[Federal Register Volume 59, Number 80 (Tuesday, April 26, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-10070]


[[Page Unknown]]

[Federal Register: April 26, 1994]


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DEPARTMENT OF DEFENSE

Office of the Secretary

32 CFR Parts 43a and 50

[DoD Directive 1344.9]
RIN 0790-AF65

 

Indebtedness of Military Personnel

AGENCY: Office of the Secretary, DoD.

ACTION: Proposed rule.

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SUMMARY: In order to comply with Public Law the Hatch Act Reform 
Amendments of 1994, the Department of Defense is in the process of 
promulgating a regulations with regard to members of the Armed Forces 
which includes provisions for the involuntary allotment of the pay of a 
member of the Armed Forces for indebtedness owed a third party as 
determined by the final judgment of a court of competent jurisdiction, 
and as further determined by competent military or executive authority, 
as appropriate, to be in compliance with the procedural requirements of 
the Soldiers' and Sailors' Civil Relief Act of 1940; and which gives 
consideration for the absence of a member of the Armed Forces from an 
appearance in a judicial proceeding resulting from the exigencies of 
military duty. While the Department of Defense has traditionally by 
regulation required members to pay their just financial obligations, no 
mechanism previously existed to enforce payments of just debts with the 
exception of payments owned for child or spousal support. The proposed 
revision of Department of Defense Directive 1344.9 (32 CFR part 50) 
establishes a program for involuntary allotments to require members to 
pay their just debts. The impact to the government of this legislation 
is much greater than to the public. The Department of Defense must hire 
additional personnel to process and review applications, as well as 
incur administrative processing costs (e.g., mailing, record keeping, 
xeroxing, and providing of processing forms). Additionally, the program 
will require personnel time in the form of review and providing 
assistance (e.g., military legal assistance) to members against whom an 
application for involuntary allotment is pending. The cost to the 
applicant for an involuntary allotment against a member's pay will be 
minimal in terms of time and money. The applicant will have to provide 
information which should already be in the applicant's possession, 
incur postage costs, and expend approximately 15 minutes completing the 
application form. In return for their effort, applicants with 
enforceable claims will be entitled to receive from the military member 
an involuntary allotment of pay on a monthly basis towards satisfaction 
of the judgment debt owed.

DATES: Written comments on this proposed rule must be received by June 
27, 1994.

ADDRESSES: Forward comments to the Office of the Under Secretary of 
Defense (Personnel and Readiness), Requirements and Resources, Legal 
Policy, room 4C763, 4000 Defense Pentagon, Washington, DC 20301-4000.

FOR FURTHER INFORMATION CONTACT:
Major Alan L. Cook, (703) 697-3387.

SUPPLEMENTARY INFORMATION: Appendix A to 32 CFR part 50 requires the 
use of two forms. The first form is an involuntary allotment 
application. Use of a standard form is required because the Hatch Act 
Reform Amendments of 1994 require a determination by competent military 
or executive authority that the final judgment of a court of competent 
jurisdiction giving rise to the involuntary allotment application 
complies with the requirements of the Soldiers' and Sailors' Civil 
Relief Act. Additionally, in order to ensure due process for 
involuntary allotment applications, several certifications and 
acknowledgements are required by the applicant. In the absence of a 
standardized form, the cost to the government of reviewing non-standard 
forms for compliance would be unfairly burdensome in comparison to the 
minimum cost to an applicant of obtaining and using a standard form to 
make application. Furthermore, use of a standard form saves the 
applicant time and money by not requiring the applicant to obtain a 
copy of the Department of Defense Directive and reading it in order to 
ensure proper submission of information to obtain an involuntary 
allotment. The second form for involuntary allotment notice and 
processing creates a standardized methodology within the Department of 
Defense, to include the Military Departments, to ensure uniform 
processing procedures. This saves both time and money for the review 
authorities. Both forms are in the process of development. However, 
their basic contents and requirements are clearly delineated in 
appendix A to 32 CFR part 50. It has been determined that 32 CFR part 
50 is not a significant regulation action. The rule does not: (1) Have 
an annual effect on the economy of $100 million or more or 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; (2) 
Create a serious inconsistency or otherwise interfere with an action 
taken or planned by another agency; (3) Materially alter the budgetary 
impact of entitlements, grants, user fees, or loan programs or the 
rights and obligations of recipients thereof; or (4) Raise novel legal 
or policy issues arising out of legal mandates, the President's 
priorities, or the principles set forth in this Executive Order. It has 
also been determined that this rule is not subject to the Regulatory 
Flexibility Act (5 U.S.C. 601) because it will not have a significant 
adverse economic impact on a substantial number of small entities. The 
primary financial effect on administering the rule will be a reduction 
in administrative costs and other burdens resulting from the 
simplification and clarification of certain policies. Finally, it has 
been determined that 32 CFR part 50 may impose reporting or record 
keeping requirements under the Paperwork Reduction Act of 1980 (44 
U.S.C. 3501-3520) and that the paperwork reduction process is under 
review.

List of Subjects in 32 CFR Parts 43a and 50

    Claims, Credit, Military personnel.

    Accordingly, under the authority of 10 U.S.C. 301, title 32 of the 
Code of Federal Regulations, chapter I, subchapter C, is proposed to be 
amended to read as follows:

PART 43A--[REMOVED]

    1. Part 43a is removed.
    2. 32 CFR part 50 is added to read as follows:

PART 50--INDEBTEDNESS OF MILITARY PERSONNEL

Sec.
50.1  Purpose.
50.2  Applicability and scope.
50.3  Definitions.
50.4  Responsibilities.
50.5  General policies.
50.6  Full disclosure and standards of fairness by creditors.
Appendix A to part 50-Processing Procedures
Appendix B to Part 50-Certificate of Compliance
Appendix C to Part 50-Standards of Fairness

    Authority: Pub. L. 103-94 and 10 U.S.C. 113(d).


