[Federal Register Volume 59, Number 65 (Tuesday, April 5, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-8089]


[[Page Unknown]]

[Federal Register: April 5, 1994]


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DEPARTMENT OF AGRICULTURE
Agricultural Stabilization and Conservation Service

7 CFR Part 792

RIN 0560-AD03

 

Debt Settlement Policies and Procedures

AGENCY: Agricultural Stabilization and Conservation Service, USDA.

ACTION: Final rule.

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SUMMARY: A proposed rule was published on June 15, 1993, with respect 
to the debt management practices of the Agricultural Stabilization and 
Conservation Service (ASCS). This final rule adopts, with minor 
changes, the provisions of the proposed rule. Accordingly, this final 
rule sets forth the policies and procedures which ASCS will use to 
settle debts. ASCS policies and procedures conform to the guidelines 
set forth in the Federal Claims Collection Act, as amended by the Debt 
Collection Act of 1982. ASCS will also follow the provisions of the 
Federal Claims Collection Standards with respect to administrative 
actions undertaken by ASCS to settle claims. This regulation is 
necessary to protect the financial integrity of many Federal 
agricultural programs by ensuring the Government will be able to 
collect, or otherwise settle, debts owed it by any person, 
organization, corporation, or other legal entity.

EFFECTIVE DATE: April 5, 1994.

FOR FURTHER INFORMATION CONTACT: Paula Roney, Debt Management and 
Contract Procedures Branch, Financial Management Division, ASCS, at 
703-305-1424.

SUPPLEMENTARY INFORMATION:

Executive Order 12866

    This final rule is issued in conformance with Executive Order 
12866. Based on information compiled by the Department, it has been 
determined that this final rule:
    (1) Would have an annual effect on the economy of less than $100 
million;
    (2) Would not adversely affect in a material way the economy, a 
sector of the economy, productivity, competition, jobs, the 
environment, public health or safety, or State, local, or tribal 
governments or communities;
    (3) Would not create a serious inconsistency or otherwise interfere 
with an action taken or planned by another agency;
    (4) Would not alter the budgetary impact of entitlements, grants, 
user fees, or loan programs or rights and obligations of recipients 
thereof; and
    (5) Would not raise novel legal or policy issues arising out of 
legal mandates, the President's priorities, or principles set forth in 
Executive Order 12866. Paperwork Reduction Act
    The information collection requirements of these regulations were 
reviewed and approved through July 31, 1996, by the Office of 
Management and Budget (OMB) and assigned OMB No. 0560-0146. The 
reporting burden for required reports is estimated to average 10 
minutes per response, including the time for reviewing instructions, 
searching existing data sources, maintaining the data and completing 
the information collection. Send comments regarding this burden 
estimate, including suggestions for reducing the burden, to OIRM, AG 
Box 7630, Washington, DC 20250.

Regulatory Flexibility Act

    ASCS is not required by 5 U.S.C. 553 or any other provision of law 
to publish a notice of proposed rulemaking with respect to the subject 
matter of this final rule. Therefore this action is exempt from the 
provision of the Regulatory Flexibility Act and no Regulatory 
Flexibility Analysis was prepared.

Executive Order 12778

    This final rule has been reviewed in accordance with Executive 
Order 12778. It is not retroactive and preempts State and local laws. 
Before any judicial action may be brought regarding the provisions of 
this final rule, administrative appeal remedies set forth at 7 CFR 
parts 24 and 780 must be exhausted.

Executive Order 12372

    This action will not have a significant impact specifically upon 
area and community development; therefore, review as established by 
Executive Order 12372 (July 14, 1982) was not used to assure that units 
of local government are informed of this action.

