[Federal Register Volume 59, Number 92 (Friday, May 13, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-11442]


[[Page Unknown]]

[Federal Register: May 13, 1994]


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FARM CREDIT SYSTEM INSURANCE CORPORATION

12 CFR Part 1408

 

Collection of Claims Owed the United States

AGENCY: Farm Credit System Insurance Corporation.

ACTION: Final rule.

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SUMMARY: The Farm Credit System Insurance Corporation (Corporation), by 
the Farm Credit System Insurance Corporation Board, adopts final 
regulations implementing the Debt Collection Act of 1982. This action 
provides procedures for the Corporation to administer claims owed to 
the United States arising from activities under Corporation 
jurisdiction. The Corporation is required by law to issue these 
regulations.

EFFECTIVE DATE: June 13, 1994.

FOR FURTHER INFORMATION CONTACT: Philip J. Shebest, Senior Attorney, 
Office of General Counsel, Farm Credit System Insurance Corporation, 
McLean, VA 22102-0826, (703) 883-4020, TDD (703) 883-4444.

SUPPLEMENTARY INFORMATION: These regulations implement the Federal 
Claims Collection Act of 1966, as amended by the Debt Collection Act of 
1982 (Pub. L. 97-365, 96 Stat. 1749) (31 U.S.C. 3701-3719 and 5 U.S.C. 
5114). In addition, these regulations supplement the regulations 
published jointly by the General Accounting Office and the Department 
of Justice (4 CFR parts 101-105).
    The proposed regulations were published on November 8, 1993, 58 FR 
59215. The Corporation received no public comments. In addition, the 
Office of Personnel Management, on April 1, 1994, approved the proposed 
regulations for publication as final regulations in accordance with 
section 8 (1) of Executive Order 11609, as redesignated by Executive 
Order 12107, and 5 CFR 550.1105. As a result, the proposed regulations 
are being adopted in final form without any changes in the regulatory 
text.

List of Subjects in 12 CFR Part 1408

    Government, Claims, Collection.

    For the reasons stated in the preamble, part 1408 of chapter XIV, 
title 12 of the Code of Federal Regulations is added to read as 
follows:

PART 1408--COLLECTION OF CLAIMS OWED THE UNITED STATES

Subpart A--Administrative Collection of Claims

Sec.
1408.1  Authority.
1408.2  Applicability.
1408.3  Definitions.
1408.4  Delegation of authority.
1408.5  Responsibility for collection.
1408.6  Demand for payment.
1408.7  Right to inspect and copy records.
1408.8  Right to offer to repay claim.
1408.9  Right to agency review.
1408.10  Review procedures.
1408.11  Special review.
1408.12  Charges for interest, administrative costs, and penalties.
1408.13  Contracting for collection services.
1408.14  Reporting of credit information.
1408.15  Credit report.

Subpart B--Administrative Offset

1408.20  Applicability.
1408.21  Collection by offset.
1408.22  Notice requirements before offset.
1408.23  Right to review of claim.
1408.24  Waiver of procedural requirements.
1408.25  Coordinating offset with other Federal agencies.
1408.26  Stay of offset.
1408.27  Offset against amounts payable from Civil Service 
Retirement and Disability Fund.

Subpart C--Offset Against Salary

1408.35  Purpose.
1408.36  Applicability of regulations.
1408.37  Definitions.
1408.38  Waiver requests and claims to the General Accounting 
Office.
1408.39  Procedures for salary offset.
1408.40  Refunds.
1408.41  Requesting current paying agency to offset salary.
1408.42  Responsibility of the Corporation as the paying agency.
1408.43  Nonwaiver of rights by payments.

    Authority: Sec. 5.58 of the Farm Credit Act (12 U.S.C. 2277a-7); 
31 U.S.C. 3701-3719; 5 U.S.C. 5514; 4 CFR parts 101-105; 5 CFR part 
550.

Subpart A--Administrative Collection of Claims


Sec. 1408.1  Authority.

    The regulations of this part are issued under the Federal Claims 
Collection Act of 1966, as amended by the Debt Collection Act of 1982, 
31 U.S.C. 3701-3719 and 5 U.S.C. 5514, and in conformity with the joint 
regulations issued under that Act by the General Accounting Office and 
the Department of Justice (joint regulations) prescribing standards for 
administrative collection, compromise, suspension, and termination of 
agency collection actions, and referral to the General Accounting 
Office and to the Department of Justice for litigation of civil claims 
for money or property owed to the United States (4 CFR parts 101-105).


Sec. 1408.2  Applicability.

    This part applies to all claims of indebtedness due and owing to 
the United States and collectible under procedures authorized by the 
Federal Claims Collection Act of 1966, as amended by the Debt 
Collection Act of 1982. The joint regulations and this part do not 
apply to conduct in violation of antitrust laws, tax claims, claims 
between Federal agencies, or to any claim which appears to involve 
fraud, presentation of a false claim, or misrepresentation on the part 
of the debtor or any other party having an interest in the claim, 
unless the Justice Department authorizes the Farm Credit System 
Insurance Corporation, pursuant to 4 CFR 101.3, to handle the claim in 
accordance with the provisions of 4 CFR parts 101 through 105. 
Additionally, this part does not apply to Farm Credit System Insurance 
Corporation's premiums regulations under part 1410 of this chapter.


Sec. 1408.3  Definitions.

