[Federal Register Volume 63, Number 87 (Wednesday, May 6, 1998)]
[Rules and Regulations]
[Pages 25136-25142]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-11966]
[[Page 25135]]
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Part II
Department of the Treasury
_______________________________________________________________________
Fiscal Service
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31 CFR Part 285
Administrative Wage Garnishment; Final Rule
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Federal Register / Vol. 63, No. 87 / Wednesday, May 6, 1998 / Rules
and Regulations
[[Page 25136]]
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DEPARTMENT OF THE TREASURY
Fiscal Service
31 CFR Part 285
RIN 1510-AA67
Administrative Wage Garnishment
AGENCY: Financial Management Service, Fiscal Service, Treasury.
ACTION: Final rule.
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SUMMARY: This final rule implements the administrative wage garnishment
provisions contained in the Debt Collection Improvement Act of 1996
(DCIA). Wage garnishment is a process whereby an employer withholds
amounts from an employee's wages and pays those amounts to the
employee's creditor in satisfaction of a withholding order. The DCIA
authorizes Federal agencies administratively to garnish the disposable
pay of an individual to collect delinquent nontax debts owed to the
United States in accordance with regulations issued by the Secretary of
the Treasury.
DATES: This rule is effective June 5, 1998.
FOR FURTHER INFORMATION CONTACT: Gerry Isenberg, Financial Program
Specialist, Debt Management Services, at (202) 874-6660 or James Regan,
Attorney-Advisor, at (202) 874-6680, Financial Management Service,
Department of the Treasury, 401 14th Street SW, Washington, DC 20227.
This document is available for downloading from the Financial
Management Service web site at the following address: http://
www.fms.treas.gov.
SUPPLEMENTARY INFORMATION:
Background
This final rule implements the wage garnishment provision in
section 31001(o) of the Debt Collection Improvement Act of 1996 (DCIA),
Pub. L. 104-134, 110 Stat. 1321-358 (Apr. 26, 1996), codified at 31
U.S.C. 3720D. Wage garnishment is a process whereby an employer
withholds amounts from an employee's wages and pays those amounts to
the employee's creditor in satisfaction of a withholding order. The
DCIA authorizes Federal agencies administratively to garnish up to 15%
of the disposable pay of a debtor to satisfy delinquent nontax debt
owed to the United States. Prior to the enactment of the DCIA, agencies
were required to obtain a court judgment before garnishing the wages of
non-Federal employees. Section 31001(o) of the DCIA preempts State laws
that prohibit wage garnishment or otherwise govern wage garnishment
procedures.
As authorized by the DCIA, a Federal agency collecting delinquent
nontax debt may garnish administratively a delinquent debtor's wages in
accordance with regulations promulgated by the Secretary of the
Treasury. The Financial Management Service (FMS), a bureau of the
Department of the Treasury, is responsible for promulgating the
regulations implementing this and other debt collection tools
established by the DCIA.
In accordance with the requirements of the DCIA, this final rule
establishes the following rules and procedures:
1. Notice
At least 30 days before an agency initiates garnishment
proceedings, the agency will give the debtor written notice informing
him or her of the nature and amount of the debt, the intention of the
agency to collect the debt through deductions from pay, and an
explanation of the debtor's rights regarding the proposed action.
2. Rights of the Debtor
The agency will provide the debtor with an opportunity to inspect
and copy records related to the debt, to establish a repayment
agreement, and to receive a hearing concerning the existence or amount
of the debt and the terms of a repayment schedule. A hearing must be
held prior to the issuance of a withholding order if the debtor's
request is timely received. For hearing requests that are not received
in the specified time frame, an agency need not delay issuance of the
withholding order prior to conducting a hearing. An agency may not
garnish the wages of a debtor who has been involuntarily separated from
employment until that individual has been reemployed continuously for
at least 12 months. The debtor bears the burden of informing the agency
of the circumstances surrounding an involuntary separation from
employment.
3. Employer's Responsibilities
The agency will send to the employer of a delinquent debtor a wage
garnishment order directing that the employer pay a portion of the
debtor's wages to the Federal Government. This final rule requires the
debtor's employer to certify certain payment information about the
debtor. Employers will not be required to vary their normal pay cycles
in order to comply with the garnishment order.
The DCIA prohibits employers from taking disciplinary actions
against the debtor based on the fact that the debtor's wages are
subject to administrative garnishment. In addition, the DCIA authorizes
an agency to sue an employer for amounts not properly withheld from the
wages payable to the debtor.
Discussion of Comments
General
In response to its Notice of Proposed Rulemaking (NPRM) concerning
Administrative Wage Garnishment (62 FR 62458, Nov. 21, 1997), FMS
received comments from Federal agencies, private collection agencies,
an umbrella organization for organizations that support the activities
of the Federal Family Education Loan Programs, and a private citizen.
Many of the commenters have been involved in implementing a similar
administrative wage garnishment provision that authorizes the U.S.
