rather than the previous practice of offsetting all 
overpayment as soon as possible. The response from affected 
veterans has been overwhelmingly positive and appreciative.
    Most importantly, we are capitalizing on the Secretary's 
customer service priority and have partnered with the Veterans 
Experience Office to dramatically improve customer service 
through their many training initiatives, including Own the 
Moment and Veterans Journey Maps.
    Going forward, here is what I would like to accomplish in 
the next year. First, have the capability for veterans to view 
debt online. We expect medical debt to be available in the next 
3 to 4 months, and compensation, pension, and education debts 
sometime in mid-2020. This is still not where I would like to 
be with everything in one place, but it is a big step in that 
direction.
    I would like to consolidate and standardize debt management 
and notification processes within each administration to 
decrease the amount of letters and reduce confusion. I would 
like to continue to reduce the inventory of debt-related 
workload and greatly reduce the processing time for actions 
like waivers. I would like to increase our utilization of our 
Veterans Experience Office and VSOs to improve the 
effectiveness of our engagement with veterans.
    Within the next 3 years, I would like to consolidate all 
debt into a single portal, giving the veteran the ability to 
see all debt in one location, to make payments, and communicate 
with VA staff regarding the debt; I would like to have a 
single, coordinated point of issuance for all debt letters and 
all electronic debt notifications; and, finally, I would like 
to better leverage computer matching agreements, and identify 
new data sources and methods to prevent the creation of debt.
    I look forward to working together and appreciate your 
continued collaboration in support of the Department. There is 
significant work ahead of us and we look forward to working 
with you as we improve our service to America's veterans.
    Thank you. We are now ready to take your questions.

    [The prepared statement of John Rychalski appears in the 
Appendix]

    Mr. Pappas. Well, thank you very much, Mr. Rychalski, for 
that statement. I know Members have questions, but I would ask 
the unanimous consent of the Subcommittee to recognize Miss 
Rice for a few minutes to take make an opening statement and 
take that out of order.
    Seeing no objection, Miss Rice, you are recognized.
    Miss Rice. Mr. Chairman and Mr. Ranking Member, thank you 
very much for this courtesy.
    It is concerning to me the number of the overpayment debt 
collection cases that I have seen in my district have involved 
elderly veterans. I am just going to give you the example of 
one pretty stark example. We had the daughter of one of my 
constituents reach out to my office for assistance on behalf of 
her father, who was a 94-year-old veteran. He was informed that 
he owed VA thousands of dollars for overpayments. This 
gentleman was on a fixed income and relied upon his VA 
benefits, so this created a real threat of financial hardship 
for him at obviously a very vulnerable age.
    In 2011, his wife had passed away, and he informed the VA 
at that time about the death of his dependent, so his benefits 
would be adjusted. It was not until 7 years later, 2018, that 
he received a letter from the VA, notifying him that the VA had 
made the dependency change then and that his benefits would be 
decreased to retroactively account for that entire time period. 
Even though the veteran had informed the VA of his dependent's 
death and 7 years had passed before VA actually processed that 
change, he and his family are now burdened with this debt.
    Now, in addition to the processing delay, the information 
provided to the veteran and my office once we got involved was 
incredibly limited and confusing. There was no explanation for 
how the VA had determined the total amount that he owed and the 
veteran's request for a waiver was denied because it hadn't 
been submitted within the short timeframe veterans have to 
dispute a debt.
    I mean, I hope that everyone on this panel sees the 
ridiculousness of this situation. This 94-year-old veteran, who 
served his country and played by the rules and informed the VA 
of the passing of his wife, to be hit with this financial 
burden when he can't--I mean, he can't pay for his life if they 
are going to take this money away from.
    So my question is, why would it take 7 years for the VA to 
process a dependency change? It is not as if there was a delay 
in the reporting; the information was in the possession of the 
VA. And why is the financial burden shifted onto the veteran 
when they did nothing wrong?
    Mr. Rychalski. So the first thing I say is that is so 
regrettable, I mean, there is no way I could justify what 
happened there. It should never take 7 years, I mean, the whole 
thing. And, to be honest, in my current role, you know, I have 
come across similar stories. So that is a complete failure on 
the part of the VA.
    What I would say, though, is that we you know, sort of 
strike a balance between being good stewards of the taxpayers' 
dollars and following the law, and also trying to protect 
veterans. In a situation like that, it shows all the things 
that we need to improve with the VA. I mean, where we want to 
get is, we, you know, identify the debt early and work with the 
veteran if it has to be repaid. We have situations where you 
have people making small payments, small monthly payments, the 
debt will never be paid off, right? But if we get them to a 
point it is something they can afford, we are complying with 
the law, that is where we want to be in compassionate debt 
counseling.
    I mean, I hope those are the exceptions. I know stories 
like that myself, but it is absolutely regrettable. There is no 
way I could justify what happened there, not at all.
    Miss Rice. Well, I appreciate that answer and I would like 
to be able to work with you, because there is simply--I mean, I 
think this case highlights exactly what you said, which is when 
rules are put in place and they are not followed by--I mean, 
the veteran is following the rules, doing everything that they 
are supposed to by the book, and then 7 years later they are 
saying, okay--first of all, how are you even coming up with the 
dollar amount that is owed?
    Mr. Rychalski. I could tell you, as you were explaining 
that story--not to break in, I apologize--
    Miss Rice. Yeah.
    Mr. Rychalski [continued]. --it made me think of a similar 
story that I heard of, you know, in preparation for this, a 
similar story with an older veteran, some wacky things that the 
VA did that really caused problems for this veteran, this 
veteran was about 100 years old, and that is what we are trying 
to get away from and that is sort of the challenge we face. I 
mean, I think we are making some progress, but there is no way 
you can justify situations like that, it just defies logic.
    Miss Rice. Well, I appreciate your willingness to at 
least--what I would like to do is help work with you to try to 
address the situation for this gentleman, because obviously he 
depends on his benefits from the VA to support him as a 94-
year-old man.
    Mr. Rychalski. And we want to hear about those cases, we 
want to work with him. Any case that you have like that, any 
questions, if they can come to us, I really feel like we 
could--we can work with the veteran and we can get them to a 
place that, you know, it is something they can afford, or 
whether it is a waiver or compromise or, you know, getting rid 
of the debt, it is getting those before they get to that point.
    Miss Rice. Yeah.
    Mr. Rychalski. Yeah. Preventing them in the first place, 
but if they happen, we want to know about it.
    Miss Rice. Well, I feel in your hands, obviously, I am 
hoping that these issues that are highlighted just in this one 
anecdotal story can be fixed--
    Mr. Rychalski. Yes.
    Miss Rice [continued]. --now that attention is brought to 
it.
    Thank you very much and I will be in touch with you.
    And, Mr. Chairman, again, and Mr. Ranking Member, thank you 
very much for taking me out of order. I yield back.
    Mr. Pappas. Thank you. I will now recognize myself for 
questioning for 5 minutes.
    Mr. Rychalski, thanks very much for your opening statement. 
As we know, this has been a large and consistent problem for 
years. The $1.6 billion figure that I cited here this morning 
has been pretty consistent over the last several years. So 
preventing overpayments has got to be a focus as part of the 
solutions that you outlined today. VA has a long way to go in 
many ways, including modernizing its accounting software, 
creating that portal that you spoke about, that has not yet 
been completed, and there should be some steps that can be 
taken to prevent these additional overpayments from occurring.
    So I am wondering if you could talk a little bit about the 
structure of VA and how it is set up to address such a big 
systemic challenge like this. Ultimately, who is responsible 
for reducing these overpayments, who is in charge?
    Mr. Rychalski. So, ultimately, I am responsible for 
reducing the overpayments. And with respect to the structure, 
sort of as I described in my opening statement, we are highly 
federated, and I think that we have a lot of people with good 
intentions working in a somewhat antiquated system in a highly 
bureaucratic organization. Where we want to be--and the other 
thing I would say about that is, we don't make use of all the 
potential sources of data and intelligence that we could to 
identify situations like that.
    That said, in my own mind, I thought of, you know, areas 
how could we eliminate some debt, and I will give you an 
example. I at one point was an active Reservist, I had a VA 
disability, and so in some cases we are not going to be able 
to, I think, prevent the debt, and I will give you an example. 
I was an IMA, an Individual Mobilization Augmentee, and there 
would be times I would decide fairly soon that I was going to 
do my IMA days like maybe tomorrow or the next day or even next 
week, there is probably no way the VA is going to know that. So 
some of this is going to happen.
    The thing we need to do is sort of bring this together to 
where we are using all of the intelligence that we have 
available to us, whether it is their computer matching 
agreements, other information in the VA, to try and anticipate 
and prevent, and we are a ways from doing that.
    So what we can do now is try and, you know, expedite things 
like the drill pay matching, getting dependency notifications 
in the system as quickly as possible, I think those are the 
near-term things to try and bring this down. Longer term, we 
need to become much more sophisticated in how we go after the 
information that is available out there and engaging with the 
veteran.
    Mr. Pappas. Well, I appreciate those comments. One of the 
things we need to insist on is a timetable for this. Can you 
give us some specific dates on when you will hit those marks?
    Mr. Rychalski. I can. As I mentioned in my testimony, so 
these are sort of my goals for the year, and I am very 
comfortable that we can meet these. There are some stretch 
goals we have as well, but in the near term, the online 
notification, online availability of statements, I mentioned 
that for VHA we expect in the next 3 to 4 months a beneficiary, 
a veteran, can go online and see what they owe to VHA for 
medical copayments, things like that.
    For VBA, electronic notification. This is where you can 
sign up and receive things electronically via email, or you can 
still get it via mail. But we think by mid-2020--and by that, I 
mean mid-fiscal year 2020, so March, April timeframe is what we 
are looking at for that.
    With respect to drill pay, this is another big area. It 
used to be back in the day and when I was in DoD, when I was a 
drilling Reservist, they did that annually. They would get a 
download from the Defense Manpower DMDC Data Center, they would 
do an annual reconciliation, they would do a batch mailing out 
to veterans. So, over the course of that year, that 
accumulated, right? Well, now they get real-time feeds from 
DMDC and they are in the process of working this. They can do 
monthly matches and they can take it from a year to the month 
that the veteran did their drill pay. I can't give you an 
estimate of the magnitude of what that is going to mean, but I 
think it is going to be substantial, and so we expect that also 
in mid-2020 to be in place.
    Those are our big initiatives for the next year.
    Mr. Pappas. Well, the clock is running and each day that 
these reforms aren't realized is another day that a veteran is 
overpaid and potentially put in dire financial straits as a 
result.
    As you mentioned in your opening statement, processes have 
evolved over time in recent years without regard for impact on 
individual veterans. And under current law, as you know, you 
are not supposed to pursue overpayments if the recovery would 
go against equity and good conscience. So can you comment on 
that in view of what VSOs and our offices have discovered about 
how some individual veterans have been treated?
    Mr. Rychalski. You know, I went to--I am going to defer 
that question to Mr. Schmitt, because I think he--he works that 
day-to-day at the Debt Management Center and I believe he has 
got a better perspective on compassionate debt collection and 
the things that they do, how they go about this.
    Mr. Schmitt. Thank you, sir.
    Thank you, Mr. Chairman. One of the things that we are 
doing--I will just cover a series of things that the VA's Debt 
Management Center really is doing. Let's just talk real quick 
about outreach. We work with the VSOs across the United States 
to attend all the major conferences to make sure we can get 
ahead to prevent debt. So we work with the veteran's service 
organizations and school certifying officials. This last year, 
DMC reached 10,900 VSO's and SCO's and of those people who 
reach millions of veterans individually, we have reached out 
with them, we have given them presentations. And thanks for 
their partnership, we often get recognition for those efforts 
to say, hey, here is what we are doing, here is how you can 
avoid becoming indebted to the U.S. Government.
    For first thing it is when we think about education, how do 
we think about when you change your rate of pursuit or you drop 
a class. If you do that before the timeframe, that results in 
an overpayment. Well, let's not do that. Or it can also help 
school certifying officials when they go in and sign up for 
class, much like I did with my Post-9/11 GI Bill, we are able 
then to understand that, hey, if you drop a class, this is what 
results.
    So it is really education on the front end that really 
helps us out.
    In terms of the compassion piece, when it comes to the VA's 
Debt Management Center as delinquent, we've done many things in 
the last year--or last 2 years since we reported before this 
panel. We no longer take everybody's entire benefit check; we 
have an automatic 12-month repayment plan. And in those cases 
when a 12-month repayment plan doesn't work, we work with them 
individually on a financial plan that works for them. So we do 
that in concurrence with them.
    Our debt counselors who work with veterans every day go 
through a 13-and-a-half-week academy, they are highly trained 
in understanding at-risk and veterans in general, and 44 
percent of our workforce are veterans.
    Those are just to name a quick few, but we are doing a lot 
more in terms of compassionate care towards veterans. And we 
have debt counselors, they are not out there doing proactive 
calling, they are actually listening to their concerns, working 
with them, creating payment plans, and then validating. If it 
is a waiver or a compromise, let's look at the validity of this 
debt, and in many cases, if we find it is not, we can go ahead 
and refund that money.
    Mr. Pappas. Thank you for those comments.
    Mr. Schmitt. Yes, sir.
    Mr. Pappas. I want to now turn things over to the Ranking 
Member, General Bergman, for 5 minutes.
    Mr. Bergman. Well, again, thank you, Mr. Chairman, and this 
is an important hearing. In fact, as I sat and I looked with 
the chart that was up here before at the 1.7, or whatever it 
is, billion dollars, reminded me of my first term on the budget 
committee where we were given the stat that every year, so 
annually, the U.S. Government pays out roughly 150 billion, 
with a B, dollars in improper payments.
    So when you think about the overall improper payment 
spending of the Federal Government and this is not a very large 
percentage of that, but I will tell you what, if you are one of 
those veterans, it is a big deal. That $149 billion really 
don't--you know, that is not going to affect you, but this is a 
big deal.
    So, again, thank you for what I have seen already in the 
progress that we are trying to make here.
    Mr. Rychalski, dependency changes, such as a divorce or a 
change in the number of dependent children, are another source 
of benefit debt. In your testimony you state that veterans can 
go online, send changes through regular mail, or call VA to 
initiate a dependency update. These options result in immediate 
changes to a veteran's disability compensation award, limiting 
the chance for an overpayment. In DAV's written testimony, 
however, they suggest that e-Benefits only processes the 
addition of dependents and not the removal of dependents.
    Could you or somebody, you know, on the panel clarify what 
dependency changes e-Benefits can or cannot process?
    Mr. Rychalski. Yeah, and I am going to ask Charles Tapp to 
take that question. I believe it has to do with the 
requirements, the documentation requirements associated with 
removing a beneficiary. So it is not a matter of the 
functionality of the system, it is more a matter of the 
requirements associated with it. But Mr. Tapp, I think, can 
help us.
    Mr. Tapp. Yes. Thank you for that question.
    So I just confirmed again just this morning as far as e-
Benefits, it is true you can add, and add spouses and 
dependents, as far as dependent children, and you can also 
remove a spouse, but you cannot remove a child. Because of the 
due diligence that goes along with it, it requires more of a 
manual process to move that forward.
    Mr. Bergman. Okay.
    Mr. Rychalski. Can I make just one clarifying question? And 
this is sort of where we strike the balance with how quickly we 
do something and how much due process we give someone, and that 
is probably something you are familiar with as well. There are 
some things that we could do faster, potentially, but we may 
limit the individual's ability to dispute a debt or due 
process.
    I want to just give you one vignette--and I apologize, I 
will do it very quickly--but we had an initiative a while 
back--and Joe Schmitt can talk more about it--in areas that 
were hit by a natural disaster. We thought, you know what, 
those poor people don't need to be worrying about their debt or 
paying debt, and so we are going to suspend the debts for 
everybody in this area affected by this natural disaster. What 
happened was, a lot of people there did not like that. We did 
it proactively, we didn't notify them. We said, hey, your debt 
is suspended, you don't have to worry about it until everything 
is taken care of. We got a lot of negative feedback from people 
that said, I am not really affected by it, I want to keep 
paying this, don't ever do that again. So now we have to sort 
of reach out.
    So I only throw that out for your consideration that 
sometimes we can do things too quickly or we think we are doing 
a good thing and people are like, no, not so much.
    I apologize.
    Mr. Bergman. No, that's okay. Well, you know, you try to do 
the right thing, then the people informed you it wasn't the 
right thing for them, but your heart was in the right place.
    Mr. Rychalski. Yeah. So we sort of hit and miss, but we 
learn from it.
    Mr. Bergman. Okay. Mr. Schmitt, VA's regulations provide 
that VA will take, quote, ``aggressive action,'' end quote, to 
recover debt, but also provide that when a veteran requests a 
waiver, VA is to apply an equity-and-good- conscience standard, 
that is what you do. Would you please explain the DMC's role in 
the waiver process and, if you know, how the equity-and-good-
conscience standard is weighed?
    Mr. Schmitt. Yes, sir. Thank you for the question.
    I don't own the waiver process. We are initially referred 
with from the veteran to pass that over to the Committee on 
Waivers and Compromises with Veterans Benefits Administration, 
so I will let him talk to the waiver process, but I would like 
to talk to you about when a debt comes to the VA's Debt 
Management Center and how we really follow through on equity 
and good conscience.
    And so every time a veteran contact us it is roughly at the 
point of 60 days post-initial notification. We work with them 
with our VA's Debt Management Center debt counselors to listen 
to their stories and to apply whether it be a waiver, a 
compromise of the debt, whether it be an automatic repayment 
plan of 12 months, there is no further verification of income 
needed for those.
    But for those people who are even in further dire need who 
have a debt that was unbeknownst to them or came to them as 
their dependency claim, in those cases we talk with them, 
provide a financial status report, and then we give them 
extended repayment plans, commensurate with the time that we 
had mentioned earlier. I think Miss Rice had mentioned, 
Congresswoman Rice had mentioned that there had been some time 
in between when it was initially submitted and came to 
fruition. In those cases, the VA's Debt Management Center makes 
a payment plan commensurate with the time also it took, in many 
cases we can have payment plans in excess of 10 years.
    Mr. Bergman. Okay.
    Mr. Schmitt. Now, for those folks, the American taxpayer 
may say that that is a long time, but the veteran, and also 
being a veteran who was $1.3 million indebted due to saving my 
son's life, I thoroughly understand the weight of what that 
requires, and I do my best or our team does our best to really 
make sure we are taking care of them.
    Mr. Bergman. Thank you.
    I see my time has expired, Mr. Chairman. I yield back.
    Mr. Pappas. Thank you.
    I would now like to recognize Mr. Rose for 5 minutes.
    Mr. Rose. Thank you, Mr. Chairman and Ranking Member both 
for your leadership on this extraordinarily important issue.
    As a veteran, I understand in critical issues like this, 
there but for the grace of God go I. So I am really sick and 
tired of people thanking soldiers for their service and then 
screwing them over, and I know you all agree with me.
    So I would like to tell you the story of just one veteran 
in my community, Staten Island and South Brooklyn. We really 
pride ourselves on being a place that looks out for vets, as I 
know many communities in the country do. So I was shocked when 
I heard of a case, though, in my district resulting in nearly 
$18,000 in debt due overpayment for just one veteran. This 
retired military veteran receiving disability benefits notified 
the VA of his pending divorce, so that they could make 
appropriate changes. And in fact, a short while later, the VA 
confirmed--confirmed--that they received an electronic alert 
indicating that the divorce was pending.
    After doing his due diligence, this veteran, though, 
thought he was in the clear, thinking any fluctuation in 
benefits was due to a change in COLA, until nearly 10 years 
later this veteran finds out that, because the VA did not have 
the actual papers received via snail mail to confirm this 
divorce, he incurred $18,000 in debt. Now he has had large 
deductions to his monthly benefits and now he needs to hire 
costly attorneys for an issue that he thought was resolved.
    This case is not unique. Can you imagine someone making a 
mistake and then you have to hire lawyers to help solve it? 
Greatest country on earth and we have to do this to our 
veterans.
    So my first question to you is that, can you commit today 
that you will work with my office and me personally so that we 
can resolve this issue, so that this veteran, who served in 
uniform so we all could enjoy the freedoms that we enjoy today, 
doesn't have to pay high-priced attorneys to fight his own 
country.
    Mr. Rychalski. Yes, absolutely.
    Mr. Rose. Okay. Thank you very much.
    What is going on with this snail mail thing? Why, if you 
get an electronic alert--have you heard problems like this 
before?
    Mr. Rychalski. I have heard similar stories, yes. And I 
defer to Joe and Charles as well for--I imagine they have heard 
of similar situations where a veteran has notified the VA and 
we haven't processed it in a timely manner, missed it, and 
they--as I mentioned to Congresswoman Rice, it is completely 
regrettable and, one of the things that we are looking at, how 
can we make this more failsafe.
    In my own mind, one of the things to do is to have sort of 
multiple venues. We do use snail mail, but having an online 
presence--
    Mr. Rose. But you admit that it is on you guys? You admit 
that you make--
    Mr. Rychalski. We are notified and we don't--absolutely, 
100 percent, I absolutely agree with that.
    Mr. Rose. But he is the one bearing the consequences of the 
mistake.
    Mr. Rychalski. And, to your point, it sounds to me and this 
is a situation, he did get screwed, there is no question.
    Mr. Rose. So we are working on this issue, though. That 
is--
    Mr. Rychalski. We are working on it--
    Mr. Rose [continued]. --a positive.
    Mr. Rychalski. --yes. The issue that you are describing we 
are working on. We are trying to find ways to prevent this from 
happening, yes.
    Mr. Rose. Okay. Is there any type of forgiveness for legal 
fees that veterans have to incur so as to fight the VA 
Department?
    Mr. Rychalski. I mean, I think I would have to take for the 
record. That is probably a legal matter and I don't know it 
well enough, but I will take it for the record and get you an 
answer.
    Mr. Rose. Okay. Anyone else, anything else to add about 
this snail mail thing?
    Mr. Tapp. Yes, sir. So, based on the timing that you 
mentioned as far as snail mail, there have been improvements in 
our processes as far as in-taking mail and scanning the mail, 
so that it moves through our system much more quickly. Because 
you are right, 10 years ago, snail mail and getting to the 
right place at the right time was absolutely a problem. But, 
again, in the more recent history over the last couple of 
years, we are scanning the mail, ingesting the information into 
the e-folder for a military member or a veteran, so that we can 
process those claims a lot more quickly.
    Mr. Rose. Anyone else? All right. So I look forward to 
working with each and every one of you, so we can resolve this 
case without high-priced New York City attorneys being 
involved.
    Thank you again.
    Mr. Pappas. Thank you, Mr. Rose.
    I now would like to recognize Mr. Roy for 5 minutes.
    Mr. Roy. Thank you, Mr. Chairman, I appreciate it. I 
apologize for being late. As many of my colleagues, we were 
voting and then taking meetings off the floor and so forth. So 
here we are.
    I am glad that I am privileged to serve on this Committee 
where at least on a bipartisan basis, I think we tend to 
actually try to work forward and get things done together, 
because I don't know if there is any place in the world that 
has more activity and less productivity than this complex, as 
we run around from committee to committee and people wonder 
what we are doing. But at least here in the Veterans Committee, 
we are at least trying to accomplish some things, so I 
appreciate you all being here.
    I have missed obviously parts of it and hopefully I am not 
being too repetitive, but I do, having read through the 
testimony that was provided, have a question for Mr. Rychalski, 
if I might.
    In your written testimony, it states that the VA's Central 
Benefits Communication Management Program processes roughly 
40,000 letters a day; does that sound right?
    Mr. Rychalski. Yes, that sounds right.
    Mr. Roy. And that you are looking to move towards an opt-in 
electronic notification system--
    Mr. Rychalski. Correct.
    Mr. Roy [continued]. --is that right?
    Mr. Rychalski. Yes.
    Mr. Roy. And so if you just kind of do back-of-the-envelope 
on that in terms of cost, you know, 40,000 letters, you 
probably get a bulk discount rate on postage, whatever that 
rate is, but times 365 days, I mean, you are at 8 million bucks 
or something, depending on what the postal rate might be. So an 
annual cost of about $8 million or something on postage alone. 
Have you estimated what the cost savings of moving to an 
electronic notification system could be?
    Mr. Rychalski. I have not specifically, and I don't know 
that we have done a cost estimate. I also don't know factually 
if we could completely--and maybe we could--completely stop the 
regular mail if they opt in. So that is actually a very fair 
question, good question. I would have to sort of get back to 
you--
    Mr. Roy. Okay.
    Mr. Rychalski [continued]. --what we can do and what cost 
savings, but I agree with you, there could be substantial cost 
savings.
    Mr. Roy. Okay. That would be great, I appreciate it.
    And then, Mr. Schmitt, I also serve on the Technology 
Modernization Subcommittee, and I have been closely looking at 
and reviewing the VA's Electronic Health Record Modernization 
effort, that is a thing I hear a lot about in the district. We 
have got Audie Murphy in San Antonio and then we have got, you 
know, 80,000 veterans who go to the VA in Kerrville. And so, 
you know, I hear a lot about as we are moving to MISSION, you 
know, and the follow-up to Choice about how getting this right 
is critical to those things functioning. And so I think that is 
really on the hearts and minds of the veterans that I talk to. 
They go, well, we love the idea behind MISSION and what is 
happening, at least what we hear, we loved conceptually the 
idea of Choice, so we are hoping MISSION will fix some of those 
things and move it in the right direction. But this question, 
right, about having records and then how that works for them of 
bouncing in and out and going to a doctor and then coming back 
and all of that.
    So my question is, it is my understanding that the new--and 
I remember a hearing we had not too long, the new Cerner health 
record system includes debt management capabilities in block 2 
of the implementation timeline, and what improvements to the 
billing and debt management process does the new platform bring 
and what challenges does it present?
    Mr. Rychalski. I think that would be a question better for 
Susan Reed.
    Mr. Roy. Sure, great. Yeah, I'm sorry about that, that 
would be great.
    Mr. Rychalski. Yeah.
    Ms. Reed. That's okay. Thank you for that question.
    At this point, I think it might be too soon to tell. That 
is definitely something that we are looking at as we go through 
our planning for the rollout of the EHR.
    I think the important thing that we want to keep in mind is 
that we want to make sure the veteran is in the center of that 
implementation.
    Mr. Roy. Okay, thank you. I appreciate it. No more 
questions.
    Mr. Pappas. Thank you.
    I will now recognize Mr. Cisneros for 5 minutes.
    Mr. Cisneros. Thank you, Mr. Chairman. Thank you all for 
being here today.
    You know, it is stated, or I read that the VA will not 
charge a veteran for the Veterans Administration's own mistake; 
is that true?
    Mr. Rychalski. If there is an overpayment, even if it is 
the VA's fault, legally, I am obligated to get repayment on it. 
So I think it is not--it depends on your definition, but not 
100 percent true. If we make a mistake and overpay someone, I 
am legally obligated to try and collect that debt.
    Mr. Cisneros. Right, but there is a waiver process; is that 
correct?
    Mr. Rychalski. That is correct. And what I would say about 
the waiver process, and my colleagues can correct me, but the 
numbers that I saw is about 50 percent of the waivers that are 
submitted are approved--is that--yeah, I think so. Yes, there 
is a waiver process, about 50 percent are approved.
    Mr. Cisneros. So what is the process for waivers and how 
does one go about--who reviews these waivers and how do they 
get approved?
    Mr. Rychalski. So I am going to ask either--maybe Charles 
Tapp is probably the best, since they own the waiver process, 
to sort of walk you through the life cycle.
    Mr. Tapp. Yes. So when we have a situation where a veteran 
comes forward and requests the opportunity for a waiver or 
compromise, basically we have three centers, two that deal with 
compensation and pension and one with education. Basically, 
they submit their case, that includes a financial worksheet, 
and basically, we go through a checklist to evaluate the 
ability for a veteran to actually repay that debt based on 
their financial situation or circumstances.
    This fiscal year, we have had 27,000 cases that have come 
in and 58 percent of those have been approved. But, again, it 
is based on their financial ability to make a repayment.
    Mr. Cisneros. So, Mr. Schmitt, you talked about a 12-month 
repayment plan, is that only for in regard to the GI Bill or is 
that regarding all overpayments?
    Mr. Schmitt. Yes, sir, it is in regard to compensation and 
pension debts alone. And so for those compensation and pension 
debts that are out there, we offer an automatic 12-month 
repayment plan.
    Mr. Cisneros. Okay. So, when I was in the Navy, one of my--
actually, it was my first job that I did, I was a disbursing 
officer, so I was in charge of paying everybody. And, kind of 
similar, when somebody would get overpaid, the Government 
always takes their money, and there are no questions asked, it 
doesn't matter, they don't really think, they just take back, 
and they would at times take a person's entire paycheck. We 
always worked with them in that situation to try and make sure 
that they had the funds, and I always had the ability to go and 
to do that, to make that happen.
    But, you know, with these situations right now, when you 
run into someone who has an overpayment and your situation, you 
said you are legally obligated to take that back. And even 
though it may be in a situation where there is a payment plan, 
it has always been my--at least when I was doing it there and I 
am sure it is probably still the standard now, that the 
Government is always going to go and take their money first. 
So, to get into this payment plan, is the money taken away 
first and then there is a process to kind of pay it back, or 
what is the process to get into this payment plan?
    Mr. Rychalski. Yeah, so I think it is automatic. What 
happens is, the veteran is notified of the potential existence 
of this debt and they are asked to--and they are given some 
options, and we can debate whether the letter is clear or not. 
I mean, I can tell you, I have read the letters, they are not 
that clear, to be honest, and we are going to work on that. But 
over a series of letters, we ask them to contact us. If they 
contact us within 30 days and they have a dispute or they want 
to waive it, or a compromise or something like that, they don't 
pursue collections. So they have some time there to sort of 
figure out what to do. If we don't hear from them, eventually 
what happens is--and they are what we call an active client 
where they have, you know, a VA payment going out, eventually 
that will be decremented.
    And what Joe was saying is, instead of doing it all at once 
like, you know, I am used to military pay doing, they will do 
that over 12 months. The veteran can contact us and let us know 
that even that 12 months isn't going to be enough. The key is 
if the veteran sort of gets engaged early. The obligation on us 
is to get the veteran notified, if that answers your question. 
But it doesn't come out all at once, it comes out over 12 
months, unless we work out something.
    But there are a lot of options for the veteran, whether it 
is not just a waiver, it could be a compromise to pay less, a 
dispute to have the debt set aside entirely.
    Mr. Cisneros. All right. Thanks for your testimony.
    I yield back my time.
    Mr. Pappas. Thank you, Mr. Cisneros.
    Well, we are hearing bells, which means we have some votes 
to tend to. We appreciate the panel for being here today. So, 
Mr. Rychalski, Mr. Schmitt, Mr. Tapp, Ms. Reed, thank you for 
joining us. We hope to look for ways to continue this 
conversation in the coming months and years to stay on top of 
this situation. As I mentioned, our offices continue to receive 
lots of calls from individual veterans who are experiencing 
overpayment and we need to make sure we are addressing this 
situation in a way that doesn't put them with a significant 
financial burden moving forward. We appreciate your commitment 
to that.
    And we will pick this up after votes with our second panel. 
So, with that, the Subcommittee stands in recess.
    Mr. Rychalski. Thank you so much.
    Mr. Pappas. Thank you.
    [Recess.]
    Mr. Pappas. The hearing will come to order. We are back and 
we are now joined with our second panel of witnesses. I would 
like to introduce them here today and thank them for joining 
us.
    First, we have Mr. Shane Liermann. Mr. Liermann is the 
Deputy National Legislative Director for Benefits at the 
Disabled American Veterans. The Subcommittee thanks you for 
appearing today.
    And, Mr. Liermann, we will turn it over to you for 5 
minutes.