Sec. 50.1   Purpose.

    This part
    (a) Sets established Department of Defense policy governing 
delinquent indebtedness of members of the Military Services, and 
establishes policy for involuntary allotments from the disposable pay 
of military members to satisfy judgment indebtedness in accordance with 
Public Law 103-94.
    (b) Sets forth procedures for processing claims of such 
indebtedness and applications for involuntary allotments from the 
disposable pay of military members.
    (c) Incorporates the provisions of Public Law 90-321, Public Law 
95-109 and Public Law 103-94.


Sec. 50.2   Applicability and scope.

    (a) The provisions of this part apply to the Office of the 
Secretary of Defense, the Military Departments, the Chairman of the 
Joint Chiefs of Staff and the Joint Staff, the Defense Agencies, and 
the DoD Field Agencies (hereafter referred to as ``DoD Components''). 
The term ``Military Services,'' as used herein, refers to the Army, the 
Navy, the Air Force, and the Marine Corps.
    (b) The provisions of this part do not apply to:
    (1) Indebtedness of a member of the Military Services to the 
Federal Government.
    (2) Processing of indebtedness claims to enforce judgments against 
military members for alimony or child support.
    (3) Claims by State or municipal governments under the processing 
procedures for complaints. Note, a State or municipal government must 
comply with Appendix A to this part when seeking an involuntary 
allotment.


Sec. 50.3   Definitions.

    (a) Absence. Is a member's lack of an ``appearance,'' at any stage 
of the judicial process, as evidenced by failing to physically attend 
court proceedings, be represented at court proceedings by counsel of 
the member's choosing, or to timely respond to pleadings, orders or 
motions.
    (b) Appearance. Is the presence and participation of a member of 
the military services throughout the judicial proceeding from which the 
judgment was issued that is the basis for a request for enforcement 
through involuntary allotment.
    (c) Applicant. The original judgment creditor, a successor in 
interest, or attorney or agent thereof who requests an involuntary 
allotment from a member of the Military Services pursuant to procedures 
described in appendix A to this part.
    (d) Court. A court of competent jurisdiction within any State, 
territory, or possession of the United States.
    (e) Debt collector. An agency or agent engaged in the collection of 
debts described under Public Law 95-109.
    (f) Disposable pay. In determining the amount of disposable pay due 
to a member and subject to involuntary allotment under the provisions 
of Public Law 103-94 and this part:
    (1) Include basic pay and compensation payable under 37 U.S.C. 
chapter 3.
    (2) Exclude:
    (i) Amounts awarded for suggestions.
    (ii) Special and incentive pays payable under 37 U.S.C. chapter 5.
    (iii) Accrued leave payments under 37 U.S.C. chapter 9.
    (iv) Payments to missing persons under 37 U.S.C. chapter 10.
    (v) Separation payments, including involuntary separation pay under 
10 U.S.C. 1174 voluntary separation incentive (VSI) under 10 U.S.C. 
1175, special separation benefit (SSB) under 10 U.S.C. 1174a, reservist 
special separation pay (RSSP) under Public Law 102-484, section 4416, 
and reservist involuntary separation pay (RISP) under Public Law 102-
484, section 4418.
    (vi) Allowances paid under 37 U.S.C. Chapter 7 and other 
reimbursements for expenses incurred in connection with duty in a 
Military Service or allowances in lieu thereof.
    (vii) Payments not specifically enumerated in paragraph (f)(1) of 
this section.
    (3) Deduct:
    (i) Amounts owed by a member to the United States.
    (ii) Amounts deducted for employment taxes.
    (iii) Amounts mandatorily withheld for the Armed Forces Retirement 
Home.
    (iv) Fines and forfeitures ordered by a court-martial or by a 
commanding officer.
    (v) Amounts properly withheld for Federal, State, or local income 
tax purposes, if the withholding of the amount is authorized or 
required by law and if amounts withheld are not greater than would be 
the case if the member claimed all dependents to which entitled. The 
withholding of additional amounts pursuant to 26 U.S.C. 3402(i) may be 
permitted only when the member presents evidence of a tax obligation 
which supports the additional withholding.
    (vi) Deductions for Servicemen's Group Life Insurance premiums;
    (vii) Deductions for the dental benefits plan premiums.
    (viii) Amounts otherwise required by law to be deducted from a 
member's pay (except payments under of 42 U.S.C. 659, 661, 662, and 
665.
    (g) Exigencies of military duty. Is a military assignment or 
mission essential duty that, because of its urgency, importance, 
duration, location, or isolation, necessitates the absence of a member 
of the military services from appearance at a judicial proceeding. 
Absence from an appearance in a judicial proceeding is normally 
presumed to be caused by exigencies of military duty during periods of 
war, national emergency, or when the member is deployed (see appendix A 
to this part, paragraph B2.c.(5)(a)).
    (h) Judgment. A final judgment must be a valid, enforceable order 
or decree, issued not earlier than two years before the date of an 
application for an involuntary allotment, by a court from which no 
appeal may be taken, or from which no appeal has been taken within the 
time allowed, or from which an appeal has been taken and finally 
decided. The judgment must award a sum certain amount and specify that 
the amount is to be paid by an individual who, at the time of 
application for the involuntary allotment, is a member of the Military 
Services.
    (i) Just financial obligations. A legal debt acknowledged by the 
military member in which there is no reasonable dispute as to the facts 
or the law; or one reduced to judgment which conforms to the Soldiers' 
and Sailors' Civil Relief Act (SSCRA), if applicable.
    (j) Member of the military services. Includes Regular, Reserve, and 
National Guard members who are not retired.
    (k) Preponderance of the evidence. A greater weight of evidence, or 
evidence which is more credible and convincing to the mind. That which 
best accords with reason and probability (see Black's Law Dictionary).
    (l) Proper and timely manner. A manner which under the 
circumstances does not reflect discredit on the military service.


