[Federal Register Volume 63, Number 63 (Thursday, April 2, 1998)]
[Rules and Regulations]
[Pages 16354-16358]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-8453]



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Part V





Department of the Treasury





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Fiscal Service



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31 CFR Part 285



Transfer of Debts to Treasury for Collection; Interim Rule

  Federal Register / Vol. 63, No. 63 / Thursday, April 2, 1998 / Rules 
and Regulations  

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DEPARTMENT OF THE TREASURY

Fiscal Service

31 CFR PART 285

RIN 1510-AA68


Transfer of Debts to Treasury for Collection

AGENCY: Financial Management Service, Fiscal Service, Treasury.

ACTION: Interim rule with request for comments.

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SUMMARY: The Debt Collection Improvement Act of 1996 (DCIA) requires 
Federal agencies to transfer any nontax debt which is over 180 days 
delinquent to the Department of the Treasury for debt collection 
action; this is known as ``cross-servicing.'' This rule establishes the 
procedures and criteria for transferring delinquent debt to the 
Department of the Treasury, explains the statutory exceptions to this 
requirement, and establishes standards under which the Secretary of the 
Treasury will make a determination whether or not to grant exemptions. 
This rule also mandates that agencies refer debts to private collection 
contractors and to debt collection centers in accordance with 
procedures established by the Financial Management Service.

DATES: Effective: April 2, 1998. Comments must be received on or before 
May 4, 1998.

ADDRESSES: All comments should be addressed to Gerry Isenberg, 
Financial Program Specialist, Debt Management Services, Financial 
Management Service, 401 14th Street SW, Room 151, Washington, D.C. 
20227. A copy of this rule is being made available for downloading from 
the Financial Management Service web site at the following address: 
http://www.fms.treas.gov.

FOR FURTHER INFORMATION CONTACT: Gerry Isenberg, Financial Program 
Specialist, at (202) 874-6859; or Ellen Neubauer or Ronda Kent, Senior 
Attorneys, at (202) 874-6680.

SUPPLEMENTARY INFORMATION:

Background

    Section 31001(m)(1) of the Debt Collection Improvement Act of 1996 
(DCIA), Pub. L. 104-134, 110 Stat. 1321-358 (1996), codified at 31 
U.S.C. 3711(g), requires Federal agencies to transfer to the Secretary 
of the Treasury any nontax debt that has been delinquent for a period 
of 180 days. Upon such transfer the Secretary of the Treasury will take 
appropriate action to collect or terminate collection action on the 
debt. The DCIA lists several exemptions to this requirement. In 
addition, the Secretary of the Treasury may exempt any class of debts 
from this requirement.
    Under the DCIA, the Secretary of the Treasury is authorized to 
prescribe regulations as the Secretary considers necessary to carry out 
this requirement. The Financial Management Service (FMS), a bureau of 
the Department of the Treasury, is responsible for promulgating the 
regulations governing this and other provisions of the DCIA. This rule 
describes when a debt must be transferred to the Department of the 
Treasury for debt collection action and when a debt will be considered 
in an exempt category. This rule explains the relationship between the 
requirement to transfer debt to Treasury for debt collection action 
(i.e., cross-servicing) and the DCIA requirement, codified at 31 U.S.C. 
3716(c), that agencies notify the Secretary of the Treasury of all debt 
over 180 days delinquent for purposes of administrative offset. This 
rule also describes the factors that the Secretary of the Treasury will 
consider in determining whether to exempt a class of debts from the 
mandatory provisions of 31 U.S.C. 3711(g).
    The DCIA also authorizes the Secretary of the Treasury to designate 
other Federal agencies as debt collection centers and to maintain a 
schedule of private collection contractors eligible for referral of 
debts owed to the United States. This rule mandates that agencies refer 
debts to debt collection centers and to private collection contractors 
in accordance with procedures established by the FMS.
    Readers are reminded that most of the provisions of the DCIA became 
effective upon enactment on April 26, 1996. FMS is publishing this rule 
to clarify and interpret the DCIA provisions pertaining to the referral 
of debts to the Department of the Treasury and Treasury-designated debt 
collection centers for collection action. However, publication of this 
rule does not delay the effective date of the DCIA, nor does it 
postpone the duty of Federal agencies to comply with the provisions of 
the DCIA.