                  STATEMENT OF SHANE LIERMANN

    Mr. Liermann. Thank you. Chairman Pappas, Ranking Member 
Bergman, and Members of the Subcommittee, on behalf of DAV's 
more than 1 million members, we thank you for the opportunity 
to present our views at today's hearing. Our full written 
testimony addresses our recommendations for debt reforms 
regarding drill pay and incarcerated veterans; however, this 
afternoon I will focus our recommendations for dependency 
status change and debt collections.
    Mr. Chairman, we understand that in an imperfect claims 
processing system there will be overpayments, and it is a 
reasonable expectation that recipients of such overpayments are 
required to repay that debt. However, we believe that a 
significant portion of overpayments can be reduced or avoided. 
VA's lack of timely action causes additional overpayments, and 
that places additional financial hardships on veterans and 
their beneficiaries.
    One of the most common ways that an overpayment is created 
is when veterans report a change in their dependency status. 
Veterans in receipt of VA compensation at 30 percent disabling 
or higher are entitled to additional monthly benefits based on 
the number of their dependents. Veterans are required to advise 
VA of a change that will remove a dependent, which will result 
in a reduction in their monthly compensation. But if VA delays 
the processing of that request to remove the dependent, it 
creates an additional amount of debt that the veteran or the 
beneficiary is responsible to repay.
    Mr. Chairman, VA's adjudication manual lists all dependency 
actions as non-rating work end products, or EPs. Non-rating 
work EPs are not considered part of VBA's backlog management 
and reporting of days pending for processing. This means that 
non-rating work EPs are a low priority. In fact, currently, 
there are over 211,000 pending claims to add or remove 
dependents within VBA.
    The VA OIG report of September 2007 indicated an estimated 
$50 million in overpayments were avoidable, and found the main 
reason for the delay in processing dependency status changes is 
due to its classification as non-rating claims. We have two 
recommendations to assist with these delays in processing 
dependency claims.
    First, assign dependency claims as rating work end 
products. This will require VBA to consider all dependency 
changes as rating work. While this will increase the number of 
pending claims by assigning a rating work end product code, it 
will reduce the additional amounts of overpayments that are 
created by VA's lack of timely action.
    Second, allow veterans and beneficiaries to remove 
dependents from their award electronically in realtime. Through 
VA's e-Benefits system, veterans can electronically add 
dependents, and VA will usually make the additions within 48 
hours. However, there is not an immediate way to remove 
dependents electronically. To reduce the additional amounts of 
debt created by not prioritizing these claims, VA must allow 
veterans to remove dependents from their award as easily as 
they can be added.
    In terms of reforming the overall debt collection process, 
I want to highlight two of our recommendations. One, reduce the 
amount recouped or offset from monthly compensation checks. 
When VA recoups the entire monthly compensation check until the 
debt is repaid, or even in 12 months, this creates a serious 
financial hardship, and can actually cause more harm to the 
veteran and their family by collecting it through their monthly 
compensation. We recommend that VA reduce all offsets and 
recoupment to 25 percent or less of their monthly payment.
    Number two, waive all amounts of debt created by VA's lack 
of timely action. As noted, large amounts of additional 
overpayments are created by VA's low prioritization and lack of 
timely action, as was noted earlier this afternoon. The 
veterans should be responsible for the amount of debt they 
create only and not being taxed with the additional amounts 
created by VA's lack of action.
    In closing, additional overpayments created by VA and the 
resultant debts often cause severe financial hardships for 
veterans and their families. In many cases, the burdens of 
repaying these debts can negatively impact a veteran's quality 
of life, put them at risk of homelessness, and affect their 
access to VA health care. We must reform VA's debt policies to 
ensure we protect veterans from additional harm.
    Mr. Chairman, this concludes my testimony. I would be 
pleased to answer any questions you and the Members of the 
Committee may have.

    [The prepared statement of Shane Liermann appears in the 
Appendix]

    Mr. Pappas. Thank you very much, Mr. Liermann.
    I will now recognize our second witness, Mr. Carlos 
Fuentes. Mr. Fuentes is the Director of National Legislative 
Service for the Veterans of Foreign Wars. And the Subcommittee 
thanks you for appearing here today, Mr. Fuentes, you have 5 
minutes.