Department of Education (Education) to garnish 10% of the disposable
pay of employed individuals who have defaulted on their student loan
obligations. See 20 U.S.C. 1095a; 34 CFR 682.410. FMS drafted the NPRM
after consultation with the Departments of Education and Justice about
their experience implementing wage garnishment to collect student
loans. The comments received in response to the NPRM based on the
commenters' experience with Education's program have been helpful in
drafting the final rule. It is important to note that Education's wage
garnishment program is applicable to the collection of one type of debt
subject to a single statutory scheme. The DCIA wage garnishment
provision and this rule, on the other hand, are applicable to all
Federal agencies collecting all types of debt, the collection of which
is subject to a variety of statutory provisions. Therefore, as
explained below, while some of the suggestions have been incorporated
into the final rule, others do not apply to a government-wide wage
garnishment program involving all Federal agencies with various types
of debts.
A review of the comments is provided in the following Comment
Analysis which includes a discussion of FMS' determination whether to
incorporate specific suggestions in the final rule. The Comment
Analysis is organized by reference to the paragraphs in the NPRM.
NPRM Sec. 285.11(a) Purpose
No changes were made to NPRM Sec. 285.11(a). FMS did not receive
any comments applicable to this paragraph.
NPRM Sec. 285.11(b) Scope
One commenter suggested that FMS incorrectly interpreted the DCIA
in the NPRM by not limiting the applicability
[[Page 25137]]
of administrative wage garnishment to the collection of only those
debts evidenced by written agreements. The commenter believes that the
language contained in 31 U.S.C. 3720D(a) authorizing wage garnishment
``if the individual is not currently making required repayment in
accordance with any agreement between the agency head and the
individual'' so limits the use of wage garnishment. FMS disagrees with
the commenter. There is nothing in the plain language of the statute to
indicate that the referenced phrase limits the applicability of wage
garnishment to debts evidenced by a written agreement. The term
``debt,'' as defined in 31 U.S.C. 3701(b)(1), as amended by the DCIA,
is not limited to debts evidenced by a written agreement between the
debtor and the Government.
One commenter suggested that the rule establish a minimum threshold
amount for garnishment based on a cost estimate of the garnishment
procedure. This is unnecessary since the use of the administrative wage
garnishment tool by agencies is voluntary and should be used by
agencies in appropriate situations. Agencies may set their own policies
regarding minimum thresholds.
NPRM Sec. 285.11(c) Definitions
One commenter suggested that the definition of agency under NPRM
Sec. 285.11(c) be expanded to authorize agents or vendors of Federal
agencies to garnish debtors' wages in accordance with this rule.
Whether or not an agent or vendor can perform a particular function on
behalf of a Federal agency is beyond the scope of this rule. While the
use of contractors for the collection of debt generally is authorized
by law, agencies may not contract out ``inherently governmental
functions.'' See Office of Management and Budget (OMB) Circular A-76.
This is not to say that contractors cannot assist agencies in
conducting administrative wage garnishment. For example, contractors
could be hired to mail notices and garnishment orders authorized by the
agency, receive documents from the debtor and the employer, and
document agency-approved repayment agreements with the debtor.
NPRM Sec. 285.11(d) General Rule
One commenter suggested that FMS clarify a statement in the NPRM
preamble concerning NPRM Sec. 285.11(d) involving the use of wage
garnishment by Treasury-designated debt collection centers. In addition
to agencies that administer the program that gives rise to the debt,
agencies that pursue the recovery of the debt for those agencies, such
as the Department of the Treasury, Treasury-designated debt collection
centers, and the Department of Justice, are authorized to conduct
administrative wage garnishment. See, e.g., the definition of
``agency'' in NPRM Sec. 285.11(c), unchanged in the final rule.
NPRM Sec. 285.11(e) Notice Requirements
The suggestion by one commenter that the rule specifically prohibit
the combination of an agency's notice of intention to garnish a
debtor's wages with other notices to the debtor has not been
incorporated into this rule. The rule gives agencies the flexibility to
combine notices where appropriate. In many circumstances, the debtor
can be informed clearly in a single communication of all debt
collection remedies available to the Federal agency and the
opportunities available to the debtor to be heard concerning the
existence or amount of the debt.
One commenter's suggestion that FMS develop a standard
administrative wage garnishment notice for government-wide use has not
been incorporated in the final rule. Because agency-specific laws
applicable to debt collection have to be considered in drafting a
notice, a standard government-wide form would not be appropriate.
One commenter suggested that the rule exempt private collection
professionals acting on behalf of agencies from the liability
provisions of the Fair Debt Collection Practices Act (FDCPA), 15 U.S.C.
1692 et seq., provided that such entities comply with the terms of this
rule and use notices and forms developed by Treasury or other agencies.
The extent to which the FDCPA may apply to any entity, particularly
private collection agencies, is outside the scope of this rule.
Several commenters suggested that the rule should clearly state
that the certificate of service may be retained electronically. Other
commenters suggested that a certificate of service is unnecessary. The
final rule retains the requirement that an agency keep a certificate of
service as evidence of mailing. However, NPRM Secs. 285.11(e)(3) and
285.11(g)(3) have been amended to indicate more clearly that the
certificate of service may be retained electronically so long as the
manner of retention is sufficient for evidentiary purposes.