Sec. 50.4  Responsibilities.

    (a) The Under Secretary of Defense (Personnel and Readiness) 
(USD(P&R)) shall:
    (1) Have policy oversight concerning involuntary allotment of 
military pay; and
    (2) Shall establish policies and procedures governing the 
assistance to be provided by military authorities to creditors of 
military personnel who have debt complaints.
    (b) The Comptroller of the Department of Defense shall establish 
procedures supplemental to those contained in this part which are 
necessary to administer and process involuntary allotments from members 
of the Military Services; this includes the authority to promulgate 
forms necessary for the efficient administration and processing of 
involuntary allotments.
    (c) The Heads of DoD Components, or their designees, shall urge 
military personnel to meet their just financial obligations, since 
failure to do so damages their credit reputation and affects the public 
image of all DoD personnel (DoD Directive 1000.10,\1\ subsection D.4., 
DoD Directive 1000.11,\2\ and DoD Directive 5500.7.\3\
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    \1\Copies may be obtained, at cost, from the National Technical 
Information Service, 5285 Port Royal Road, Springfield, VA 22161.
    \2\See footnote 1 to Sec. 50.4(c).
    \3\See footnote 1 to Sec. 50.4(c).
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    (d) The Director, Defense Finance and Accounting Services, or his 
or her designee, shall:
    (1) Assure implementation of this part and compliance with its 
provisions.
    (2) Determine whether the provisions of the Soldiers' and Sailors' 
Civil Relief Act (SSCRA) have been complied with under the provisions 
of Public Law 103-94.
    (3) Act as the DoD Executive Agent for forms prescribed by this 
part, or otherwise necessary to process involuntary allotments.
    (e) The Secretaries of the Military Departments shall help ensure 
compliance with the requirements of this part, to include:
    (1) Requiring commanders to counsel members to pay their just 
debts, including complying, as appropriate, with court orders and 
judgments for the payment of alimony or child support.
    (2) Ensuring notification and counseling of members against whom 
creditors are seeking involuntary allotments pursuant to a court 
judgment in accordance with the provisions of this part.
    (3) Designating those commanders who shall be responsible for 
determining whether a member's absence from a judicial proceeding was 
caused by exigencies of military duty.
    (4) Emphasizing prompt command action to assist with the processing 
of involuntary allotment applications.


Sec. 50.5  General policies.

    (a) Members of the Military Services are expected to pay their just 
financial obligations in a proper and timely manner. However, DoD 
Components have no legal authority, except as stated in paragraphs 
(a)(1) and (a)(2) of this section, to require members to pay a private 
debt or to divert any part of their pay for its satisfaction.
    (1) Legal process instituted in civil courts to enforce judgments 
against military personnel for the payment of alimony or child support 
will be acted upon in accordance with the provisions of Public Law 93-
647, as amended, and part 7, chapter 7, section B. of DoD 7000.14-
R,\4\, Volume 7.
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    \4\See footnote 1 to Sec. 50.4(c).
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    (2) Involuntary allotments pursuant to the provisions of Public Law 
103-94 shall be established in accordance with the provisions of this 
part.
    (b) Whenever possible, indebtedness disputes should be resolved 
through amicable means. Claimants desiring to contact a military member 
concerning a claim of indebtedness may obtain the member's military 
address by writing to the locator service of the Military Department 
concerned, and enclosing the appropriate fee for the service, as 
provided under DoD Instruction 7230.7.\5\
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    \5\See footnote 1 to Sec. 50.4(c).
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    (c) The following general policies apply to processing of debt 
complaints.
    (1) Creditors are encouraged to use the processing procedures for 
debt complaints described in appendix A to this part. Complaints 
meeting the requirements of this part will receive prompt processing 
assistance from commanders.
    (2) Assistance in indebtedness matters will not be extended to 
those creditors:
    (i) Who have not made a bona fide effort to collect the debt 
directly from the military member;
    (ii) Whose claims are patently false and misleading;
    (iii) Whose claims are obviously exorbitant; or
    (iv) Who are in an ``off-limits'' status, or who have been 
determined to be practicing unfair consumer or commercial practices 
detrimental to the morale and welfare of service members, pursuant to 
applicable directives of the military services, to include the Armed 
Forces Disciplinary Control Board and Off-Installation Liaison and 
Operations regulations.\6\
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    \6\See footnote 1 to Sec. 50.4(c).
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    (3) Some States have enacted laws which prohibit creditors from 
contacting a debtor's employer with respect to indebtedness or 
communicating facts on indebtedness to an employer unless certain 
conditions are met. The conditions which must be met to remove this 
prohibition are generally such things as reduction of a debt to 
judgment and obtaining written permission of the debtor.
    (i) At DoD installations in States having such laws, the processing 
of debt complaints will not be extended to those creditors who are in 
violation of the State law. Commanders may advise creditors that this 
rule has been established because it is the general policy of the 
Military Services to comply with State law when that law does not 
infringe upon significant military interests.
    (ii) This policy will govern even though a creditor is not licensed 
to do business in the State where the debtor is located. A similar 
practice will be commenced in any State enacting a similar law with 
respect to debt collection.
    (4) Under the provisions of Public Law 95-109, contact by a debt 
collector with third parties, such as commanding officers, for the 
purpose of aiding debt collection is prohibited without a court order, 
or the debtor's prior consent, given directly to the debt collector. 
Creditors are generally exempt from Public Law 95-109, but only when 
they collect on their own behalf.
    (d) The following general policies apply to processing of 
involuntary allotments (except statutory allotments for child support 
or alimony).
    (1) In those cases in which the indebtedness of a military member 
has been reduced to a judgment, an application for an involuntary 
allotment from the disposable pay of the member may be made pursuant to 
the procedures described in appendix A to this part. These procedures 
provide the exclusive remedy available under Public Law 103-94.
    (2) Involuntary allotment requests will not be processed for 
creditors who, either at the time of application for the involuntary 
allotment or at the time the debt was incurred that forms the basis for 
the court judgment, are in an ``off-limits'' status, or who have been 
determined to be practicing unfair consumer or commercial practices 
detrimental to the morale and welfare of service members, pursuant to 
applicable directives of the military services, to include the Armed 
Forces Disciplinary Control Board and Off-Installation Liaison and 
Operations regulation.
    (3) An involuntary allotment from a member's disposable pay shall 
not be commenced in any indebtedness case in which:
    (i) Exigencies of military duty caused the absence of the member 
from the judicial proceeding at which the judgment was rendered.
    (ii) There has not been compliance with the procedural requirements 
of the SSCRA.
    (4) Only one involuntary allotment pursuant to Public Law 103-94 
and this part may be authorized from the disposable pay of a member at 
any given time.
    (5) An involuntary allotment shall not exceed the lesser of 15 
percent of a member's disposable pay, or the maximum amount authorized 
under the garnishment law of the State where the judgment was entered. 
An involuntary allotment shall not be authorized if the pay of a 
similarly situated civilian employee is not subject to garnishment 
under the applicable State law and Public Law 103-94.
    (6) The amount of an involuntary allotment under Public Law 103-94 
and this part when combined with deductions as a result of garnishments 
or statutory allotments for spousal support and child support under 42 
U.S.C. 659, 661, 662, or 665, may not exceed the maximum percentage 
specified in 15 U.S.C. 1673. In any case in which the maximum 
percentage would be exceeded, garnishments and involuntary allotments 
for spousal and child support shall take precedence over involuntary 
allotments authorized under Public Law 103-94 and this part. 
Involuntary allotments established pursuant to Public Law 103-94 shall 
be reduced or stopped as necessary to avoid exceeding the maximum 
percentage allowed.