                  STATEMENT OF CARLOS FUENTES

    Mr. Fuentes. Chairman Pappas and General Bergman, on behalf 
of the VFW and our Auxiliary, I would like to thank you for the 
opportunity to present our views on how VA can effectively 
prevent and manage overpayments. Having to deal with erroneous 
forfeiture of benefits or financially-constraining repayment 
plans have a detrimental impact on the well-being and 
livelihood of those who have worn our Nation's uniform.
    The majority of veterans the VFW assists with overpayment 
issues results from confusion or errors with education 
benefits. Through the VFW's One Student Veteran Program, we 
have been notified by countless veterans who have received debt 
notifications because VA administrative errors have caused 
overpayments. The VFW also hears and addresses overpayment 
issues through our network of more than 2,500 highly-trained 
VA-accredited service officers around the world. Changes in 
dependency claims is the most common reason for overpayments in 
VA disability compensation. VA's inability to timely address 
concurrent receipt issues also cause overpayments, which VA is 
later required to recoup.
    For example, a veteran who is still a National Guard or 
Reserve component is not eligible to receive VA disability 
compensation and drill pay concurrently. VA's delay or errors 
in processing such adjustments commonly create overpayments for 
veterans. The VFW urges Congress to eliminate the concurrent 
receipt issues that often result in veterans or their survivors 
having to repay benefits that they should be eligible to 
receive, but have to pay back because of misguided laws that 
require them to forfeit one earned benefit for another.
    Once an overpayment is noticed, VA will send ambiguously-
worded notifications of overpayments, which also provides 
options for overpayments. If veterans are unable to contact VA 
to contest the debt, provide repayment, or enter into payment 
agreements with VA, their debt is sent to collections and VA 
will begin garnishment of their disability compensation 
benefits until the debt is satisfied.
    While veterans have the ability to seek relief by 
requesting a waiver, VA's inability to provide them with clear 
and concise information regarding their debts in a timely 
manner significantly hinders their ability to take action. In a 
perfect world, discrepancies will be noticed and addressed 
immediately; however, there have been instances where it has 
taken upwards of 5 years and 10 years for VA to properly notify 
veterans or notice overpayments. In some instances, veterans 
themselves have to notify VA before any action is taken.
    To its credit, VA has made concerted efforts to eliminate 
overpayments and, in some cases, informed veterans that they 
will not be held liable for overpayments, but more must be 
done. VA's inconsistent administration of veterans' benefits, 
misinterpretation of rules and regulations, lack of training 
for program administrators, and lack of effective communication 
with veterans are the principal reasons VA continues to overpay 
veterans.
    Many veterans, especially those on fixed incomes, have 
limited access to financial resources needed to immediately 
repay an overpayment; however, VA will often offset a veteran's 
entire monthly disability compensation benefit in order to pay 
down a debt, without the veteran knowing about the debt or 
being afforded the ability to request an alternative method of 
payment or relief.
    This is why the VFW has supported legislation that would 
require the use of certified mail when notifying a veteran of 
debt. And, to address confusing letters, the Veterans Benefits 
Transition Act of 2018 required VA to collaborate with 
veteran's service organizations to develop a standard and plain 
language format for all the debt letters sent to veterans.
    The VFW is unaware of the development of such standard 
format and urges the Subcommittee to inquire about its status. 
Plain language letters which detail debt will have a 
significant impact and will be able to provide veterans the 
ability to seek relief.
    The VFW also urges Congress to pass S.805, the Veteran Debt 
Fairness Act of 2019, which would improve VA debt collection 
process, limit VA's authority to recover overpayments caused by 
administrative errors, and improve the due process afforded to 
veterans with respect to such recovery.
    Mr. Chairman, that concludes my remarks. Thank you for the 
opportunity, and I am happy to answer any questions you may 
have.

    [The prepared statement of Carlos Fuentes appears in the 
Appendix]

    Mr. Pappas. Thank you very much, Mr. Fuentes.
    I will now recognize our third witness, Mr. Mike Saunders. 
Mr. Saunders is the Director of Military & Consumer Policy at 
Veterans Education Success.
    The Subcommittee thanks you for appearing here today, Mr. 
Saunders, and you have 5 minutes.

                   STATEMENT OF MIKE SAUNDERS

    Mr. Saunders. Chairman Pappas, Ranking Member Bergman, and 
Members of the Subcommittee, thank you for the opportunity to 
provide input on VA overpayments and debt collection 
procedures.
    Veterans Education Success is a non-profit organization 
that provides free counseling and legal assistance to students 
using their GI Bill and military education benefits, and works 
to advance higher education success for all military-affiliated 
students. We greatly appreciate the Subcommittee's attention to 
this very important issue, and I would like to thank the VA for 
their recognition of the problem, but action is required.
    We have helped approximately 5,000 veterans with GI Bill 
problems. We have seen a recent uptick in the number of 
military-connected students who are experiencing VA clawbacks 
of their hard-earned GI Bill, giving us a first-hand view of 
how opaque and, frankly, Kafkaesque the process can be.
    Veterans' complaints largely fall into two main overpayment 
situations: overpayments for a dropped class and retroactive 
readjustments of GI Bill benefits awarded to a veteran. GI Bill 
overpayments warrant this Subcommittee's attention.
    A 2015 GAO report found a startling 1-in-4 Post-9/11 GI 
Bill students experience GI Bill overpayment. According to GAO, 
90 percent of GI Bill overpayments are caused by veteran 
enrollment changes. The problem is that VA disburses the entire 
term of Post-9/11 GI Bill benefits after a veteran sits for 
just one day of class. If students drop out or drop a class 
after the first day, the school still gets the tuition and fees 
for the entire term. This incentivizes some unscrupulous 
college recruiters to lie to veterans to get them to enroll, 
knowing the student will likely drop out quickly.
    Worse still, VA comes after the veteran for the overpaid 
tuition, even though the tuition never touched the veteran's 
hands, but was sent straight to the school. This defies common 
sense. Students are being asked to come up with tens of 
thousands of dollars that they don't have and never touched. In 
contrast, the U.S. Department of Education delays disbursement 
until after the typical college add/drop period, and claws back 
tuition from the school and not the student.
    We thank the Subcommittee on Economic Opportunity and many 
Members here today for working with us to solve this through 
the bipartisan Forever GI Bill Class Evaluation Act, which 
would delay GI Bill disbursement until after the typical add/
drop period; and the bipartisan Student Veteran Empowerment 
Act, which would require VA to verify Post-9/11 GI Bill 
enrollment on a monthly basis, as it already does for the 
Montgomery GI Bill, rather than waiting until the end of the 
semester.
    Another problem we urge the Subcommittee to address is 
retroactive readjustment of education benefits. One case 
brought to VES involves a beneficiary who had the Post-9/11 GI 
Bill transferred to her by her father, who was assured by his 
personnel office that retiring 33 days before the end of the 2-
year service obligation he incurred for transferring his 
education benefit would not affect that benefit transfer. VA 
approved her GI Bill and she went to college. Nevertheless, 7 
years after her father retired and 6 years after she graduated, 
VA sent her a debt collection notice stating that she owed up 
to $100,000, and that they were also going to restore her 
father's education benefit, in clear contravention of the 
wishes of the family.
    If a veteran lied to VA, then VA should go after the 
veteran, but VA administrative errors are not a veteran's 
fault. If VA certifies a student's eligibility, it can't ask 
for repayment 6 years after the student relied on VA's approval 
and graduated.
    Now, turning from GI Bill specifics to VA's overall debt 
collection practices, we have identified a number of critical 
problems we hope the Subcommittee will address.
    First, VA's aggressive collection tactics are on their face 
in opposition to VA's emphasis on serving those who have 
committed to defend us. For example, GAO found that VA collects 
nearly all its debts by withholding a veteran's other benefits, 
such as withholding entire disability payments. If you take 
that much-needed money, veterans have to choose between paying 
for food, medicine, or housing. Importantly, VA's regulation 
calling for aggressive debt collection goes well beyond what is 
called for by statute. We urge the Committee to require VA to 
bring its regulations in line with statute, and to also to 
forbid VA from taking more than 25 percent of a veteran's 
benefits to cover unrelated debts to VA.
    Second, VA's aggressive debt collection methods are 
particularly unfair given the VA relies on outdated methods of 
notifying veterans. VA's letters alerting veterans of a debt 
are often confusing and sent to outdated addresses. As one 
military-connected student who came to VES for help said I 
don't believe a human has looked at any of the letters I have 
been sent, they don't add up or make sense. Semesters are 
omitted, figures they quote as to what I owe on one document 
don't match with figures they quote on a different document. 
Dates and explanations don't make sense.
    In sum, we firmly believe VA can do better and we request 
the Committee's assistance in ensuring this happens.
    Thank you for the opportunity to present our views, and I 
am happy to answer any questions you may have.

    [The prepared statement of Mike Saunders appears in the 
Appendix]

    Mr. Pappas. Thank you very much, Mr. Saunders.
    I will now recognize our fourth witness, Mr. Gerardo Avila. 
Mr. Avila is the Deputy Director for Military Boards and 
Memorial Benefits at The American Legion.
    The Subcommittee thanks you very much for appearing here 
today and you have 5 minutes, Mr. Avila.

                   STATEMENT OF GERARDO AVILA

    Mr. Avila. All right, thank you.
    Chairman Pappas, Ranking Member Bergman, and distinguished 
Members who proudly serve on the Subcommittee, on behalf of our 
National Commander, James ``Bill'' Oxford, thank you for the 
opportunity to comment on an important issue of the Department 
of Veterans Affairs overpayment and debt collection processes. 
It is my duty and honor to represent The American Legion and 
assist this Committee in better understanding this issue, how 
it impacts our veterans, and provide recommendations for 
improvement. It is crucial that we address these issues in an 
effort to ensure that we are not unduly burdening America's 
veterans with debt as the result of bureaucratic inefficiencies 
or errors.
    Every veteran understood that when they volunteered to 
serve their country it would come with sacrifice and hardship, 
what they didn't expect is to be placed in a hardship situation 
by the very institution who is supposed to be there for them; 
it is the Legionnaires' collective experience that the creation 
of overpayments are doing just that. Over the years, VA has 
made progress in reducing overpayments; however, there is still 
significant room for improvement.
    The American Legion last testified before this Subcommittee 
on the issue of VA overpayments and debt collections on May 24, 
2017. During that testimony, we focused on the initial cause of 
debt, communication between the VA and the veteran, the 
collection process, and the garnishment of an active benefit. 
The American Legion has seen improvement in several of these 
areas.
    First, The American Legion would like to commend VA for 
taking a proactive role in reducing the dependent claims 
backlog and initiate new methods enabling veterans to 
personally update a dependent status via phone, scan, and e-
Benefits. Due to these efforts, we have seen a reduction in the 
debt involving dependency claims, and that the improvement has 
been the reduction in the amount owed due to simultaneous 
receipt of drill pay and disability benefits. While a drill 
payment remains a large originator of debt at VA, collaboration 
with the Defense Finance and Accounting Service has reduced the 
total amount owed.
    The American Legion is encouraged by these efforts and 
implores these agencies to continue to work together to 
eliminate overpayments completely by increasing the frequency 
with which they rectify their accounts.
    We are also encouraged that VA has instituted a more 
forgiving process when garnishing an active benefit as a means 
to repay a debt. The old practice of garnishing the entire 
amount resulted in many veterans facing financial hardship. 
Veterans and their families rely on the monthly VA benefits to 
make ends meet.
    While these improvements are a step in the right direction, 
we have the following recommendations. Internally, VA must fix 
the lack of integration between the various information 
management systems. The lack of interoperability results in 
issues ranging from incorrect addresses to not being able to 
provide a clear answer on the initial source of the debt. In a 
perfect scenario, all IT systems would generate a veteran's 
latest status and most up-to-date information.
    Additionally, most accredited representatives do not have 
access to the various systems that VA utilizes. This lack of 
access makes it nearly impossible for representatives to assist 
the veteran in navigating the complex and confusing network. In 
a recent pension case we assisted on, we found that the medical 
documentation needed had been provided to the VA, but had not 
been processed by the pension center. Since there was no 
contact with DMC, the amount owed was referred to the Treasury 
Department for offset. Thanks to our representatives, we were 
able to track down the medical information and provide it to 
the pension center to avoid further harm.
    As the result of issues like this, The American Legion 
calls upon VA to continue to integrate its information 
management systems and expand access to accredited 
representatives.
    The best solution to avoid an overpayment is for VA to 
immediately be notified when a veteran's status has changed. 
Information like change in net worth, monthly drill, or 
incarceration is already being collected by different entities, 
who in many cases are the first to become aware of this change. 
The goal should be to develop partnerships with key agencies to 
ensure critical information is accessible and can be provided 
to the veteran.
    In an effort to eliminate overpayments, The American Legion 
urges VA to aggressively seek out partnerships and collaborate 
with as many agencies and organizations as necessary to 
correctly reflect a veteran's current status.
    The American Legion agrees that if a veteran sees a benefit 
they are not entitled to, they should have to pay it back. 
Well, we disagreed with--or some of the collection practices 
used that have resulted in unnecessary financial harm to our 
veterans.
    From our recent meetings with VA officials and through our 
daily interactions with the DMC, we feel that the employees' 
hearts are in the right place. By implementing our 
recommendations, the VA will put itself on the path to solving 
the overpayment issue.
    We would like to thank this Committee once again for the 
opportunity to testify on this important, and I will be happy 
to answer any questions.

    [The prepared statement of Gerardo Avila appears in the 
Appendix]