Background

    The Federal Claims Collection Act of 1966 (the Act), as amended by 
the Debt Collection Act of 1982 (31 U.S.C. 3711, et seq.), and the 
joint regulations promulgated thereunder by the Comptroller General and 
the Attorney General (4 CFR parts 101-105) provide minimum standards 
for the administrative collection of claims by the United States. The 
Federal Claims Collection Standards (FCCS) require each Federal agency 
to take aggressive action to collect debts owed it, and to cooperate 
with other Federal agencies in their debt collection activities. 
Federal agencies are required to promulgate regulations consistent with 
the standards.
    Currently, ASCS follows the Department of Agriculture's debt 
collection procedures at 7 CFR part 3. However, 7 CFR part 3 provides 
that the head of any agency of the Department may adopt separate 
regulations to be followed for the collection of claims and debts. ASCS 
requires separate regulations for the following reasons:
    (1) In order to make ASCS regulations consistent with Commodity 
Credit Corporation's debt settlement policies and procedures at 7 CFR 
part 1403 to the extent that it would not conflict with the Act or the 
FCCS, such as providing for hearings and reviews to our National 
Appeals Division;
    (2) In order to set our priority for collecting debt by offset;
    (3) In order to allow ASCS to depart from 7 CFR part 3 in those 
areas where it would not conflict with the Act or the FCCS, such as the 
requirement in 7 CFR part 3 to send notice by personal delivery or 
certified mail; and,
    (4) To allow any amendments or revisions necessitated by statutory 
or program changes to be made at the agency level rather than the 
departmental level.
    This regulation is necessary to protect the financial integrity of 
many Federal agricultural programs by ensuring the Government will be 
able to collect, or otherwise settle, debts owed it by any person, 
organization, corporation, or other legal entity.
    Two comments were received in response to the proposed rule 
published in the Federal Register on June 15, 1993 (58 FR 33029). The 
first commenter questioned why ASCS failed to address the use of 
alternative dispute resolution, as required by Pub. L. 101-552. Pub. L. 
101-552 requires the Secretary of Agriculture, with respect to each 
program under the Secretary's jurisdiction that makes, guarantees, or 
insures agricultural loans, to prescribe rules requiring each such 
program to participate in State agricultural loan mediation programs. 
However, since ASCS does not make, guarantee or insure agricultural 
loans, this provision does not apply to it. Rules governing mediation 
of Commodity Credit Corporation agricultural loan programs administered 
by ASCS employees to which this provision does apply are contained in 7 
CFR part 1405.
    This commenter also objects to the provision of 7 CFR 792.8 which 
provides that all debts due ASCS or CCC may be offset without regard to 
assignments which may have been filed. This provision was developed to 
increase the ability of ASCS and CCC to recoup delinquent debts and to 
deter the circumvention of offset by such practices as the assignment 
of payments to friends, relatives, partners, or subsidiary 
corporations. Taking an assignment of an ASCS or CCC program payment as 
security for a debt has never been without risk. There has always been 
the possibility that a payment will not be made, e.g., if a producer 
fails to comply with contract requirements. Therefore, it was 
determined that any heightened risk to lenders is outweighed by the 
benefit to the Government in the increased ability to collect 
delinquent debts.
    This commenter further takes exception to the provision in 7 CFR 
792.10(b) which states that ASCS will assess late payment interest on 
the full amount of delinquent debts, which means the sum of the 
principal, accrued program interest and any other charges which are due 
and owing at the time the late payment interest is assessed. The 
commenter states that this provision is illegal under North Dakota law 
and has the effect of charging a rate in excess of that which is 
disclosed to the borrower. Since ASCS programs are not loan programs, 
debts due ASCS are not based on amounts borrowed. Instead they are 
generally based on failure to comply with contract provisions. Further, 
agencies of the Federal Government are not bound by State laws 
regarding debt collection activities.
    This commenter states that provisions of 7 CFR 792.7, which provide 
for administrative offset prior to the completion of due process 
requirements in certain circumstances, have the effect of 
``swallowing'' due process. The commenter also states that payments 
should be withheld rather than offset during the period before due 
process is completed. The language referred to in 7 CFR 792.7 is taken 
from the Federal Claims Collection Standards with which agencies are 
required to be consistent. In addition, taking offset prior to 
completion of due process requirements does not negate any rights which 
the debtor has. Due process requirements still must be completed. 
Further, there is no benefit to the debtor in ``withholding'' payment 
rather than offsetting payment. In either case, the debtor does not 
have use of the funds. In fact by offsetting payment and applying it to 
the debt, rather than merely holding the payment, the debtor is ensured 
that any interest assessment will be stopped. If when due process is 
completed it is determined that the debtor does not owe the debt, the 
offset payment will be returned to the debtor, with prompt payment 
interest when applicable.
    Finally, this commenter made several broad policy suggestions which 
were not within the scope of these regulations. These suggestions will 
not be responded to in this regulation.
    The second commenter also expressed concern that the provisions of 
7 CFR 792.7 which permit offset prior to completion of all due process 
requirements would negate the due process requirements. As stated 
above, that is not the case. Due process requirements do not stop 
because offset is taken. They are still required to be completed in the 
same time periods regardless of whether or not offset has been taken. 
This commenter also needed clarification regarding the difference 
between the cited provision for accelerated offset and the provisions 
for withholding at 7 CFR 792.9. Withholding is a temporary action and 
monies withheld are not actually credited to the debtor. It is 
generally used when the amount due is uncertain. Under accelerated 
offset, the payment is actually applied to the debt. As stated above, 
this will ensure that any interest which may be accruing is stopped. 
This is more difficult to ensure in cases of withholding since in most 
cases, because the amount due is uncertain, there is no recorded debt 
to which to apply the payment.

List of Subjects in 7 CFR Part 792

    Claims, Income taxes.

    Accordingly, subchapter E, chapter VII of title 7 of the Code of 
Federal Regulations is amended by adding a new part 792 to read as 
follows:

PART 792--DEBT SETTLEMENT POLICIES AND PROCEDURES

Sec.
792.1  Applicability.
792.2  Administration.
792.3  Definitions.
792.4  Demand for payment of debts.
792.5  Collection by payment in full.
792.6  Collection by installment payments.
792.7  Collection by administrative offset.
792.8  Priorities of offsets versus assignments.
792.9  Withholding.
792.10  Late payment interest, penalty and administrative charges.
792.11  Waiver of late payment interest, penalty charge and 
administrative charges.
792.12  Administrative appeal.
792.13  Additional administrative collection action.
792.14  Contact with debtor's employing agency.
792.15  Prior provision of rights with respect to debt.
792.16  Discharge of debts.
792.17  Referral of delinquent debts to credit reporting agencies.
792.18  Referral of debts to Department of Justice.
792.19  Referral of delinquent debts to IRS for tax refund offset.
792.20  Reporting discharged debts to IRS.
792.21  Referral of debts to private collection agencies.
792.22  Collection and compromise.