Section Analysis

(a) Definitions

    The intent of 31 U.S.C. 3711(g) is to centralize the collection of 
delinquent debt owed to the Government within Treasury, which has the 
authority to designate debt collection centers to administer 
centralized collection. Therefore, the definitions in paragraph (a) of 
this rule are intended to apply to every Federal agency in the 
Government and every entity who owes delinquent nontax debt to the 
Federal Government.

(b) General Rule

    Paragraph (b) of this section explains that ``cross-servicing'' is 
the term used to refer to the function performed by a Federal agency 
that is providing debt collection services for another Federal agency. 
Debt collection services may include, but are not limited to, sending 
demand letters, telephoning the debtor, and referring the debt for 
collection by offset or by a private collection contractor. The 
Department of the Treasury and debt collection centers, more fully 
described in paragraph (f) of this section, are authorized to perform 
cross-servicing.

(c) Mandatory Transfer to FMS

    Paragraph (c)(1) of this section states the general rule that 
unless a nontax debt which is over 180 days delinquent falls within one 
of the exempt categories listed under paragraph (d) of this section, it 
must be transferred to the Financial Management Service (FMS) of the 
Department of the Treasury for collection action. For accounting and 
reporting purposes, however, the debt remains on the books and records 
of the agency which transferred the debt, i.e., the creditor agency. 
The terms ``transfer'' and ``refer'' (see paragraph (h), below) as used 
in this rule have the same meaning.
    Paragraph (c)(2) of this section describes the actions which FMS 
may take relative to a debt which is transferred to FMS under this 
paragraph. Paragraph (c)(2) clarifies that FMS will take action upon a 
debt in accordance with the statutory and regulatory requirements and 
other authorities that apply to that debt or to the particular action 
being taken subject to terms and conditions agreed upon, in writing, 
between FMS and the creditor agency. Transfer of a debt to FMS does not 
change the rights and/or obligations of the debtor. Thus, for example, 
if an agency's authority to compromise a certain type of debt is set 
forth in a statute or regulation, that statute or regulation would 
continue to govern.
    Paragraph (c)(3) of this section describes when a debt will be 
considered 180 days delinquent for purposes of mandatory transfer to 
FMS. Paragraph (c)(3) recognizes that there are circumstances where 180 
days or more has passed from the time a debt is first established as 
delinquent on an agency's books and records, but collection action on 
that debt may not be appropriate either because there has not been a 
final agency determination

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regarding the debt, or there is a legal bar to further collection 
action. The 180 day period begins when the creditor agency first 
establishes the debt as delinquent and continues to run even though 
collection action may be barred. Nevertheless, agencies are not 
required to transfer to FMS debts which are over 180 days delinquent 
until such time as a final agency determination regarding the debt is 
made or the legal bar to further collection action is removed. For 
example, agencies are not required to transfer debt where the amount 
due is in dispute and the agency has not yet made a final determination 
regarding the amount due; where an administrative appeals process is 
pending and continued collection action during the appeals process is 
prohibited; or where the automatic stay in a bankruptcy proceeding 
applies. Once a final agency determination regarding the debt is made 
or the legal bar to further collection action is removed, however, the 
debt must be immediately transferred to FMS. Agencies are cautioned 
that circumstances where an agency's determination regarding a debt is 
still pending at the time the debt is 180 days delinquent should 
generally exist only where an applicable statute or regulation requires 
it. In all other circumstances, agency determinations regarding debts 
must be made within reasonable time frames which, absent compelling 
circumstances, should not exceed 180 days from the time the debt is 
first established.