    Mr. Pappas. Well, thank you very much for the testimony of 
the four Members of this panel here today, and for your 
dedication on a daily basis to all those who have served and 
are serving our Nation. We really appreciate your advocacy and 
your presence here today.
    We will begin the questioning portion of this panel and I 
will begin by recognizing myself for 5 minutes of questioning. 
I want to focus in a little bit on the letters that were talked 
about with the VA earlier and were alluded to by some of you 
here today as well.
    We all know that Congress passed a law that requires the VA 
to work with veteran's service organizations to improve these 
letters to veterans. We have heard stories about how veterans 
can receive multiple communications that are many times quite 
confusing and opaque. So I am wondering how the VA has worked 
with your organizations to improve these letters, and do you 
think the VA has made improvements in recent years in debt 
collection notifications and in ensuring that these 
notifications are clearer for our veterans?
    That's open to the entire panel.
    Mr. Liermann. Thank you, Mr. Chairman. The reason it gets 
so confusing is they always send two letters.
    First, the VA regional office, if it is a debt created by a 
dependency issue, they will send a letter to the veteran 
notifying them there may be an overpayment and they may owe 
money to the VA. Then they will get a separate letter from the 
Debt Management Center, sometimes 2 to 3 weeks, sometimes 
months later, and then that letter doesn't provide any 
information other than here is how much you owe us and, if you 
don't take action in 30 days, we will take your monthly 
compensation check.
    So that is the way the process currently works, and I don't 
believe they have reached out to us any time soon to discuss 
any of the new letters. I know that recently VA has shown us 
letters after they have already drafted them, but I am not 
aware of any current ongoing discussions about improving those 
with the VSOs' assistance, Mr. Chairman.
    Mr. Fuentes. I have seen a report from VA saying that they 
are working on the standard plain-language format that is 
required by the Veterans Benefits Transition Act 2018. But we 
talked to all the folks over at the VFW who would be invited to 
these meetings where they would collaborate with us and none of 
us are tracking any invitations. So I don't know if they are 
forthcoming or not, but so far, we have not been engaged in 
that discussion.
    Mr. Saunders. No, not on this issue, we have not worked 
with the VA at all. And just to echo what Shane said, the case 
that I referenced in my opening statement, I actually saw all 
the documents that that beneficiary got from the VA. She got 
her initial statement from the regional office laying out why 
they thought she owed a certain amount of money, and then she 
got three different letters from Debt Management Center that 
totaled up to $100,000. The first letter said she owed $68,000, 
so it wasn't even clear how much she owed. Yeah, just the 
process is pretty unclear.
    Mr. Avila. I would agree with the letters. The letters that 
we have seen were more on the VBA side notifying when a veteran 
is service-connected, but not necessarily specific to the debt 
management and the collection process.
    And I think just to echo on how the--the debt is created, 
obviously, everybody knows at the regional office, and they are 
the ones that have the detail and they send out the 
notification. And if the veteran did not get that, then the 
next letter they are going to get is from DMC. DMC might have 
limited information. I think this goes to the point about the 
integration of the IT systems. So, if every IT system had the 
correct information, DMC would not only have a dollar amount, 
but they would be able to explain to the veteran when they call 
about why do they owe this amount.
    And I think nobody likes to pay money back, but if you are 
given the reason why you owe, then you say, okay, yes, that is 
correct, and I think veterans would be more willing to pay the 
debt if they knew the full information.
    Mr. Pappas. Well, thank you. And I am just curious if each 
of you would be willing to be available to work with the VA on 
this problem moving forward. If we could just have a yes or no, 
if you will make yourselves available to the VA to be consulted 
about the issue around communications.
    Mr. Liermann. Absolutely.
    Mr. Fuentes. Yes, and we feel it is absolutely necessary.
    Mr. Saunders. Yes.
    Mr. Avila. Correct, we will be.
    Mr. Pappas. Well, thank you for that.
    I was struck by many of the examples of real problems that 
are caused by these debt collections that we heard in your 
testimony here today. Clearly, these show just the nature of 
the problem and the frustration that is felt by veterans and 
their families causes harm.
    Mr. Liermann, I am wondering if I could just ask you a 
little bit about drill pay and disability compensation. I 
understand that VA is proposing to suspend compensation 
benefits when it receives notice that a veteran will receive 
drill pay. Can you speak to your concerns about that specific 
proposal?
    Mr. Liermann. Yes, Mr. Chairman. Thank you.
    The way the current process works with drill pay is the VA 
will not take any action until they are notified, generally by 
DoD. If the veteran notifies the veteran--excuse me, the 
veteran notifies the VA in advance of their drill pay, then VA 
can start taking actions in collecting that amount. In the 
proposal, the proposed legislation that was introduced earlier, 
they are suggesting that they stop paying the veteran if the 
veteran may receive drill pay. Without him actually--or her--
being on Active duty, getting that drill pay, their proposal is 
to stop the payment the minute they find out they may receive 
it before they even get it.
    So our concern is; one, VA is not going to pay them their 
compensation because they believe that they are getting drill 
pay; two, if their drill pay status or their drill changes, 
which is very common for a lot of people in the Guard and the 
Reserves, orders change quite frequently, then they won't get 
an Active duty check for that month, nor are they getting their 
VA compensation check that month. And the VA is proposing to 
take away the due process portion of that as well.
    So, while they are trying to correct the problem, we think 
they are creating a larger problem by taking away that due 
process and essentially the veteran may not receive any pay for 
that period from his drill or Guard duty or from the VA, and 
that is a big concern for us.
    Mr. Pappas. Okay. My time is up. I would like to turn it 
over to our Ranking Member, General Bergman, for 5 minutes.
    Mr. Bergman. Thank you, Mr. Chairman.
    Mr. Liermann, let's just kind of continue down that road 
just a second on that question that the Chairman just asked. 
So, as you characterized the details of it, of what they would 
do, would that be in your mind considered one of those non-
technical barriers to achieving a goal, or is that just a way 
of doing--you know, just a way of doing business? Is there a 
way to not do that?
    Mr. Liermann. I think, as I reported earlier, if they do 
more reporting and they do monthly reporting of when drill pay 
is being paid for veterans who are also getting compensation, I 
think that is a better way to do it. If we start collecting 
before they are being paid, I think that is just a horrible way 
to go and putting veterans in a more vulnerable position than 
we already are. That was a proposed piece of--I'm sorry, that 
was a proposed regulation in April, there is no more comment 
periods, it is closed, we are just waiting for them to drop the 
final rule and address all the comments that were submitted in 
April.
    Mr. Bergman. Okay. Well, again, there has been a suggestion 
that there are non-technical barriers in a different subject to 
removing dependents through e-Benefits. Do you know what those 
non-technical barriers are, Mr. Liermann?
    Mr. Liermann. I am not sure what the VA meant by non-
technical, but here is how we view this as being real simple. 
The veteran gets to choose who they receive benefits for, they 
report their number of dependents. So, if the veteran says I 
want to remove a dependent, I don't see how that becomes a 
technical problem or a larger problem on VA, because now they 
are paying less money out.
    Generally, when you have to add a dependent, they require a 
lot of information--birth certificates, marriage certificates--
but they have waived all of that in e-Benefits to allow you to 
do that instantaneously. So we don't understand what their 
barrier problem is in allowing them to remove them 
instantaneously in e-Benefits.
    Mr. Bergman. Okay. Mr. Fuentes, have you got any big events 
going on this week?
    Mr. Fuentes. I do have a personal one, sir.
    Mr. Bergman. What would that be?
    Mr. Fuentes. Expecting our first child tomorrow, so--
    Mr. Bergman. Congratulations.
    Mr. Fuentes. Thank you very much.
    [Applause.]
    Mr. Bergman. That is a big deal. Just remember, you cannot 
give a baby too much, it is absolutely impossible. Just try to 
remember that when they are 2.
    [Laughter.]
    Mr. Fuentes. Thank you, sir.
    Mr. Bergman. Now, Mr. Fuentes, on a more serious note here, 
the situation at hand here, concurrent receipt of drill pay and 
VA benefits is one of the VFW's, you know, top priorities. Do 
you have any examples of how it affects the average veteran who 
chooses to continue serving in the Guard and Reserve after they 
separate from Active duty?
    Mr. Fuentes. General, I served under you, very, very, very 
far under you when I was in the Marine Corps Reserve--
    Mr. Bergman. You were the reason I had a job. My job is to 
serve you guys.
    Mr. Fuentes. Thank you, sir. And I am sure you can relate 
as much as I did that, you know, you can't live off of drill 
pay. Right? And we are using the Reserve component a lot more 
to fight today's wars than we have in previous years. So we 
need Reserve component servicemembers. This is one of the 
reasons that folks will want to leave. Right? So they are 
either required to forfeit their earned benefits, because they 
are disabled veterans, or work for free. Those are just not 
viable options.
    And then on top of that, because of bureaucratic issues, 
they are now faced with, you know, this--I have an example 
here, $32,000 in debt that they have to pay at once or find a 
way to collect the money to pay for it. That is unacceptable 
and our view is that we just need to get rid of the issue by 
getting rid of the requirement to collect or forfeit VA 
disability pay.
    Mr. Bergman. Okay. Well, you know, Mr. Chairman--and I see 
my time is about up here--I think it would be a good issue for 
us to look into to see. As Mr. Fuentes states, we need to 
retain good men and women in the Guard and Reserve, especially 
with all the experience they have gained, and we need to make 
sure that we are not creating a barrier. Again, there is a cost 
to everything, but we don't want to create a barrier to long-
term retention of good folks.
    So, with that, I yield back.
    Mr. Pappas. Well, thank you very much. And if the Ranking 
Member would indulge just a couple more questions here before 
we conclude, I would like to get a couple more issues out 
there.
    And, Mr. Avila, just one for you. Your testimony notes that 
in the first 30 days of the debt collection process, it is a 
crucial timeframe for our veterans to receive protection from 
garnishment. Thirty days isn't really a sufficient time to 
complete that required action. So what can the VA do to ensure 
that veterans are able to receive protection from garnishment?
    Mr. Avila. So you are absolutely correct, the first--a 
veteran can request a waiver up to 120 days, but that first 30 
days I would mention, that is the crucial period to avoid any 
garnishment and affecting their benefits. And we already know 
from issues that sometimes the veterans did not receive the 
notifications, the initial notifications. So we believe and we 
support a movement to up to maybe 90 days, and this will give 
the veteran ample time to respond back to DMC and to take 
appropriate action before any garnishment or possible loss of 
benefit can occur.
    Mr. Pappas. Well, thank you, sir, for that.
    And, Mr. Saunders, one for you as well. I am surprised that 
there is such a disparity between how the VA handles this issue 
versus other agencies of our Federal Government, including the 
Department of Veterans Education, and I am wondering if you can 
explain how DoD deals with overpayments and if there is 
anything that can be, you know, learned from VA in how to 
approach these issues with veterans.
    Mr. Saunders. Thank you for the question, Chairman. The 
Department of Education pays out their Federal education money 
in stages. They certify that a student is enrolled in the 
beginning and then they pay it out after the add/drop period, 
and then they have another period at the end of the semester 
when they pay a final amount of money and they claw back any 
overpayments from that final amount that they pay the schools.
    So they are taking the money from the schools and it 
smooths out the process for the students.
    Mr. Pappas. Well, thanks for that. And I guess as it 
pertains to our veterans, that sort of, you know, planned-out 
process is a lot easier for them, many of whom are living 
paycheck-to-paycheck, just like most Americans.
    Mr. Saunders. Absolutely. And, you know, the add/drop 
period, a lot of people add/drop classes, and communicating to 
people the impact that that can have on your benefit, it is 
unfair to the veteran to force them to take classes that they 
wouldn't take and any other student wouldn't be forced to take.
    Mr. Pappas. Well, thank you for that.
    General Bergman, I think, had one additional question here.
    Mr. Bergman. Yes, thank you, Mr. Chairman. You know, 5 
minutes go fast, but we have got a lot of meaty things here to 
discuss.
    Mr. Saunders, in your written statement you commented that 
VA should try to reduce the amount of retroactive adjustments 
for GI Bill payments, which amount to VA making a processing 
mistake, and then going back to the veterans to make up the 
difference once the mistake is found. Why would these veterans 
not have a case to ask for equitable relief in these 
situations?
    Mr. Saunders. That is a great question, General Bergman. So 
equitable relief is--it is like a final remedy, it exhausts all 
your future appeals with the VA. It is a way to get it done, 
but if for whatever reason some situation, it wasn't resolved 
completely, you would prefer the process be handled by waiver. 
You would want to go to VA's Education Service and have them 
tackle the problem. That is the preferred way is to have human 
eyes on it.
    Mr. Bergman. Okay, good. Well, thank you very much, and I 
appreciate the extra time, Mr. Chairman.
    Mr. Pappas. Absolutely, any time.
    And I think, before we close today's hearing, I just want 
to thank once again our folks on the second panel here today 
for your responses and your willingness to be a part of the 
solution moving forward. And I thank as well the Department of 
Veterans Affairs for sticking around and for their input on our 
first panel.
    Just some concluding observations. I think this afternoon 
we heard from VA officials that preventing these overpayments 
is an important goal they are working toward. We also heard 
from that providing clear guidance, direction, and support for 
veterans is another important goal. We also heard from those 
working with and advocating for our veterans here today that 
too many people continue to suffer confusion, frustration, and 
financial harm as a result.
    VA's testimony did not lay out for us a clear path toward 
preventing hundreds of thousands of veterans receiving debt 
notices each year. It seems all too likely that the 
Subcommittee could hear testimony a year from now showing that 
another billion and a half dollars in debt collections is 
outstanding, which was the same level around the time of this 
Subcommittee's last hearing.
    I wasn't satisfied wholly with the VA testimony that tried 
to outline steps for ensuring that the Department communicates 
clearly and effectively with veterans even after new 
requirements were put into law last year, and I think more work 
needs to be done there. I appreciate our veterans service 
organizations' commitment to be a part of that.
    It is worth repeating that the many different parts of VA 
involved with notifying veterans and collecting debts is a 
major obstacle getting in the way of reforms. Ultimately, 
fixing debt management will mean a VA-wide solution.
    General Bergman, I believe that our staffs should work 
together with the Department to address these issues and needs, 
and I think this should include legislation for any possible 
new authority and requirements that would help this situation.
    So, Mr. Ranking Member, I would like to give you any time 
you would like for any closing remarks.
    Mr. Bergman. I have none.
    Mr. Pappas. Well, seeing none, I wish to express again my 
appreciation to all the witnesses for appearing here today, for 
your thoughts and views.
    And Members of this Subcommittee will have 5 legislative 
days to revise and extend their remarks, and include any 
extraneous material.
    So, without objection, the Subcommittee stands adjourned.

    [Whereupon, at 4:21 p.m., the Subcommittee was adjourned.]




                            A P P E N D I X

                              ----------                              

                 Prepared Statement of Jon J. Rychalski
    Good Afternoon Chairman Pappas, Ranking Member Bergman, and Members 
of the Subcommittee. I am Jon J. Rychalski, Assistant Secretary for 
Management and Chief Financial Officer of the Department of Veterans 
Affairs (VA). Joining me today are my colleagues, Joseph Schmitt, 
Executive Director of the Debt Management Center (DMC), Charles Tapp, 
Chief Financial Officer Veterans Benefit Administration (VBA), and 
Susan Reed, Executive Director, Office of Community Care - Revenue 
Operations, Veterans Health Administration (VHA).
    I want to thank the Subcommittee for this opportunity to discuss 
our efforts to address a critical aspect of financial management, 
overpayments and collection processes. We are working to address 
overpayments as part of a broad effort to transform VA into a world-
class customer service organization and tackle issues affecting 
Veterans that have lingered for years. The focus of our efforts is to 
improve our processes, communications and awareness to significantly 
reduce the occurrence of overpayments - thus eliminating collections.
    As part of this transformation, we are working closely with 
Congress, Veterans Service Organizations (VSOs) and other stakeholders 
to reform delivery of care and service to our Nation's Veterans and 
their loved ones. This reform includes improving our debt management 
practices. I highlighted the tangible actions VA has taken to eliminate 
the opportunities for these overpayments to occur (reducing the 
quantity and dollar value of the overpayments), as well as ways VA has 
improved the overall Veteran experience to make the repayment of the 
debt as simple and easy as possible based on each Veteran's unique 
financial situation. This collection is required under ``Collection and 
Compromise'' of 31 U.S.C. Sec.  3711, which provides that ``the head of 
an executive, judicial, or legislative agency.shall try to collect a 
claim of the United States Government for money or property arising out 
of the activities of, or referred to, the agency.'' VA's debt recovery 
requirement is consistent with what citizens experience when receiving 
an overpayment from other Federal Agencies.
    Veteran debt commonly occurs when Veterans receive more financial 
assistance than they are entitled to by law. For example, VA is 
prohibited by 38 U.S.C. Sec.  5304(c) from paying disability 
compensation for days in which a Veteran is receiving drill pay as a 
member of the Reserves or National Guard. To minimize negative impacts 
on Veterans from this situation, VA changed its policies to make 
repayment of the debt less burdensome. For example, compensation and 
pension debts, including drill pay, now have a 12-month default re-
payment period rather than immediately withholding the full amount of 
drill pay from future compensation payments, which could cause 
substantial financial harm.
    Furthermore, to address the root cause of the debt, VA is currently 
working with the Department of Defense to enable us to dramatically 
increase the frequency of computer matches of compensation and drill 
pay, and we are on track to go from annual to monthly matches by mid-
2020. These actions will continue to significantly reduce the incidence 
of overpayments and the amount of accrued overpayment to each Veteran. 
VA staff have also worked with the DMC and VSOs, using human-centered-
design techniques, to rewrite several dozen overpayment letters to more 
clearly explain what Veterans need to know about their debt and the 
full range of options available to resolve the debt. Culturally, we are 
improving customer service rather than simply recovering as much of an 
overpayment quickly as possible.
    We are working on initiatives working to reduce or eliminate 
opportunities for overpayments to occur. For example, VA has 
implemented numerous data matching agreements with other Federal and 
state agencies. VA conducts reconciliations with law enforcement 
agencies to prevent overpayments to fugitive felons. Based on this 
information, VA automatically terminates the award upon expiration of 
the due process period. The Veteran is provided notice, and then 
afforded the opportunity to respond and submit evidence that they are 
no longer a fugitive during this due process period prior to an award 
adjustment. This action assists the Veteran by reducing the amount of 
overpayment incurred while in a fugitive status. VA reconciles reported 
income information with the Social Security Administration (SSA) to 
prevent overpayments of Pension and Parents' Dependency and Indemnity 
Compensation payments; VA verifies information with the SSA and the 
Bureau of Prisons to identify beneficiaries who may be subject to 
reduction or termination of compensation payments; and VA checks weekly 
with the SSA to stop payments to deceased Veterans.
    We are also actively working on mitigating several other situations 
in which a Veteran or beneficiary can be overpaid. Benefits 
overpayments may occur when there are changes to a granted benefit such 
as payments made to an educational institution. An example of a change 
would include if Veterans reduce their course loads after VA has paid 
the educational institution. In addition, an overpayment can also 
occur, when Veterans have a change to their dependent status. This 
typically occurs when there is a death, divorce, remarriage, marriage 
of a child, discontinued school attendance, or duplicate school child 
entitlement. While not an overpayment, medical copayments are another 
reason for VA to initiate debt collection procedures. Certain Veterans 
who receive VA medical care must also pay a co-payment to VA, which is 
not collected at the time of service; rather it is subsequently billed 
to the Veteran. VA notifies Veterans of copayment requirements and 
provides instructions for submitting timely payments. In certain cases, 
VA must take actions to recover overdue copayments in accordance with 
existing law and regulations.
    Finally, there are occasions in which a Veteran, through no 
personal fault, incurs a debt to a VA community care provider due to 
delayed payments from VA to that provider. This can negatively impact a 
Veteran's credit rating. To avoid this unnecessary burden, VA is 
focusing efforts on and making significant progress in reducing 
delinquent claims to community care providers. We are dramatically 
improving our claims processing capabilities through several 
transformative initiatives. First, the Community Care Network (CCN) 
contracts will usher in commercial claims processing capabilities and 
strict timelines. These contracts do and will require that network 
providers will be paid for clean claims through CCN within 30 days. 
Second, we are implementing a new referral management system to more 
seamlessly communicate Veteran referral information to the claims 
processor. This has been a primary reason for denied or problematic 
claims in the past. Finally, for any claims not adjudicated through the 
CCN contracts, we are installing a commercial state-of-the-industry 
claims processing system called eCAMS that will speed the process of 
claims adjudication and timely filing. We expect these initiatives to 
result in substantial claims processing improvements in 2020. Let me 
state emphatically that VA must do everything in our power to avoid 
erroneously creating Veteran debt or adversely affecting a Veteran's 
livelihood or credit through no fault of their own.
    Due to the complexity of VA's enterprise and the number of systems 
involved in delivering healthcare, benefits, and services to Veterans 
and beneficiaries, VA currently tracks the amount and the age of 
overpayments independently in each Administration. We are working to 
improve this situation that we acknowledge is untenable for the 
Veteran. It is our plan to have capability for Veterans to view debt 
online within the next year.
    VHA is developing an electronic option to permit viewing of monthly 
Patient Medical Statements via the ``MyHealtheVet'' portal. Veterans 
may elect to receive a notice of debt by electronic means as well as 
standard mail. In the future, we expect Veterans will be able to view 
or print the statements electronically via the portal. These statements 
are currently delivered to enrolled co-pay-required Veterans by 
standard mail to advise Veteran patients of their medical copayment 
debts, provide a description of those debts, and present all payment 
options available to them.
    VBA operates a Centralized Benefits Communication Management 
Program that processes roughly 40,000 letters per day. Letters 
processed through CBCM include the range of benefits letters VBA 
offers, such as compensation entitlement, that are generated through 
the Veterans Benefits Management System (VBMS). Included in this 
correspondence are letters notifying Veterans that an event has 
occurred that might mean they have been overpaid a VA benefit. By early 
to mid-2020, VBA anticipates launching the option for Veterans to opt-
in to receive electronic correspondence. This project will initially 
encompass disability compensation and pension overpayments and later 
extend to all VBA lines of business. We intend to send electronic 
correspondence initially to Veterans who have opted in; however, some 
correspondence may remain solely in the hard-copy form to meet 
statutory requirements related to certain notifications.
    Ultimately, we will bring all debt together in one location and 
intend to have that operational by calendar year 2022. We are actively 
working with our VSO partners and our Veterans Experience Office (which 
is responsible for the Cross-Agency Priority Goal of improving customer 
experience) to apply the same human-centered-design principles to 
streamline future communications. VA fully supports the intent to 
develop a standardized notification letter as well as content which 
clearly conveys to Veterans the specific reason(s) why they are 
indebted to the United States and what options are available to them to 
address their indebtedness (i.e., disputing the debt, requesting a 
waiver, reaching a compromise, and/or requesting a payment plan).
    This task is not as straightforward as it may seem on the surface, 
because there are numerous types of debt letters with numerous back-end 
systems that run the operations of the business line for which the 
overpayment occurred, and even more systems to create and print these 
letters.
    VA has increased its self-service offerings to veterans through 
eBenefits, by utilizing an electronic rules-based processing system. 
Veterans can now go online, send changes through regular mail, or call 
VA to initiate an update to dependency information. These options 
result in immediate changes to a Veteran's disability compensation 
award, limiting the chance for an overpayment to occur. In FY 2019, the 
rules-based processing system automatically processed over 130,000 
dependency changes for beneficiaries, while Veterans were able to log 
into eBenefits to modify their dependency information over 170,000 
times.
    We understand the challenges of overpayment recovery, and we are 
listening to stakeholders and adopting best practices to minimize the 
burden on Veterans and their families. If an overpayment occurs, we 
notify the Veteran and provide an opportunity for them to submit 
evidence stating why the overpayment information is incorrect. It is 
very important for Veterans to work with VA in this initial 
notification period.
    If no response is received, typically within 30-60 days, VA DMC may 
initiate the process for recovery. There, a team of specially trained 
debt counselors will work with each individual Veteran or beneficiary 
to establish a payment plan or provide guidance to process a dispute, 
compromise or waiver request. Veterans can also appeal the debt 
establishment for up to a year. In cases where an overpayment is not 
resolved within 120 days, VA must comply with Public Law 104-134 and 
the Debt Collection Improvement Act of 1996 to refer the debt to the 
Department of the Treasury. We also report delinquent debt to credit 
reporting agencies as required by law.
    The DMC sends all overpayment collection notifications via standard 
mail; prior to sending, the Center verifies addresses against 
information we have in our administrations and the U.S. Postal Service. 
When notices are returned as undeliverable, we check with external 
systems such as the U.S. Postal Service's Address Management System, 
private vendors, and the US Treasury to update addresses. The DMC 
averages an undeliverable return mail rate of approximately 4 percent 
due to incorrect addresses, which compares with the U.S. Postal 
Service's undeliverable rate of 3.7 percent.
    We are committed to improving the repayment process based on each 
Veteran's unique financial situation and delivering the world-class 
customer service that Veterans deserve. We offer multiple options for 
Veterans to address overpayments. Our DMC website provides both a toll-
free call number and online information on requesting a waiver, 
submitting a compromise offer - which is a lesser amount that satisfies 
the full debt, or making an online payment.
    We also modified our approach to recovering overpayments. Rather 
than automatically recovering as much of an overpayment as possible 
from a Veteran's next disability compensation payment, we are now 
offering payment plans that automatically deduct a portion of the 
overpayment from the Veterans monthly compensation payments to minimize 
any financial hardship.
    To further help Veterans, we have been working with Credit 
Reporting Agencies to find the best way to clear derogatory credit. In 
FY 2016, VA created an adverse credit repair hotline and provided the 
phone number and web links to vital information to all the credit 
reporting agencies to share on their web sites. Since its inception, 
that hotline has received over 265,000 calls and fixed over 85,000 
billing issues. Although privacy concerns are pervasive in these 
medical debts, we continue to work with the Credit Reporting Agencies 
to find ways to safely and electronically refute derogatory credit 
related to community care billing.
    VA is committed to protecting the health and welfare of Veterans 
and is focused on delivering world class benefits and services to 
Veterans. We have been working with the Subcommittee on this important 
issue and we look forward to continuing to work with the Subcommittee 
for the benefit of all Veterans. This concludes my testimony; my 
colleagues and I are happy to take your questions.