    Authority: 31 U.S.C. 3701, 3711, 3716-3719, 3728; 4 CFR Parts 
101-105; 7 CFR 3.21(b).


Sec. 792.1  Applicability.

    Except as may otherwise be provided by statute, this part sets 
forth the manner in which the Agricultural Stabilization and 
Conservation Service (ASCS) will settle and collect debts by ASCS. The 
provisions of part 1403 of this title are applicable to actions of ASCS 
regarding the settlement and collection of debts on the behalf of the 
Commodity Credit Corporation (CCC).


Sec. 792.2  Administration.

    The regulations in this part will be administered under the general 
supervision and direction of the Administrator, ASCS.


Sec. 792.3  Definitions.

    The following definitions shall be applicable to this part:
    Administrative charges means the additional costs of processing 
delinquent debts against the debtor, to the extent such costs are 
attributable to the delinquency. Such costs include, but are not 
limited to, costs incurred in obtaining a credit report, costs of 
employing commercial firms to locate debtor, costs of employing 
contractors for collection services, costs of selling collateral or 
property to satisfy the debt.
    Administrative offset means deducting money payable or held by the 
United States Government, or any agency thereof, to satisfy in whole or 
in part a debt owed the Government, or any agency thereof.
    ASCS means the Agricultural Stabilization and Conservation Service 
of the United States Department of Agriculture (USDA).
    CCC means the Commodity Credit Corporation.
    Certified financial statement means an account of the assets, 
liabilities, income and expenses of a debtor, executed in accordance 
with generally accepted accounting principles and attested to as 
accurate by the debtor and preparer, under penalty of perjury.
    Claim means an amount of money or property which has been 
determined by ASCS, after a notice of delinquency and a demand for the 
payment of the debt has been made by ASCS, to be owed to ASCS by any 
person other than a Federal agency.
    Credit reporting agency means: (1) A reporting agency as defined at 
4 CFR 102.5(a), or
    (2) Any entity which has entered into an agreement with USDA 
concerning the referral of credit information.
    Debt means any amount owed to ASCS which has not been satisfied 
through payment or otherwise.
    Debt record refers to the account, register, balance sheet, file, 
ledger, data file, or similar record of debts owed to ASCS, CCC, or any 
other Government Agency with respect to which collection action is 
being pursued, and which is maintained in an ASCS office.
    Delinquent debt means: (1) Any debt owed to ASCS that has not been 
paid by the date specified in the applicable statute, regulation, 
contract, or agreement; or
    (2) Any debt that has not been paid by the date of an initial 
notification of indebtedness mailed or hand-delivered pursuant to 
Sec. 792.4.
    Discharged debt means any debt, or part thereof, which ASCS has 
determined is uncollectible and has closed out, and if the amount in 
controversy exceeds $100,000.00, excluding interest and administrative 
charges, or such higher amount as may be prescribed, in which the 
Department of Justice has concurred in such determination.
    IRS means the Internal Revenue Service.
    Late payment interest rate means the amount of interest charged on 
delinquent debts and claims. The late payment interest rate shall be 
determined as of the date a debt becomes delinquent and shall be equal 
to the higher of the Prompt Payment Act interest rate or the standard 
late payment rate prescribed by 31 U.S.C. 3717, which is based on the 
Treasury Department's current value of funds rate.
    Person means an individual, partnership, association, corporation, 
estate or trust, or other business enterprise or other legal entity 
and, whenever applicable, the Federal Government or a State government, 
or any agency thereof.
    Salary offset means the deduction of money from the current pay 
account of a present or former Government employee payable by the 
United States Government to, or held by the Government for, such person 
to satisfy a debt that person owes the Government.
    Settlement means any final disposition of a debt or claim.
    System of records means a group of any records under the control of 
ASCS or CCC from which information is retrieved by the name of the 
individual, organization or other entity or by some identifying number, 
symbol, or other identification assigned to the individual, 
organization or other entity.
    Withholding means the taking of action to temporarily prevent the 
payment of some or all amounts to a debtor under one or more contracts 
or programs.


Sec. 792.4  Demand for payment of debts.