Sec. 50.6  Full disclosure and standards of fairness by creditors

    The Truth in Lending Act prescribes the general disclosure 
requirements which must be met by those offering or extending consumer 
credit, and 12 CFR part 226 prescribes the specific disclosure 
requirements for both open-end and installment credit transactions. In 
place of Federal Government requirements, State regulations apply to 
credit transactions when the Federal Reserve Board has determined that 
the State regulations impose substantially similar requirements and 
provide adequate enforcement measures. Commanding officers, with the 
assistance of judge advocates, should check regulations of the Federal 
Reserve Board to determine whether Federal or State laws and 
regulations govern.

Appendix A to Part 50--Processing Procedures

A. Debt Complaints

    1. It is incumbent on those submitting indebtedness complaints 
to show that the disclosure requirements of the Truth in Lending 
Act, and 12 CFR part 226 have been met and that the Standards of 
Fairness (appendix C to this part) have been applied.
    2. Creditors subject to 12 CFR part 226, and assignees claiming 
thereunder, shall submit with their request for debt processing 
assistance an executed copy of the Certificate of Compliance 
(appendix B to this part), and a true copy of the general and 
specific disclosures provided the military member as required by the 
Truth in Lending Act. Requests which do not meet these requirements 
will be returned without action to the claimant.
    3. A creditor not subject to 12 CFR part 226, such as a public 
utility company (as set forth in Sec. 226.3 thereof), shall submit 
with the request a certification that no interest, finance charge, 
or other fee is in excess of that permitted by the law of the State 
in which the obligation was incurred.
    4. A foreign-owned company having debt complaints shall submit 
with its request a true copy of the terms of the debt (English 
translation) and shall certify that it has subscribed to the 
Standards of Fairness.
    5. Indebtedness complaints which meet the requirements of this 
part will be processed by DoD Components. Processed means that Heads 
of DoD Components, or designees, shall:
    a. Review all available facts surrounding the transaction 
forming the basis of the compliant, including the member's legal 
rights and obligations, and any defenses or counterclaims the member 
may have.
    b. Advise the member that (1) just financial obligations are 
expected to be paid in a proper and timely manner, and what the 
member should do to comply with that policy; (2) financial and legal 
counseling services are available under the provisions of DoD 
Directive 1344.7\1\ in resolving indebtedness; and (3) that a 
failure to pay just debts may result in the creditor obtaining a 
court judgment which could form the basis for collection of pay from 
the member pursuant to an involuntary allotment.
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    \1\See footnote 1 to Sec. 50.4(c).
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    c. If a member acknowledges a debt as a result of creditor 
contact with a DoD Component, advise the member that assistance and 
counseling may be available from the on-base military banking 
office, or the credit union serving the military field of 
membership, or other available military community service 
organizations.
    d. Direct that the appropriate commander advise the claimant 
that (1) those aspects of DoD policy prescribed in Sec. 50.5 are 
pertinent to the particular claim in question; and (2) the member 
concerned has been counseled concerning his or her obligations with 
respect to the claim. The commander's response will not undertake to 
arbitrate any disputed debt, or to admit or deny the validity of the 
claim. Under no circumstances will the response indicate whether any 
action has been taken against the member as a result of the 
compliant.