(d) Exceptions to Mandatory Transfer

    Paragraph (d) of this section describes more fully the exceptions 
to mandatory transfer listed in the DCIA. Paragraph (d)(1) lists the 
statutory exceptions. Paragraph (d)(2) more fully describes each 
exception.
    Under paragraph (d)(2)(i) of this section, a debt is in litigation 
only if it has been referred to the Attorney General for litigation or 
if proceedings before a court of competent jurisdiction are actually 
pending. For debts which have been referred to the Attorney General for 
litigation, it is not necessary that court proceedings actually be 
pending. For other debts, however, such as debts owed to agencies with 
independent litigating authority or those debts which are the subject 
of defensive litigation, proceedings before a court must actually be 
pending. A debt which has only been referred to agency counsel for 
legal review is not considered to be in litigation. Nothing in the DCIA 
or in this rule is intended to affect an agency's authority to refer 
debts, which are not subject to mandatory transfer to FMS, to the 
Attorney General where appropriate.
    Under paragraph (d)(2)(ii) of this section, a debt is in 
foreclosure if judicial foreclosure proceedings before a court of 
competent jurisdiction are actually pending or a Notice of Default or 
comparable action required under applicable law to initiate a 
nonjudicial foreclosure proceeding against real or personal property 
has been issued. Additionally, for a debt to be considered in 
foreclosure it is also necessary that the agency expects to receive 
proceeds from the foreclosure which may be applied to the debt.
    Under paragraph (d)(3) of this section, a debt is scheduled for 
sale only if it is scheduled to be sold under an established asset 
sales program within one year (or longer if approved by the Office of 
Management and Budget) from the time it is eligible for sale, that is, 
from the time the debt has been approved to be included in an asset 
sales program.
    Under paragraph (d)(4) of this section, a debt is at a private 
collection contractor only if it has been referred to a private 
collection contractor in accordance with paragraph (e) of this section.
    Under paragraph (d)(5) of this section, a debt is at a debt 
collection center only if it has been referred to a debt collection 
center in accordance with paragraph (f) of this section.
    Under paragraph (d)(6) of this section, a debt is being collected 
by internal offset only if an internal offset has been initiated and 
the agency expects that the debt will be collected in full within three 
years from the date of delinquency. An internal offset will be 
considered to have been initiated if funds payable to the debtor by the 
creditor agency have been withheld or, in cases where prior notice to 
the debtor is required, if such notice has been issued.
    Paragraph (d)(7) of this section sets forth the factors the 
Secretary of the Treasury will consider in granting exemptions for 
other classes of debts. Generally, the presumption is that an exemption 
will not be granted absent compelling circumstances.

(e) Schedule of Private Collection Contractors

    The DCIA requires the Secretary of the Treasury to maintain a 
schedule of private collection contractors eligible to receive debts 
owed to Federal agencies. FMS and other debt collection centers must 
utilize this schedule of contractors when referring debts to a private 
collection contractor. Agencies which refer debts which are less than 
180 days delinquent to private collection contractors may utilize this 
schedule of contractors provided they do so in accordance with 
procedures established by FMS. Agencies are not required to use this 
schedule of contractors for debts which are less than 180 days 
delinquent or for debts which are otherwise exempt from the mandatory 
transfer requirement described in paragraph (c) of this section.

(f) Debt Collection Centers

    Paragraph (f) of this section explains that a debt collection 
center is a Federal agency designated by the Secretary of the Treasury, 
under standards and terms established by the Secretary, to collect 
debts owed to the United States. A debt collection center may be an 
agency, or a unit or subagency within a Federal agency. Debt collection 
centers will take action upon a debt in accordance with the statutory 
or regulatory requirements and other authorities that apply to the debt 
or to the particular action being taken. Debt collection centers are 
authorized, subject to the terms under which the debt collection center 
has been designated as such by the Secretary of the Treasury, to take 
any action on behalf of the creditor agency to collect, compromise, 
suspend or terminate collection action on debts, in accordance with the 
terms and conditions set forth, in writing, by the creditor agency. The 
action a debt collection center may take is intended to be interpreted 
broadly to include actions, such as reporting debts to credit bureaus 
and obtaining credit reports, which facilitate collection.

