[Federal Register Volume 60, Number 163 (Wednesday, August 23, 1995)]
[Rules and Regulations]
[Pages 43705-43707]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-20781]



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 Rules and Regulations
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  Federal Register / Vol. 60, No. 163 / Wednesday, August 23, 1995 / 
Rules and Regulations  


[[Page 43705]]


DEPARTMENT OF AGRICULTURE

Consolidated Farm Service Agency

7 CFR Part 792

Commodity Credit Corporation

7 CFR Part 1403

RIN 0560-AD78


Debt Settlement Policies and Procedures

AGENCIES: Consolidated Farm Service Agency and Commodity Credit 
Corporation, USDA.

ACTION: Final rule.

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SUMMARY: A proposed rule was published in the Federal Register on 
August 24, 1994, at 59 FR 43504, amending 7 CFR parts 792 and 1403, 
which set forth the debt settlement policies and procedures of the 
Consolidated Farm Service Agency (CFSA) and the Commodity Credit 
Corporation (CCC), respectively. This final rule adopts the provisions 
of the proposed rule. This final rule amends CCC's debt settlement 
policies and procedures to remove references to Internal Revenue 
Service Notices of Levy, except to exempt them from coverage, and 
revises the rate of interest to be charged on delinquent debts. This 
final rule also amends CFSA's and CCC's debt settlement policies and 
procedures to provide for offset of a debtor's pro rata share of 
payments due any entity which the debtor participates in, either 
directly or indirectly. This regulation protects the financial 
integrity of many Federal agricultural programs by ensuring the 
Government will be able to collect, or otherwise settle, debts owed it 
by any person, organization, corporation, or other legal entity.

EFFECTIVE DATE: August 23, 1995.

FOR FURTHER INFORMATION CONTACT: Carol Spencer, CFSA, USDA, P.O. Box 
2415, Washington, DC 20013-2415, at 703-305-1422.

SUPPLEMENTARY INFORMATION:

Executive Order 12866

    This final rule has been reviewed in conformance with Executive 
Order 12866 and has been determined to be a significant regulatory 
action.

Paperwork Reduction Act

    This action will not increase the Federal paperwork burden for 
individuals, small businesses, and others and will not have a 
significant impact on a substantial number of small entities.

Regulatory Flexibility Act

    Neither CFSA nor CCC is required by 5 U.S.C. 553 or any other 
provision of law to publish a notice of proposed rulemaking with 
respect to the subject matter of this final rule. Therefore this action 
is exempt from the provision of the Regulatory Flexibility Act and no 
Regulatory Flexibility Analysis was prepared.

Executive Order 12778

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

Executive Order 12372

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

Background

    The Federal Claims Collection Act of 1966, as amended by the Debt 
Collection Act of 1982 (31 U.S.C. 3711, et seq.), and the joint 
regulations promulgated thereunder by the Comptroller General and the 
Attorney General (4 CFR parts 101-105) provide minimum standards for 
the administrative collection of claims by the United States. The Act 
also provides that nothing therein shall diminish the existing 
authority of the head of an agency to settle, compromise, or close 
claims. The CCC Charter Act, as amended (15 U.S.C. 714, et seq.), 
provides that CCC shall have the authority to make final and conclusive 
settlement and adjustment of any claims by or against it irrespective 
of the amount at issue. CCC is, therefore, not subject to the 
provisions of the Federal Claims Collection Act of 1966 or its 
implementing regulations. However, it has been CCC policy to follow the 
Federal Claims Collection Standards (FCCS) to the maximum practicable 
extent. The FCCS require each Federal agency to take aggressive action 
to collect debts owed it.

Discussion of Final Rule

1. Impact of Interest Rate Change on CFSA and CCC and Affected Private 
Interests
    This rule amends 7 CFR part 1403 to change the rate of interest 
which CCC charges on its delinquent debts from a rate equal to that 
assessed under the Prompt Payment Act, to a rate equal to the higher of 
the Treasury Department's current value of funds rate or the rate of 
interest assessed under the Prompt Payment Act. CCC currently charges 
interest on delinquent debts at a rate equal to that charged under the 
Prompt Payment Act. That rate was chosen because it was generally a 
higher rate than the current value of funds rate required under the 
Debt Collection Act, and would ensure that CCC, at a minimum, would 
always recoup the cost of CCC borrowing. It was also believed to be 
equitable since it is the same rate which CCC is required to pay when 
its payments are late. This rule amends the rate which CCC charges on 
delinquent debts to the higher of the Treasury Department's current 
value of funds rate or the rate assessed under the Prompt Payment Act. 
Concerning the difference in interest rates, over the past 10 years the 
current value of funds rate was higher than the Prompt Payment Act rate 
for only one 6-month period. The economic effect of this rate change is 
likely to be minimal. This change, however, allows the late payment 
interest rate assessed by CCC to conform to the late payment interest 
rate assessed by CFSA, as well as, conforming to the rate required by 
the Federal Claims Collection Act of 1966, as amended. As both CCC and 
CFSA programs are administered by the same 

[[Page 43706]]
offices, administrative costs should be reduced by having the same 
interest rates apply to both programs.

2. References to IRS Notices of Levy

    This rule also amends 7 CFR part 1403 regarding references to 
Internal Revenue Service (IRS) Notices of Levy. It was the past policy 
of CCC to treat IRS Notices of Levy the same as requests for 
administrative offset from other Federal agencies. This was agreed to 
in 1970 by CCC and IRS, and was documented in former regulations 
dealing with offset at 7 CFR part 13. However, due to a change in 
policy by IRS, changes in our previous regulations, certain court 
decisions, and advice from the Office of the General Counsel, it has 
been determined that IRS Notices of Levy can no longer be treated as 
offset requests, but should be honored only as required by statute, 
including taking priority over assignments of CFSA and CCC payments. 
Therefore, this final rule amends the CCC debt settlement regulations 
to remove all references to IRS Notices of Levy, except to specifically 
exempt them from coverage in 7 CFR 1403.7. This change will create 
little cost or benefit to CCC.