    In this part (except where the term is defined elsewhere in this 
part), the following definitions shall apply:
    (a) Administrative offset or offset, as defined in 31 U.S.C. 
3701(a)(1), means withholding money payable by the United States 
Government to, or held by the Government for, a person to satisfy a 
debt the person owes the Government.
    (b) Agency means a department, agency, or instrumentality in the 
executive or legislative branch of the Government.
    (c) Claim or debt means money or property owed by a person or 
entity to an agency of the Federal Government. A ``claim'' or ``debt'' 
includes amounts due the Government from loans insured by or guaranteed 
by the United States and all other amounts due from fees, leases, 
rents, royalties, services, sales of real or personal property, 
overpayment, penalties, damages, interest, and fines.
    (d) Claim certification means a creditor agency's written request 
to a paying agency to effect an administrative offset.
    (e) Corporation means the Farm Credit System Insurance Corporation.
    (f) Creditor agency means an agency to which a claim or debt is 
owed.
    (g) Debtor means the person or entity owing money to the Federal 
Government.
    (h) Hearing official means an individual who is responsible for 
reviewing a claim under Sec. 1408.10.
    (i) Paying agency means an agency of the Federal Government owing 
money to a debtor against which an administrative or salary offset can 
be effected.
    (j) Salary offset means an administrative offset to collect a debt 
under 5 U.S.C. 5514 by deductions at one or more officially established 
pay intervals from the current pay account of a debtor.


Sec. 1408.4  Delegation of authority.

    The Corporation official(s) designated by the Chairman of the Farm 
Credit System Insurance Corporation are authorized to perform all 
duties which the Chairman is authorized to perform under these 
regulations, the Federal Claims Collection Act of 1966, as amended, and 
the joint regulations issued under that Act.


Sec. 1408.5  Responsibility for collection.

    (a) The collection of claims shall be aggressively pursued in 
accordance with the provisions of the Federal Claims Collection Act of 
1966, as amended, the joint regulations issued under that Act, and 
these regulations. Debts owed to the United States, together with 
charges for interest, penalties, and administrative costs, should be 
collected in one lump sum unless otherwise provided by law. If a debtor 
requests installment payments, the debtor, as requested by the 
Corporation, shall provide sufficient information to demonstrate that 
the debtor is unable to pay the debt in one lump sum. When appropriate, 
the Corporation shall arrange an installment payment schedule. Claims 
which cannot be collected directly or by administrative offset shall be 
either written off as administratively uncollectible or referred to the 
General Counsel for further consideration.
    (b) The Chairman, or designee of the Chairman, may compromise 
claims for money or property arising out of the activities of the 
Corporation, where the claim (exclusive of charges for interest, 
penalties, and administrative costs) does not exceed $100,000. When the 
claim exceeds $100,000 (exclusive of charges for interest, penalties, 
and administrative costs), the authority to accept a compromise rests 
solely with the Department of Justice. The standards governing the 
compromise of claims are set forth in 4 CFR part 103.
    (c) The Chairman, or designee of the Chairman, may suspend or 
terminate the collection of claims which do not exceed $100,000 
(exclusive of charges for interest, penalties, and administrative 
costs) after deducting the amount of any partial payments or 
collections. If, after deducting the amount of any partial payments or 
collections, a claim exceeds $100,000 (exclusive of charges for 
interest, penalties, and administrative costs), the authority to 
suspend or terminate rests solely with the Department of Justice. The 
standards governing the suspension or termination of claim collections 
are set forth in 4 CFR part 104.
    (d) The Corporation shall refer claims to the Department of Justice 
for litigation or to the General Accounting Office (GAO) for claims 
arising from audit exceptions taken by the GAO to payments made by the 
Corporation in accordance with 4 CFR part 105.


Sec. 1408.6  Demand for payment.

    (a) A total of three progressively stronger written demands at not 
more than 30-day intervals should normally be made upon a debtor, 
unless a response or other information indicates that additional 
written demands would either be unnecessary or futile. When necessary 
to protect the Government's interest, written demands may be preceded 
by other appropriate actions under Federal law, including immediate 
referral for litigation and/or administrative offset.
    (b) The initial demand for payment shall be in writing and shall 
inform the debtor of the following:
    (1) The amount of the debt, the date it was incurred, and the facts 
upon which the determination of indebtedness was made;
    (2) The payment due date, which shall be 30 calendar days from the 
date of mailing or hand delivery of the initial demand for payment;
    (3) The right of the debtor to inspect and copy the records of the 
agency related to the claim or to receive copies if personal inspection 
is impractical. The debtor shall be informed that the debtor may be 
assessed for the cost of copying the documents in accordance with 
Sec. 1408.7;
    (4) The right of the debtor to obtain a review of the Corporation's 
determination of indebtedness;
    (5) The right of the debtor to offer to enter into a written 
agreement with the agency to repay the amount of the claim. The debtor 
shall be informed that the acceptance of such an agreement is 
discretionary with the agency;
    (6) That charges for interest, penalties, and administrative costs 
will be assessed against the debtor, in accordance with 31 U.S.C. 3717, 
if payment is not received by the payment due date;
    (7) That if the debtor has not entered into an agreement with the 
Corporation to pay the debt, has not requested the Corporation to 
review the debt, or has not paid the debt by the payment due date, the 
Corporation intends to collect the debt by all legally available means, 
which may include initiating legal action against the debtor, referring 
the debt to a collection agency for collection, collecting the debt by 
offset, or asking other Federal agencies for assistance in collecting 
the debt by offset;
    (8) The name and address of the Corporation official to whom the 
debtor shall send all correspondence relating to the debt; and
    (9) Other information, as may be appropriate.
    (c) If, prior to, during, or after completion of the demand cycle, 
the Corporation determines to collect the debt by either administrative 
or salary offset, the Corporation shall follow, as applicable, the 
requirements for a Notice of Intent to Collect by Administrative Offset 
or a Notice of Intent to Collect by Salary Offset set forth in 
Sec. 1408.22.
    (d) If no response to the initial demand for payment is received by 
the payment due date, the Corporation shall take further action under 
this part, under the Federal Claims Collection Act of 1966, as amended, 
under the joint regulations (4 CFR parts 101-105), or under any other 
applicable State or Federal law. These actions may include reports to 
credit bureaus, referrals to collection agencies, termination of 
contracts, debarment, and salary or administrative offset.