B. Involuntary Allotments

1. Involuntary Allotment Application

    a. Regardless of the Service affiliation of the military member 
involved, an application to establish an involuntary allotment from 
the disposable pay of a military member shall be made by sending a 
signed application on DD Form aa,\2\ ``Involuntary Allotment 
Application,'' to the Defense Finance and Accounting Service (DFAS) 
at the following address. Defense Finance and Accounting Service, 
Cleveland Center, Code L, PO Box 998002, Cleveland, OH 44199-8002.
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    \2\This form will be developed. The final form will be included 
as an appendix to this part.
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    (1) Each application must include a copy of the final judgment 
certified by the clerk of court, proof of actual service on the 
member, and such other documents as may be required by paragraph 
B.1.b. of this part.
    (2) A garnishment summons or order is insufficient to satisfy 
this final judgment requirement and is not needed in order to apply 
for an involuntary allotment under this appendix.
    (3) Proof of actual service on the military member shall, in the 
case of any default judgment, and may, in other cases, be 
demonstrated by including with the application for involuntary 
allotment a copy of the return of service showing personal service 
on the member or, where service by certified or registered mail is 
permitted by the rules of court, of the return receipt for such mail 
signed by the member. Involuntary allotments will not be authorized 
without evidence of actual service. In cases where jurisdiction was 
obtained by substituted service (such as service by publication or 
by mailing to a last known address), or where the judgment was 
entered on a confession of judgment, no involuntary allotment will 
be authorized and the application will be returned to the creditor.
    b. Applications for involuntary allotment, must contain the 
following information, certifications, and acknowledgment:
    (1) The full name, social security number, and branch of service 
of the military member against whose disposable pay an involuntary 
allotment is sought. Although not required, inclusion of the 
member's current duty station and duty address on the application 
form will facilitate processing of the application.
    (2) The applicant's full name and address. If the applicant is 
not a natural person, the application must be signed by an 
individual with the authority to act in behalf of such entity. If 
the allotment is to be in favor of other than the judgment creditor, 
proof of the right to succeed to the interest of the original 
judgment creditor is required and must be attached to the 
application.
    (3) A certification that the judgment has not been amended, 
superseded, set aside, or satisfied; or, if the judgment has been 
satisfied in part, the extent to which the judgment remains 
unsatisfied.
    (4) A certification that the judgment was issued while the 
member was not on active duty. If the judgment was issued while the 
member was on active duty, a certification that the member was 
present or represented by an attorney of the member's choosing in 
the proceedings, or if the member was not present or so represented, 
a certification that the judgment or other court documents comply 
with the rights of the member under the SSCRA.
    (5) A certification that the member's pay could be garnished 
under applicable State law and Public Law 103-94 if the member were 
a civilian employee.
    (6) A certification that, to the knowledge of the applicant, the 
debt has not been discharged in bankruptcy not has the member filed 
for protection from creditors under the bankruptcy laws of the 
United States.
    (7) A certification that the applicant will promptly notify the 
designated DFAS official to discontinue the involuntary allotment if 
the judgment is satisfied prior to the collection of the total 
amount of the judgment through the involuntary allotment process.
    (8) A certification that if the member overpays the amount owed 
on the judgment, the applicant will refund the amount of overpayment 
to the member within 30 days of discovery or notice of the 
overpayment, whichever is earlier, and that if the applicant fails 
to repay the member, the applicant understands he or she may be 
denied the right to collect by involuntary allotment on other debts 
reduced to judgments.
    (9) A certification that at either the time of application for 
the involuntary allotment or the time the debt was incurred that 
forms the basis for the court judgment, the applicant (and the 
judgment creditor, if different from the applicant) was (were) not 
in an ``off-limits'' status, or had not been determined to be 
practicing unfair consumer or commercial practices detrimental to 
the morale and welfare of service members, pursuant to applicable 
directives of the military services, to include the Armed Forces 
Disciplinary Control Board and Off-Installation Liaison and 
Operations regulation.
    (10) A certification that the applicant (and the judgment 
creditor, if different from the applicant) has (have) complied with 
the Standards of Fairness contained in appendix C to this part.
    (11) Acknowledgment that as a condition of application, the 
applicant agrees that neither the United States, nor any disbursing 
official or Federal employee whose duties include processing 
involuntary allotment applications and payments, shall be liable 
with respect to any payment or failure to make payment from moneys 
due or payable by the United States to any person pursuant to any 
application made in accordance herewith.
    c. The original and three copies of the application and 
supporting documents must be submitted by the applicant to DFAS.
    d. A complete ``application package'' (the DD Form aa, 
``Involuntary Allotment Application'', supporting documentation, and 
three copies of the application and supporting documents), is 
required for processing of any request to establish an involuntary 
allotment pursuant to this part.
    e. The designated DFAS official shall refuse to process any 
application that does not conform with the requirements of this 
part, is unsigned, is incomplete in any material regard, lacks 
required documentation, or contains false certifications. If an 
application is ineligible for processing under this part, the 
application package shall be returned to the applicant with an 
explanation of the deficiency. In cases involving repeated false 
certifications by an applicant, the designated DFAS official may 
refuse to accept or process additional applications by that 
applicant for such period of time as the official deems appropriate 
to deter against such violations in the future.

2. Processing of Involuntary Allotment Applications

    a. Promptly upon receipt of DD Form aa, ``Involuntary Allotment 
Application'', the designated DFAS official shall review the 
``application package'' to ensure compliance with the requirements 
of this part. If the application package is complete, the DFAS 
official shall:
    (1) Determine the location and address of the commander as 
designated by the military service to have authority to give notice 
of the involuntary allotment application to the member against whose 
pay the involuntary allotment application in sought, and, if 
required, to determine whether exigencies of military duty caused 
the absence of the member from the judicial proceeding at which the 
judgment was rendered;
    (2) Mail one copy of the application package to the member and 
two copies of the application package, along with DD Form bb,\3\ 
``Involuntary Allotment Notice and Processing,'' to the commander of 
the military member;
---------------------------------------------------------------------------

    \3\See footnote 1 to section B.1.a. to this appendix.
---------------------------------------------------------------------------