    (a) When a debt is due ASCS, an initial written demand for payment 
of such amount shall be mailed or hand-delivered to the debtor. If the 
debt is not paid in full by the date specified in the initial demand 
letter, or if a repayment schedule acceptable to ASCS has not been 
arranged with the debtor, the initial demand may be followed by two 
subsequent written demands at approximately 30-day intervals, unless it 
is determined by ASCS that further demands would be futile and the 
debtor's response does not require rebuttal. The initial or subsequent 
demand letters shall specify the following: (1) The basis for and the 
amount of the debt determined to be due ASCS, including the principal, 
applicable interest, costs, and other charges;
    (2) ASCS' intent to establish an account on a debt record 30 days 
after the date of the letter, or other applicable period of time, if 
the debt is not paid within that time;
    (3) The applicable late payment interest rate.
    (i) If a late payment interest rate is specified in the contract, 
agreement or program regulation, the debtor shall be informed of that 
rate and the date from which the late payment interest has been 
accruing;
    (ii) If a late payment interest rate is not specified in the 
contract, agreement or program regulation, the debtor shall be informed 
of the applicable late payment interest rate set out in Sec. 792.10.
    (4) ASCS' intent, if applicable, to collect the debt 30 days from 
the date of the initial demand letter, or other applicable period of 
time, by administrative offset from any CCC or ASCS payments due or to 
become due to the debtor, and that the claim may be reported to other 
agencies of the Federal government for offset from any amounts due or 
to become due to the debtor;
    (5) ASCS' intent, if applicable, under Sec. 792.17, to report any 
delinquent debt to a credit reporting agency no sooner than 60 days 
from the date of the letter;
    (6) ASCS' intent, if applicable, under Sec. 792.19, to refer any 
delinquent debt to the IRS, no sooner than 60 days from the date of the 
letter, to be considered for offset against any tax refund due or to 
become due the debtor.
    (7) If not previously provided, the debtor's right to request 
administrative review by an authorized ASCS official, and the proper 
procedure for making such request. If the request relates to the: (i) 
Existence or amount of the debt, it must be made within 15 days from 
the date of the letter, unless a different time period is specified in 
the contract, agreement or program regulation;
    (ii) Appropriateness of reporting to a credit reporting agency, it 
must be made within 30 days from the date of the letter; or
    (iii) Appropriateness of referral to IRS for tax refund offset, it 
must be made within 60 days from the date of the letter, if applicable.
    (8) The debtor's right to a full explanation of the debt and to 
dispute any information in the records of ASCS concerning the debt;
    (9) The opportunity afforded the debtor to enter into a written 
agreement which is acceptable to ASCS for the repayment of the debt;
    (10) That ASCS maintains the right to initiate legal action to 
collect the amount of the debt;
    (11) That if any portion of the debt remains unpaid or if a 
repayment schedule satisfactory to ASCS has not been arranged 90 days 
after the due date, a penalty charge shall be assessed on the unpaid 
balance of the debt as prescribed in Sec. 792.10(e);
    (b) When ASCS deems it necessary to protect the Government's 
interest, written demand may be preceded by other appropriate actions.


Sec. 792.5  Collection by payment in full.

    Except as ASCS may provide, ASCS shall collect debts owed to the 
Government, including applicable interest, penalties, and 
administrative costs, in full, whenever feasible whether the debt is 
being collected by administrative offset or by another method, 
including voluntary payment. If a debt is paid in one lump sum after 
the due date, ASCS will impose late payment interest, as provided in 
Sec. 792.10, unless such interest is waived as provided in Sec. 792.11.


Sec. 792.6  Collection by installment payments.

    (a) Payments in installments may be arranged, at ASCS' discretion, 
if a debtor furnishes satisfactory evidence of inability to pay a claim 
in full by the specified date. The size and frequency of installment 
payments shall: (1) Bear a reasonable relation to the size of the debt 
and the debtor's ability to pay; and
    (2) Normally be of sufficient size and frequency to liquidate the 
debt in not more than three years.
    (b) Except as otherwise determined by ASCS, no installment 
arrangement will be considered unless the debtor submits a certified 
financial statement which reflects the debtor's assets, liabilities, 
income, and expenses. The financial statement shall not be required to 
be submitted sooner than 15 workdays following its request by ASCS.
    (c) All installment payment agreements shall be in writing and 
require the payment of interest at the late payment interest rate in 
effect on the date such agreement is executed, unless such interest is 
waived or reduced by ASCS. The installment agreement shall specify all 
the terms of the arrangement and include provision for accelerating the 
debt in the event the debtor defaults.
    (d) ASCS may deem a repayment plan to be abrogated if the debtor 
fails to comply with its terms.
    (e) If the debtor's financial statement or other information 
discloses the ownership of assets which are not encumbered, the debtor 
may be required to secure the payment of an installment note by 
executing a security agreement and financing agreement which provides 
ASCS a security interest in the assets until the debt is paid in full.
    (f) If the debtor owes more than one debt to ASCS, ASCS may allow 
the debtor to designate the manner in which a voluntary installment 
payment is to be applied. If the debtor does not designate the 
application of a voluntary installment or partial payment, the payment 
will be applied to such debts as determined by ASCS.


Sec. 792.7  Collection by administrative offset.