(g) Administrative Offset

    This section explains the relationship between (1) the DCIA 
requirement that debts over 180 days delinquent be transferred to 
Treasury for collection action (i.e., cross-servicing) and (2) the DCIA 
requirement that agencies notify the Secretary of the Treasury of debts 
over 180 days delinquent for purposes of administrative offset. Debts 
which are transferred to FMS or a Treasury-designated debt collection 
center under this rule will, where appropriate, be referred for 
collection by administrative offset and agencies are not required to 
take any further action to comply with the DCIA requirement regarding 
administrative offset. Debts not transferred under this rule, for 
example, debts which fall within one of the exempt categories, may 
nevertheless be subject to the mandatory offset requirement.

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(h) Voluntary Referral of Debts Less Than 180 Days Delinquent.

    Although agencies are required to transfer debt to FMS which is 
more than 180 days delinquent, paragraph (h) of this section is 
intended to clarify that agencies may voluntarily refer debt less than 
180 days delinquent to FMS, to a private collection contractor in 
accordance with paragraph (e) of this section and procedures 
established by FMS, or to a debt collection center in accordance with 
paragraph (f) of this section and procedures established by FMS. As 
noted above, the terms ``transfer'' and ``refer'' as used in this rule 
have the same meaning.

(i) Certification

    Paragraph (i) of this section describes the requirement that the 
head of an agency or someone with authority to act on behalf of the 
head of the agency with regard to debt collection matters, must certify 
to FMS or to a debt collection center that debts transferred are valid, 
legally enforceable, that there are no legal bars to collection, and 
that all due process requirements have been met. This means that the 
agency must certify that it has made a final determination that the 
debt is due in the amount transferred, that there are no legal bars to 
collection such as bankruptcy, and that the agency has provided (or has 
arranged to provide) the debtor with notice and an opportunity to be 
heard where required as a prerequisite to a particular collection 
action. In addition, paragraph (i) explains that the creditor agency is 
responsible for notifying FMS of any changes to the status of the legal 
enforceability of the debt. For example, unless the creditor agency 
determines that the automatic stay imposed at the time of a bankruptcy 
filing pursuant to 11 U.S.C. 362 has been lifted or is no longer in 
effect, in most cases collection activity against the debtor should 
stop immediately. Therefore, it is imperative that the creditor agency 
notify FMS immediately upon learning that a bankruptcy petition has 
been filed with respect to a debtor.

(j) Fees

    Paragraph (j) of this section describes the DCIA authority for FMS 
and debt collection centers to charge fees, to retain fees from amounts 
collected, and to deposit and use fees. Paragraph (j) of this section 
also describes the authority for creditor agencies to add these fees to 
the amount of the debt.

Regulatory Analysis

    This interim rule is not a significant regulatory action as defined 
in Executive Order 12866. Because no notice of proposed rulemaking is 
required for this interim rule, the provisions of the Regulatory 
Flexibility Act do not apply.

