[Federal Register Volume 64, Number 14 (Friday, January 22, 1999)]
[Proposed Rules]
[Pages 3454-3456]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-1240]


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 Proposed Rules
                                                 Federal Register
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 This section of the FEDERAL REGISTER contains notices to the public of 
 the proposed issuance of rules and regulations. The purpose of these 
 notices is to give interested persons an opportunity to participate in 
 the rule making prior to the adoption of the final rules.
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  Federal Register / Vol. 64, No. 14 / Friday, January 22, 1999 / 
Proposed Rules  

[[Page 3454]]


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SMALL BUSINESS ADMINISTRATION

13 CFR Parts 134 and 140


Debt Collection Through Offset

AGENCY: U.S. Small Business Administration.

ACTION: Proposed rule.

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SUMMARY: The U.S. Small Business Administration (SBA) proposes to amend 
its regulations on Debt Collection Through Offset. SBA proposes to 
amend these regulations to conform with the Debt Collection Procedures 
Act of 1996 and the Debt Collection Improvement Act of 1996. The 
amendments will allow other Federal agencies to offset debts owed to 
SBA and will allow SBA to participate in the Government-wide Treasury 
Offset Program administered by the Department of the Treasury.
    SBA is currently publishing the proposed language for its 
regulations on General Rules and Debt Collection Through Offset. At a 
later date, SBA will publish the proposed language for its regulations 
on Debt Collection Through Administrative Wage Garnishment and proposed 
amendments that define terms used in that future proposal.

DATES: Submit comments on or before February 22, 1999.

ADDRESSES: Address all comments concerning this proposed rule to Arnold 
S. Rosenthal, Assistant Administrator, Office of Portfolio Management, 
Small Business Administration, 409 Third Street, SW., Washington, DC 
20416.

FOR FURTHER INFORMATION CONTACT: Arnold S. Rosenthal, Assistant 
Administrator, Office of Portfolio Management (202) 205-6481.

SUPPLEMENTARY INFORMATION: 13 CFR Part 140 established procedures for 
SBA to collect past-due debts through administrative or salary offset. 
SBA now proposes to amend this rule, pursuant to the Debt Collection 
Improvement Act of 1996, Pub. L. 104-134, authorizing the Agency to: 
participate in the mandatory Government-wide payment offset system 
known as the Treasury Offset Program administered by the Department of 
Treasury.
    To participate in the Treasury Offset Program, the administrative 
or salary offset procedures must be available not only to SBA, but to 
other agencies as well. This proposed rule would make the changes 
necessary to allow SBA or another Federal agency to collect past-due 
debts through administrative or salary offset. This proposed rule also 
amends SBA's offset procedures, and contains plain language revisions 
and clarifications.
    The following is a section by section analysis of each provision of 
SBA's regulations that would be affected by this proposed rule:
     Section 140.1 would be amended to incorporate plain 
language principles.
     Section 140.2 would be deleted and replaced with a 
definition section.
     Section 140.3 would be deleted. The offset procedures 
would now be located in Sec. 140.6.
     Section 140.5 would be added to explain the purpose and 
scope of the offset procedures.
     Section 140.6 would be added to set forth the offset 
procedures. The new procedures establish two steps for offset. The 
first entails the verification of a debt. SBA will send a notice to the 
debtor and review any response to determine whether the debt is past 
due and enforceable. The SBA Office of Hearings and Appeals would no 
longer review administrative offsets, and would only review salary 
offsets. The second steps involves SBA's implementation of an 
administrative or salary offset or referral of a debt to the Department 
of the Treasury or another Federal agency for offset. In addition, SBA 
would now be able to implement an offset action upon referral from 
another Federal agency.
     Section 134.202 paragraph (b) would also be amended to 
refer only to salary offsets.

Compliance With Executive Orders 12612, 12778, and 12866, the 
Regulatory Flexibility Act (5 U.S.C. 601 et seq.), and the 
Paperwork Reduction Act (44 U.S.C. Ch. 35)

    SBA certifies that this rule would not have a significant economic 
impact on a substantial number of small entities within the meaning of 
Executive Order 12866 or the Regulatory Flexibility Act, 5 U.S.C. 601 
et seq. This proposed rule only applies to individuals who have 
outstanding debts to the United States. It is not likely to have an 
annual economic effect of $100 million or more, result in a major 
increase in costs or prices, or have a significant adverse effect on 
competition or the United States economy.
    For purposes of the Paperwork Reduction Act, 44 U.S.C. Ch. 35, SBA 
certifies that this rule contains no new reporting or record keeping 
requirements.
    For purposes of Executive Order 12612, SBA certifies that this rule 
would not have any federalism implications warranting the preparation 
of a Federalism Assessment.
    For purposes of Executive Order 12778, SBA certifies that this rule 
is drafted, to the extent practicable, under the standards set forth in 
Section 2 of that Order.