Sec. 1408.7  Right to inspect and copy records.

    The debtor may inspect and copy the Corporation records related to 
the claim. The debtor shall give the Corporation reasonable advanced 
notice that he/she intends to inspect and copy the records involved. 
The debtor shall pay copying costs unless they are waived by the 
Corporation. Copying costs shall be assessed pursuant to Sec. 1402.22 
of this chapter.


Sec. 1408.8  Right to offer to repay claim.

    (a) The debtor may offer to enter into a written agreement with the 
Corporation to repay the amount of the claim. The acceptance of such an 
offer and the decision to enter into such a written agreement is at the 
discretion of the Corporation.
    (b) If the debtor requests a repayment arrangement because payment 
of the amount due would create a financial hardship, the Corporation 
shall analyze the debtor's financial condition. The Corporation may 
enter into a written agreement with the debtor permitting the debtor to 
repay the debt in installments if the Corporation determines, in its 
sole discretion, that payment of the amount due would create an undue 
financial hardship for the debtor. The written agreement shall set 
forth the amount and frequency of installment payments and shall, in 
accordance with Sec. 1408.12, provide for the imposition of charges for 
interest, penalties, and administrative costs unless waived by the 
Corporation.
    (c) The written agreement may require the debtor to execute a 
confess-judgment note when the total amount of the deferred 
installments will exceed $750. The Corporation shall provide the debtor 
with a written explanation of the consequences of signing a confess-
judgment note. The debtor shall sign a statement acknowledging receipt 
of the written explanation. The statement shall recite that the written 
explanation was read and understood before execution of the note and 
that the debtor signed the note knowingly and voluntarily. 
Documentation of these procedures will be maintained in the 
Corporation's file on the debtor.


Sec. 1408.9  Right to agency review.

    (a) If the debtor disputes the claim, the debtor may request a 
review of the Corporation's determination of the existence of the debt 
or of the amount of the debt. If only part of the claim is disputed, 
the undisputed portion should be paid by the payment due date.
    (b) To obtain a review, the debtor shall submit a written request 
for review to the Corporation official named in the initial demand 
letter, within 15 calendar days after receipt of the letter. The 
debtor's request for review shall state the basis on which the claim is 
disputed.
    (c) The Corporation shall promptly notify the debtor, in writing, 
that the Corporation has received the request for review. The 
Corporation shall conduct its review of the claim in accordance with 
Sec. 1408.10.
    (d) Upon completion of its review of the claim, the Corporation 
shall notify the debtor whether the Corporation's determination of the 
existence or amount of the debt has been sustained, amended, or 
canceled. The notification shall include a copy of the written decision 
issued by the hearing official pursuant to Sec. 1408.10(e). If the 
Corporation's determination is sustained, this notification shall 
contain a provision which states that the Corporation intends to 
collect the debt by all legally available means, which may include 
initiating legal action against the debtor, referring the debt to a 
collection agency for collection, collecting the debt by offset, or 
asking other Federal agencies for assistance in collecting the debt by 
offset.


Sec. 1408.10  Review procedures.

    (a) Unless an oral hearing is required by Sec. 1408.23(d), the 
Corporation's review shall be a review of the written record of the 
claim.
    (b) If an oral hearing is required under Sec. 1408.23(d) the 
Corporation shall provide the debtor with a reasonable opportunity for 
such a hearing. The oral hearing, however, shall not be an adversarial 
adjudication and need not take the form of a formal evidentiary 
hearing. All significant matters discussed at the hearing, however, 
will be carefully documented.
    (c) Any review required by this part, whether a review of the 
written record or an oral hearing, shall be conducted by a hearing 
official. In the case of a salary offset, the hearing official shall 
not be under the supervision or control of the Chairman of the Farm 
Credit System Insurance Corporation.
    (d) The Corporation may be represented by legal counsel. The debtor 
may represent himself or herself or may be represented by an individual 
of the debtor's choice and at the debtor's expense.
    (e) The hearing official shall issue a final written decision based 
on documentary evidence and, if applicable, information developed at an 
oral hearing. The written decision shall be issued as soon as 
practicable after the review but not later than 60 days after the date 
on which the request for review was received by the Corporation, unless 
the debtor requests a delay in the proceedings. A delay in the 
proceedings shall be granted if the hearing official determines, in his 
or her sole discretion, that there is good cause to grant the delay. If 
a delay is granted, the 60-day decision period shall be extended by the 
number of days by which the review was postponed.
    (f) Upon issuance of the written opinion, the Corporation shall 
promptly notify the debtor of the hearing official's decision. Said 
notification shall include a copy of the written decision issued by the 
hearing official pursuant to paragraph (e) of this section.


Sec. 1408.11  Special review.

    (a) An employee subject to salary offset, under subpart C of this 
part, or a voluntary repayment agreement, may, at any time, request a 
special review by the Corporation of the amount of the salary offset or 
voluntary repayment, based on materially changed circumstances such as, 
but not limited to, catastrophic illness, divorce, death, or 
disability.
    (b) To determine whether an offset would prevent the employee from 
meeting essential subsistence expenses (costs incurred for food, 
housing, clothing, transportation, and medical care), the employee 
shall submit a detailed statement and supporting documents for the 
employee, his or her spouse, and dependents indicating:
    (1) Income from all sources;
    (2) Assets;
    (3) Liabilities;
    (4) Number of dependents;
    (5) Expenses for food, housing, clothing, and transportation;
    (6) Medical expenses; and
    (7) Exceptional expenses, if any.
    (c) If the employee requests a special review under this section, 
the employee shall file an alternative proposed offset or payment 
schedule and a statement, with supporting documents, showing why the 
current salary offset or payments result in an extreme financial 
hardship to the employee.
    (d) The Corporation shall evaluate the statement and supporting 
documents, and determine whether the original offset or repayment 
schedule imposes an undue financial hardship on the employee. The 
Corporation shall notify the employee in writing of such determination, 
including, if appropriate, a revised offset or payment schedule.