Special Analyses

    FMS is promulgating this interim rule without opportunity for prior 
public comment pursuant to the Administrative Procedure Act, 5 U.S.C. 
553 (the ``APA''), because FMS has determined, for the following 
reasons, that a comment period would be unnecessary, impracticable, and 
contrary to the public interest. The DCIA was effective immediately 
upon its enactment on April 26, 1996. In implementing the DCIA 
provision requiring Federal agencies to transfer debt over 180 days 
delinquent to Treasury for debt collection, FMS has identified the need 
to provide guidance to Federal agencies. To ensure that this guidance 
was provided in a consistent and meaningful manner, FMS has determined 
that a rule is desirable.
    Nothing in this rule impacts the rights or obligations of debtors 
nor changes the authorities under which Federal agencies collect debt. 
This rule provides critical guidance needed to facilitate the ongoing 
transfer of debts to Treasury for debt collection. Thus, FMS believes 
that it is in the public interest to issue this interim rule without 
opportunity for prior public comment.
    The public is invited to submit comments on the interim rule which 
will be taken into account before a final rule is issued.
    FMS has determined that good cause exists to make this interim rule 
effective upon publication without providing the 30 day period between 
publication and the effective date contemplated by 5 U.S.C. 553(d). The 
purpose of a delayed effective date is to afford persons affected by a 
rule a reasonable time to prepare for compliance. However, in this 
case, the requirement to transfer debt to Treasury for debt collection 
became effective on April 26, 1996. Inasmuch as this interim rule 
provides important guidance that is expected to facilitate full 
implementation of the authority contained in the law, FMS believes that 
good cause exists to make the rule effective upon publication.

List of Subjects in Part 285

    Administrative Practice and Procedure, Credit, Debt, Loan Programs

Authority and Issuance

    For the reasons set forth in the preamble, 31 CFR part 285 is 
amended as follows:

PART 285--DEBT COLLECTION AUTHORITIES UNDER THE DEBT COLLECTION 
IMPROVEMENT ACT OF 1996

    1. The authority citation for Part 285 is revised to read as 
follows:

    Authority: 26 U.S.C. 6402; 31 U.S.C. 321, 3701, 3711, 3716, 
3720A; E.O. 13019, 3 CFR, 1996 Comp., p. 216.

    2. Subpart B is added to Part 285 to read as follows:

Subpart B--Authorities Other Than Offset

Sec.
285.11  [Reserved]
285.12  Transfer of debts to Treasury for Debt collection

Subpart B--Authorities Other Than Offset


Sec. 285.11  [Reserved]


Sec. 285.12  Transfer of Debts to Treasury for debt collection.

    (a) Definitions. For purposes of this section:
    Agency means a department, agency, court, court administrative 
office, or instrumentality in the executive, judicial, or legislative 
branch of the Federal Government, including government corporations.
    Creditor agency means any Federal agency that is owed a debt.
    Debt means any amount of money, funds or property that has been 
determined by an appropriate official of the Federal government to be 
owed to the United States by a person. As used in this rule, the term 
``debt'' does not include debts arising under the Internal Revenue Code 
of 1986 or the tariff laws of the United States.
    FMS means the Financial Management Service, a bureau of the 
Department of the Treasury.
    Person means an individual, corporation, partnership, association, 
organization, State or local government, or any other type of entity 
other than a Federal agency.
    Secretary means the Secretary of the Treasury.
    (b) In general. Cross-servicing means that FMS, a Federal agency, 
or a unit or subdivision within a Federal agency, under a designation 
by the Secretary of the Treasury, is taking appropriate debt collection 
action on behalf of one or more Federal agencies or unit or subdivision 
thereof. Agencies which provide such cross-servicing are known as debt 
collection centers.
    (c) Mandatory transfer of debts to FMS. (1) Except as set forth in 
paragraph (d) of this section, a creditor agency shall transfer any 
debt that is more than 180 days delinquent to FMS for debt