    (3) Within 60 days of mailing of the copies of the application 
package and DD Form bb, ``Involuntary Allotment Notice and 
Processing'', DFAS will provide notice to the member and the 
member's commander that automatic processing of the involuntary 
allotment application will occur if a response is not received 
within 90 calendar days from the original date of mailing. 
Additionally, notice will be provided that automatic processing may 
be delayed if the member's commander provides DFAS notice that the 
member has been granted an extension to respond as authorized by 
this part, the date the response is due, and the reason(s) for the 
extension. In the absence of any additional correspondence from the 
member's commander, DFAS may automatically process the involuntary 
allotment application 15 calendar days after the extended date that 
the commander notified DFAS the response was due.
    (4) Retain the original of the application package.
    b. Upon receipt of an application package and DD Form bb, 
``Involuntary Allotment Notice and Processing,'' from the designated 
DFAS official, the commander (as noted in paragraph B.2.a.(1) of 
this Appendix) will immediately notify the member of the receipt of 
the application, provide the member a copy of the entire application 
package, and counsel the member using and completing Part I of DD 
Form bb concerning the following.
    (1) That an application for the establishment of an involuntary 
allotment has been received and that the member could have up to 15 
percent of disposable pay taken to satisfy the judgment upon which 
the application is based.
    (2) That the member has 15 calendar days from the date of 
receipt of the notice to respond to the commander by completing Part 
II of DD Form bb and submitting any information or documentation 
deemed relevant by the member. That for good cause shown, the 
commander may grant an extension of reasonable time (normally not 
exceeding 30 calendar days) to submit a response. That during times 
of deployment, war, national emergency, or other similar situations, 
extensions exceeding 30 calendar days may be granted.
    (3) That the member's response will either consent to the 
involuntary allotment or contest it.
    (4) That the member may contest the application for the 
following reasons:
    (a) The member's rights under the SSCRA were not complied with 
during the judicial proceeding upon which the involuntary allotment 
application is sought.
    (b) Exigencies of military duty caused the absence of the member 
from appearance in a judicial proceeding forming the basis for the 
judgment upon which the application is sought.
    (c) Information contained in the application is false or 
erroneous in material part.
    (d) The judgment has been fully satisfied, or has been 
superseded or set aside.
    (e) The judgment has been materially amended, or partially 
satisfied. When asserting this defense, the member shall include 
evidence of the amount of the judgment that remains in effect and is 
unsatisfied.
    (f) There is a legal impediment to the establishment of the 
involuntary allotment (for example, the judgment debt has been 
discharged in bankruptcy, or the judgment debtor has filed for 
protection from the creditors under the bankruptcy laws of the 
United States, or the applicant is not the judgment creditor nor a 
proper successor in interest to that creditor).
    (g) Either now or at the time the debt was incurred that forms 
the basis for the court judgment, the applicant (and the judgment 
creditor, if different from the applicant) was (were) in an ``off-
limits'' status, or had been determined to be practicing unfair 
consumer or commercial practices detrimental to the morale and 
welfare of service members, pursuant to applicable directives of the 
military services, to include the Armed Forces Disciplinary Control 
Board and Off-Installation Liaison and Operations regulation.
    (h) Either now or at the time the debt was incurred that forms 
the basis for the court judgment, the applicant (and the judgment 
creditor, if different from the applicant) was (were) acting in a 
manner that violated the Standards of Fairness promulgated as 
Appendix C to this part.
    (i) Or other appropriate reasons which must be clearly specified 
and explained by the member.
    (5) That, if the member contests the involuntary allotment, the 
member shall provide evidence (documentary or otherwise) in support 
thereof. The evidence provided must enable the decisional authority 
to decide whether to approve the application for an involuntary 
allotment. Furthermore, that any evidence submitted by the member 
may be disclosed to the applicant for the involuntary allotment.
    (6) That the member may consult with a legal assistance 
attorney, or a civilian attorney at no expense to the government. 
That if a legal assistance attorney is available, the member should 
immediately arrange for an appointment. That if a legal assistance 
attorney is not available, the member may request form the commander 
an appropriate delay until such time as a legal assistance attorney 
becomes available for consultation (in cases where a response will 
not be submitted back to DFAS within 90 days from the date DFAS 
mailed the copies of the application package, the commander must 
immediately notify the designated DFAS official of the delay, the 
date for an expected response, and the reason for the delay--e.g., 
unavailability of a legal assistance attorney for counseling). 
Additionally, that requests for extensions of time based on the need 
for legal assistance may be denied to members who fail to exercise 
due diligence in seeking such assistance.
    (7) That if the member contests the involuntary allotment on the 
grounds that exigencies of military duty caused the absence of the 
member from the judicial proceeding at which the judgment was 
rendered, then the member's commander will review and make the final 
determination on this contention, and notify the designated DFAS 
official of the commander's decision by completing Part III of DD 
Form bb and forwarding the form to DFAS.
    (8) That if the member contests the involuntary allotment on any 
basis other than exigencies of military duty, the application 
package, DD Form bb, and the member's response, if any, will be 
returned to the designated DFAS official for appropriate action.
    (9) That if the member fails to respond to the commander within 
the time period specified (including any extensions authorized by 
the commander), the commander shall notify the designated DFAS 
official of the member's failure to respond by completing Part III 
of DD Form bb and forwarding the form to DFAS.
    c. After counseling the member (as noted in paragraph B.2.a.(1) 
of this appendix) the commander shall:
    (1) Date and sign Part I of DD Form bb;
    (2) Obtain the member's acknowledgment of counseling by having 
the member sign in the appropriate space on Part I of DD Form bb;