Sec. 1408.12  Charges for interest, administrative costs, and 
penalties.

    (a) Except as provided in paragraph (d) of this section, the 
Corporation shall:
    (1) Assess interest on unpaid claims;
    (2) Assess administrative costs incurred in processing and handling 
overdue claims; and
    (3) Assess penalty charges not to exceed 6 percent a year on any 
part of a debt more than 90 days past due.
    The imposition of charges for interest, administrative costs, and 
penalties shall be made in accordance with 31 U.S.C. 3717.
    (b)(1) Interest shall accrue from the date of mailing or hand 
delivery of the initial demand for payment or the Notice of Intent to 
Collect by either Administrative or Salary Offset if the amount of the 
claim is not paid within 30 days from the date of mailing or hand 
delivery of the initial demand or notice.
    (2) The 30-day period may be extended on a case-by-case basis if 
the Corporation reasonably determines that such action is appropriate. 
Interest shall only accrue on the principal of the claim and the 
interest rate shall remain fixed for the duration of the indebtedness, 
except, as provided in paragraph (c) of this section, in cases where a 
debtor has defaulted on a repayment agreement and seeks to enter into a 
new agreement, or if the Corporation reasonably determines that a 
higher rate is necessary to protect the interests of the United States.
    (c) If a debtor defaults on a repayment agreement and seeks to 
enter into a new agreement, the Corporation may assess a new interest 
rate on the unpaid claim. In addition, charges for interest, 
administrative costs, and penalties which accrued but were not 
collected under the original repayment agreement shall be added to the 
principal of the claim to be paid under the new repayment agreement. 
Interest shall accrue on the entire principal balance of the claim, as 
adjusted to reflect any increase resulting from the addition of these 
charges.
    (d) The Corporation may waive charges for interest, administrative 
costs, and/or penalties if it determines that: (1) The debtor is unable 
to pay any significant sum toward the claim within a reasonable period 
of time;
    (2) Collection of charges for interest, administrative costs, and/
or penalties would jeopardize collection of the principal of the claim;
    (3) Collection of charges for interest, administrative costs, or 
penalties would be against equity and good conscience; or
    (4) It is otherwise in the best interest of the United States, 
including the situation where an installment payment agreement or 
offset is in effect.


Sec. 1408.13  Contracting for collection services.

    The Chairman, or designee of the Chairman, may contract for 
collection services in accordance with 31 U.S.C. 3718 and 4 CFR 102.6 
to recover debts.


Sec. 1408.14  Reporting of credit information.

    The Chairman, or designee of the Chairman, may disclose to a 
consumer reporting agency information that an individual is responsible 
for a debt owed to the United States. Information will be disclosed to 
reporting agencies in accordance with the terms and conditions of 
agreements entered into between the Corporation and the reporting 
agencies. The terms and conditions of such agreements shall specify 
that all of the rights and protection afforded to the debtor under 31 
U.S.C. 3711(f) have been fulfilled. The Corporation shall notify each 
consumer reporting agency, to which a claim was disclosed, when the 
debt has been satisfied.


Sec. 1408.15  Credit report.

    In order to aid the Corporation in making appropriate 
determinations regarding the collection and compromise of claims; the 
collection of charges for interest, administrative costs, and 
penalties; the use of administrative offset; the use of other 
collection methods; and the likelihood of collecting the claim, the 
Corporation may institute, consistent with the provisions of the Fair 
Credit Reporting Act (15 U.S.C. 1681, et seq.), a credit investigation 
of the debtor immediately following a determination that the claim 
exists.

Subpart B--Administrative Offset


Sec. 1408.20  Applicability.

    (a) The provisions of this subpart shall apply to the collection of 
debts by administrative [or salary] offset under 31 U.S.C. 3716, 5 
U.S.C. 5514, or other statutory or common law.
    (b) Offset shall not be used to collect a debt more than 10 years 
after the Government's right to collect the debt first accrued, unless 
facts material to the Government's right to collect the debt were not 
known and could not reasonably have been known by the official or 
officials of the Government who were charged with the responsibility of 
discovering and collecting such debt.
    (c) Offset shall not be used with respect to: (1) Debts owed by 
other agencies of the United States or by any State or local 
government;
    (2) Debts arising under or payments made under the Social Security 
Act, the Internal Revenue Code of 1986, as amended, or tariff laws of 
the United States; or
    (3) Any case in which collection by offset of the type of debt 
involved is explicitly provided for or prohibited by another statute.
    (d) Unless otherwise provided by contract or law, debts or payments 
which are not subject to offset under 31 U.S.C. 3716 or 5 U.S.C. 5514 
may be collected by offset if such collection is authorized under 
common law or other applicable statutory authority.


Sec. 1408.21  Collection by offset.