    (a) The provisions of this section shall apply to all debts due 
ASCS except as otherwise provided in this part and part 1404 of this 
title. This section is not applicable to:
    (1) ASCS requests for administrative offset against money payable 
to a debtor from the Civil Service Retirement and Disability Fund and 
ASCS requests for salary offset against a present, former or retired 
employee of the Federal Government which shall be made in accordance 
with regulations at part 3 of this title;
    (2) ASCS requests for administrative offset against a Federal 
income tax refund payable to a debtor which shall be made in accordance 
with Sec. 792.19;
    (3) Cases in which ASCS must adjust, by increasing or decreasing, a 
payment which is to be paid under a contract in order to properly make 
other payments due by ASCS; and
    (4) Any case in which a statute explicitly provides for or 
prohibits using administrative offset to collect the debt for the type 
of debt involved.
    (b) Debts due ASCS or CCC may be collected by administrative offset 
from amounts payable by ASCS when: (1) The debtor has been provided 
written notification of the basis and amount of the debt and has been 
given an opportunity to make payment. Such written notification and 
opportunity includes notice of the right to pursue an administrative 
appeal in accordance with part 780 of this chapter or any other 
applicable appeal procedures, if not previously provided;
    (2) The debtor has been provided an opportunity to request to 
inspect and copy the records of ASCS related to the debt;
    (3) The debtor has been given the opportunity to enter into a 
written agreement which is acceptable to ASCS for repayment of the 
debt;
    (4) The debtor has been notified in writing that the debt will be 
collected by administrative offset if not paid; and
    (5) The debt has not been delinquent for more than ten years or 
legal action to enforce the debt has not been barred by an applicable 
period of limitation, whichever is later.
    (c) Administrative offset shall also be effected against amounts 
payable by ASCS:
    (1) When requested or approved by the Department of Justice; or
    (2) When a person is indebted under a judgment in favor of ASCS or 
the United States.
    (d) A payment due any person may be offset when there is a breach 
of a contract or a violation of ASCS program requirements, and offset 
is considered necessary by ASCS to protect the financial interests of 
the Government.
    (e) ASCS may effect administrative offset against a payment to be 
made to a debtor prior to completion of the procedures required by 
paragraphs (b)(1) through (b)(4) of this section if: (1) Failure to 
take the offset would substantially prejudice ASCS' ability to collect 
the debt; and
    (2) The time before the payment is to be made does not reasonably 
permit the completion of those procedures.
    (f) (1) Judgments in favor of the United States may be offset 
against any amounts payable by ASCS based on information provided by or 
obtained from the Department of Justice. Debts due any agency other 
than ASCS which have not been reduced to judgment shall be offset 
against amounts payable by ASCS to a debtor when an agency of the U.S. 
Government has submitted a written request for offset which is mailed 
or hand-delivered to the appropriate ASCS State office, Kansas City 
Financial Management Office, Kansas City Management Office, or Kansas 
City Commodity Office. Such written request must: (i) Bear the 
signature of an authorized representative of the requesting agency;
    (ii) Include a certification that all requirements of the law and 
the regulations for collection of the debt and for requesting offset 
have been complied with;
    (iii) State the name, address (including county), and, where 
legally available, the Social Security number or employer ID number of 
the debtor, and a brief description of the basis of the debt, including 
identification of the judgment, if any;
    (iv) State the amount of the debt separately as to principal, 
interest, penalties, and administrative costs. Interest, if any, shall 
be computed on a daily basis to a date shown in the request. The amount 
to be offset shall not exceed the principal sum owed by the debtor, 
plus interest computed in accordance with the request, and any late 
payment interest, penalties and administrative costs that have been 
assessed;
    (v) Certify that the debtor has not filed for bankruptcy. If the 
debtor has filed for bankruptcy, a copy of the order of the bankruptcy 
court relieving the agency from the automatic stay must be included; 
and
    (vi) State the name, address, and telephone number of a contact 
person within the agency and the address to which payment should be 
sent.
    (2) Unless prohibited by law, the head of an agency, or a designee, 
may defer or subordinate in whole or in part the right of the agency to 
recover through offset all or part of any indebtedness to such agency, 
or may withdraw a request for offset. Notice of such action must be 
sent to the appropriate ASCS office.
    (g)(1) After ASCS has complied with the provisions of this part, 
ASCS may request other agencies of the Government to offset amounts 
payable by them to persons indebted to ASCS.
    (2) In the case of a request to IRS for a tax refund offset, the 
provisions at Sec. 792.19 shall apply.
    (h) (1) Debts shall be collected by offset in the following order 
of priority without regard to the date of the request for such 
collection:
    (i) Debts to ASCS.
    (ii) Debts to other agencies of USDA as determined by ASCS.
    (iii) Debts to other government agencies as determined by ASCS.
    (2) In the case of multiple debts involving the same debtor, ASCS 
may, at its discretion, deviate from the usual order of priority in 
applying recovered amounts to debts owed other agencies when considered 
to be in the Government's best interest. Such decision shall be made by 
ASCS based on the facts and circumstances of the particular case.
    (i) Amounts recovered by offset for ASCS and CCC debts but later 
found not to be owed to the Government shall be promptly refunded.
    (j) The debtor shall be notified whenever any offset action has 
been taken.
    (k) Offsets made pursuant to this section shall not deprive a 
debtor of any right he or she might otherwise have to contest the debt 
involved in the offset action either by administrative appeal or by 
legal action.
    (l) Any action authorized by the provisions of this section may be 
taken against amounts payable to a debtor who operates under more than 
one name, provided there is identical ownership, or ASCS determines 
that the debtor has established an entity for the purpose of avoiding 
the payment of the claim or debt.
    (m) The amount to be offset shall not exceed the actual or 
estimated amount of the debt, including interest, administrative 
charges, and penalties, unless the Department of Justice requests that 
a larger specified amount be offset.
    (n) Offset action will not be taken against payments when: (1) A 
debt has been discharged as provided in Sec. 792.16.
    (2) ASCS determines such action will unduly interfere with the 
administration of an ASCS or CCC program.
    (3) The debt has been delinquent for more than ten years or legal 
action to enforce the debt due ASCS is barred by an applicable period 
of limitation, whichever is later.


Sec. 792.8  Priorities of offsets versus assignments.