NPRM Sec. 285.11(f) Hearing
One Federal agency asked that the rule address whether an agency
needs to publish its own regulation before it can engage in
administrative wage garnishment under the DCIA. Another commenter
questioned how an agency's existing hearing procedures for debt
determination relate to the wage garnishment requirements contained in
the DCIA and NPRM. The phrase ``consistent with this section'' was
added to NPRM Sec. 285.11(f)(1) in this final rule to clarify that
agency regulations must follow the minimum requirements for wage
garnishment hearings as set forth in this rule. Each agency is
responsible for prescribing hearing procedures in accordance with the
statutory and regulatory requirements of this rule and other
requirements applicable to that agency's debt collection hearing
procedures. Those agencies with hearings procedures which meet the
requirements established under this rule and agency-specific statutory
and other requirements need not develop new hearing procedures.
Agencies should seek legal advice from their agency counsel to
determine whether existing agency procedures meet the requirements
established under this rule and whether the agency is required to
publish new or amended regulations. Section 285.11(b)(6) has been added
to the final rule to further clarify that ``(n)othing in this section
requires agencies to duplicate notices or administrative proceedings
required by contract or other laws or regulations.''
The final rule does not incorporate one commenter's suggestion that
the Department of the Treasury or the Department of Justice be required
to review agencies' wage garnishment procedures and regulations prior
to allowing an agency to initiate a wage garnishment program. Unique
statutory requirements apply to every Federal program that gives rise
to delinquent debt. Thus, the agency administering the program that
gives rise to the debt is in the best position to know what is
required. The Departments of Treasury and Justice will continue,
however, to provide guidance to agencies concerning debt collection
practices and procedures.
One commenter recommended amending NPRM Sec. 285.11(f)(4) by
establishing that a debtor has 15 ``calendar'' days, rather than 15
``business'' days, to request a hearing. FMS was concerned that 15
calendar days would not allow sufficient time for a debtor to request a
hearing prior to the issuance of a garnishment order given that 15
calendar days could include four to seven weekend days or holidays. For
this reason, NPRM Sec. 285.11(f)(4) has not been changed.
Several comments addressed the hearing procedures proposed in the
NPRM. The final rule incorporates the comment from two commenters
[[Page 25138]]
suggesting that the requirement in NPRM Sec. 285.11(f)(8)(ii) that a
debtor prove by ``clear and convincing evidence'' that no debt exists
or that the amount of the debt is incorrect is too burdensome. In the
final rule at Sec. 285.11(f)(8)(ii), FMS replaced the ``clear and
convincing'' standard with the less burdensome ``preponderance of the
evidence'' standard.
One commenter suggested that proving the terms of the repayment
schedule are ``unreasonable,'' as required at NPRM
Sec. 285.11(f)(8)(ii), is too vague and that the debtor should be
required to show that the terms of the repayment schedule would cause a
``financial hardship'' to the debtor. The final rule incorporates this
suggestion.
In response to a commenter's suggestion, NPRM Sec. 285.11(f)(8)(ii)
has been amended to clarify that the debtor may present evidence that
collection of the debt may not be pursued due to operation of law,
e.g., enforcement of the order is subject to the automatic stay imposed
at the time of a bankruptcy filing pursuant to 11 U.S.C. 362.
Two commenters suggested that this rule restrict hearing officials
to those individuals not under the supervision or control of the head
of the agency. The commenters suggested that the rule, without such a
change, could result in inequitable wage garnishment hearing decisions
since an agency, and its qualified hearing officer, have a vested
interest in the outcome. FMS disagrees for three reasons. First,
Congress did not intend to require that hearing officials be
independent. Unlike other statutes, see, e.g., 5 U.S.C. 5514(a)(2)
(concerning Federal salary offset), the DCIA does not require an
independent hearing official. Second, the rule explicitly sets forth
minimum hearing procedures that ensure the debtor has a meaningful
opportunity to be heard and minimize the risk of erroneous deprivation
of the debtor's property interest in his or her wages. Finally, any
final hearing decision by the agency on wage garnishment is subject to
judicial review under the Administrative Procedure Act. See, e.g., 5
U.S.C. 706 (concerning judicial review of an agency's actions).
NPRM Sec. 285.11(g) Wage Garnishment Order
One commenter noted that the provision under NPRM Sec. 285.11(g)
requiring agencies to submit a wage garnishment order to a debtor's
employer within 30 days of a hearing decision (or within 30 days after
the debtor fails to make a timely request for a hearing) should be
reconciled with the 20 day period provided under Education's wage
garnishment regulation at 34 CFR 682.410(b)(10)(H). Such a
reconciliation with Education's rule is not warranted or necessary. The
time period in this rule accommodates a broad range of agencies'
requirements and is consistent with the goal of issuing a wage
garnishment order promptly after notice and an opportunity to be heard
have been provided to the debtor.