                                 
                Prepared Statement of Shane L. Liermann
    Chairman Pappas, Ranking Member Bergman, and Members of the 
Subcommittee:

    Thank you for inviting DAV (Disabled American Veterans) to testify 
at today's hearing on ``Preventing Harm to Veterans: Examining VA's 
Overpayments and Debt Collection Practices.''
    DAV is a congressionally chartered national veterans' service 
organization of more than one million wartime veterans, all of whom 
were injured or made ill while serving on behalf of this Nation.
    To fulfill our service mission to America's injured and ill 
veterans and the families who care for them, DAV directly employs a 
corps of more than 260 National Service Officers (NSOs), all of whom 
are themselves wartime service-connected disabled veterans, at every VA 
regional office (VARO), as well as other VA facilities throughout the 
Nation. Together with our chapter, department, transition and county 
veteran service officers, DAV has over 4,000 accredited representatives 
on the front lines providing free claims and appeals services to our 
Nation's veterans, their families and survivors. We represent over one 
million veterans and survivors, making DAV the largest veterans' 
service organization (VSO) providing claims assistance. This provides 
us with an expert understanding and direct knowledge in navigating the 
VA claims and appeals process.
    Mr. Chairman, additional overpayment amounts created by VA and the 
resultant debts owed by veterans often cause severe financial hardships 
for veterans and their families. In many cases, the burden of repaying 
these debts can negatively impact a veteran's quality of life, put them 
at risk of homelessness and affect their access to VA health care. Our 
testimony will discuss the creation of overpayments, VA mitigating 
additional overpayment amounts, and debt notification, waiver of 
overpayments and debt collection.
 VETERAN AND BENEFICIARY OVERPAYMENT CREATION & MITIGATING ADDITIONAL 
                                AMOUNTS
    Veterans are entitled to receive compensation based on injuries and 
illnesses incurred or aggravated by military service. The amount of 
compensation a veteran or beneficiary is entitled to may change due to 
many factors, to include changes in dependency, additional service-
connected disabilities, reserve or National Guard service or change in 
the severity of the service-connected condition. Overpayment of 
benefits can occur when these changes are reported by the veteran and 
implemented by VA, due to actions or inactions by VA or the veterans 
themselves.
    We believe that a significant portion of overpayments can be 
reduced or avoided. VA's lack of timely action causes additional 
overpayments and that places the resultant debts and financial 
hardships on veterans and beneficiaries. Some of the most frequent 
overpayment creations and recommendations the Veterans Benefits 
Administration (VBA) can take to mitigate their complicity in 
increasing the amounts are addressed below.

Dependency Changes

    Veterans in receipt of VA compensation at 30 percent disabling or 
higher are entitled to additional monthly benefits based on the number 
of their dependents. This includes spouses, children, step-children, 
adopted children and dependent parents.
    Veterans are advised by the VA to notify them when their dependency 
status changes. VA criteria require a reduction of benefits for the 
loss of a dependent due to marriage, divorce, death or in the case of a 
child, attainment of age 18 generally, or 23 if attending school. When 
a veteran is divorced or the spouse is deceased, it is the veteran's 
responsibility to advise the VA of the termination of the marriage for 
removal of the former spouse from the veteran's benefits.
    Even timely reporting of a removal of a dependent will create at 
least one month of an overpayment. If VA delays the processing of that 
request to remove the dependent, it creates an additional amount of 
debt that the veteran or beneficiary is responsible to repay.
    Through VA's eBenefits system, veterans can electronically add 
dependents and VA will usually make the additions within 48 hours. If 
the veteran submits the dependency information to add a dependent via 
paper application there is no set timeframe for completion of the work. 
However to remove a dependent veterans can notify VA through eBenefits 
about the removal of a dependent but this will only trigger the VA to 
send paperwork to the veteran. There is not an immediate way to remove 
dependents electronically.
    A review of VA's M21-1 adjudication manual lists all dependency 
actions as non- rating work end products (EP). EPs are specific codes 
to identify types of claims or actions required, and VBA uses this 
system to monitor and manage its workload. However, non-rating work EPs 
are not considered part of VBA's backlog management and reporting of 
days pending for processing. This means that non-rating work EPs are of 
the lowest priority to VBA and receive the least amount of attention.
    By failing to place the appropriate attention to dependency claims, 
VBA has created additional avoidable amounts of overpayments. The VA 
Office of the Inspector General (OIG) report of September 28, 2007, 
``Audit of Veterans Benefits Administration Controls to Minimize 
Compensation Benefits Overpayments'' indicated that between January 
2004 and March 2006, an estimated $50.8 million in overpayments were 
avoidable. The OIG report also found that the main reason for the delay 
in processing dependency status changes is due to its classification as 
non-rating claims and a low priority for VBA.
    For example, a widow receiving dependency and indemnity 
compensation remarried in 1986 and notified the VA of the marriage in 
April 1995, and again in March 2003. However, the VA did not terminate 
benefits until January 7, 2004, altogether resulting in an overpayment 
of $179,966. Had VA acted promptly on the first notification, $104,866 
(58 percent) of the $179,966, overpayment and debt could have been 
avoided.
    The September 2018 OIG report of ``Review of Accuracy of Reported 
Pending Disability Claims Backlog Statistics'' stated that the pending 
backlog could be significantly understated when compared to some 
definitions VA has used because it does not include all the claims that 
had been awaiting rating decisions for over 125 days. For example, VBA 
only counted rating EPs in its reported backlog; however, other EPs 
also requiring adjudicative actions that impact veteran and beneficiary 
monthly payments are not counted in the backlog and subsequently not 
given any priority or incentive for the completion of dependency 
claims.
    The September 7, 2019, VBA workload report provides that there are 
374,362 pending rating-work EPs/claims. As of September 13, 2019, VBA 
noted the current number of pending dependency claims is over 211,000. 
As dependency claims are not considered rating work EPs, they are not 
counted in the VBA report on September 7, 2019. Therefore they are 
considered a very low priority and employees are not provided any 
incentive to complete these issues timely, thus creating additional 
amounts of overpayments that are avoidable.

Recommendations

    1. Assign dependency claims as rating work EPs. Within VBA, rating 
claims work has a higher priority for the assignment, control, and 
completion of work. Dependency changes are considered non-rating work 
EPs and a low priority, which creates delays in VA adding new 
dependents and increases the amount of overpayments caused by delaying 
the removal of dependents. Assigning dependency claims as rating work 
EPs will require VBA to consider all dependency changes as rating work. 
While this will increase the number pending claims, by assigning a 
rating work EP, it will reduce the amount of additional amounts of 
overpayments created by VA's lack of timely action.

    2. Allow veterans and beneficiaries to remove dependents from their 
award electronically in realtime. As noted, veterans have the ability 
to add dependents in real-time via eBenefits. To reduce the amounts of 
additional amounts of debt created by not prioritizing these claims, 
the VA must allow veterans to remove dependents as easily as they can 
be added.

    3. Apply the principle of ``constructive knowledge'' to 
automatically waive all additional overpayment amounts created by VA. 
There is a legal concept known as ``constructive knowledge'' that could 
be relevant to this problem. The Court of Appeals for Veterans Claims 
has defined the notice of ``constructive knowledge'' within the VA. In 
Bell v. Derwinski, 2 Vet. App. 611 (1992), the Court held that the VA 
is deemed to have constructive knowledge of all VA records and such 
records are considered evidence of record at the time a decision is 
made. This concept applies to dependency change of status issues.
    For example, if the veteran advises a VA Medical Center, Outpatient 
Clinic, Vocational Rehabilitation and Employment Services, VA Insurance 
Center, or other VA program and not the VA Regional Office (VARO) of 
the change in dependency, the VA is considered to have ``constructive 
knowledge'' of the change in status. Since the veteran identified the 
change to the VA, it had knowledge. This can allow veterans to lessen 
the amount of the overpayment created by the dependency change by 
reverting back to the date any office in VA was notified of the change. 
The same logic should be applied to the entire federal government, 
thereby deeming notice to any federal agency as providing notice to VA.

Drill Pay

    Members of the reserves and the National Guard are eligible to 
receive VA compensation for their illnesses and injuries related to 
their active military service. Drill pay refers to the monetary amount 
received by reservists and members of the National Guard for performing 
active or inactive duty for training. Statutes prohibit the concurrent 
receipt of drill pay and VA compensation or pension. Thus, veterans who 
perform active or inactive for duty training must choose the benefit 
they prefer and waive the other. In most cases, veterans choose to 
receive drill pay as it is usually the greater benefit. Although 
veterans or the Department of Defense (DoD) may notify the VA, in many 
instances, the veteran will receive both and creating the overpayment.
    At the end of each fiscal year, the Defense Manpower Data Center 
(DMDC) sends an electronic file to VA that identifies veterans who 
received both drill pay and VA disability compensation or pension 
during that fiscal year. This annual audit will identify those in 
receipt of both and acknowledge additional overpayments for the 
reservist of National Guard Member.
    Current 38 C.F.R. 3.103 establishes the procedures for notice of 
law in the VA benefits system. In particular, Sec.  3.103(b)(2) 
establishes procedures that VA must follow before an ``award of 
compensation, pension or dependency and indemnity compensation'' can be 
``terminated, reduced or otherwise adversely affected.'' Importantly, 
VA must provide a veteran with notice of a proposed adverse action and 
60 days to provide evidence showing why the adverse action should not 
be taken. VA continues to pay benefits during this 60-day period.
    Current regulations provide exceptions for when VA may dispense 
with the 60- day notice requirement and terminate or reduce benefits at 
the same time it notifies a veteran of such action. One exception is 
specific to veterans who inform VA when they return to active duty or 
participate in training duty. VA may take immediate action to suspend 
payment of VA benefits when the decision is ``based upon a written 
statement provided to VA by a veteran indicating that he or she has 
returned to active service, the nature of that service, and the date of 
reentry into service, with the knowledge or notice that receipt of 
active service pay precludes concurrent receipt of VA compensation or 
pension.''

VA Proposed Rule Change April 2019

    On April 19, 2019, through the Federal Register, VA issued its 
proposed rule changes regarding active service pay and active duty for 
training pay (drill pay). It is VA's intention to eliminate the burden 
of additional debts for those who return to active duty or who receive 
drill pay.
    When a veteran proactively notifies VA of his or her receipt of 
active service pay, VA may suspend benefits without waiting 60 days. VA 
proposes to expand this exception to include notice of receipt of 
active service pay from DoD. In other words, if VA is notified about 
the active duty for training pay from DoD, they will not provide the 
veteran with due process and start collecting compensation due to the 
debt creation. This may sound like a remedy; however, it will create 
confusion for those veterans and will create additional financial 
hardships by removing due process. We oppose any attempt to remove the 
due process and for VBA to start collecting the debt without any notice 
to the veteran.
    VA also proposes to amend 38 CFR 3.103 to allow VA to suspend 
compensation benefits upon receipt of DoD notice that a veteran has 
received, is receiving, or will receive active service pay. We take 
exception to this proposal. 38 U.S.C. Sec.  5304(c) states that 
``pension, compensation, or retirement pay on account of any such 
person's own service shall not be paid to such person for any period 
for which such person receives active service pay.'' The statute 
clearly states the veteran must receive the active pay. While this 
proposal may be well intentioned, it's proposing to suspend VA 
compensation without the veteran ever receiving drill or active service 
pay. This violates the statue and there will be situations where the 
orders may change, thus creating circumstances where the veteran will 
not receive active service or drill pay or VA compensation. This will 
again place undue financial hardships on veterans and their families. 
We stand firm against these proposed rule changes made by the VA.

Recommendation

    1.Require Quarterly the Defense Manpower Data Center to provide 
Quarterly Reviews. We recommend VA should not institute the proposed 
changes, but instead should require Defense Manpower Data Center to 
provide quarterly reports on those veterans receiving drill pay or 
active service pay at the same time as compensation. This will provide 
more current updates rather than doing it at the end of each fiscal 
year, which will prevent and minimize overpayments.

Incarcerated Veterans

    Federal law requires VBA to reduce compensation and pension 
benefits for veterans incarcerated in a federal, state, or local penal 
institution in excess of 60 days. Effective the 61st day of 
incarceration, VBA must reduce compensation benefits for veterans 
convicted of a felony and discontinue pension benefits for veterans 
convicted of a felony or misdemeanor. VBA reduces compensation benefits 
to the 10 percent disability rate for veterans rated 20 percent service 
connected or more. For veterans whose service-connected disability 
rating is 10 percent, VBA reduces the benefit payment by one-half.
    VA Regional Office (VARO) and Pension Management Center (PMC) 
employees are responsible for making incarceration adjustments. Once 
the veteran is released from the penal institution, VBA will restore 
their full benefits. If the VA does not reduce the incarcerated 
veteran's disability benefits after the 61st day, an overpayment will 
be created, even when reported timely.
    As previously discussed, the importance of timely VA action on 
reported changes for veterans' benefits can prevent additional amounts 
of debt. VA also considers incarceration adjustments as low priority 
and non-rating work EPs.
    In June 2016, the OIG issued the report ``Audit of Compensation and 
Pension Payments to Incarcerated Veterans.'' It determined that between 
July 2008 and June 2015, VA's ineffective actions in processing 
incarceration adjustments resulted in significant improper payments 
totaling more than $100 million. These improper payments then became 
the veteran's responsibility to repay.
    According to the OIG, VBA did not place priority on processing 
incarceration adjustments because VBA did not consider these non-rating 
claims to be part of the disability claims backlog. Both VBA Central 
Office staff from Compensation Service and the Office of Field 
Operations as well as VARO service center managers and staff 
consistently reported that incarceration adjustments were not a high 
priority.

Recommendations

    1.Assign incarceration adjustments as rating work EPs. Within VBA, 
rating claims work has a higher priority for the assignment, control, 
and completion of work. However, as discussed above, this low priority 
places incarcerated veterans and their families at an unfair 
disadvantage.

    2. Automatically apply apportionments to veterans' families at the 
61st day of incarceration for a felony. The dependent family of 
incarcerated veterans can apply for an apportionment of the amount of 
compensation withheld from the veteran. If it was completed on the 61st 
day for veterans' families of record, this would lessen any hardships 
placed on the family and would help to prevent large overpayments being 
made to the veteran.

    3. Apply the principle of constructive knowledge throughout the 
entire federal government. The VA currently receives information and 
cross matches on income data with the IRS, incarcerations with the 
Federal Bureau of Prisons, and the Department of Defense. Once a 
veteran is identified as an incarcerated veteran with any federal 
agency, such as income tax applications, changes with the DEERS program 
within the DoD or changes noted with TRICARE, this would be considered 
constructive knowledge with the VA and lessen the amounts of additional 
debts created by VA's lack of timely action.

Nonservice-connected Pension Recipients

    VBA processes and adjudicates a variety of pension programs for 
veterans and a death pension program for survivors. Veterans who are 
age 65 or older or totally and permanently disabled due to illness and 
injuries not related to military service, who served during a period of 
war, and who meet the net worth and income requirements are eligible 
for nonservice-connected pension. While veterans are not able to 
receive both compensation payments and pension payments; they can elect 
which to receive.
    The maximum rates of pension will be reduced by the amount of the 
countable annual income of the veteran; however, veterans can offset 
their income with proof of unreimbursed medical expenses. The VA 
considers Social Security payments as countable income and in December 
2012, the VA started an initiative with the Internal Revenue Service 
and the Social Security Administration to electronically verify each 
veteran's continued eligibility for pension. When the additional income 
or benefits received change the veteran's countable income, an 
overpayment for that entire reporting period can be created.
        DEBT NOTIFICATION, WAIVER OF OVERPAYMENTS AND COLLECTION
    When VBA has identified an overpayment for a veteran or 
beneficiary, they provide written notice that an overpayment has 
occurred. Once VBA has identified the debt and notify the claimant, it 
is sent to a third-party collection agency, the Debt Management Center 
(DMC).
    The DMC collects debts resulting from individuals' participation in 
VA benefit programs and manages VA's benefit debt portfolio. The DMC is 
not part of the VA but is overseen by the VA Office of Finance. The DMC 
manages the entire collection process for VBA. The Veterans Health 
Administration (VHA) uses the DMC's administrative offset services to 
refer delinquent first-party medical debts for internal offset against 
active VA benefits. VHA also uses DMC services to refer debts to 
Treasury for offset under the Treasury Offset Program.
    Statutes provide that when VA has determined that a debt exists, 
they shall promptly demand, in writing, payment of the debt. VA shall 
notify the debtor, veteran or beneficiary, of his or her rights and 
remedies and the consequences of failure to cooperate with collection 
efforts. As the DMC is the sole collection agency for VBA, the debt is 
not considered established until the veteran or beneficiary, receives a 
formal notice of debt from the DMC. The debt notice must include exact 
amount of the debt, the specific reasons for the debt, in simple and 
concise language, and the rights and remedies to include requesting a 
waiver, setting up a payment plan, option for a compromise offer, and 
that a collection may be made by offsetting their monthly compensation 
or pension payments.
    If the debtor, within thirty days of the date of the notification 
disputes, in writing, the existence or amount of the debt, offset shall 
not commence until the dispute is reviewed. If the debtor, within 
thirty days of the date of notification requests, in writing, waiver of 
collection, offset shall not commence until the VA has made an initial 
decision on waiver. If the debtor, within thirty days of the 
notification requests, in writing, a hearing on the waiver request, no 
decision shall be made on the waiver request until after the hearing 
has been held.
    VA will pursue collection action once an adverse initial decision 
is reached on the debtor's request for waiver and/or the debtor's 
informal dispute concerning the existence or amount of the debt, even 
if the debtor subsequently pursues appellate relief. The DMC will start 
collecting the debt after the conclusion of the 30-day period given to 
debtors. The collection of the debt is usually through recoupment of 
the entire VA monthly compensation payment.
    We understand that in an imperfect claims processing system, there 
will be overpayments and that it is a reasonable expectation that 
recipients of such overpayments are required to repay that debt. 
However, collection of debts via recoupment of the entire monthly 
payment, causes severe financial hardships for veterans and their 
families. In many cases, the burden of repaying these debts can 
negatively impact a veteran's quality of life, put them at risk of 
homelessness and affect their access to VA health care. Our 
recommendations below are based on DAV Resolution No. 108, supporting 
reforms to the recovery of debts by the VA.