    (3) Determine if the member consents to the involuntary 
allotment or needs the time authorized under this part to review the 
application package and take appropriate action. If the member 
consents to the voluntary allotment, the commander will direct the 
member to appropriately complete Part II of DD Form bb. The 
commander will then forward the DD Form bb to the designated DFAS 
official.
    (4) As soon as possible, but not later than the end of the 
authorized time period for the member to submit his or her response, 
the commander will forward by mail the DD Form bb and any response 
received from member to DFAS.
    (5) If the member fails to respond within the time authorized 
for a response, or asserts that exigencies of military duty caused 
the absence of the member from an appearance in the judicial 
proceeding upon which the Involuntary Allotment Application is 
sought, then the commander will complete Part III of DD Form bb 
prior to forwarding of the form and the member's response, if any, 
to the designated DFAS official.
    (a) In determining whether exigencies of military duty caused 
the absence of the member, the commander at the level designated by 
the Service concerned shall consider the definition of ``exigencies 
of military duty'' contained in this part, the evidence provided by 
the member, any other reasonably available evidence (e.g., a copy of 
the member's personnel record), and whether the military duties in 
question were of such paramount importance that they precluded 
making the member available to attend the judicial proceedings, or 
rendered the member unable to timely respond to process, motions, 
pleadings, or orders of the court.
    (b) The evidentiary standard for a commander to determine 
whether exigencies of military duty caused the absence of the member 
from an appearance in the judicial proceeding upon which the 
Involuntary Allotment Application is sought is ``a preponderance of 
the evidence''.
    (6) Provide the member a copy of the completed DD Form bb within 
five days of mailing to the designated DFAS official.
    d. Upon receipt of DD Form bb, ``Involuntary Allotment Notice 
and Processing,'' and any additional evidence submitted by the 
member, the designated DFAS official will conduct a review of the 
entire application package, DD Form bb, ``Involuntary Allotment 
Notice and Processing,'' and any evidence submitted by the member, 
to determine whether the application for an involuntary allotment 
will be approved and established.
    (1) In those cases where the commander of the member has 
completed Part III of DD Form bb, and determined that exigencies of 
military duty caused the absence of the member from an appearance in 
a judicial proceeding upon which the involuntary allotment 
application is sought, the designated DFAS official shall deny the 
involuntary allotment application. The designated DFAS official will 
provide the applicant written notice of the denial and the reason 
therefor. Additionally, the designated DFAS official shall advise 
the applicant that the responsibility for determining whether 
exigencies of military duty existed belonged to the member's 
commander, that the commander's decision is final, that DFAS has no 
authority to change the commander's decision regarding exigencies of 
military duty, and that any correspondence concerning this issue 
should be addressed to the Service concerned.
    (2) In all cases other than as described in paragraph B.2.d(1) 
of this section, the designated DFAS official shall deny an 
involuntary allotment application, and give written notice to the 
applicant of the reason(s) for denial, if the designated DFAS 
official determines that:
    (a) The member's rights under the SSCRA were not complied with 
during the judicial proceeding upon which the involuntary allotment 
application is sought.
    (b) The pay of a similarly situated civilian employee is not 
subject to garnishment under applicable State law and Public Law 
103-94, and the regulations promulgated thereunder.
    (c) Information contained in the application is false or 
erroneous in material part.
    (d) The judgment has been fully satisfied, or has been 
superseded or set aside.
    (e) The judgment has been materially amended, or partially 
satisfied. In such a case, the request for involuntary allotment may 
be approved only to satisfy that portion of the judgment that 
remains in effect and unsatisfied; the remainder of the request 
shall be denied.
    (f) There is a legal impediment to the establishment of the 
involuntary allotment (for example, the judgment debt has been 
discharged in bankruptcy, or the judgment debtor has filed for 
protection from the creditors under the bankruptcy laws of the 
United States, or the applicant is not the judgment creditor nor a 
proper successor in interest to that creditor).
    (g) Either now or at the time the debt was incurred that forms 
the basis for the court judgment, the applicant (and the judgment 
creditor, if different from the applicant) was (were) in an ``off-
limits'' status, or had been determined to be practicing unfair 
consumer or commercial practices detrimental to the morale and 
welfare of services members, pursuant to applicable directives of 
the military services, to include the Armed Forces Disciplinary 
Control Board and Off-Installation Liaison and Operations 
regulation.
    (h) Either now or at the time the debt was incurred that forms 
the basis for the court judgment, the applicant (and the judgment 
creditor, if different from the applicant) was (were) acting in a 
manner that violated the Standards of Fairness promulgated as 
Appendix A to this part.
    (i) A separate involuntary allotment (pursuant to Public Law 
103-94 and this part) already exists against the member's disposable 
pay.
    (j) Because of spousal and child support garnishments or 
statutory allotments, the member has insufficient funds from which 
to pay the requested involuntary allotment without violating the 
applicable maximum percentage prescribed in 15 U.S.C. 1673.
    (k) The applicant has abused the processing privilege (e.g., an 
applicant, having been notified of the requirements of this part, 
repeatedly refuses or fails to comply therewith).
    (l) Or other appropriate reasons which must be clearly explained 
to the applicant.
    (3) In all cases other than as described in paragraphs B.2.d.(1) 
and (2) of this section, the designated DFAS official shall approve 
the involuntary allotment application and establish an involuntary 
allotment against the disposable pay of the member.
    e. The designated DFAS official shall, at any time after 
establishing an involuntary allotment, cancel or suspend such 
allotment and notify the applicant of that cancellation if a member 
submits legally sufficient proof, by affidavit or otherwise, that 
the allotment should not continue because of the existence of the 
factors enumerated in paragraph B.2.d(2) of this section.