The final rule does not incorporate one commenter's suggestion that
NPRM Sec. 285.11(g)(2) be amended to delete the requirement that the
wage garnishment order be signed by the head of the agency or his/her
designee. The commenter suggested that issuance of the wage garnishment
order on agency letterhead including the agency's seal is sufficient to
demonstrate official issuance. This rule requires a signature to
authenticate a wage withholding order. Failure to include a signature
on a wage withholding order could result in employer uncertainty as to
the validity of the order and could result in delay, and possible loss,
of garnishment payments to which the Government is entitled.
As noted in the NPRM and as suggested by a commenter, FMS is
developing a wage garnishment order form. It is anticipated that the
use of a standard wage garnishment order form by agencies will make it
easier for private sector employers to recognize and comply with agency
wage garnishment order requirements. This form will be available from
FMS at the address listed above and will be available for downloading
from the FMS web site at the following address: www.fms.treas.gov.
One commenter suggested that rather than require the agency to keep
a certificate of service indicating the date of the mailing of a
garnishment order, the rule should require the debtor's employer to
verify receipt. The commenter's rationale is that the DCIA (31 U.S.C.
3720D(f)(2)(A)) and NPRM Sec. 285.11(o) authorize the agency to sue the
employer for noncompliance with the wage garnishment order. The final
rule does not incorporate this comment because the Government need only
show that the order was mailed, not whether it actually was received.
Nelson v. Diversified Collection Services, 961 F.Supp. 863, 868-69 (D.
Md. 1997). By requiring an agency to retain a copy of the certificate
of service, the agency can produce evidence that the order was mailed
without having to place an additional burden on the employer.
One commenter suggested that the requirement to comply with the
wage garnishment order should be waived under circumstances when a
small employer (with less than five employees) would be subject to a
major hardship (financial or otherwise) as a result of complying with
the order. Such a change to the rule is unnecessary since the use of
the wage garnishment collection tool by agencies is not mandated under
the DCIA. Agencies can set their own policies on when it is appropriate
to utilize the administrative wage garnishment process.
NPRM Sec. 285.11(h) Certification by Employer
The final rule did not incorporate the recommendation of two
commenters to delete the requirement under NPRM Sec. 285.11(h)
requiring the debtor's employer to complete and return a certification
form to the agency. The commenters suggested this provision is unduly
burdensome and that an employer's failure to complete and return the
form could unnecessarily delay the garnishment process. The
certification form serves multiple purposes. One, the form provides the
agency with information necessary to monitor the employer's compliance
with the wage garnishment order in accordance with the requirements of
the DCIA and applicable laws. The form also will provide information so
the agency can calculate anticipated collection amounts to determine
whether to pursue other collection tools. Finally, the form will assist
the employer in calculating the amount to be garnished from the
debtor's disposable pay. It is noted that the employer's failure to
complete the certification form as required does not affect the
employer's responsibility to withhold the appropriate garnishment
amount within a ``reasonable time'' in accordance with this rule. See
NPRM Sec. 285.11(i)(7), renumbered as Sec. 285.11(i)(8) in the final
rule.
NPRM Sec. 285.11(i) Amounts Withheld
Two commenters recommended clarifying the impact of the Consumer
Credit Protection Act's (CCPA) minimum disposable pay requirement on
the wage garnishment provisions of the DCIA and this rule. See CCPA,
Sec. 303(a)(2), codified at 15 U.S.C. 1673(a)(2) (maximum allowable
garnishment). NPRM Sec. 285.11(i) has been amended to clarify that the
amount of garnishment is limited by the CCPA. Under section 285.11(i)
of the final rule, the amount of garnishment is the lesser of the
amount indicated on the garnishment order up to 15% of the debtor's
disposable pay or the amount set forth in 15 U.S.C. 1673(a)(2). The
amount set forth in 15 U.S.C. 1673(a)(2) is the amount by which a
debtor's
[[Page 25139]]
disposable pay exceeds an amount equivalent to thirty times the minimum
wage. For example, if a debtor receives disposable pay of $160.00 per
week and thirty times the minimum wage is $154.50, the amount that may
be garnished weekly is the lesser of $24.00 (15% of $160) or $5.50
($160.00-$154.40 = $5.50). See 29 CFR 870.10(b)(1) for information on
calculating an amount equivalent to thirty times the minimum wage.
Section 285.11(i)(3) of the final rule is the same as NPRM
Sec. 285.11(i)(2) except that Sec. 285.11(i)(3)(iii) has been added to
clarify the amount of garnishment for a debtor who owes multiple debts
to a single creditor agency. Under section 285(i)(3)(iii) of the final
rule, an agency may issue multiple withholding orders so long as the
total amount garnished from the debtor's pay for such orders does not
exceed the garnishment amount permitted under Sec. 285.11(i)(2). For
purposes of Sec. 285.11(i)(3)(iii), the term ``agency'' refers to the
agency that is owed the debt.
One commenter suggested deleting the language in NPRM
Sec. 285.11(i)(7) (renumbered as Sec. 285.11(i)(8) in the final rule)
requiring that the wage garnishment order ``indicate a reasonable
period of time within which the employer is required to commence wage
withholding'' because garnishment orders in all other contexts
typically require immediate compliance. This suggestion was not
incorporated into the final rule. The ``reasonable period of time''
given to employers allows employers adequate time to calculate
garnishment withholding payroll data involving a debtor employee
without disrupting the normal payroll cycle. It is anticipated that a
``reasonable period of time'' generally will mean that the employer
will commence withholdings within two pay cycles following receipt of
the garnishment order. This may vary given an employer's circumstances.