    (a) No amounts payable to a debtor by ASCS shall be paid to an 
assignee until there have been collected any amounts owed by the debtor 
except as provided in this section.
    (b) A payment which is assigned in accordance with part 1404 of 
this title by execution of Form CCC-36 shall be subject to offset for 
any debt owed to ASCS or CCC or any judgment in favor of the United 
States without regard to the date notice of assignment was accepted by 
ASCS or CCC.
    (c) A payment which is assigned in accordance with part 1404 of 
this title by execution of Form CCC-252 shall be offset: (1) Against 
any debt of the assignor entered on the debt record of the applicable 
ASCS office prior to the filing of such form with ASCS or CCC, or
    (2) At anytime, regardless of the date of filing of such form with 
ASCS or CCC, if the debt which is the basis for the offset arises from 
a judgment in favor of the United States, or under the same contract 
under which the payment is earned by the assignor.
    (d) With respect to all other Federal agencies, offset shall be 
made of any amounts due any other Federal agency which have not been 
reduced to judgment, and which are entered on the debt record of the 
appropriate ASCS office prior to the date the notice of assignment was 
accepted by ASCS or CCC.
    (e) Any amount due and payable to the assignor which remains after 
deduction of amounts paid to the assignee shall be available for 
offset.


Sec. 792.9  Withholding.

    (a) Withholding of a payment prior to the completion of an 
applicable offset procedure may be made from amounts payable to a 
debtor by ASCS to ensure that the interests of ASCS and the United 
States will be protected as provided in this section.
    (b) A payment may be withheld to protect the interests of ASCS or 
the United States only if ASCS determines that: (1) There has been a 
serious breach of contract or violation of program requirements and the 
withholding action is considered necessary to protect the financial 
interests of ASCS;
    (2) There is substantial evidence of violations of criminal or 
civil frauds statutes and criminal prosecution or civil frauds action 
is of primary importance to program operations of ASCS;
    (3) Prior experience with the debtor indicates that collection will 
be difficult if amounts payable to the debtor are not withheld;
    (4) There is doubt that the debtor will be financially able to pay 
a judgment on the claim of ASCS;
    (5) The facts available to ASCS are insufficient to determine the 
amount to be offset or the proper payee;
    (6) A judgment on a claim of ASCS has been obtained; or
    (7) Such action has been requested by the Department of Justice.
    (c) Except for debts due ASCS or CCC, withholding action by ASCS on 
amounts payable to debtors of other Government agencies may not be made 
unless requested by the Department of Justice.


Sec. 792.10  Late payment interest, penalty and administrative charges.

    (a) Late payment interest provisions of this section shall not 
apply:
    (1) To debts owed by Federal agencies and State and local 
governments. Interest on debts owed by such entities shall be charged 
to the extent authorized under the common law or applicable statutory 
authority.
    (2) If an applicable statute, regulation, agreement, or contract 
either prohibits the charging of such interest or specifies the 
interest or charges applicable to the debt involved;
    (3) If the late payment interest is waived by ASCS in accordance 
with Sec. 792.11.
    (4) To administrative charges as set forth in paragraph (f) of this 
section.
    (b) ASCS will assess late payment interest on the full amount of 
delinquent debts. For purposes of this section, the term ``full amount 
of the delinquent debt'' means the sum of the principal, accrued 
program interest, and any other charges which are otherwise due and 
owing to ASCS on the delinquent debt at the time the late payment 
interest is assessed, except as provided in paragraphs (a)(2) and 
(d)(3) of this section.
    (c) The late payment interest shall be expressed as an annual rate 
of interest which ASCS charges on delinquent debts. The late payment 
interest rate shall be equal to the higher of the Treasury Department's 
current value of funds rate or the rate of interest assessed under the 
Prompt Payment Act, determined as of the date specified in paragraphs 
(d)(1) and (d)(2) of this section. The rate of interest assessed under 
the Prompt Payment Act was chosen as an alternative rate to ensure that 
the Government would recoup interest at a rate which was at least as 
high as that which it pays for late payments.
    (d) (1) When a debt results from a statute, regulation, contract, 
or other agreement with specific provisions for late payment interest 
and payment due date, late payment interest shall accrue on the amount 
of the debt from the first day the debt became delinquent, unless 
otherwise provided by statute.
    (2) With respect to debts not resulting from a statute, regulation, 
contract, or agreement containing specific provisions for late payment 
interest and payment due date, late payment interest shall begin to 
accrue from the date on which notice of the debt, including notice of 
late payment interest, is first mailed or hand-delivered to the debtor.
    (3) The rate of late payment interest initially assessed will be 
fixed for the duration of the indebtedness, except when a debtor has 
defaulted on a repayment agreement and seeks to enter into a new 
agreement. ASCS may then set a new rate of interest which reflects the 
late payment interest rate in effect at the time the new agreement is 
executed. All charges which accrued, but which were not collected under 
the defaulted agreement, shall be added to the principal to be paid 
under a new repayment agreement.
    (4) The late payment interest on delinquent debts will accrue on a 
daily basis.
    (e) Except as specified in paragraph (a)(2) of this section, a 
penalty charge of three (3) percent per annum will be assessed on any 
portion of a debt which remains unpaid ninety (90) days after the date 
described in paragraph (d)(1) or (d)(2) of this section, if no 
repayment schedule satisfactory to ASCS has been agreed upon. Such 
penalty charge will be assessed retroactively from the date late 
payment interest began to accrue and applied on a daily basis. Such 
rate shall continue to accrue until the delinquent debt has been paid.
    (f) ASCS shall assess as administrative charges the additional 
costs of processing delinquent debts against the debtor, to the extent 
such costs are attributable to the delinquency. Such costs include, but 
are not limited to, costs incurred in obtaining a credit report, costs 
of employing commercial firms to locate debtor, costs of employing 
contractors for collection services, costs of selling collateral or 
property to satisfy the debt.
    (g) When a debt is paid in partial or installment payments, 
payments will be applied first to administrative charges, second to the 
penalty charge assessed in accordance with paragraph (e) of this 
section and late payment interest, and third to outstanding principal.