    (a) Collection of a debt by administrative [or salary] offset shall 
be accomplished in accordance with the provisions of these regulations, 
4 CFR 102.3, and 5 CFR part 550, subpart K. It is not necessary for the 
debt to be reduced to judgment or to be undisputed for offset to be 
used.
    (b) The Chairman, or designee of the Chairman, may determine that 
it is feasible to collect a debt to the United States by offset against 
funds payable to the debtor.
    (c) The feasibility of collecting a debt by offset will be 
determined on a case-by-case basis. This determination shall be made by 
considering all relevant factors, including the following: (1) The 
degree to which the offset can be accomplished in accordance with law. 
This determination should take into consideration relevant statutory, 
regulatory, and contractual requirements;
    (2) The degree to which the Corporation is certain that its 
determination of the existence and amount of the debt is correct;
    (3) The practicality of collecting the debt by offset. The cost, in 
time and money, of collecting the debt by offset and the amount of 
money which can reasonably be expected to be recovered through offset 
will be relevant to this determination; and
    (4) Whether the use of offset will substantially interfere with or 
defeat the purpose of a program authorizing payments against which the 
offset is contemplated. For example, under a grant program in which 
payments are made in advance of the grantee's performance, the 
imposition of offset against such a payment may be inappropriate.
    (d) The collection of a debt by offset may not be feasible when 
there are circumstances which would indicate that the likelihood of 
collection by offset is less than probable.
    (e) The offset will be effected 31 days after the debtor receives a 
Notice of Intent to Collect by Administrative Offset (or Notice of 
Intent to Collect by Salary Offset if the offset is a salary offset), 
or upon the expiration of a stay of offset, unless the Corporation 
determines under Sec. 1408.24 that immediate action is necessary.
    (f) If the debtor owes more than one debt, amounts recovered 
through offset may be applied to them in any order. Applicable statutes 
of limitation would be considered before applying the amounts recovered 
to any debts owed.


Sec. 1408.22  Notice requirements before offset.

    (a) Except as provided in Sec. 1408.24, the Corporation will 
provide the debtor with 30 calendar days' written notice that unpaid 
debt amounts shall be collected by administrative [or salary] offset 
(Notice of Intent to Collect by Administrative [or Salary] Offset) 
before the Corporation imposes offset against any money that is to be 
paid to the debtor.
    (b) The Notice of Intent to Collect by Administrative [or Salary] 
Offset shall be delivered to the debtor by hand or by mail and shall 
provide the following information:
    (1) The amount of the debt, the date it was incurred, and the facts 
upon which the determination of indebtedness was made;
    (2) In the case of an administrative offset, the payment due date, 
which shall be 30 calendar days from the date of mailing or hand 
delivery of the Notice;
    (3) In the case of a salary offset:
    (i) The Corporation's intention to collect the debt by means of 
deduction from the employee's current disposable pay account until the 
debt and all accumulated interest is paid in full; and
    (ii) The amount, frequency, proposed beginning date, and duration 
of the intended deductions;
    (4) The right of the debtor to inspect and copy the records of the 
Corporation related to the claim or to receive copies if personal 
inspection is impractical. The debtor shall be informed that he/she 
shall be assessed for the cost of copying the documents in accordance 
with Sec. 1408.7 of this part;
    (5) The right of the debtor to obtain a review of, and to request a 
hearing, on the Corporation's determination of indebtedness, the 
propriety of collecting the debt by offset, and, in the case of salary 
offset, the propriety of the proposed repayment schedule (i.e., the 
percentage of disposable pay to be deducted each pay period). The 
debtor shall be informed that to obtain a review, the debtor shall 
deliver a written request for a review to the Corporation official 
named in the Notice, within 15 calendar days after the debtor's receipt 
of the Notice. In the case of a salary offset, the debtor shall also be 
informed that the review shall be conducted by an official arranged for 
by the Corporation who shall be a hearing official not under the 
control of the Chairman of the Farm Credit System Insurance 
Corporation, or an administrative law judge;
    (6) That the filing of a petition for hearing within 15 calendar 
days after receipt of the Notice will stay the commencement of 
collection proceedings;
    (7) That a final decision on the hearing (if one is requested) will 
be issued at the earliest practical date, but not later than 60 days 
after the filing of the written request for review unless the employee 
requests, and the hearing official grants, a delay in the proceedings;
    (8) The right of the debtor to offer to enter into a written 
agreement with the Corporation to repay the amount of the claim. The 
debtor shall be informed that the acceptance of such an agreement is 
discretionary with the Corporation;
    (9) That charges for interest, penalties, and administrative costs 
shall be assessed against the debtor, in accordance with 31 U.S.C. 
3717, if payment is not received by the payment due date. The debtor 
shall be informed that such assessments must be made unless excused in 
accordance with the Federal Claims Collection Standards (4 CFR parts 
103 and 104);
    (10) The amount of accrued interest and the amount of any other 
penalties or administrative costs which may have been added to the 
principal debt;
    (11) That if the debtor has not entered into an agreement with the 
Corporation to pay the debt, has not requested the Corporation to 
review the debt, or has not paid the debt prior to the date on which 
the offset is to be imposed, the Corporation intends to collect the 
debt by administrative [or salary] offset or by requesting other 
Federal agencies for assistance in collecting the debt by offset. The 
debtor shall be informed that the offset shall be imposed against any 
funds that might become available to the debtor, until the principal 
debt and all accumulated interest and other charges are paid in full;
    (12) The date on which the offset will be imposed, which shall be 
31 calendar days from the date of mailing or hand delivery of the 
Notice. The debtor shall be informed that the Corporation reserves the 
right to impose an offset prior to this date if the Corporation 
determines that immediate action is necessary;
    (13) That any knowingly false or frivolous statements, 
representations, or evidence may subject the debtor to:
    (i) Penalties under the False Claims Act, 31 U.S.C. 3729 through 
3731, or any other applicable statutory authority;
    (ii) Criminal penalties under 18 U.S.C. 286, 287, 1001, and 1002, 
or any other applicable statutory authority; and, with regard to 
employees,
    (iii) Disciplinary procedures appropriate under 5 U.S.C. chapter 
75; 5 CFR part 752, or any other applicable statute or regulation;
    (14) The name and address of the Corporation official to whom the 
debtor shall send all correspondence relating to the debt or the 
offset;
    (15) Any other rights and remedies available to the debtor under 
statutes or regulations governing the program for which the collection 
is being made;
    (16) That unless there are applicable contractual or statutory 
provisions to the contrary, amounts paid on or deducted for the debt, 
which are later waived or found not owed to the United States, will be 
promptly refunded to the employee; and
    (17) Other information, as may be appropriate.
    (c) When the procedural requirements of this section have been 
provided to the debtor in connection with the same debt or under some 
other statutory or regulatory authority, the Corporation is not 
required to duplicate those requirements before effecting offset.