NPRM Sec. 285.11(j) Exclusions From Garnishment.
No changes were made to the NPRM Sec. 285.11(n). FMS did not
receive any comments applicable to this paragraph.
NPRM Sec. 285.11(k) Financial Hardship
The final rule does not incorporate one commenter's suggestion that
NPRM Sec. 285.11(k) be amended further to define the standards for
agency review of a debtor's request for an adjustment in the amount
withheld under a wage garnishment order due to ``financial hardship''
based on ``materially changed circumstances.'' NPRM Sec. 285.11(k),
unchanged in the final rule, provides illustrative examples of the type
of events which may give rise to financial hardship due to ``materially
changed circumstances,'' such as disability, divorce, or catastrophic
illness. However, whether financial hardship exists must be determined
by an agency's review of the particular facts and circumstances of a
given case.
NPRM Sec. 285.11(l) Ending Garnishment
The final rule does not incorporate a commenter's suggestion that
the rule clarify whether collection costs need to be collected before
terminating the garnishment action. NPRM Sec. 285.11(l), unchanged in
the final rule, clearly requires termination of garnishment only after
the agency ``has fully recovered the amounts owed by the debtor,
including interest, penalties and administrative costs consistent with
the FCCS (Federal Claims Collection Standards).'' See 31 U.S.C. 3717(e)
and 4 CFR 102.13 regarding the collection of administrative costs
associated with a debt.
NPRM Sec. 285.11(m) Actions Prohibited by the Employer
No changes were made to NPRM Sec. 285.11(m). FMS did not receive
any comments applicable to this paragraph.
NPRM Sec. 285.11(n) Refunds
No changes were made to NPRM Sec. 285.11(n). FMS did not receive
any comments applicable to this paragraph.
NPRM Sec. 285.11(o) Right of Action.
The final rule does not incorporate a commenter's suggestion that
NPRM Sec. 285.11(o) be amended to remove the requirement that a Federal
agency must ``terminate collection action'' as a prerequisite to
commencing suit against a debtor's employer for failure to withhold
amounts from wages pursuant to a wage garnishment order. The DCIA
specifically provides that ``suit (against an employer) may not be
filed before the termination of the collection action, unless earlier
filing is necessary to avoid expiration of any applicable statute of
limitations period.'' 31 U.S.C. 3720D(f)(2)(B).
However, FMS has amended NPRM Sec. 285.11(o) in the final rule to
incorporate a suggestion by another commenter that the rule be changed
to clarify that ``termination of the collection action'' merely refers
to the particular debtor/employee, rather than the debt. This change
gives agencies flexibility to terminate collection action against one
of the debtors and file suit against that debtor's employer for failing
to withhold that debtor's wages pursuant to a wage garnishment order.
At the same time, the agency could continue collection efforts
involving the other debtors who are jointly and severally liable to the
agency on the debt.
Regulatory Analysis
This rule is not a significant regulatory action as defined in
Executive Order 12866. It is hereby certified that this regulation,
including the certification referenced in this final rule (see
paragraph (h) of this section), will not have a significant economic
impact on a substantial number of small entities. Although a
substantial number of small entities will be subject to this regulation
and to the certification requirement in this rule, the requirements
will not have a significant economic impact on these entities.
Employers of delinquent debtors must certify certain information about
the debtor such as the debtor's employment status and earnings. This
information is contained in the employer's payroll records. Therefore,
it will not take a significant amount of time or result in a
significant cost for an employer to complete the certification form.
Even if an employer is served withholding orders on several employees
over the course of a year, the cost imposed on the employer to complete
the certifications would not have a significant economic impact on that
entity. Employers are not required to vary their normal pay cycles in
order to comply with a withholding order issued pursuant to this rule.
List of Subjects in 31 CFR Part 285
Administrative practice and procedure, Claims, Debts, Garnishment
of wages, Hearing and appeal procedures, Salaries, Wages.
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, 3720D; E.O. 13019; 3 CFR, 1996 Comp., p. 216.
2. Section 285.11 is added to Subpart B to read as follows:
Sec. 285.11 Administrative wage garnishment.
(a) Purpose. This section provides procedures for Federal agencies
to collect money from a debtor's
[[Page 25140]]
disposable pay by means of administrative wage garnishment to satisfy
delinquent nontax debt owed to the United States.
(b) Scope. (1) This section applies to any Federal agency that
administers a program that gives rise to a delinquent nontax debt owed
to the United States and to any agency that pursues recovery of such
debt.
(2) This section shall apply notwithstanding any provision of State
law.
(3) Nothing in this section precludes the compromise of a debt or
the suspension or termination of collection action in accordance with
applicable law. See, for example, the Federal Claims Collection
Standards (FCCS), 4 CFR parts 101-105.