Sec. 792.11  Waiver of late payment interest, penalty charge and 
administrative charges.

    (a) ASCS shall waive the collection of late payment interest and 
administrative charges on a debt or any portion of a debt which is paid 
within 30 days after the date on which late payment interest began to 
accrue.
    (b) ASCS may waive the assessment and collection of all or a 
portion of the penalty charge on debts which are appealed in accordance 
with 7 CFR part 780 or other applicable appeal procedures from either 
the date of the appeal or the date such interest began to accrue, 
whichever is later, until the date a final administrative determination 
is issued. Such waiver shall not apply for any delay due to: (1) The 
appellant's request for a postponement of the scheduled hearing;
    (2) The appellant's request for an additional time following the 
hearing to present additional information or a written closing 
statement; or
    (3) The appellant's failure to timely present information to the 
reviewing authority.
    (c) Assessment and collection of late payment interest, the penalty 
charge and administrative charges under this part may be waived by ASCS 
in full, or in part, if it is determined by the Controller, ASCS, or 
his or her designee, that such action is in the best interest of ASCS.


Sec. 792.12  Administrative appeal.

    If the opportunity to appeal the determination has not previously 
been provided under part 24 of this title or part 780 of this chapter 
or any other appeal procedure, a debtor may obtain an administrative 
review under part 780 of this chapter, or other applicable appeal 
procedures, of ASCS' determination concerning the existence or amount 
of a debt, if a request is filed with the authority who made the 
determination within 15 days of the date of ASCS' initial demand 
letter, unless a longer period is specified in the initial demand 
letter.


Sec. 792.13  Additional administrative collection action.

    Nothing contained in this part shall preclude the use of any other 
administrative or contractual remedy which may be available to ASCS to 
collect debts owed to the Government.


Sec. 792.14  Contact with debtor's employing agency.

    When a debtor is employed by the Federal Government or is a member 
of the military establishment or the Coast Guard, and collection by 
offset cannot be accomplished in accordance with 5 U.S.C. 5514, ASCS 
may contact the employing agency to arrange for payment of the debt by 
allotment or otherwise, in accordance with section 206 of Executive 
Order No. 11222, May 8, 1965, 30 FR 6469, 3 CFR, 1964-1965 Comp., p 
306.


Sec. 792.15  Prior provision of rights with respect to debt.

    ASCS will not provide an administrative appeal with respect to 
issues which were raised or should have been raised at any 
administrative review requested by the debtor as provided under another 
statute or regulation before: (a) Effecting administrative offset;
    (b) Referring the debt to private collection or credit reporting 
agencies;
    (c) Referring the debt for salary offset against the current pay of 
a present or former Government employee; or
    (d) Referring the debt to IRS for tax refund offset.


Sec. 792.16  Discharge of debts.

    (a) Except as required by other applicable regulation or statute, a 
debt or part thereof owed ASCS shall be discharged with the concurrence 
of the Department of Justice, if applicable, and the records and 
accounts on that debt closed in the following situations: (1) When an 
obligation or part thereof is discharged in bankruptcy;
    (2) When an obligation or part thereof is the subject of a final 
judgment entered by a court of competent jurisdiction which is adverse 
to ASCS and no appeal will be taken by ASCS;
    (3) When a debt or part thereof is compromised and paid, the amount 
of such compromise;
    (4) When collection of a debt by administrative offset is barred in 
accordance with Sec. 792.7(b)(5).
    (b) Debts discharged in accordance with this section may be 
reported to the Internal Revenue Service pursuant to Sec. 792.20.


Sec. 792.17  Referral of delinquent debts to credit reporting agencies.