Sec. 1408.23  Right to review of claim.

    (a) If the debtor disputes the claim, the debtor may request a 
review of the Corporation's determination of the existence of the debt, 
the amount of the debt, the propriety of collecting the debt by offset, 
and in the case of salary offset, the propriety of the proposed 
repayment schedule. If only part of the claim is disputed, the 
undisputed portion should be paid by the payment due date.
    (b) To obtain a review, the debtor shall submit a written request 
for review to the Corporation official named in the Notice of Intent to 
Collect by Administrative [or Salary] Offset within 15 calendar days 
after receipt of the notice. The debtor's written request for review 
shall state the basis on which the claim is disputed and shall specify 
whether the debtor requests an oral hearing or a review of the written 
record of the claim. If an oral hearing is requested, the debtor shall 
explain in the request why the matter cannot be resolved by a review of 
the documentary evidence alone.
    (c) The Corporation shall promptly notify the debtor, in writing, 
that the Corporation has received the request for review. The 
Corporation shall conduct its review of the claim in accordance with 
Sec. 1408.10.
    (d) The Corporation's review of the claim, under this section, 
shall include providing the debtor with a reasonable opportunity for an 
oral hearing if:
    (1) An applicable statute authorizes or requires the Corporation to 
consider waiver of the indebtedness, the debtor requests waiver of the 
indebtedness, and the waiver determination turns on an issue of 
credibility or veracity; or
    (2) The debtor requests reconsideration of the debt and the 
Corporation determines that the question of the indebtedness cannot be 
resolved by reviewing the documentary evidence; for example, when the 
validity of the debt turns on an issue of credibility or veracity.
    (e) A debtor waives the right to a hearing and will have his or her 
debt offset in accordance with the proposed offset schedule if the 
debtor:
    (1) Fails to file a written request for review within the timeframe 
set forth in paragraph (b) of this section, unless the Corporation 
determines that the delay was the result of circumstances beyond his or 
her control; or
    (2) Fails to appear at an oral hearing of which he or she was 
notified unless the hearing official determines that the failure to 
appear was due to circumstances beyond the employee's control.
    (f) Upon completion of its review of the claim, the Corporation 
shall notify the debtor whether the Corporation's determination of the 
existence or amount of the debt has been sustained, amended, or 
canceled. The notification shall include a copy of the written decision 
issued by the hearing official, pursuant to Sec. 1408.10(e). If the 
Corporation's determination is sustained, this notification shall 
contain a provision which states that the Corporation intends to 
collect the debt by offset or by requesting other Federal agencies for 
assistance in collecting the debt.
    (g) When the procedural requirements of this section have been 
provided to the debtor in connection with the same debt or under some 
other statutory or regulatory authority, the Corporation is not 
required to duplicate those requirements before effecting offset.


Sec. 1408.24  Waiver of procedural requirements.

    (a) The Corporation may impose offset against a payment to be made 
to a debtor prior to the completion of the procedures required by this 
part, if:
    (1) Failure to impose the offset would substantially prejudice the 
Government's ability to collect the debt; and
    (2) The timing of the payment against which the offset will be 
imposed does not reasonably permit the completion of those procedures.
    (b) The procedures required by this part shall be complied with 
promptly after the offset is imposed. Amounts recovered by offset, 
which are later found not to be owed to the Government, shall be 
promptly refunded to the debtor.


Sec. 1408.25  Coordinating offset with other Federal agencies.

    (a)(1) Any creditor agency which requests the Corporation to impose 
an offset against amounts owed to the debtor shall submit to the 
Corporation a claim certification which meets the requirements of this 
paragraph. The Corporation shall submit the same certification to any 
agency that the Corporation requests to effect an offset.
    (2) The claim certification shall be in writing. It shall certify 
the debtor owes the debt and that all of the applicable requirements of 
31 U.S.C. 3716 and 4 CFR part 102 have been met. If the intended offset 
is to be a salary offset, a claim certification shall instead certify 
that the debtor owes the debt and that the applicable requirements of 5 
U.S.C. 5514 and 5 CFR part 550, subpart K, have been met.
    (3) A certification that the debtor owes the debt shall state the 
amount of the debt, the factual basis supporting the determination of 
indebtedness, and the date on which payment of the debt was due. A 
certification that the requirements of 31 U.S.C. 3716 and 4 CFR part 
102 have been met shall include a statement that the debtor has been 
sent a Notice of Intent to Collect by Administrative Offset at least 31 
calendar days prior to the date of the intended offset or a statement 
that pursuant to 4 CFR 102.3(b)(5) said Notice was not required to be 
sent. A certification that the requirements of 5 U.S.C. 5514 and 5 CFR 
part 550, subpart K, have been met shall include a statement that the 
debtor has been sent a Notice of Intent to Collect by Salary Offset at 
least 31 calendar days prior to the date of the intended offset or a 
statement that pursuant to 4 CFR 102.3(b)(5) said Notice was not 
required to be sent.
    (b)(1) The Corporation shall not effect an offset requested by 
another Federal agency without first obtaining the claim certification 
required by paragraph (a) of this section. If the Corporation receives 
an incomplete claim certification, the Corporation shall return the 
claim certification with notice that a claim certification which 
complies with the requirements of paragraph (a) of this section must be 
submitted to the Corporation before the Corporation will consider 
effecting an offset.
    (2) The Corporation may rely on the information contained in the 
claim certification provided by a requesting creditor agency. The 
Corporation is not authorized to review a creditor agency's 
determination of indebtedness.
    (c) Only the creditor agency may agree to enter into an agreement 
with the debtor for the repayment of the claim. Only the creditor 
agency may agree to compromise, suspend, or terminate collection of the 
claim.
    (d) The Corporation may decline, for good cause, a request by 
another agency to effect an offset. Good cause includes that the offset 
might disrupt, directly or indirectly, essential Corporation 
operations. The refusal and the reasons shall be sent in writing to the 
creditor agency.