(4) The receipt of payments pursuant to this section does not
preclude a Federal agency from pursuing other debt collection remedies,
including the offset of Federal payments to satisfy delinquent nontax
debt owed to the United States. A Federal agency may pursue such debt
collection remedies separately or in conjunction with administrative
wage garnishment.
(5) This section does not apply to the collection of delinquent
nontax debt owed to the United States from the wages of Federal
employees from their Federal employment. Federal pay is subject to the
Federal salary offset procedures set forth in 5 U.S.C. 5514 and other
applicable laws.
(6) Nothing in this section requires agencies to duplicate notices
or administrative proceedings required by contract or other laws or
regulations.
(c) Definitions. As used in this section the following definitions
shall apply:
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.
For purposes of this section, agency means either the agency that
administers the program that gave rise to the debt or the agency that
pursues recovery of the debt.
Business day means Monday through Friday. For purposes of
computation, the last day of the period will be included unless it is a
Federal legal holiday.
Certificate of service means a certificate signed by an agency
official indicating the nature of the document to which it pertains,
the date of mailing of the document, and to whom the document is being
sent.
Day means calendar day. For purposes of computation, the last day
of the period will be included unless it is a Saturday, a Sunday, or a
Federal legal holiday.
Debt or claim 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 an individual, including debt
administered by a third party as an agent for the Federal Government.
Delinquent nontax debt means any nontax debt that has not been paid by
the date specified in the agency's initial written demand for payment,
or applicable agreement, unless other satisfactory payment arrangements
have been made. For purposes of this section, the terms ``debt'' and
``claim'' are synonymous and refer to delinquent nontax debt.
Debtor means an individual who owes a delinquent nontax debt to the
United States.
Disposable pay means that part of the debtor's compensation
(including, but not limited to, salary, bonuses, commissions, and
vacation pay) from an employer remaining after the deduction of health
insurance premiums and any amounts required by law to be withheld. For
purposes of this section, ``amounts required by law to be withheld''
include amounts for deductions such as social security taxes and
withholding taxes, but do not include any amount withheld pursuant to a
court order.
Employer means a person or entity that employs the services of
others and that pays their wages or salaries. The term employer
includes, but is not limited to, State and local Governments, but does
not include an agency of the Federal Government.
Garnishment means the process of withholding amounts from an
employee's disposable pay and the paying of those amounts to a creditor
in satisfaction of a withholding order.
Withholding order means any order for withholding or garnishment of
pay issued by an agency, or judicial or administrative body. For
purposes of this section, the terms ``wage garnishment order'' and
``garnishment order'' have the same meaning as ``withholding order.''
(d) General rule. Whenever an agency determines that a delinquent
debt is owed by an individual, the agency may initiate proceedings
administratively to garnish the wages of the delinquent debtor.
(e) Notice requirements. (1) At least 30 days before the initiation
of garnishment proceedings, the agency shall mail, by first class mail,
to the debtor's last known address a written notice informing the
debtor of:
(i) The nature and amount of the debt;
(ii) The intention of the agency to initiate proceedings to collect
the debt through deductions from pay until the debt and all accumulated
interest, penalties and administrative costs are paid in full; and
(iii) An explanation of the debtor's rights, including those set
forth in paragraph (e)(2) of this section, and the time frame within
which the debtor may exercise his or her rights.
(2) The debtor shall be afforded the opportunity:
(i) To inspect and copy agency records related to the debt;
(ii) To enter into a written repayment agreement with the agency
under terms agreeable to the agency; and
(iii) For a hearing in accordance with paragraph (f) of this
section concerning the existence or the amount of the debt or the terms
of the proposed repayment schedule under the garnishment order.
However, the debtor is not entitled to a hearing concerning the terms
of the proposed repayment schedule if these terms have been established
by written agreement under paragraph (e)(2)(ii) of this section.
(3) The agency will keep a copy of a certificate of service
indicating the date of mailing of the notice. The certificate of
service may be retained electronically so long as the manner of
retention is sufficient for evidentiary purposes.
(f) Hearing--(1) In general. Agencies shall prescribe regulations
for the conduct of administrative wage garnishment hearings consistent
with this section or shall adopt this section without change by
reference.
(2) Request for hearing. The agency shall provide a hearing, which
at the agency's option may be oral or written, if the debtor submits a
written request for a hearing concerning the existence or amount of the
debt or the terms of the repayment schedule (for repayment schedules
established other than by written agreement under paragraph (e)(2)(ii))
of this section.
(3) Type of hearing or review. (i) For purposes of this section,
whenever an agency is required to afford a debtor a hearing, the agency
shall provide the debtor with a reasonable opportunity for an oral
hearing when the agency determines that the issues in dispute cannot be
resolved by review of the documentary evidence, for example, when the
validity of the claim turns on the issue of credibility or veracity.
(ii) If the agency determines that an oral hearing is appropriate,
the time and location of the hearing shall be established by the
agency. An oral hearing may, at the debtor's option, be conducted
either in-person or by telephone conference. All travel
[[Page 25141]]
expenses incurred by the debtor in connection with an in-person hearing
will be borne by the debtor. All telephonic charges incurred during the
hearing will be the responsibility of the agency.