Recommendations

    1. Reduce the amount recouped from monthly compensation payments. 
We fully agree that veterans and their families must repay the debts 
they created. However, currently VA recoups the entire monthly 
compensation payment until the debt is repaid. In many instances, a 
veteran's compensation is the majority or sole monthly income. 
Collecting the entire amount creates a serious financial hardship and 
can actually cause more harm to the veteran and their family by 
collecting it via this means. We recommend that VA reduce the 
recoupment amount to 25 percent or less of the monthly payment.

    2. Waive all amounts of debt created by VA's lack of timely action. 
As noted above, large amounts of additional overpayments are created by 
VA's low prioritization and lack of timely action. The veteran should 
be responsible for the amount of debt they created only, and not the 
additional amounts created by the VA.

    3. Time limitation on debt discovery. Every state has a statute of 
limitations on debt collection to avoid causing financial catastrophe. 
VA should not collect debts that have been discovered and found to be 
more than five years old. This would not apply in cases of fraud.

    In conclusion, overpayments by VA and the resultant debts owed by 
veterans often cause severe financial hardships for veterans and their 
families. In many cases, the burden of repaying these debts can 
negatively impact a veteran's quality of life, put them at risk of 
homelessness and affect their access to VA health care. Our 
recommendations provide avenues to mitigate VA's creation of additional 
debt as well as discuss reform the debt notification and debt 
collection process.
    Mr. Chairman, this concludes my testimony on behalf of DAV. I would 
be happy to answer any questions you or other members of the 
Subcommittee may have.

                                 
                  Prepared Statement of Carlos Fuentes
    Chairman Pappas, Ranking Member Bergman and members of the 
Subcommittee, on behalf of the men and women of the Veterans of Foreign 
Wars of the United States (VFW) and its Auxiliary, thank you for the 
opportunity to provide our remarks on how the Department of Veterans 
Affairs (VA) can effectively prevent and manage overpayments.
    The glacial speed at which VA moves is nothing new to the VFW, or 
the members of this Subcommittee. Normally, bureaucratic redundancies 
that exist within organizations are meant to serve as a protective 
mechanism, as they can promote proper oversight, accountability, and 
thoroughness. With regard to overpayments and debt recoupment issues, 
however, bureaucratic processes and terminology prevent veterans from 
seeking the timely relief they need. Having to deal with erroneous 
forfeiture of benefits or financially constraining repayment plans have 
a detrimental impact on the well-being and livelihood of those who have 
worn our Nation's uniform.
    The VFW assists veterans who experience issues stemming from 
overpayments. According to our estimates, about 60 percent of the cases 
where the VFW intervenes results in veterans being granted either 
partial or full relief from the debt from VA's Debt Management Center 
(DMC). However, the onus is on veterans to prove that they were not 
overpaid, so getting relief is often times a long and arduous process.
    The majority of overpayments the VFW sees result from confusions or 
errors with education benefits. The VFW offers a suite of benefits and 
services to student veterans, including more than $6.5 million in 
scholarships through the VFW Sport Clips Help A Hero Scholarship, 
grants to students facing financial hardship through the VFW Unmet 
Needs Program when their education benefits were not provided on time; 
a semester-long fellowship to research and advocate to fix issues 
facing the veterans community through the VFW-Student Veterans of 
America Legislative Fellowship Program; and casework assistance for 
veterans facing issues accessing their benefits through the VFW's 1 
Student Veteran program. Through our casework assistance, we have been 
notified by countless veterans who have received a debt notification 
from VA because their enrollment status changed and the school failed 
to notify VA, or an VA administrative error caused an overpayment.
    The VFW also hears about and addresses overpayment issues through 
our network of more than 2,500 highly trained and VA-accredited service 
officers around the world. Changes in number of dependents is the most 
common reason for overpayment of disability compensation. Often, VA 
takes so long to make the change that it creates overpayments. VA's 
inability to timely address concurrent receipt issues also cause 
overpayments, which VA is later required to recoup. For example, a 
veteran who is still in the National Guard or reserve component is not 
eligible to receive VA disability compensation and drill pay 
concurrently. VA has a process to validate drill pay with the 
Department of Defense. Again, VA's delay or error in processing such 
adjustments commonly creates overpayments for veterans.
    The VFW urges Congress to eliminate the concurrent receipt issues 
that often result in veterans or their survivors having to repay 
benefits they should be eligible to receive, but have to pay back 
because of misguided laws that require them to forfeit one earned 
benefit for another. Disabled veterans who are still serving in the 
reserve components should not be forced to give up a portion of their 
VA disability compensation because they choose to continue serving our 
country. Worse, they should not be required to work for free, which 
they would be required to do if they choose to receive tax-free VA 
disability compensation instead of their drill pay. Military retirees 
are also required to forgo their retirement pay unless they have a 
service-connected disability rating of 50 percent or higher. The VFW is 
grateful that Congress provided relief for highly disabled military 
retirees, but those who are rated between 10 percent and 40 percent 
service-connected disabled are equally deserving of receiving both of 
their earned benefits.
    Once an overpayment is noticed, VA will send an ambiguously worded 
notification of overpayment, which also provides options for repayment. 
If veterans are unable to contact VA to contest the debt, provide 
repayment, or enter into a payment agreement with VA, their debt is 
sent to collections and VA will begin garnishment of their disability 
compensation benefits until the debt is satisfied. While veterans have 
the ability to seek relief by filing a relief waiver, VA's inability to 
provide them clear and concise information regarding their debts in a 
timely manner significantly hinders their ability to take action in 
order to prevent VA from taking further action, which could adversely 
impact their credit or cause a financial hardship.
    In a perfect world, this discrepancy would be noticed immediately. 
However, there have been instances where it has taken upwards of five 
years for VA to properly notify veterans of overpayments. In many 
circumstances, veterans themselves have to notify VA that they are 
being overpaid.
    To its credit, VA has made a concerted effort to eliminate 
overpayments and, in some cases, informed veterans that they will not 
be held liable for overpayments, but more must be done. VA's 
inconsistent administration of veterans' benefits, interpretation of 
rules and regulations, lack of training for program administrators, and 
lack of effectiveness when communicating with veterans are the 
principal reasons VA continues to overpay veterans and spends an untold 
amount of resources collecting overpayments.
    The VFW understands that overpayments must be recouped in order for 
benefit programs to work efficiently, but it is important to state that 
debt notices must be clear and provide concise information regarding 
what steps veterans need to take in order to resolve any outstanding 
debts as soon as possible. Ultimately, veterans should be responsible 
for repaying the overpayment, if it is indeed legitimate. Due to the 
aforementioned inconsistencies regarding communication from VA, as well 
as the general lack of information regarding the nature of the debt, 
many veterans are simply unable to meet the deadline imposed on them by 
VA.
    Many veterans, especially those who have a fixed income, have 
limited access to the financial resources needed to immediately repay 
an overpayment. Astoundingly, VA will often offset a veteran's entire 
monthly benefit payment in order to pay down a debt, without the 
veteran knowing about the debt or being afforded the opportunity to 
request an alternative method of payment or relief. Without 
guaranteeing that the veteran is actually receiving the debt 
notification letter, however, the VFW feels that this action all but 
denies the veteran due process which is why we have supported 
legislation that would require the use of certified mail when notifying 
a veteran of debt.
    Aside from applying for a waiver to fully discharge a debt, VA 
currently has two alternative options--one that utilizes a personal 
checking account, but requires a financial status report to be mailed 
to DMC, and one that automatically offsets a veteran's monthly 
benefits, but also requires a financial status report to be completed 
and mailed in the event that the debt cannot be repaid in one year's 
time. Both options provide the veteran a way to pay down the debt over 
the course of several months, but loses its utility once a financial 
status report is required, and is only effective in the event that VA 
has the proper contact information and the veteran received the debt 
notice in the first place.
    To address the issue of confusing letters, section 504 of the VFW-
supported Veterans Benefits Transition Act of 2018, required VA to 
collaborate with veterans service organizations to develop a standard 
and plain language format for all debt letters sent to veterans. The 
VFW is unaware of the development of such standard format and urges the 
Subcommittee to inquire about its status. A plain language letter which 
details how debt was accrued and any recourse available would 
significantly improve the VA debt collection process.
    The VFW also urges Congress to pass S. 805, Veterans Debt Fairness 
Act of 2019, which would improve the VA debt collection process, limit 
the authority of the Secretary of Veterans Affairs to recover 
overpayments caused by VA errors, and improve the due process afforded 
veterans with respect to such recovery.
    It is important for debt notices to be clear and provide concise 
information regarding what steps veterans must take to resolve any 
outstanding debts. Ultimately, a veteran should be responsible for 
repaying the overpayment, if it is indeed legitimate. Due to the 
inconsistencies regarding communication of overpayments from VA, as 
well as the general lack of information regarding the nature of such 
debt, many veterans are simply unable to meet the deadline imposed on 
them by VA. To further complicate things, the VFW's interaction with 
VA's DMC personnel has made it very clear that VA employees lack a 
proper understanding of VA policy and procedures regarding debt 
recoupment. The VFW believes S. 805 would address these concerns, and 
strongly urges the Subcommittee to introduce, consider, and advance a 
House companion.

                                 
                  Prepared Statement of Mike Saunders
    Chairman Pappas, Ranking Member Bergman, and Members of the 
Committee:
    Thank you for the opportunity to provide insight into the debt 
collection practices at the Department of Veterans Affairs (VA). 
Veterans Education Success is a non-profit organization that works to 
advance higher education success for all military-affiliated students 
and provides free counseling and legal assistance to students using 
their GI Bill and military benefits.
    We are very appreciative of all the hard work this Subcommittee 
puts into ensuring that the vital function of oversight is properly 
conducted. We are happy to offer the following comments on VA's debt 
collection practices and overpayment issues regarding VA educational 
benefits.
    VA's debt collection practices are a critical issue impacting 
hundreds of thousands of veterans each year. Current VA debt collection 
practices impact veterans and their families in myriad ways: 
withholding disability benefits, negative credit reports, large 
unexpected debts, and other consequences that greatly impact veterans' 
quality of life.
    We have helped approximately 5,000 veterans with GI Bill problems. 
We have seen a recent uptick in the number of military-connected 
students who are experiencing VA clawbacks of their earned education 
benefits, giving us a first-hand view of how opaque and, frankly, 
Kafkaesque the process can be.

Recommendations

    We urge that the Committee take up the following recommendations:

    1. Enact the Forever GI Bill Class Evaluation Act, which would help 
solve a major cause of GI Bill overpayments by delaying GI Bill 
disbursement until the student has completed 10 days of classes, has 
cleared the add/drop period, and is certain about which classes s/he is 
taking. This would also help solve GI Bill overpayments by stopping the 
``Just 1 Day'' mentality of unscrupulous college recruiters (who 
mislead veterans about the college's offerings because they know the 
college will receive the full term of GI Bill tuition if a veteran sits 
for just one day of class).

    2. Enact the Student Veteran Empowerment Act, which would also help 
solve GI Bill overpayments by requiring VA to undertake monthly 
verification of Post-9/11 GI Bill enrollment, just like VA already does 
with the Montgomery GI Bill, in order to catch enrollment changes 
earlier and not create overpayments by disbursing too much money. 
Monthly verification of Post-9/11 GI Bill enrollment is one of the 
Government Accountability Office (GAO)'s recommendations from its 2015 
report on GI Bill overpayments.\1\
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    \1\ U.S. Government Accountability Office, ``Post-9/11 GI Bill: 
Additional Actions Needed to Help Reduce Overpayments and Increase 
Collections'' (Oct. 2015), 10, available at https://www.gao.gov/assets/
680/673230.pdf. GAO made eight recommendations to the VA to address 
those issues. These recommendations include: expanding monitoring of 
available information on overpayment debts and collections; providing 
guidance to student veterans and schools about the consequences of 
enrollment changes; providing guidance to schools about the benefits of 
using a dual certification process; implementing a way for GI Bill 
beneficiaries to verify enrollment status monthly; expanding the 
methods by which veterans and schools are notified of overpayment 
debts; including both the cause of the debt and how to repay it in debt 
letters; revising policy for calculating overpayments to increase 
collection; and ensuring full recovery of tuition and fee payments if a 
school does not charge a veteran for any tuition or fees after dropping 
a class or withdrawing from school. So far, VA has fully addressed only 
one recommendation and partially addressed three. VA now provides 
additional guidance in GI Bill award letters about the possible 
consequences of changes to enrollment. VA reported to GAO that it plans 
to implement a monthly enrollment verification system in December 2020, 
and it has deferred other actions for a later date, citing IT upgrade 
plans for Fiscal Year 2019 as a reason for the delay. There is no 
indication on the GAO action tracker that VA has expanded monitoring of 
overpayment debts and collections, expanded the methods by which 
veterans are notified of overpayment debts, or included both the cause 
of overpayment debts and how to repay them in initial debt notification 
letters.

    3. Align VA's tuition clawbacks with the US Department of 
Education. Since both VA and the Department of Education send tuition 
directly to the school, it is the school that should pay back any 
tuition overpayment. The Department of Education handles this directly 
with schools through ``Return to Title IV'' procedures. But VA 
currently requires students to repay tuition funds that never touched 
the students' hands. It is unfair to ask students to come up with tens 
of thousands of dollars, or more, in tuition funds they never touched, 
which VA sent directly to the school. VA should be aligned with the 
---------------------------------------------------------------------------
Department of Education on tuition clawbacks.

    4. Require VA to bring its debt collection practices in line with 
federal statutes and lessen its aggressive practices. VA's regulation 
calls for, and VA engages in, very ``aggressive'' debt collection 
practices. But VA's regulation and practices are not supported by 
statute, and are unfair to veterans, especially because most debts are 
inadvertent and unwitting. VA should be required to bring its 
regulation in line with the statute. VA should also be required to 
dramatically change its debt collection practices when the cause of the 
debt is VA's own error in accounting or approval of benefits. For 
example, ``retroactive adjustments'' to GI Bill benefits are not fair 
to a student who has already finished the classes. If VA authorizes a 
student to attend classes, but later determines the student received a 
GI Bill overpayment, it is VA that should bear the burden of that 
mistake, because the student already counted on that GI Bill payment 
for the classes.

    5. Forbid VA from driving veterans into homelessness or hunger. 
Embrace the draft Senate bill that would limit VA from taking more than 
25% of a veterans' benefits to cover unrelated debts to VA. GAO 
determined that VA collects most debts by withholding a veteran's other 
benefits, such as disability compensation for disabled veterans. 
Congress should forbid VA from taking a veteran's other VA benefits if 
taking those benefits would drive the veteran into hunger or 
homelessness. America does not need more homeless veterans, especially 
not disabled veterans, who rely on the VA disability compensation for 
housing and food. The House could take up the draft Senate legislation 
that would limit VA from taking more than 25% of a veteran's benefits 
to cover unrelated debts to VA. VA also should slow down the reporting 
of debts to credit agencies and the Treasury in situations where VA is 
unable to reach a veteran, so that veterans are not unnecessarily 
harmed due to a potential administrative issue.

    6. Require VA to modernize its letter process and make the 
information clearer. As GAO recommended, VA should expand its 
notification methods to do a better job of reaching veterans beyond 
letters in the regular mail. VA should install a central address 
updating system and allow debt collection letters to be sent via email; 
update its IT infrastructure so it is not relying on letters sent in 
the mail to outdated addresses; and collaborate with Veterans Service 
Organizations to create simple, easy to understand letters that clearly 
indicate the reason for the overpayment, the amount of the overpayment, 
and how to repay it. (GAO made the same recommendation in its 2015 
report.) Veterans deserve clear information. Congress could ask GAO to 
conduct a review of best practices in debt collection from other 
agencies and the private sector to ensure VA's internal structure is 
modernized and clear.\2\
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    \2\ 38 USC Sec.  3685(c).
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    Below please find background information and more details on each 
of these recommendations. We appreciate the Subcommittee's time and 
attention:
         I. GI Bill Overpayments are a Key Problem for Veterans
    While 88% of VA overpayment debts are related to veterans' health 
benefits, there has been an increasing number of students using their 
GI Bill benefits who have incurred overpayment debts.\3\
---------------------------------------------------------------------------
    \3\ Bureau of Consumer Financial Protection, Office of 
Servicemember Affairs, Annual Report (Jan. 2019), 12, available at 
https://files.consumerfinance.gov/f/documents/cfpb--osa--annual-
report--2018.pdf.

    GI Bill Overpayments Affect 1 in 4 Beneficiaries: A startling one 
in four student veteran beneficiaries are affected by an overpayment, 
according to GAO. In October 2015, GAO released a report analyzing 
Post-9/11 GI Bill overpayments and VA debt collection efforts.\4\ GAO 
found that, in Fiscal Year 2014, VA had made $416 million in Post-9/11 
GI Bill overpayments, affecting 1 in 4 beneficiaries.\5\ For-profit 
institutions received twice as much in overpayments as nonprofit 
schools and nearly twice as much as public schools.\6\
---------------------------------------------------------------------------
    \4\ Supra note 1 at 35.
    \5\ Id. at 10.
    \6\ In Fiscal Year 2014, for-profit schools received $70 million in 
overpayments, non-profit schools received $32 million, and public 
schools received $44 million. Id. at 13 n.20.