    (a) This section specifies the procedures that will be followed by 
ASCS and the rights that will be afforded to debtors when ASCS reports 
delinquent debts to credit reporting agencies.
    (b) Before disclosing information to a credit reporting agency in 
accordance with this part, ASCS shall review the claim and determine 
that it is valid and delinquent.
    (c) Before a debt may be referred to a credit reporting agency, the 
debtor must be notified, pursuant to Sec. 792.4, of ASCS' intent to 
make such a report. Such notification shall include: (1) ASCS' intent 
to disclose to a credit reporting agency that the debtor is responsible 
for the debt, and that such disclosure will be made not less than 60 
days after notification to such debtor.
    (2) The information intended to be disclosed to the credit 
reporting agency under paragraph (g)(1) of this section.
    (3) The debtor's right to enter a repayment agreement on the debt, 
including, at the discretion of ASCS, installment payments, and that if 
such an agreement is reached, the debt will not be referred to a credit 
reporting agency.
    (4) The debtor's right to review of this action in accordance with 
paragraph (i) of this section.
    (d) The debtor shall be notified, in writing at the debtor's last 
known address, when ASCS has reported any delinquent debt to a credit 
reporting agency.
    (e) (1) ASCS shall notify each credit reporting agency to which an 
original disclosure of delinquent debt information was made of any 
substantial change in the condition or amount of the claim.
    (2) ASCS shall promptly verify or correct, as appropriate, 
information about the debt on request of a credit reporting agency. The 
records of the debtor shall reflect any correction resulting from such 
request.
    (f) Information reported to a credit reporting agency on delinquent 
debts shall be derived from the system of records maintained by ASCS.
    (g) ASCS shall limit delinquent debt information disclosed to 
credit reporting agencies to: (1) The name, address, taxpayer 
identification number, and other information necessary to establish the 
identity of the debtor;
    (2) The amount, status, and history of the claim; and
    (3) The program under which the claim arose.
    (h) Reasonable action shall be taken to locate a debtor for whom 
ASCS does not have a current address before reporting delinquent debt 
information to a credit reporting agency.
    (i) (1) Before disclosing delinquent debt information to a credit 
reporting agency, ASCS shall, upon request of the debtor, provide for a 
review of the debt in accordance with Sec. 792.12. This review shall 
only consider defenses or arguments which were not available or could 
not have been available at any previous appeal proceeding permitted 
under Sec. 792.12.
    (2) Upon receipt of a request for review within 30 days from the 
date of notice to the debtor of intent to refer delinquent debt 
information to a credit reporting agency, ASCS shall suspend its 
schedule for disclosure to a credit reporting agency until a final 
decision regarding the appropriateness of disclosure to a credit 
reporting agency is made.
    (3) Upon completion of the review, the reviewing official shall 
transmit to the debtor a written notification of the decision. If 
appropriate, the debtor shall be notified of the scheduled date on or 
after which the debt will be referred to the credit reporting agency. 
The debtor will also be notified of any changes from the initial 
notification in the information to be disclosed.
    (j) (1) In accordance with guidelines established by the 
Administrator, ASCS, the responsible claims official shall report to 
credit reporting agencies delinquent debt information specified in 
paragraph (g) of this section.
    (2) The agreements entered into by USDA and credit reporting 
agencies shall provide the necessary assurances to ASCS that the credit 
reporting agencies to which information will be provided are in 
compliance with the provisions of all the laws and regulations of the 
United States relating to providing credit information.
    (3) ASCS shall not report delinquent debt information to credit 
reporting agencies when: (i) The debtor has entered a repayment 
agreement covering the debt with ASCS, and such agreement is still 
valid; or
    (ii) ASCS has suspended its schedule for disclosure of delinquent 
debt information pursuant to paragraph (i)(2) of this section.
    (k) Disclosures made under this section shall be in accordance with 
the requirements of the Privacy Act, as amended (5 U.S.C. 552a).
    (l) The provisions of paragraphs (a) through (k) of this section 
apply to commercial debts owed by farm producers and all personal 
debts. All commercial debts owed by debtors other than farm producers 
may be reported to credit reporting agencies without following the 
provisions of paragraphs (a) through (k) of this section.


Sec. 792.18  Referral of debts to Department of Justice.

    (a) Debts that exceed $100,000.00 exclusive of interest, penalties, 
and administrative charges, or such higher amount as may be prescribed, 
shall be referred to the Department of Justice before they can be 
discharged.
    (b) Debts which cannot be compromised or on which collection action 
cannot be suspended or terminated, may be referred to the Department of 
Justice for collection action. Claims of less than $600.00 exclusive of 
interest, penalties, and administrative costs will not be referred to 
the Department of Justice unless:
    (1) Referral is important to a significant enforcement policy, or
    (2) The debtor not only has the clear ability to pay the claim, but 
the Government can effectively enforce payment, having due regard for 
the exemptions available to the debtor under State and Federal law and 
the judicial remedies available to the Government.


Sec. 792.19  Referral of delinquent debts to IRS for tax refund offset.

    ASCS may refer legally enforceable delinquent debts to IRS to be 
offset against tax refunds due to debtors under 26 U.S.C. 6402, in 
accordance with the provisions of 31 U.S.C. 3720A and Treasury 
Department regulations.


Sec. 792.20  Reporting discharged debts to IRS.

    (a) In accordance with IRS regulations, ASCS may report to IRS as 
discharged debts on IRS Form 1099-G the amounts specified in paragraph 
(b) of this section.
    (b) The following discharged debts may be reported to IRS: (1) The 
amount of a debt discharged under a compromise agreement between ASCS 
and the debtor, except for compromises made due to doubt about the 
Government's ability to prove its case in court for the full amount of 
the debt.
    (2) The amount of a debt discharged by the running of the statutory 
period of limitation for collecting the debt by administrative offset 
specified in 31 U.S.C. 3716.


Sec. 792.21  Referral of debts to private collection agencies.

    If ASCS' collection efforts have been unsuccessful after 90 days 
from the date of delinquency, the head of the agency or his designee 
may enter into a contract with any person or organization, under such 
terms and conditions as the head of the agency or his designee 
considers appropriate for collection services to recover debts owed to 
ASCS.


Sec. 792.22  Collection and compromise.

    The Administrator, ASCS, or his designee may compromise any claim 
of the Government of not more than $100,000.00 exclusive of interest, 
penalties, and administrative charges, or such higher amount as may be 
prescribed, that has not been referred to another executive or 
legislative agency for further collection action.

    Signed at Washington, DC, on March 28, 1994.
Bruce R. Weber,
Acting Administrator, Agricultural Stabilization and Conservation 
Service.
[FR Doc. 94-8089 Filed 4-4-94; 8:45 am]
BILLING CODE 3410-05-P