3. Expanded Offset

    Finally, this rule amends 7 CFR parts 792 and 1403 to provide for 
an expanded ability to offset payments from debtors to collect 
delinquent debt. During 1993, CFSA and CCC collected approximately $76 
million, of which $32 million or 42 percent of the total was through 
administrative offset. As such, it is the most effective debt 
collection tool. However, in the past debtors have avoided offset of 
their program payments by reorganizing their farming operations, 
changing the name of their operations, transferring ownership of their 
operations, receiving payments under more than one entity, or by 
changing the payee in some other manner. In order to increase CFSA's 
and CCC's ability to collect delinquent debts, without adversely 
affecting other non-debtors, the regulations are amended to provide for 
offset of a debtor's pro rata share of payments due any entity which 
the debtor participates in, either directly or indirectly.
    This rule also provides for offset when CFSA or CCC determines that 
a debtor has established an entity, or transferred ownership of, 
reorganized, or changed in some other manner, his or her operations in 
order to avoid a debt. By allowing for this expanded ability to offset, 
CFSA and CCC will substantially increase their ability to collect 
delinquent debt in an efficient and effective manner. This will also 
help ensure that those owing delinquent debts are not continuing to 
receive government payments, without first satisfying their debts. 
While it is not feasible to estimate the exact amount by which CFSA and 
CCC collections will increase, it is likely that these circumstances 
arise most often with debtors who have debts of $50,000 or more. 
Therefore, increased collections could be sizeable in relation to past 
collections. There should be no cost to the government created by this 
change.
    This regulation will protect the financial integrity of many 
Federal agricultural programs by ensuring the Government will be able 
to collect, or otherwise settle, debts owed it by any person, 
organization, corporation, or other legal entity.
    A description of the amendments made by this final rule was set 
forth in the proposed rule at 59 FR 43504 (August 24, 1994). The 
proposed rule requested comments with respect to the proposed 
amendments. No comments were received and it has been determined that 
the proposal should be adopted as a final rule with modifications to 
reflect the reorganization of the Department of Agriculture, and for 
purposes of clarity.
List of Subjects

7 CFR Part 792

    Claims, Income taxes.

7 CFR Part 1403

    Claims, Income taxes, Loan programs--agriculture.

    Accordingly, 7 CFR parts 792 and 1403 are amended as follows:

PART 792--DEBT SETTLEMENT POLICIES AND PROCEDURES

    1. The authority citation for 7 CFR part 792 continues to read as 
follows:

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

    2. Section 792.7(l) is revised to read as follows:


Sec. 792.7  Collection by administrative offset.

* * * * *
    (l) Any action authorized by the provisions of this section may be 
taken:
    (1) Against a debtor's pro rata share of payments due any entity 
which the debtor participates in, either directly or indirectly, as 
determined by CFSA.
    (2) When CFSA determines that the debtor has established an entity, 
or reorganized, transferred ownership of, or changed in some other 
manner, their operation, for the purpose of avoiding the payment of the 
claim or debt.
* * * * *

PART 1403--DEBT SETTLEMENT POLICIES AND PROCEDURES

    3. The authority citation for 7 CFR part 1403 continues to read as 
follows:

    Authority: 15 U.S.C. 714b and 714c; 7 U.S.C. 1445b-2(b).

    4. Section 1403.7 is amended by:
    A. Removing the word ``and'' at the end of paragraph (a)(3),
    B. Removing the period at the end of paragraph (a)(4) and inserting 
a semicolon in its place and adding the word ``and'',
    C. Adding paragraph (a)(5),
    D. Removing paragraph (m)(4),
    E. Redesignating paragraphs (m)(5) and (m)(6) as paragraphs (m)(4) 
and (m)(5), respectively, and
    F. Revising paragraph (q) to read as follows:


Sec. 1403.7  Collection by administrative offset.

    (a) * * *
    (3) Cases in which CCC must adjust, by increasing or decreasing, a 
payment which is to be paid under a contract in order to properly make 
other payments due by CCC;
    (4) Any case in which collection of the type of debt involved by 
administrative offset is explicitly provided for or prohibited by 
statute; and
    (5) IRS Notices of Levy which shall be honored in accordance with 
IRS statutes and regulations.
* * * * *
    (q) Any action authorized by the provisions of this section may be 
taken:
    (1) Against a debtor's pro rata share of payments due any entity 
which the debtor participates in, either directly or indirectly, as 
determined by CCC.
    (2) When CCC determines that the debtor has established an entity, 
or reorganized, transferred ownership of, or changed in some other 
manner, their operation, for the purpose of avoiding the payment of the 
claim or debt.
* * * * *
    5. Section 1403.9(c) is revised to read as follows:


Sec. 1403.9  Late payment interest and administrative charges.

* * * * *
    (c) The late payment interest shall be expressed as an annual rate 
of interest which CCC charges on delinquent debts. The late payment 
interest rate shall be equal to the higher of the Treasury Department's 
current value of funds rate or the rate of interest assessed under the 
Prompt Payment Act, determined as of the date specified in paragraphs 
(d)(1) and (d)(2) of this section.
* * * * * 

[[Page 43707]]

    Signed at Washington, DC, on August 15, 1995.
Bruce R. Weber,
Acting Administrator, Consolidated Farm Service Agency and Acting 
Executive Vice President, Commodity Credit Corporation.
[FR Doc. 95-20781 Filed 8-22-95; 8:45 am]
BILLING CODE 3410-05-P