    GI Bill Overpayments are Caused Partly by VA's Payment of Full 
Tuition After ``Just 1 Day'': A major cause of GI Bill overpayments is 
the way VA disburses GI Bill tuition to a school for the entire term 
after a student sits for just 1 day of class. If a student withdraws or 
drops a class after the first day, VA nevertheless disburses to the 
school the entire term of tuition and fees for that student.
    This incentivizes predatory schools to use deceptive tactics to 
convince military-connected students to sit for just 1 day. This ``Just 
1 Day'' mentality leads unscrupulous schools to focus primarily on 
convincing a veteran to enroll, rather than on the academic success of 
their students. Veterans who have come to us for help have told us that 
unscrupulous recruiters lied to them about the types of classes and 
programs offered, the school's true tuition and how much they would 
need to pay out of pocket beyond the GI Bill, the school's 
accreditation and their ability to transfer to a public university, 
whether the school had real professors, the classroom equipment 
available, and more. From a recruiter's viewpoint, they are under 
pressure from their college to enroll veterans with the GI Bill 
(because the GI Bill is seen as the ``military gravy train'' and 
recruiters are told to ``get asses in classes,'' as one recruiter 
testified before Congress\7\), and may be less than honest in order to 
get the veteran to enroll.
---------------------------------------------------------------------------
    \7\ See Testimony of Christopher Neiweem, former recruiter for 
DeVry, before the US Senate Appropriations Committee, Subcommittee on 
Defense (June 12, 2013), available at https://
www.appropriations.senate.gov/imo/media/doc/hearings/
Neiweem%20Testimony.pdf.
---------------------------------------------------------------------------
    This problem is exacerbated by the 90/10 loophole in the Higher 
Education Act, which inadvertently incentivizes for-profit colleges to 
target veterans with aggressive and deceptive recruiting in order to 
get the GI Bill, which the schools use to offset the cap on Title IV 
funds they otherwise face.\8\ Many such schools explicitly adopt a 
business model called ``churn,'' in which they plan for students to 
drop out quickly, so they focus on quick and short enrollments.\9\ This 
causes significant waste, fraud, and abuse of a student's hard-earned 
education benefits and taxpayer dollars.
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    \8\ For-Profit Colleges, Vulnerable G.I.'s, Hollister K. Petraeus, 
The New York Times (Sep. 21, 2011), available at https://
www.nytimes.com/2011/09/22/opinion/for-profit-colleges-vulnerable-
gis.html.
    \9\ US Senate Health, Education, Labor and Pensions Committee, For 
Profit Higher Education: The Failure to Safeguard the Federal 
Investment and Ensure Student Success (Jul. 30, 2012), 77, available at 
https://www.help.senate.gov/imo/media/for--profit--report/PartI-
PartIII-SelectedAppendixes.pdf.
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    In contrast to VA's disbursement of a full term of GI Bill after 
just 1 day, the US Department of Education delays disbursement for new 
students and prorates the amount of tuition the school has ``earned'' 
during the term, up until 60 percent of the semester has passed (after 
the 60 percent cutoff, a school is viewed as having earned 100 percent 
of the term of Title IV funds).
    ``Forever GI Bill Class Evaluation Act'' Can Solve This: The House 
Veterans Affairs Committee recently introduced draft legislation titled 
the ``Forever GI Bill Class Evaluation Act,'' which would defer 
disbursement of GI Bill payments until 10 days after the start of the 
academic term.\10\ This bill would greatly benefit both VA and student 
veterans. It would address the problem of overpayments to the school by 
only paying for classes after the add/drop date has passed.

    \10\ US House of Representatives, Committee Repository, available 
at https://docs.house.gov/Committee/Calendar/
ByEvent.aspx?EventID=109773.
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    GI Bill Overpayments are Also Partly Caused by VA's Slow Enrollment 
Verification: According to the GAO report, the biggest cause of GI Bill 
overpayments in 2014 was veteran enrollment changes, which caused 90% 
of GI Bill overpayments (VA error constituted 2% and school error 
8%).\11\
---------------------------------------------------------------------------
    \11\ Supra note 1 at 12.
---------------------------------------------------------------------------
    A majority of schools rely on a single-stage certification process 
that is prone to creating overpayments.\12\ The problem occurs when a 
student drops a class early in the semester, even during the add/drop 
period, but VA does not find out until the end of the semester and has 
already paid the school for the dropped course, creating an 
overpayment. The students followed all normal school procedures during 
the add/drop period, so many veterans are surprised by VA's assertions 
that they have a GI Bill overpayment.
---------------------------------------------------------------------------
    \12\ Id. at 19.
---------------------------------------------------------------------------
    GAO recommended VA adopt a two-stage certification process that can 
help reduce overpayments due to enrollment changes:

    ``Schools can initially precertify a veteran's enrollment for $0 
tuition and fees before the term begins, which allows VA to start 
paying housing benefits without delay. The school can then recertify 
the enrollment with the actual tuition and fees amount at a later date 
- e.g., after the period to add or drop classes ends when many 
enrollment changes have already occurred. Since VA does not send 
tuition payments until the school certifies an actual tuition and fee 
amount, dual-certification can help prevent tuition overpayments that 
occur when a veteran drops a class at the beginning of the term.''\13\
---------------------------------------------------------------------------
    \13\ The GAO report identified an issue with school officials 
having inadequate training, which contributed to reporting errors. 
Congress addressed this issue by granting VA the ability to set 
training requirements for school officials. Considering VA's lack of 
action on GAO's recommendations from the 2015 report, it would be worth 
it to determine whether VA followed Congress's statutory directive to 
set these requirements. Id. at 20, 22.
---------------------------------------------------------------------------
    VA discussed the benefits of dual-certification in a 2016 webinar 
for schools, although it is not clear the extent to which VA has been 
informing schools of dual-certification's benefits.\14\
---------------------------------------------------------------------------
    \14\ VBA Education Service Quarterly Webinar (Jun. 2, 2016), 
available at https://www.benefits.va.gov/GIBILL/docs/presentations/
SCO--Webinar--06-02-2016.pdf.
---------------------------------------------------------------------------
    The Student Veteran Empowerment Act (Section 5) would help solve 
this: Section 5 of the Student Veteran Empowerment Act requires monthly 
verification of Post-9/11 GI Bill enrollment, which VA already does for 
the Montgomery GI Bill. This would help solve VA's slow verification of 
enrollment.

 II. VA Wrongly Claws Back GI Bill Tuition Overpayments from Students, 
Rather Than Schools, Even Though Schools Received the Tuition Payments 
                            Directly from VA
    When a student drops a class or drops out - after discovering that 
the school was not what was promised, which is fairly common with the 
aggressive and deceptive recruiting by predatory colleges - an 
overpayment is created. Even though schools receive GI Bill tuition 
payments directly from VA, VA goes after the student, rather than the 
school, when there is a GI Bill overpayment. It does not make sense to 
place the burden on student veterans to repay tuition overpayments when 
the tuition funds were sent straight to the school from VA and never 
touched the student's hands. Students are shocked and overwhelmed when 
they receive a letter from VA requesting tens of thousands of dollars, 
sometimes even $100,000, for tuition overpayments, when they never had 
access to those funds. How are students expected to come up with 
thousands of dollars in cash to repay money they never had?
    And what happens when a student asks the school to give back the 
tuition overpayments? Many bad actor schools laugh in a student's face. 
The student is on the hook, but the bad actor school keeps the money.

    Agency Alignment with the Education Department Could Solve This: 
Instead of clawing back from students tuition payments that went 
directly to the schools without touching the students' hands, VA should 
work directly with schools to return overpayments. The US Department of 
Education currently takes this approach with overpayments of federal 
student aid funds.\15\ VA could make a number of changes to its debt 
collection process, including its collection methods, how it notifies 
students of overpayment debt, how it tracks overpayment debt, and the 
information it provides to schools about GI Bill certification methods.
---------------------------------------------------------------------------
    \15\ Supra note 1 at 8.

III. VA's Aggressive Debt Collection Practices Harm Veterans, Undermine 
          Military Readiness, and Are Not Supported by Statute
    VA's regulations allow aggressive debt collection from veterans 
that can often hurt veterans and their families.\16\
---------------------------------------------------------------------------
    \16\ 38 CFR Sec.  1.911, ``Collection of debts owed by reason of 
participation in a benefits program,'' governs the debt collection 
practices of the VA. It outlines the procedure the VA uses for benefits 
programs like the GI Bill and other education benefits: There must be 
written demands by the VA once a debt is determined to exist 
(1.911(b)), and the debtor has a right to informally dispute the amount 
of the debt, request a waiver of collection and a hearing on the waiver 
request, and finally appeal the VA's decision underlying the debt 
(1.911(c)).

    VA's Practices are Not Supported by Statute: VA's aggressive debt 
collection practices are not supported by statute. Federal statute 
---------------------------------------------------------------------------
provides:

    ``any overpayment... may be recovered... in the same manner as any 
other debt due the United States.''\17\
---------------------------------------------------------------------------
    \17\ 38 USC Sec.  3685(c).

    VA's regulations instead call for very aggressive debt collection. 
Specifically, 38 CFR Sec.  1.910- ``Aggressive collection action,'' 
---------------------------------------------------------------------------
section (a) states:

    ``VA will take aggressive collection action on a timely basis, with 
effective follow-up, to collect all claims from money or property 
arising from its activities.''\18\
---------------------------------------------------------------------------
    \18\ 38 CFR Sec.  1.910- ``Aggressive collection action.''

    VA's Practices are Traumatic to Veterans: In practice, the impact 
on veterans is significant. VA has sent out hundreds of thousands of 
overpayment notification letters in the past few years, and annually 
recoups around $1.6 billion in debts.\19\ To recoup overpayments, VA is 
allowed to withhold up to 100% of a veteran's monthly disability 
benefits until the debt is fully repaid.\20\
---------------------------------------------------------------------------
    \19\ Veterans shouldn't have to shoulder VA errors: VA debt 
collection must be improved, Kayla Williams, The Hill (Mar. 28, 2019), 
available at https://thehill.com/opinion/healthcare/436219-va-debt-
collection-must-be-improved.
    \20\ Id.
---------------------------------------------------------------------------
    One family we helped had this to say about the stress of the 
situation:

    ``VA is charging our son $100,000+ GI Bill/911 saying he doesn't 
qualify for the benefit...they paid four years college and now...four 
years later they sent a letter asking to pay back that amount of money. 
We called them every semester and received letters of the remaining of 
months/benefit. We are under a lot of stress with this...my husband is 
an 80% Disabled Veteran with 22 years of service/ honorable discharge 
and I am a disabled person...I don't stop crying.''\21\
---------------------------------------------------------------------------
    \21\ E.R., a mother of a veteran who telephoned Veterans Education 
Success to seek help on Aug. 19, 2019.

    VA Withholds Much-Needed Living Allowance for Disabled Veterans and 
other Benefits: VA's debt collection process for overpayment debts is 
too aggressive and puts the livelihood and wellbeing of veterans, 
servicemembers, and their families at risk. Most often, overpayments 
are collected directly from subsequent GI Bill or other VA payments to 
veterans.\22\
---------------------------------------------------------------------------
    \22\ Supra note 1 at 15.
---------------------------------------------------------------------------
    Veterans\23\ have four options once they receive a letter from the 
Debt Management Center (DMC): ``[T]hey can arrange to repay the debt in 
full, set up a payment plan, dispute the existence or amount of the 
debt, or request a waiver of the debt due to financial hardship or 
special circumstances.''\24\ If a veteran does not pursue one of these 
four options, VA takes more aggressive steps to collect the debt, such 
as offsetting future Post-9/11 GI Bill payments, other VA benefits, or 
tax returns, and reporting debts to credit rating agencies.\25\
---------------------------------------------------------------------------
    \23\ Schools have similar repayment options and are responsible for 
an overpayment if it is made before the start of the semester. Id at 5.
    \24\ Id. at 7.
    \25\ Id.
---------------------------------------------------------------------------
    In its report, GAO found that, at least in Fiscal Year 2014, VA 
tapped into veterans' other benefits to cover 84% of debts, and another 
12% of payments came from other federal payments, such as a veteran's 
tax funds or social security checks.\26\
---------------------------------------------------------------------------
    \26\ Id. at 15 n.22 (``In fiscal year 2014, VA collected 61 percent 
of veteran overpayments by deducting the debts from subsequent GI Bill 
or other VA payments, 23 percent from direct payments, 12 percent from 
offsetting other federal payments, and 5 percent from private debt 
collection agencies.'')
---------------------------------------------------------------------------
    What this means in practice can be horrific. Too often, VA will 
withhold a veteran's much-needed benefits like disability compensation. 
Pulling the rug out from under veterans' feet like this can prevent 
them from finishing their schooling and have devastating effects on 
their health and well-being. By going after veterans' much-needed basic 
funds for housing and food, VA's debt collection practices could leave 
them homeless or hungry. Veterans rely on disability compensation to 
make ends meet.\27\ In less dramatic cases, when VA offsets a veteran's 
benefits, such as a student's Basic Allowance for Housing, it could 
prevent the veteran from covering his or her expenses and continuing 
his or her education.\28\
---------------------------------------------------------------------------
    \27\ The VA overpaid tens of thousands of veterans, and now it says 
they have to give their money back, Sara Jerving, Vice (Mar. 27, 2017), 
available at https://www.vice.com/en--ca/article/ywn9xb/va-veterans-
overpayment.
    \28\ Id.
---------------------------------------------------------------------------
    Worse still, by taking a veterans' much-needed benefits, VA could 
push veterans with PTSD and other psychological disorders over the 
edge.
    For example, MSG Tad Steckler, a recipient of the Soldier's Medal 
for heroism who retired after serving for 22 years, was suddenly faced 
with a $21,000 disability compensation overpayment. Steckler was unable 
to work due to his service-connected disabilities, and the added stress 
of this unexpected debt and possible deduction from his benefits 
reportedly exacerbated his PTSD symptoms. Loved ones were afraid to 
leave him alone due to disturbing comments he made that indicated he 
was contemplating suicide. At one point, he told VA representatives, 
``How are you going to get the money if I'm dead?'' Steckler's story 
highlights the adverse effect VA debt collection practices can have on 
veterans.\29\
---------------------------------------------------------------------------
    \29\ Id.
---------------------------------------------------------------------------
    In another example, LCpl Brian Easley, a Marine Corps veteran who 
suffered from PTSD and schizophrenia, attempted to rob a bank after VA 
garnished his disability compensation to recover GI Bill 
overpayments.\30\ Easley's story ended abruptly after he was killed by 
police during crisis negotiation.
---------------------------------------------------------------------------
    \30\ Prior to the attempted robbery, Easley repeatedly called the 
Veterans Crisis Line, which hung up on him. He also attempted to plead 
his case in person at a VA regional office, where he was sent away to 
obtain paperwork. ``They Didn't Have to Kill Him'': The Death of Lance 
Corporal Brian Easley, Aaron Gell, Task and Purpose (Apr. 9, 2019), 
available at https://taskandpurpose.com/didnt-kill-death-lance-
corporal-brian-easley.
---------------------------------------------------------------------------
    In March of 2019, a bipartisan group of Senators introduced 
legislation that would limit the amount VA can withhold from veterans' 
benefits to 25% and limit the recovery period of overpayments to 5 
years.\31\ Senator Jon Tester, speaking on VA debt collection practices 
and the proposed legislation, said, ``It's wrong to put the debt from 
the VA's accounting mistakes on the shoulders of men and women who have 
served their country.''\32\
---------------------------------------------------------------------------
    \31\ Should veterans have to pay for VA's benefit errors?, Leo 
Shane III, Military Times (Mar. 20, 2019), available at https://
www.militarytimes.com/news/pentagon-congress/2019/03/20/should-
veterans-have-to-pay-for-vas-benefits-errors/.
    \32\ Id.

    VA's Retroactive Readjustments of GI Bill Benefits can be Harmful 
to Veterans: Veterans who bring complaints to Veterans Education 
Success largely fall into two main overpayment situations: overpayments 
for enrollment changes, and retroactive readjustments of GI Bill 
benefits awarded to a veteran. We have seen VA retroactively lower the 
percentage of GI Bill benefits to which a veteran is entitled after the 
veteran has begun using the benefits, and even after the veteran has 
left school. This can often occur years later, many times for 
substantial amounts, as much as $100,000.
    One such case brought to Veterans Education Success involved a 
beneficiary who had had the Post-9/11 GI Bill transferred to her by her 
father, who was assured by his personnel office that retiring 33 days 
before the end of the two-year service obligation he incurred for 
transferring his education benefit would not affect that benefit 
transfer. Seven years after her father retired, and six years after she 
graduated, VA sent the beneficiary a debt collection notice stating 
that she owed up to $100,000, and that they were also going to restore 
her father's education benefit, in clear contravention of the wishes of 
the family.
    If the veteran lied or misled VA in some way, then it is 
understandable for VA to request reimbursement. Absent that, and with 
enrollment certified by VA officials every semester, Congress should 
give serious consideration as to whether it is fair to retroactively 
change a veteran's GI Bill payments when he or she has already finished 
the classes. In these cases, veterans rely on a promise that the GI 
Bill would cover their classes, VA comes back to the veteran after the 
classes are completed to say it was a mistake, and the veteran needs to 
come up with tens of thousands of dollars. This is not a client-
oriented action.
    In the case of our client, we were able to obtain assistance from 
the VA Education Service, which agreed to waive the debt. This 
prevented a young woman's credit from being destroyed and her dreams of 
becoming a homeowner from being dashed. But we do not believe that VA 
is taking this approach in a proactive manner.
    Retroactive adjustment of GI Bill benefits can also take place when 
a school moves from a higher-cost BAH ``code'' to a lower-cost one. A 
defect in the Long Term Solution (LTS) system, which pays GI BIll 
benefits, is that if a school moves it will trigger an overpayment 
notice for any student who has ever attended that school, even if they 
attended it when it was in the higher-cost area. VA employees must 
notice this error and manually correct it. Sometimes they are 
successful and, like all humans, sometimes they are not. VA can do 
better here.

    VA's Notification Process Does Not Adequately Inform Veterans of 
their Obligations: VA's aggressive approach to debt collection is 
especially troubling because VA often has not adequately informed 
veterans of their overpayment debts. At the time of the 2015 GAO 
report, veterans received information regarding their debts in two 
separate letters. The initial letter included information on the debt 
amount and the cause of the overpayment debt, but did not include 
information on how to repay it.\33\ Veterans had to wait for a second 
letter that explained how to repay overpayment debt. According to GAO, 
``[t]his delay in receiving all of the information associated with 
their debt could also delay the collection process since veterans may 
be less likely to repay their debts until they understand both the 
cause of overpayments and have the information they need on how to 
repay them.''\34\ VA concurred with GAO's recommendation and said it 
would, by January 2016, modify initial debt letters to students and 
schools on both the cause of the debt and how to repay it, but there is 
no evidence that VA has changed its practices, at least according to 
the GAO tracker.
---------------------------------------------------------------------------
    \33\ Supra note 1 at 28.
    \34\ The VA's rationale for sending two separate letters was prompt 
notification to allow veterans to dispute debts. Id. at 28-29.