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collection services. For accounting and reporting purposes, the debt 
remains on the books and records of the agency which transferred the 
debt.
    (2) On behalf of the creditor agency, FMS will take appropriate 
action to collect or compromise the transferred debt, or to suspend or 
terminate collection action thereon, in accordance with the statutory 
and regulatory requirements and authorities applicable to the debt and 
the action. Appropriate action to collect a debt may include referral 
to another debt collection center, a private collection contractor, or 
the Department of Justice for litigation. The creditor agency shall 
advise FMS, in writing, of any specific statutory or regulatory 
requirements pertaining to their debt and will agree, in writing, to a 
collection strategy which includes parameters for entering into 
compromise and repayments agreements with debtors.
    (3) A debt is considered 180 days delinquent for purposes of this 
section if it is 180 days past due and is legally enforceable. A debt 
is legally enforceable if there has been a final agency determination 
that the debt, in the amount stated, is due and there are no legal bars 
to collection action. Where, for example, a debt is the subject of a 
pending administrative review process required by statute or regulation 
and collection action during the review process is prohibited, the debt 
is not considered legally enforceable for purposes of mandatory 
transfer to FMS and is not to be transferred even if the debt is more 
than 180 days past-due. Once there has been a final agency 
determination that the debt, in the amount stated, is due and there are 
no legal bars to collection action, however, any debt over 180 days 
delinquent must be immediately transferred to FMS. Nothing in this 
section is intended to impact the date of delinquency of a debt for 
other purposes such as for purposes of accruing interest and penalties.
    (d) Exceptions to mandatory transfer. (1) A creditor agency is not 
required to transfer a debt to FMS pursuant to paragraph (c)(1) of this 
section only during such period of time that the debt:
    (i) Is in litigation or foreclosure as described in paragraph 
(d)(2) of this section;
    (ii) Is scheduled for sale as described in paragraph (d)(3) of this 
section;
    (iii) Is at a private collection contractor if the debt has been 
referred to a private collection contractor in accordance with 
paragraph (e) of this section;
    (iv) Is at a debt collection center if the debt has been referred 
to a Treasury-designated debt collection center in accordance with 
paragraph (f) of this section;
    (v) Is being collected by internal offset as described in paragraph 
(d)(4) of this section; or
    (vi) Is covered by an exemption granted by the Secretary as 
described in paragraph (d)(5) of this section.
    (2)(i) A debt is in litigation if:
    (A) The debt has been referred to the Attorney General for 
litigation by the creditor agency; or
    (B) The debt is the subject of proceedings pending in a court of 
competent jurisdiction, including bankruptcy proceedings, whether 
initiated by the creditor agency, the debtor, or any other party.
    (ii) A debt is in foreclosure if:
    (A)(1) Collateral securing the debt is the subject of judicial 
foreclosure proceedings in a court of competent jurisdiction; or
    (2) Notice has been issued that collateral securing the debt will 
be foreclosed upon, liquidated, sold, or otherwise transferred pursuant 
to applicable law in a nonjudicial proceeding; and
    (B) The creditor agency anticipates that proceeds will be available 
from the liquidation of the collateral for application to the debt.
    (3) A debt is scheduled for sale if:
    (i) The debt will be disposed of under an asset sales program 
within one (1) year after becoming eligible for sale; or
    (ii) The debt will be disposed of under an asset sales program and 
a schedule established by the creditor agency and approved by the 
Director of the Office of Management and Budget.
    (4) A debt is being collected by internal offset if a creditor 
agency expects the debt to be collected in full within three (3) years 
from the date of delinquency through internal offset. ``Internal 
offset'' means withholding of funds payable by the creditor agency to 
the debtor to satisfy, in whole or part, the debt owed to the creditor 
agency by that debtor.
    (5)(i) Upon the written request of the head of an agency, or as the 
Secretary may determine on his/her own initiative, the Secretary may 
exempt any class of debts from the application of the requirement 
described in paragraph (c)(1) of this section. In determining whether 
to exempt a class of debts, the Secretary will determine whether 
exemption is in the best interests of the Government after considering 
the following factors:
    (A) Whether an exemption is the best means to protect the 
government's financial interest, taking into consideration the number, 
dollar amount, age and collection rates of the debts for which 
exemption is requested;
    (B) Whether the nature of the program under which the delinquencies 
have arisen is such that the transfer of such debts would interfere 
with program goals; and
    (C) Whether an exemption would be consistent with the purposes of 
the Debt Collection Improvement Act of 1996 (DCIA), Pub. L. 104-134, 
110 Stat. 1321-358 (April 26, 1996).
    (ii) Requests for exemptions must clearly identify the class of 
debts for which an exemption is sought and must explain how application 
of the factors listed above to that class of debts warrants an 
exemption.
    (e) Schedule of private collection contractors. FMS will maintain a 
schedule of private collection contractors eligible for referral of 
debts from FMS, other debt collection centers, and creditor agencies 
for collection action. An agency with debt which has not been 
transferred to FMS or referred to another debt collection center, for 
example, debt that is less than 180 days delinquent, may refer such 
debt to a private collection contractor listed on FMS' schedule of 
private collection contractors provided they do so in accordance with 
procedures established by FMS. Alternatively, an agency may refer debt 
that is less than 180 days delinquent to a private collection 
contractor pursuant to a contract between the creditor agency and the 
private collection contractor, as authorized by law.
    (f) Debt collection centers. A debt collection center is a Federal 
agency or a unit or subagency within a Federal agency that has been 
designated by the Secretary of the Treasury to collect debt owed to the 
United States. FMS is a debt collection center. Debt collection centers 
will take action upon a debt in accordance with the statutory or 
regulatory requirements and other authorities that apply to the debt or 
to the particular action being taken. Debt collection centers may, on 
behalf of the creditor agency, subject to the terms under which the 
debt collection center has been designated as such by the Secretary, 
take any action to collect, compromise, suspend or terminate collection 
action on debts in accordance with terms and conditions agreed upon in 
writing by the creditor agency and the debt collection center or FMS.
    (g) Administrative offset. As described in paragraph (c) of this 
section, under the DCIA agencies are required to transfer all debts 
over 180 days delinquent to FMS for purposes of debt collection (i.e., 
cross-servicing). Agencies are also required, under the