(iii) In those cases when an oral hearing is not required by this
section, an agency shall nevertheless accord the debtor a ``paper
hearing,'' that is, an agency will decide the issues in dispute based
upon a review of the written record. The agency will establish a
reasonable deadline for the submission of evidence.
(4) Effect of timely request. Subject to paragraph (f)(13) of this
section, if the debtor's written request is received by the agency on
or before the 15th business day following the mailing of the notice
described in paragraph (e)(1) of this section, the agency shall not
issue a withholding order under paragraph (g) of this section until the
debtor has been provided the requested hearing and a decision in
accordance with paragraphs (f)(10) and (f)(11) of this section has been
rendered.
(5) Failure to timely request a hearing. If the debtor's written
request is received by the agency after the 15th business day following
the mailing of the notice described in paragraph (e)(1) of this
section, the agency shall provide a hearing to the debtor. However, the
agency will not delay issuance of a withholding order unless the agency
determines that the delay in filing the request was caused by factors
over which the debtor had no control, or the agency receives
information that the agency believes justifies a delay or cancellation
of the withholding order.
(6) Hearing official. A hearing official may be any qualified
individual, as determined by the head of the agency, including an
administrative law judge.
(7) Procedure. After the debtor requests a hearing, the hearing
official shall notify the debtor of:
(i) The date and time of a telephonic hearing;
(ii) The date, time, and location of an in-person oral hearing; or
(iii) The deadline for the submission of evidence for a written
hearing.
(8) Burden of proof. (i) The agency will have the burden of going
forward to prove the existence or amount of the debt.
(ii) Thereafter, if the debtor disputes the existence or amount of
the debt, the debtor must present by a preponderance of the evidence
that no debt exists or that the amount of the debt is incorrect. In
addition, the debtor may present evidence that the terms of the
repayment schedule are unlawful, would cause a financial hardship to
the debtor, or that collection of the debt may not be pursued due to
operation of law.
(9) Record. The hearing official must maintain a summary record of
any hearing provided under this section. A hearing is not required to
be a formal evidentiary-type hearing, however, witnesses who testify in
oral hearings will do so under oath or affirmation.
(10) Date of decision. The hearing official shall issue a written
opinion stating his or her decision, as soon as practicable, but not
later than sixty (60) days after the date on which the request for such
hearing was received by the agency. If an agency is unable to provide
the debtor with a hearing and render a decision within 60 days after
the receipt of the request for such hearing:
(i) The agency may not issue a withholding order until the hearing
is held and a decision rendered; or
(ii) If the agency had previously issued a withholding order to the
debtor's employer, the agency must suspend the withholding order
beginning on the 61st day after the receipt of the hearing request and
continuing until a hearing is held and a decision is rendered.
(11) Content of decision. The written decision shall include:
(i) A summary of the facts presented;
(ii) The hearing official's findings, analysis and conclusions; and
(iii) The terms of any repayment schedules, if applicable.
(12) Final agency action. The hearing official's decision will be
the final agency action for the purposes of judicial review under the
Administrative Procedure Act (5 U.S.C. 701 et seq.).
(13) Failure to appear. In the absence of good cause shown, a
debtor who fails to appear at a hearing scheduled pursuant to paragraph
(f)(4) of this section will be deemed as not having timely filed a
request for a hearing.
(g) Wage garnishment order. (1) Unless the agency receives
information that the agency believes justifies a delay or cancellation
of the withholding order, the agency shall send, by first class mail, a
withholding order to the debtor's employer within 30 days after the
debtor fails to make a timely request for a hearing (i.e., within 15
business days after the mailing of the notice described in paragraph
(e)(1) of this section), or, if a timely request for a hearing is made
by the debtor, within 30 days after a final decision is made by the
agency to proceed with garnishment.
(2) The withholding order sent to the employer under paragraph
(g)(1) of this section shall be in a form prescribed by the Secretary
of the Treasury on the agency's letterhead and signed by the head of
the agency or his/her delegatee. The order shall contain only the
information necessary for the employer to comply with the withholding
order. Such information includes the debtor's name, address, and social
security number, as well as instructions for withholding and
information as to where payments should be sent.
(3) The agency will keep a copy of a certificate of service
indicating the date of mailing of the order. The certificate of service
may be retained electronically so long as the manner of retention is
sufficient for evidentiary purposes.
(h) Certification by employer. Along with the withholding order,
the agency shall send to the employer a certification in a form
prescribed by the Secretary of the Treasury. The employer shall
complete and return the certification to the agency within the time
frame prescribed in the instructions to the form. The certification
will address matters such as information about the debtor's employment
status and disposable pay available for withholding.
(i) Amounts withheld. (1) After receipt of the garnishment order
issued under this section, the employer shall deduct from all
disposable pay paid to the applicable debtor during each pay period the
amount of garnishment described in paragraph (i)(2) of this section.