Sec. 1408.26  Stay of offset.

    (a)(1) When a creditor agency receives a debtor's request for 
inspection of agency records, the offset is stayed for 10 calendar days 
beyond the date set for the record inspection.
    (2) When a creditor agency receives a debtor's offer to enter into 
a repayment agreement, the offset is stayed until the debtor is 
notified as to whether the proposed agreement is acceptable.
    (3) When a review is conducted, the offset is stayed until the 
creditor agency issues a final written decision.
    (b) When offset is stayed, the amount of the debt and the amount of 
any accrued interest or other charges will be withheld from payments to 
the debtor. The withheld amounts shall not be applied against the debt 
until the stay expires. If withheld funds are later determined not to 
be subject to offset, they will be promptly refunded to the debtor.
    (c) If the Corporation is the creditor agency and the offset is 
stayed, the Corporation will immediately notify an offsetting agency to 
withhold the payment pending termination of the stay.


Sec. 1408.27  Offset against amounts payable from Civil Service 
Retirement and Disability Fund.

    The Corporation may request that monies payable to a debtor from 
the Civil Service Retirement and Disability Fund be administratively 
offset to collect debts owed to the Corporation by the debtor. The 
Corporation must certify that the debtor owes the debt, the amount of 
the debt, and that the Corporation has complied with the requirements 
set forth in this part, 4 CFR 102.3, and the Office of Personnel 
Management regulations. The request shall be submitted to the official 
designated in the Office of Personnel Management regulations to receive 
the request.

Subpart C--Offset Against Salary


Sec. 1408.35  Purpose.

    The purpose of this subpart is to implement section 5 of the Debt 
Collection Act of 1982 (Pub. L. 97-365 (5 U.S.C. 5514)), which 
authorizes the collection of debts owed by Federal employees to the 
Federal Government by means of salary offsets. These regulations 
provide procedures for the collection of a debt owed to the Government 
by the imposition of a salary offset against amounts payable to a 
Federal employee as salary. These regulations are consistent with the 
regulations on salary offset published by the Office of Personnel 
Management, codified in 5 CFR part 550, subpart K. Since salary offset 
is a type of administrative offset, the requirements of subpart B also 
apply to salary offsets.


Sec. 1408.36  Applicability of regulations.

    (a) These regulations apply to the following cases: (1) Where the 
Corporation is owed a debt by an individual currently employed by 
another agency;
    (2) Where the Corporation is owed a debt by an individual who is 
currently employed by the Corporation; or
    (3) Where the Corporation currently employs an individual who owes 
a debt to another Federal agency. Upon receipt of proper certification 
from the creditor agency, the Corporation will offset the debtor-
employee's salary in accordance with these regulations.
    (b) These regulations do not apply to the following: (1) Debts or 
claims arising under the Internal Revenue Code of 1986, as amended (26 
U.S.C. 1 et seq.); the Social Security Act (42 U.S.C. 301 et seq.); the 
tariff laws of the United States; or to any case where collection of a 
debt by salary offset is explicitly provided for or prohibited by 
another statute (e.g., travel advances in 5 U.S.C. 5705 and employee 
training expenses in 5 U.S.C. 4108).
    (2) Any adjustment to pay arising from an employee's election of 
coverage or a change in coverage under a Federal benefits program 
requiring periodic deductions from pay if the amount to be recovered 
was accumulated over four pay periods or less.
    (3) A claim which has been outstanding for more than 10 years after 
the creditor agency's right to collect the debt first accrued, unless 
facts material to the Government's right to collect were not known and 
could not reasonably have been known by the official or officials 
charged with the responsibility for discovery and collection of such 
debts.


Sec. 1408.37  Definitions.

    In this subpart, the following definitions shall apply:
    (a) Agency means:
    (1) An executive agency as defined by 5 U.S.C. 105, including the 
United States Postal Service and the United States Postal Rate 
Commission;
    (2) A military department as defined in 5 U.S.C. 102;
    (3) An agency or court of the judicial branch, including a court as 
defined in 28 U.S.C. 610, the District Court for the Northern Mariana 
Islands, and the Judicial Panel on Multi-district Litigation;
    (4) An agency of the legislative branch, including the United 
States Senate and the United States House of Representatives; or
    (5) Other independent establishments that are entities of the 
Federal Government.
    (b) Disposable pay means, for an officially established pay 
interval, that part of current basic pay, special pay, incentive pay, 
retired pay, retainer pay, or, in the case of an employee not entitled 
to basic pay, other authorized pay remaining after the deduction of any 
amount required by law to be withheld. The Corporation shall allow the 
deductions described in 5 CFR 581.105 (b) through (f).
    (c) Employee means a current employee of the Corporation or other 
agency, including a current member of the Armed Forces or Reserve of 
the Armed Forces of the United States.
    (d) Waiver means the cancellation, remission, forgiveness, or 
nonrecovery of a debt allegedly owed by an employee to the Corporation 
or another agency as permitted or required by 5 U.S.C. 5584 or 8346(b), 
10 U.S.C. 2774, 32 U.S.C. 716, or any other law.


Sec. 1408.38  Waiver requests and claims to the General Accounting 
Office.