[[Page 16358]]

DCIA, to notify the Secretary of all debts over 180 days delinquent for 
purposes of administrative offset. Administrative offset is one type of 
collection tool used by FMS and Treasury-designated debt collection 
centers to collect debts transferred under this section. Thus, by 
transferring debt to FMS or to a Treasury-designated debt collection 
center under this section, Federal agencies will satisfy the 
requirement to notify the Secretary of debts for purposes of 
administrative offset and duplicate referrals are not required. A debt 
which is not transferred to FMS for purposes of debt collection, 
however, such as a debt which falls within one of the exempt categories 
listed in paragraph (d) of this section, nevertheless, may be subject 
to the DCIA requirement of notification to the Secretary for purposes 
of administrative offset.
    (h) Voluntary referral of debts less than 180 days delinquent. A 
creditor agency may refer any debt that is less than 180 days 
delinquent to FMS or, with the consent of FMS, to a Treasury-designated 
debt collection center for debt collection services.
    (i) Certification. Before a debt may be transferred to FMS or 
another debt collection center, the head of the creditor agency or his 
or her delegatee must certify, in writing, that the debts being 
transferred are valid, legally enforceable, and that there are no legal 
bars to collection. Creditor agencies must also certify that they have 
complied with all prerequisites to a particular collection action under 
the laws, regulations or policies applicable to the agency unless the 
creditor agency has requested, and FMS has agreed, to do so on the 
creditor agency's behalf. The creditor agency shall notify FMS 
immediately of any change in the status of the legal enforceability of 
the debt, for example, if the creditor agency receives notice that the 
debtor has filed for bankruptcy protection.
    (j) Fees. FMS and other debt collection centers may charge fees for 
debt collection services. Fees must be based on costs, however, fees 
paid to recover amounts owed may not exceed amounts collected. Nothing 
in this rule precludes a credit agency from agreeing to pay fees for 
debt collection services which are not based on amounts collected. FMS 
and debt collection centers are authorized to retain fees from amounts 
collected and may deposit and use such fees in accordance with 31 
U.S.C. 3711(g). Fees charged by FMS and other debt collection centers 
may be added on to the debt as an administrative cost if authorized 
under 3717(e).

    Dated: March 25, 1998.
Richard L. Gregg,
Commissioner.
[FR Doc. 98-8453 Filed 4-1-98; 8:45 am]
BILLING CODE 4810-35-P