    VA is Still Sending Only Paper Letters, Which May Not Reach the 
Veteran: Students often do not receive debt notification letters. As of 
January 2019, VA was still sending only paper letters to veterans to 
notify them of their debts.\35\ Because student veterans move so often, 
debt notification letters can easily be sent to the wrong address.\36\
---------------------------------------------------------------------------
    \35\ Supra note 3 at 13.
    \36\ Supra note 1 at 26.
---------------------------------------------------------------------------
    Not receiving notification letters can set off a harmful chain of 
events for veterans. Not knowing of an overpayment debt can cause 
veterans to miss key deadlines to request waivers or dispute the debt, 
resulting in missing out on the opportunity to suspend collection 
actions.\37\
---------------------------------------------------------------------------
    \37\ ``Specifically, VA will not suspend collection actions if a 
veteran requests a waiver or disputes the amount of a debt more than 30 
days after the initial notification letter.'' Id.
---------------------------------------------------------------------------
    For example, one military family we helped just barely received the 
debt notice because of address changes. In November 2018, our client 
was living out of the country. She found out that she had a sizeable 
six year old debt to VA only because VA sent letters to a group house 
that she lived in before she graduated, and a current resident 
miraculously knew how to get in touch with her.
    In addition to using shockingly outdated addresses, the letters our 
client received from VA and the DMC told her that she owed $82,000, and 
then $100,000. These are obviously stunningly high amounts and would 
cause enormous stress to anybody. Moreover, if VA cannot effectively 
communicate the correct amount of money that is owed, what chance do 
veterans have of avoiding crushing hits to their credit reports?
    VA could address this issue by expanding methods of debt 
notification, as GAO recommended in 2015. Rather than relying only on 
mail, VA could use existing infrastructure, such as VA's eBenefits 
portal, to notify veterans of their overpayment debt. According to the 
2015 GAO report, eBenefits ``provides over 3 million veterans with 
access to personalized information about their VA benefits. VA 
officials have said this system could be upgraded to provide veterans 
with online access to debt notification letters; however, the agency 
has not implemented this proposal due to other funding 
priorities.''\38\
---------------------------------------------------------------------------
    \38\ Id. at 27-28.
---------------------------------------------------------------------------
    These issues with notifying veterans of their debt led GAO to 
conclude that VA debt collection is hampered by the processes VA uses 
to notify and collect debts from veterans and schools.\39\ 
Additionally, GAO concluded that the lack of a single source of 
information on both the cause of debts and repayment options creates 
unnecessary confusion for veterans, which can lead to delays in 
repayment and administrative burdens for schools.\40\
---------------------------------------------------------------------------
    \39\ Id. at 34.
    \40\ Id.
---------------------------------------------------------------------------
    The House Committee on Veterans' Affairs Economic Opportunity 
Subcommittee held a hearing in 2017 which addressed VA debt collection 
and overpayment issues. Chairman Jodey Arrington discussed the GAO 
report's recommendations and implementation issues, saying:

    ``The GAO made eight recommendations to the VA to reduce these 
overpayments going forward and to increase collections of this money. 
However, many of these recommendations still have not been implemented, 
and based on the Department's written statement, it is unclear when 
they will be implemented, if ever. . .[I]t is clear that in many ways 
it is a matter of lack of IT resources and the need for greater 
prioritization to be placed on these programs within the VBA. I know 
that IT resources are tight, but I believe it's time for the VA to 
prioritize resources for projects that provide direct impact to 
veterans...''\41\
---------------------------------------------------------------------------
    \41\ House Committee on Veterans' Affairs, Improving the Quality 
and Timeliness of GI Bill Processing for Student Veterans (Jun. 8, 
2017), 26:38, available at https://republicans-veterans.house.gov/
calendar/eventsingle.aspx?EventID=1771.

    We understand that there are significant hurdles to updating the 
current IT system, but we feel that it is necessary not only to 
safeguard veterans and their families from having their lives 
negatively impacted by an unexpected debt, but also to cut down on the 
money and manpower VA assigns to overpayment issues.\42\
---------------------------------------------------------------------------
    \42\ The VA is spending millions of dollars to collect debts that 
it created, Sara Jerving, Vice (Oct. 25, 2017), available at https://
www.vice.com/en--us/article/8xmve3/the-va-is-spending-millions-of-
dollars-to-collect-debts-that-it-created.

    VA's Letters are Often Confused and Confusing: We have helped 
veterans who have received letters that just do not make sense. The 
following is an example of the types of complaints we have seen 
---------------------------------------------------------------------------
regarding GI Bill overpayments:

    ``I... don't believe a human has looked at any of the letters I 
have been sent. They don't add up or make sense. Semesters are omitted, 
figures they quote as what I `owe' on one document don't match with 
figures they quote on a different document. Dates and explanations 
don't make sense. All in all the letters appear to be form based, built 
by bad queries running new protocol on an old file. automatically 
[sent] to me without review. A small part of me hopes as soon as a 
person does look at the situation to put together a `statement of the 
case,' that they will find a waiver on my file and the whole situation 
will go away. But I am prepared for the worst.''

    In 2017, the Veterans Fair Debt Notice Act was introduced in the 
House to address a number of issues with VA debt collection practices, 
specifically to have VA work with Veterans Service Organizations to 
collaborate on standard language for debt letters, and to allow 
veterans to elect to be notified through electronic means.\43\ 
Providing information to veterans would help clear confusion and make 
it easier for them to dispute overpayment debts. One suggestion, from 
John Towles, deputy director of legislative service for Veterans of 
Foreign Wars, is that the VA should provide ``line item accounting 
similar to a credit card statement'' to veterans.\44\
---------------------------------------------------------------------------
    \43\ H.R. 3705 - Veterans Fair Debt Notice Act of 2017, available 
at https://www.congress.gov/bill/115th-congress/house-bill/3705.
    \44\ Supra note 42.

    VA's Debt Collection Practices Undermine Military Readiness and the 
Pentagon Budget: Reporting debts to credit agencies can put veterans' 
and servicemembers' careers at risk. (Active duty servicemembers may 
use the GI Bill through the ``Top Up'' program, as a veteran who has 
subsequently returned to active service, or as a family member of a 
veteran, and as a result may face VA debt collection.)
    In 2018, the US Department of Defense (DoD) announced a policy of 
``Continuous Evaluation'' (CE) of security clearance eligibility, which 
entails real-time tracking of the credit reports of security clearance 
holders. According to the CFPB, ``over 187,000 veterans received 
overpayment notices from [the DMC].. Approximately one in four veterans 
using the Post-9/11 GI Bill received an overpayment.''\45\ Considering 
the number of veterans who receive overpayments, VA is putting a large 
number of veterans' careers at risk through its aggressive debt 
collection practices.
---------------------------------------------------------------------------
    \45\ Supra note 3 at 12.
---------------------------------------------------------------------------
    Similarly, the CFPB's Office of Servicemembers Affairs recently 
documented how VA debt collection practices can harm servicemembers' 
security clearances:

    ``Recently, in preparation for an upcoming periodic reinvestigation 
of my security clearance I conducted a review of my credit score and 
noted [a VA] reporting action which I was previously unaware of. I 
provided [an] on time [payment] to the VA, however internal processing 
of that payment caused a delay in crediting the payment to my account. 
Additionally, VA DMC (debt management center) continued to receive, 
acknowledge, and process payments up to and beyond the date the debt 
was transferred to Treasury.. Because VA DMC transferred the debt to 
Treasury and submitted a negative report to the credit reporting 
agencies, I have been characterized as financially irresponsible. In 
more than twenty years of active service to my country and over thirty 
total years of military service, including three combat tours, I have 
always lived up to my commitments.''
    - Active duty servicemember from Louisiana\46\
---------------------------------------------------------------------------
    \46\ Id.

    The harm also extends to the Pentagon's costs and military 
---------------------------------------------------------------------------
readiness. The Defense Department has determined:

    ``Each separation of a Service member is estimated to cost the 
Department $58,250, and the Department estimates that each year 
approximately 4,640 to 7,580 Service members are involuntarily 
separated where financial distress is a contributing factor.''\47\
---------------------------------------------------------------------------
    \47\ Limitations on Terms of Consumer Credit Extended to Service 
Members and Dependents, 80 FR 43559 (Jul. 22, 2015), available at 
https://www.federalregister.gov/documents/2015/07/22/2015-17480/
limitations-on-terms-of-consumer-credit-extended-to-service-members-
and-dependents.

    VA's stated mission is ``to fulfill President Lincoln's promise `To 
care for him who shall have borne the battle, and for his widow, and 
his orphan' by serving and honoring the men and women who are America's 
Veterans.''\48\ VA's aggressive debt collection practices are currently 
harming the veterans VA is supposed to care for, serve, and honor.
---------------------------------------------------------------------------
    \48\ US Department of Veterans Affairs, About VA, Mission 
Statement, available at https://www.va.gov/about--va/mission.asp.

                               Conclusion
    Veterans Education Success sincerely appreciates the opportunity to 
share our views on this important topic. Pursuant to Rule X12(g)(4) of 
the House of Repres/entatives, Veterans Education Success has received 
no federal grants in Fiscal Year 2019, nor in the two previous fiscal 
years.

                                 
                  Prepared Statement of Gerardo Avila
    Chairman Pappas, Ranking Member Bergman, and distinguished members 
who proudly serve on this Subcommittee; on behalf of our National 
Commander, James W. ``Bill'' Oxford, thank you for the opportunity to 
comment on the important issue of the Department of Veterans Affairs 
(VA) overpayment and veteran debt collection practices. It is my duty 
and honor to represent The American Legion and assist this Committee in 
better understanding this issue, how it impacts our veterans, and 
provide recommendations for improvement. It is imperative that we 
address these issues in an effort to ensure we are not unduly burdening 
America's veterans with debt as a result of bureaucratic inefficiencies 
or errors.
    The American Legion has worked extensively on matters concerning VA 
debt management and has had a dedicated representative at the VA's Debt 
Management Center (DMC) in the Saint Paul, MN Regional Office 
advocating for veterans for over 40 years.
                      Update From Previous Hearing
    The American Legion last testified before this Subcommittee on the 
issue of VA overpayments and debt collection on May 24, 2017.\1\ Before 
commenting on further improvements that need to be made, we would like 
to provide an update on issues we previously testified on and the 
progress made in a variety of areas. The American Legion's previous 
testimony focused on four specific areas: ways to prevent overpayments 
from happening, methods to improve communication with the veteran, 
regional offices and the DMC, the time period allotted to request a 
waiver prior to garnishing active benefits, and better options for 
recoupment of overpayments in an effort to avoid financial hardship 
situations.
---------------------------------------------------------------------------
    \1\ https://docs.house.gov/meetings/vr/vr08/20170524/106019/hhrg-
115-vr08-wstate-larsenj-20170524.pdf
---------------------------------------------------------------------------
    A large volume of veteran debt was created in 2017 due to lack of 
processing dependent status claims, drill pay for National Guard or 
Reserve members entitled to VA compensation, and education benefits. 
The American Legion would like to commend VA for taking a proactive 
role in reducing the dependent claims backlog and initiating new 
methods enabling veterans to personally update their dependent status 
via phone, scan, and eBenefits. Due to these efforts, we have seen a 
reduction of debt involving a dependency claim. While drill pay and 
education overpayments still account for the majority of the veteran 
debt we assist on, the total amount owed has significantly decreased. 
VA's collaboration and communication with the Defense Finance and 
Accounting Services (DFAS) has greatly reduced the amount owed by 
servicemembers, and has assisted in keeping the debt at a manageable 
level. We are encouraged that VA and DFAS are making efforts to improve 
processes and encourage them to increase the frequency with which they 
reconcile accounts in an attempt to eliminate the overpayments 
altogether. We are also encouraged to hear that VA is exploring 
possible options with institutions of higher learning who accept 
federal funds such as the GI Bill on methods to recoup monies paid if 
the students withdrew or had another authorized reason for not 
attending or completing the course.
    Our second concern involved communication between the veteran, 
regional office, and DMC. VA uses written correspondence to notify a 
veteran of an overpayment and the collection process. Our concern was, 
and still is, that many veterans never receive the notification or 
collection letter as a result of incorrect or outdated addresses on 
file. While we understand that veterans must take some ownership and 
keep their contact information up to date with VA, VA must ensure this 
is not a cumbersome process requiring veterans to change their address 
repeatedly in an assortment of systems. In accordance with the Code of 
Federal Regulations (C.F.R.) 1.911 (d), VA is required to send a notice 
of debt that must include the exact amount of the debt, the reason for 
the debt, the individual's rights and remedies in connection with the 
debt, and inform the debtor that collection may be made through offset 
of current or future benefits and that interest and administrative 
costs may be added. This must be sent to the veteran's ``latest address 
of record'' in order to be valid. The courts have held that this means 
when a veteran's current address is known to one part of VA, all other 
parts are responsible for knowing it as well.\2\
---------------------------------------------------------------------------
    \2\ Erickson v. West, 13 Vet.App. 495-501 (2000)
---------------------------------------------------------------------------
    It is our understanding that VA has made efforts to ensure 
interoperability between information technology (IT) systems, but has 
not been successful due to a lack of compatibility between outdated 
legacy systems. In addition to inaccurate mailing addresses, we 
previously stated issues with the lack of detail contained in the 
collection letters. In a recent meeting with VA, we were encouraged to 
learn that VA has made it a priority to update its letters to make them 
more concise, specific, and easier to understand. The American Legion 
stands ready to assist in these efforts.
    Our third concern focused on the collection process within DMC. 
Once DMC receives a notification of an overpayment from a regional 
office, within 30 days a collection due process letter is mailed 
advising the veteran of the debt amount and provides a notice of the 
veteran's rights and obligations. The first 30 days are crucial for the 
veteran to take action to stop any possible garnishment of a current 
benefit. Even though an applicant can request a waiver up to 180 days, 
requesting it within 30 days is the only way to prevent garnishment. 
From our many years of assisting in this arena, it has been our 
experience that 30 days is not sufficient time to take action, even 
when the veteran has received the demand letter. The American Legion 
would support an extension of the 30 day window to request a waiver to 
avoid garnishment being extended to 90 days.
    The last topic we addressed during our previous testimony was the 
recoupment methods used by DMC. If a veteran does not respond within 
the first 30 days of the first demand letter and they were actively 
receiving a benefit, DMC would recoup the entire amount until the debt 
was paid. Needless to say, many veterans and their families depend on 
their monthly benefit to maintain fiscal solvency. The American Legion 
can attest to the thousands of families who were further put in 
financial hardship as a direct result of this practice. We are happy to 
report that DMC has discontinued this practice, and currently spreads 
the amount owed over a 12-month period and recoups the debt at a 
prorated percentage. While this method is not perfect and can still 
lead to an entire benefit to be garnished based on the amount owed, 
this updated practice has been beneficial to most veterans.
        The American Legion's Recommendations to Address VA Debt
    Based on our experience assisting veterans facing possible 
garnishment of their benefit, financial hardship, and damaged credit 
history, we offer the following suggestions to stop or minimize 
overpayment and improve the collection process to ensure America's 
veterans are not unnecessarily burdened with undue financial burdens.
                            Internal Repairs
    One of the major obstacles we have identified, as previously 
mentioned, is the lack of integration of the countless information 
management systems currently in use at the VA. Most of VA's systems do 
not communicate with each other. Debt management, education, vocational 
rehabilitation, appeals, medical care, and home loans all have their 
own systems, which do not communicate with the main VA benefits system. 
Information that is updated in these systems does not flow to the 
others. For example, a debt may be generated by an education office, 
where the veteran's current address is noted. However, that system does 
not communicate with debt management's systems, or even with Veterans 
Benefits Management System (VBMS). Thus, debt management may not be 
aware of an address update in another system. This can result in debt 
notification letters being sent to the wrong address and if a letter is 
not returned, DMC concludes that the notice was valid. If no response 
is received from the veteran, it proceeds with collection actions.
    The lack of interoperability between IT systems poses a challenge 
not just to VA employees, but the veteran service community. The 
problem of different systems not communicating is difficult to resolve 
for several reasons. The various systems were developed at separate 
times, many systems are in different formats, and are still, for the 
most part, internal. This means that DMC's internal IT systems are not 
accessible to representatives, or even to other departments within VA. 
This makes it difficult to avoid mistakes between one part of VA and 
another. One example is that the records of the Buffalo, NY Education 
Office are not accessible to most employees of the St. Louis Education 
Office. Representatives also have difficulty researching a case because 
sometimes it is necessary to piece together information from several 
systems in order to have a comprehensive view of what a potential issue 
may be. At present, representatives must obtain these bits of 
information manually, by requesting it from the parts of VA that do 
have access to the systems. Fixes for this problem are in progress, but 
so far nothing has been able to interface all systems without losing 
crucial information.
    The American Legion calls upon VA to continue efforts to integrate 
its systems, and to expand representative access to all systems. We 
also call upon DMC to continually update its contact information, and 
to research the latest address on file at the VA office where the debt 
originated. Further, if an invalid notice occurs due to one of these 
problems, we urge DMC to promptly correct its error, stop the 
collection process, and re-notify the veteran correctly.
                            External Repairs
    The American Legion believes that the best solution to solve the 
problem of VA debt is to eliminate the creation of overpayments. A VA 
benefit debt is generated through a number of actions, to include 
change of income or net worth, dependent status, receipt of drill pay, 
incarceration, and school attendance. As previously stated, VA has made 
significant improvements to minimize overpayment resulting from drill 
pay. This was accomplished mostly through outreach and collaboration 
with DFAS. The American Legion believes that further partnerships with 
additional government agencies and institutions of higher learning will 
further reduce the creation of overpayments.
    Improved communication with the Department of Treasury can reduce 
or eliminate the overpayments when a veteran's net income changes. 
Likewise, a similar concept can be applied with the Department of 
Justice to ensure a veteran's benefit is stopped or reduced when they 
are incarcerated. Additionally, it has been our experience that some 
veterans have misconceptions about what income needs to be reported and 
how it impacts their benefit levels.
    Trying to uncover the best solution to establish partnerships with 
colleges and universities poses a greater challenge, as they don't all 
fall under one single authority. According to a recent U.S. Government 
Accountability Office report, student debt is one of the primary 
creators of VA overpayments.\3\ The American Legion believes that 
controls should be put in place to mitigate overpayments as a result of 
changes in course load and enrollment status.
---------------------------------------------------------------------------
    \3\ https://www.gao.gov/products/GAO-16-42
---------------------------------------------------------------------------
    In an effort to eliminate the creation of overpayments, The 
American Legion urges VA to aggressively seek out partnerships and 
collaborate with as many agencies and organizations as possible to 
correctly update a veteran's current status.
                               Conclusion
    Debt collection within VA and Treasury Departments are complicated 
and nuanced. The American Legion sees room for improvement, and we have 
highlighted some of those suggestions in this testimony. Overall, The 
American Legion believes that VA does an adequate job in protecting 
veterans from added exposure when they are identified as having been 
overpaid and works to ensure that veterans are aware of their rights, 
resources, and consequences should they neglect to address these issues 
right away.
    As always, The American Legion thanks this Committee for the 
opportunity to elucidate the position of the nearly 2 million veteran 
members of this organization. For additional information regarding this 
testimony, please contact Mr. Lawrence Montreuil, Legislative 
Associate, at [email protected] or (202) 861-2700.