    (a) The regulations contained in this subpart do not preclude an 
employee from requesting a waiver of an overpayment under 5 U.S.C. 5584 
or 8346(b), 10 U.S.C. 2774, 32 U.S.C. 716, or in any way questioning 
the amount or validity of a debt by submitting a subsequent claim to 
the General Accounting Office in accordance with the procedures 
prescribed by the General Accounting Office.
    (b) These regulations also do not preclude an employee from 
requesting a waiver pursuant to other statutory provisions pertaining 
to the particular debts being collected.


Sec. 1408.39  Procedures for salary offset.

    (a) The Chairman, or designee of the Chairman, shall determine the 
amount of an employee's disposable pay and the amount to be deducted 
from the employee's disposable pay at regular pay intervals.
    (b) Deductions shall begin within three official pay periods 
following the date of mailing or delivery of the Notice of Intent to 
Collect by Salary Offset.
    (c)(1) If the amount of the debt is equal to or is less than 15 
percent of the employee's disposable pay, such debt should be collected 
in one lump-sum deduction.
    (2) If the amount of the debt is not collected in one lump-sum 
deduction, the debt shall be collected in installment deductions over a 
period of time not greater than the anticipated period of employment. 
The size and frequency of installment deductions will bear a reasonable 
relation to the size of the debt and the employee's ability to pay. 
However, the amount deducted from any pay period will not exceed 15 
percent of the employee's disposable pay for that period, unless the 
employee has agreed in writing to the deduction of a greater amount.
    (3) A deduction exceeding the 15-percent disposable pay limitation 
may be made from any final salary payment pursuant to 31 U.S.C. 3716 in 
order to liquidate the debt, whether the employee is being separated 
voluntarily or involuntarily.
    (4) Whenever an employee subject to salary offset is separated from 
the Corporation and the balance of the debt cannot be liquidated by 
offset of the final salary check pursuant to 31 U.S.C. 3716, the 
Corporation may offset any later payments of any kind against the 
balance of the debt.
    (d) In instances where two or more creditor agencies are seeking 
salary offsets against current employees of the Corporation or where 
two or more debts are owed to a single creditor agency, the 
Corporation, at its discretion, may determine whether one or more debts 
should be offset simultaneously within the 15-percent limitation. Debts 
owed to the Corporation should generally take precedence over debts 
owed to other agencies.


Sec. 1408.40  Refunds.

    (a) In instances where the Corporation is the creditor agency, it 
shall promptly refund any amounts deducted under the authority of 5 
U.S.C. 5514 when:
    (1) The debt is waived or otherwise found not to be owed to the 
United States (unless expressly prohibited by statute or regulations); 
or
    (2) An administrative or judicial order directs the Corporation to 
make a refund.
    (b) Unless required or permitted by law or contract, refunds under 
this section shall not bear interest.


Sec. 1408.41  Requesting current paying agency to offset salary.

    (a) To request a paying agency to impose a salary offset against 
amounts owed to the debtor, the Corporation shall provide the paying 
agency with a claim certification which meets the requirements set 
forth in Sec. 1408.25(a) of this part. The Corporation shall also 
provide the paying agency with a repayment schedule determined under 
the provisions of Sec. 1408.39 or in accordance with a repayment 
agreement entered into with the debtor.
    (b) If the employee separates from the paying agency before the 
debt is paid in full, the paying agency shall certify the total amount 
collected on the debt. A copy of this certification shall be sent to 
the employee and a copy shall be sent to the Corporation. If the paying 
agency is aware that the employee is entitled to payments from the 
Civil Service Retirement and Disability Fund, or other similar 
payments, it must provide written notification to the agency 
responsible for making such payments that the debtor owes a debt 
(including the amount) and that the provisions of this section have 
been fully complied with. However, the Corporation must submit a 
properly certified claim to the agency responsible for making such 
payments before the collection can be made.
    (c) When an employee transfers to another paying agency, the 
Corporation is not required to repeat the due process procedures set 
forth in 5 U.S.C. 5514 and this part to resume the collection. The 
Corporation shall, however, review the debt upon receiving the former 
paying agency's notice of the employee's transfer to make sure the 
collection is resumed by the new paying agency.
    (d) If a special review is conducted pursuant to Sec. 1408.11 and 
results in a revised offset or repayment schedule, the Corporation 
shall provide a new claim certification to the paying agency.


Sec. 1408.42  Responsibility of the Corporation as the paying agency.

    (a) When the Corporation receives a claim certification from a 
creditor agency, deductions should be scheduled to begin at the next 
officially established pay interval. The Corporation shall send the 
debtor written notice which provides: (1) That the Corporation has 
received a valid claim certification from the creditor agency;
    (2) The date on which salary offset will begin;
    (3) The amount of the debt; and
    (4) The amount of such deductions.
    (b) If, after the creditor agency has submitted the claim 
certification to the Corporation, the employee transfers to a different 
agency before the debt is collected in full, the Corporation must 
certify the total amount collected on the debt. The Corporation shall 
send a copy of this certification to the creditor agency and a copy to 
the employee. If the Corporation is aware that the employee is entitled 
to payments from the Civil Service Retirement Fund and Disability Fund, 
or other similar payments, it shall provide written notification to the 
agency responsible for making such payments that the debtor owes a debt 
(including the amount).


Sec. 1408.43  Nonwaiver of rights by payments.

    An employee's involuntary payment of all or any portion of a debt 
being collected under this subpart shall not be construed as a waiver 
of any rights the employee may have under 5 U.S.C. 5514 or any other 
provisions of a written contract or law unless there are statutory or 
contractual provisions to the contrary.

    Dated May 3, 1994.
Nan P. Mitchem,
Acting Secretary to the Board, Farm Credit System Insurance 
Corporation.
[FR Doc. 94-11442 Filed 5-12-94; 8:45 am]
BILLING CODE 6710-01-P