3. Payments

    a. Except as provided in paragraph B.3.c. of this section, 
payment of an involuntary allotment shall commence within 30 days 
after the designated DFAS official has approved the involuntary 
allotment.
    b. Payments under this part shall not be required to be made 
more frequently than once each month, and the designated official 
shall not be required to vary normal pay and disbursement cycles.
    c. If the designated DFAS official receives several applications 
concerning the same member of a Military Service, payments shall be 
satisfied on a first-come, first-served basis.
    d. Payments shall continue until the sum certain amount of the 
judgment is collected. Interest or other costs earned during the 
collection period can be collected only by submitting a separate 
judgment and involuntary allotment application.
    e. If the member is found not to be entitled to money due from 
or payable by the Military Services, the designated official shall 
return the application and advise the applicant that no money is due 
from or payable by the Military Service to the member. When it 
appears that disposable pay available for the purpose of involuntary 
allotment is exhausted temporarily or otherwise unavailable, the 
applicant shall be told why and for how long that money is 
unavailable, if known. If the member separates from active duty, the 
applicant shall be informed that the allotment is discontinued.
    f. The applicant shall notify the designated official promptly 
if the judgment upon which the allotment is based is satisfied, 
vacated, modified, or set aside, and the designated official shall 
adjust or discontinue the involuntary allotment accordingly.
    g. The Comptroller may, in DoD 7000.14-R, Volume 7, Part A, 
designate the priority to be given to such involuntary allotments 
among the deductions and collections taken from members' pay, except 
that they may not give precedence over deductions required to arrive 
at a member's disposable pay or garnishments for alimony and child 
support payments and statutorily required child and spousal support 
allotments. In the absence of a contrary designation by the 
Comptroller, all other lawful deductions (except voluntary 
allotments by the member) and collections shall take precedence over 
these involuntary allotments.

Appendix B to Part 50--Certificate of Compliance

  I certify that the---------------------------------------------------

 upon extending credit-------------------------------------------------
(Name of Creditor)

to---------------------------------------------------------------------

 on (Date)-------------------------------------------------------------

complied with the full disclosure requirements of the Truth-in-
Lending Act and Federal Reserve Board Regulation Z, and the Fair 
Debt Collection Practices Act (or the laws and regulations of State 
of ____________________), and that the attached statement is a true 
copy of the general and specific disclosures provided the obligor as 
required by law.
    I further certify that the Standards of Fairness set forth in 
DoD Directive 1344.9\1\ have been applied to the consumer credit 
transaction to which this form refers. (If the unpaid balance has 
been adjusted as a consequence, the specific adjustments in the 
finance charge and the annual percentage rate should be set forth 
below.)

    \1\See footnote 1 to Sec. 50.4(c).
---------------------------------------------------------------------------

----------------------------------------------------------------------
(Adjustments)

----------------------------------------------------------------------

----------------------------------------------------------------------
(Date of Certification)

----------------------------------------------------------------------
Signature of Creditor or Authorized Representative

----------------------------------------------------------------------
(Street)
----------------------------------------------------------------------
(City, State and Zip Code)

Appendix C to Part 50--Standards of Fairness

    1. No finance charge contracted for, made, or received under any 
contract shall be in excess of the charge which could be made for 
such contract under the law of the place in which the contract is 
signed in the United States by the military member.
    a. In the event a contract is signed with a U.S. company in a 
foreign country, the lowest interest rate of the State or States in 
which the company is chartered or does business shall apply.
    b. However, interest rates and service charges applicable to 
overseas military banking facilities will be as established by the 
Department of Defense.
    2. No contract or loan agreement shall provide for an attorney's 
fee in the event of default unless suit is filed, in which event the 
fee provided in the contract shall not exceed 20 percent of the 
obligation found due. No attorney fees shall be authorized if the 
attorney is a salaried employee of the holder.
    3. In loan transactions, defenses which the debtor may have 
against the original lender or its agent shall be good against any 
subsequent holder of the obligation. In credit transactions, 
defenses against the seller or its agent shall be good against any 
subsequent holder of the obligation, provided that the holder had 
actual knowledge of the defense or under conditions where reasonable 
inquiry would have apprised the holder of this fact.
    4. The military member shall have the right to remove any 
security for the obligation beyond State or national boundaries if 
the military member of the family moves beyond such boundaries under 
military orders and notifies the creditor, in advance of the 
removal, of the new address where the security will be located. 
Removal of the security shall not accelerate payment of the 
obligation.
    5. No late charge shall be made in excess of 5 percent of the 
late payment, or $5,00, whichever is the lesser amount, or as 
provided by law or applicable regulatory agency determination. Only 
one late charge may be made for any tardy installment. Late charges 
will not be levied where an allotment has been timely filed, but 
payment of the allotment has been delayed. Late charges by overseas 
banking facilities are a matter of contract with the Department of 
Defense.
    6. The obligation may be paid in full at any time or through 
accelerated payments of any amount. There shall be no penalty for 
repayment. In the event of prepayment, that portion of the finance 
charges which has inured to the benefit of the seller or creditor 
shall be prorated on the basis of the charges which would have been 
ratably payable had finance charges been calculated and payable as 
equal periodic payments over the terms of the contract, and only the 
prorated amount to the date of prepayment shall be due. As an 
alternative, the ``Rule of 78'' may be applied.
    7. If a charge is made for loan insurance protection, it must be 
evidenced by delivery of a policy or certificate of insurance to the 
military member within 30 days.
    8. If the loan or contract agreement provides for payments in 
installation, each payment other than the down payment, shall be in 
equal or substantially equal amount, and installments shall be 
successive and of equal or substantially equal duration.
    9. If the security for the debt is repossessed and sold in order 
to satisfy or reduce the debt, the repossession and resale will be 
governed by the laws of the State in which the security is 
requested.
    10. A contract for personal goods and services may be terminated 
at any time before delivery of the goods or services without charge 
to the purchaser. However, if goods made to the special order of the 
purchaser result in preproduction costs, or require preparation for 
delivery, such additional costs will be listed in the order form or 
contract.
    a. No termination charge will be made in excess of this amount. 
Contracts for delivery at future intervals may be terminated as to 
the undelivered portion.
    b. The purchaser shall be chargeable only for that proportion of 
the total cost which the goods or services delivered bear to the 
total goods called for by the contract. This is in addition to the 
right to rescind certain credit transactions, involving a security 
interest in real estate provided by Public Law 90-321 and Federal 
Reserve Board Regulation Z (12 CFR part 226).

    Dated: April 20, 1994.
L.M. Bynum,
Alternate OSD Federal Register, Liaison Officer, Department of Defense.
[FR Doc. 94-10070 Filed 4-25-94; 8:45 am]
BILLING CODE 5000-04-M