(2)(i) Subject to the provisions of paragraphs (i)(3) and (i)(4) of
this section, the amount of garnishment shall be the lesser of:
(A) The amount indicated on the garnishment order up to 15% of the
debtor's disposable pay; or
(B) The amount set forth in 15 U.S.C. 1673(a)(2) (Restriction on
Garnishment). The amount set forth at 15 U.S.C. 1673(a)(2) is the
amount by which a debtor's disposable pay exceeds an amount equivalent
to thirty times the minimum wage. See 29 CFR 870.10.
(3) When a debtor's pay is subject to withholding orders with
priority the following shall apply:
(i) Unless otherwise provided by Federal law, withholding orders
issued under this section shall be paid in the amounts set forth under
paragraph (i)(2) of this section and shall have priority over other
withholding orders which are served later in time. Notwithstanding the
foregoing, withholding orders for family support shall have priority
over withholding orders issued under this section.
(ii) If amounts are being withheld from a debtor's pay pursuant to
a withholding order served on an employer before a withholding order
[[Page 25142]]
issued pursuant to this section, or if a withholding order for family
support is served on an employer at any time, the amounts withheld
pursuant to the withholding order issued under this section shall be
the lesser of:
(A) The amount calculated under paragraph (i)(2) of this section,
or
(B) An amount equal to 25% of the debtor's disposable pay less the
amount(s) withheld under the withholding order(s) with priority.
(iii) If a debtor owes more than one debt to an agency, the agency
may issue multiple withholding orders provided that the total amount
garnished from the debtor's pay for such orders does not exceed the
amount set forth in paragraph (i)(2) of this section. For purposes of
this paragraph (i)(3)(iii), the term agency refers to the agency that
is owed the debt.
(4) An amount greater than that set forth in paragraphs (i)(2) and
(i)(3) of this section may be withheld upon the written consent of
debtor.
(5) The employer shall promptly pay to the agency all amounts
withheld in accordance with the withholding order issued pursuant to
this section.
(6) An employer shall not be required to vary its normal pay and
disbursement cycles in order to comply with the withholding order.
(7) Any assignment or allotment by an employee of his earnings
shall be void to the extent it interferes with or prohibits execution
of the withholding order issued under this section, except for any
assignment or allotment made pursuant to a family support judgment or
order.
(8) The employer shall withhold the appropriate amount from the
debtor's wages for each pay period until the employer receives
notification from the agency to discontinue wage withholding. The
garnishment order shall indicate a reasonable period of time within
which the employer is required to commence wage withholding.
(j) Exclusions from garnishment. The agency may not garnish the
wages of a debtor who it knows has been involuntarily separated from
employment until the debtor has been reemployed continuously for at
least 12 months. The debtor has the burden of informing the agency of
the circumstances surrounding an involuntary separation from
employment.
(k) Financial hardship. (1) A debtor whose wages are subject to a
wage withholding order under this section, may, at any time, request a
review by the agency of the amount garnished, based on materially
changed circumstances such as disability, divorce, or catastrophic
illness which result in financial hardship.
(2) A debtor requesting a review under paragraph (k)(1) of this
section shall submit the basis for claiming that the current amount of
garnishment results in a financial hardship to the debtor, along with
supporting documentation. Agencies shall consider any information
submitted in accordance with procedures and standards established by
the agency.
(3) If a financial hardship is found, the agency shall downwardly
adjust, by an amount and for a period of time agreeable to the agency,
the amount garnished to reflect the debtor's financial condition. The
agency will notify the employer of any adjustments to the amounts to be
withheld.
(l) Ending garnishment. (1) Once the agency has fully recovered the
amounts owed by the debtor, including interest, penalties, and
administrative costs consistent with the FCCS, the agency shall send
the debtor's employer notification to discontinue wage withholding.
(2) At least annually, an agency shall review its debtors' accounts
to ensure that garnishment has been terminated for accounts that have
been paid in full.
(m) Actions prohibited by the employer. An employer may not
discharge, refuse to employ, or take disciplinary action against the
debtor due to the issuance of a withholding order under this section.
(n) Refunds. (1) If a hearing official, at a hearing held pursuant
to paragraph (f)(3) of this section, determines that a debt is not
legally due and owing to the United States, the agency shall promptly
refund any amount collected by means of administrative wage
garnishment.
(2) Unless required by Federal law or contract, refunds under this
section shall not bear interest.
(o) Right of action. The agency may sue any employer for any amount
that the employer fails to withhold from wages owed and payable to an
employee in accordance with paragraphs (g) and (i) of this section.
However, a suit may not be filed before the termination of the
collection action involving a particular debtor, unless earlier filing
is necessary to avoid expiration of any applicable statute of
limitations period. For purposes of this section, ``termination of the
collection action'' occurs when the agency has terminated collection
action in accordance with the FCCS or other applicable standards. In
any event, termination of the collection action will have been deemed
to occur if the agency has not received any payments to satisfy the
debt from the particular debtor whose wages were subject to
garnishment, in whole or in part, for a period of one (1) year.
Dated: April 30, 1998.
Richard L. Gregg,
Commissioner.
[FR Doc. 98-11966 Filed 5-5-98; 8:45 am]
BILLING CODE 4810-35-P