List of Subjects

13 CFR Part 134

    Administrative practice and procedure.

13 CFR Part 140

    Claims, Government employees, Income taxes, Wages.

    Accordingly, under the authority contained in section 5(b)(6) of 
the Small Business Act (15 U.S.C. 634(b)(6)), SBA proposes to amend 13 
CFR parts 134 and 140 as follows:

PART 134--[AMENDED]

    1. The authority citation for part 134 continues to read as 
follows:

    Authority: 5 U.S.C. 504, 15 U.S.C. 632, 634(b)(6), and 637(a).

    2. Revise Sec. 134.202(b) to read as follows:


Sec. 134.202  Commencement of cases.

* * * * *
    (b) In debt collection proceedings under part 140, subpart B, of 
this chapter, no later than 15 days after you receive of a notice of 
indebtedness and plan to collect such debt by salary offset;
* * * * *

PART 140--[AMENDED]

    3. Amend the heading for part 140 to read as follows:

[[Page 3455]]

PART 140--DEBT COLLECTION

    4. The authority citation for part 140 is revised to read as 
follows:

    Authority: 31 U.S.C. 3711, Collection and compromise; 31 U.S.C. 
3720A, Reduction of tax refund by amount of debt; 5. U.S.C. 5514, 
Installment deduction for indebtedness to the United States; 31 
U.S.C. 3716, Administrative offset; 15 U.S.C. 634(b)(6), Small 
Business Act; 31 U.S.C. 3720, the Debt Collection Improvement Act of 
1996.

    5-6. Add a subpart heading for Secs. 140.1 through 140.2, to read 
as follows:

Subpart A--General Rules

    7. Revise Sec. 140.1 to read as follows:


Sec. 140.1  What does this part cover?

    This part establishes procedures we may use to collect past-due 
debts owed to the Government. You cannot use our failure to follow 
these regulations to defend against a suit to collect a debt.
    8. Revise Sec. 140.2 to read as follows:


Sec. 140.2  Definitions.

    Unless otherwise noted, the following definitions apply to subpart 
B.
    (a) Administrative offset. To satisfy a debt, we may withhold money 
we owe you or another Federal agency owes you. This procedure is an 
``administrative offset'' and is authorized by 31 U.S.C. 3716.
    (b) Agency. Agency includes a department, agency, court, or court 
administrative office, in the executive, judicial, or legislative 
branch of the Federal Government, including Government corporations. 
For purposes of this section, agency means either the agency 
administering the program giving rise to the debt or the agency 
attempting to recover the debt.
    (c) Creditor agency. Creditor agency means any agency owed a debt 
that seeks to collect that claim through administrative offset.
    (d) Day. Day means calendar day. To count days, include the last 
day of the period unless it is a Saturday, a Sunday, or a Federal legal 
holiday.
    (e) Debt. Debt means money owed to the United States for any 
reason, including loans made or guaranteed by the United States, fees, 
leases, rents, royalties, services, sales of real or personal property, 
overpayments, fines, penalties, damages, interest, or forfeitures. A 
debtor is someone who owes money to the United States from any source.
    (f) Debtor/You/Your. Debtor/You/Your means a person, organization, 
or entity, other than a Federal agency, that owes a debt.
    (g) Disposable pay. As used in subpart B of this part (offset), 
disposable pay means what remains of your pay after any amounts 
required by law are deducted.
    (h) Legally Enforceable. As used in subpart B of this part 
(offset), a debt is legally enforceable if, on the date of offset, 
SBA's claim would not be barred in even one forum, including a State or 
Federal Court or administrative agency. Non-judgment debts are 
enforceable for ten years; judgment debts are enforceable beyond 10 
years.
    (i) Non-tax. Non-tax means not related to an obligation under the 
Internal Revenue Code of 1986, as amended.
    (j) Past-Due. As used in subpart B of this part (offset), a debt is 
past due if it has been reduced to judgment, accelerated, or due for at 
least 90 days.
    (k) Salary offset. If you are an active or retired Federal employee 
(a civilian employee as defined by 5 U.S.C. 2105, an employee of the 
U.S. Postal Service or Postal Rate Commission, or a member of the 
Uniformed Services or Reserve of the Uniformed Services), we may deduct 
payments owed to the United States from your paycheck. This procedure 
is a ``salary offset'' and is authorized by 5 U.S.C. 5514 and 31 U.S.C. 
3716.
    (1) Any amount deducted from your salary in any one pay period will 
not exceed 15 percent of your disposable pay, unless you agree in 
writing to a greater percentage.
    (2) A Federal agency also may collect against travel advances, 
training expenses, disallowed payments, retirement benefits, or any 
other amount due you, including lump sum payments. These collection 
efforts are not salary offsets and are not subject to the 15-percent 
limitation in paragraph (k)(1) of this section.
    (l) Tax refund offset. We may request that the Department of the 
Treasury (Treasury) reduce your tax refund by the amount of the debt as 
authorized by 31 U.S.C. 3720A. A Federal agency, at the same time, may 
take additional action against you to collect the debt. Even if SBA 
refers your debt to other agencies (within 6 months of the initial 
notice), it needs to review your debt only once under subpart B of this 
part and its authorizing statutes.
    (m) Treasury Offset Program. The Treasury Offset Program is a 
centralized process which provides for the offset of Federal payments, 
including Federal tax refunds, Federal salary payments, retirement 
payments, and other types of payments, to collect debts you owe the 
Federal Government. The Treasury operates the Treasury Offset Program 
through the Financial Management Service.
    (n) We/Our/Us. We/Our/Us refers to the SBA.
    9. Remove Sec. 140.3 and add a subpart heading for Secs. 140.5 
through 140.6 to read as follows:

Subpart B--Debt Collection Through Offset

    10. Add Sec. 140.5 to read as follows:


Sec. 140.5  What does this subpart cover?

    This subpart establishes procedures we may use to collect, through 
offset, past-due debts you owe to the United States. An offset occurs 
when we or another Federal agency withhold(s) money to which you may be 
entitled to satisfy a debt that you owe to the United States. These 
regulations set forth procedures for how we determine if a debt is past 
due and legally enforceable, and thus appropriate for offset. These 
regulations also set forth procedures we follow when implementing an 
offset action or referring the debt to another agency for offset. You 
cannot use our failure to follow these regulations to defend against a 
suit to collect the debt
    9. Add 9. Sec. 140.6 to read as follows:


Sec. 140.6  How does SBA verify whether I owe a debt, or collect a debt 
from me through offset?

    (a) Verifying a debt. (1) At least 30 days before starting an 
offset action or referring a debt to another agency for offset, we must 
send you a written notice .
    (2) Our written notice must state the nature and amount of the 
debt; that we or another Federal agency may attempt an offset; that you 
may present evidence that the debt does not exist, is not past due, or 
is not legally enforceable; that you may inspect and copy, at your 
expense, Government records relating to the debt; that, to avoid the 
offset, you may reach an agreement with us on a schedule for repayment; 
and that, if you do not reach agreement on repayment or seek review of 
the debt, we or another agency may offset without further notice. If we 
propose a schedule for repayment of your debt, you may present evidence 
that you cannot meet this schedule. If a written agreement establishes 
this schedule, you cannot challenge the schedule.
    (3) We also must tell you that, unless you respond to the notice as 
provided in paragraph (a)(4) or (a)(5) of this section, we or the 
agency to which we refer your debt may disclose to consumer reporting 
agencies (also known as credit bureaus or credit agencies) that you are 
responsible for the debt, and the specific information necessary to 
establish your identity, including the amount, status, history of

[[Page 3456]]

the debt, and agency program under which it arose. If you respond to us 
within the 15-or 60-day periods set forth in paragraphs (a)(4) and 
(a)(5) of this section, we will not disclose the information to 
consumer reporting agencies and will not refer the debt to another 
Federal agency until we consider your response and determine that you 
owe a past-due, legally enforceable debt.
    (4) If we notify you that we intend to start a salary offset to 
satisfy your debt, you may request a hearing from SBA's Office of 
Hearings and Appeals (OHA). Part 134 of this title governs OHA 
proceedings. To have a hearing before OHA, you must request a hearing 
within 15 days of receiving the notice. If you file your request in 
time, we must stop collection proceedings until OHA's Administrative 
Law Judge (ALJ) decides your case. You must state in your request for 
an OHA hearing the date you received the notice and present the 
evidence you believe shows the debt is not past due or legally 
enforceable. You also must send a copy of your submission to the SBA 
Associate General Counsel for Litigation, Office of General Counsel, at 
the Small Business Administration, 409 Third Street, SW., Washington, 
DC 20416. OHA's ALJ will issue a decision within 60 days after you 
filed your request for a hearing with OHA.
    (5) If we notify you that we intend to start an administrative 
offset or to refer your debt to another Federal agency for possible 
offset, you may request review from the SBA official identified in the 
notice. To obtain review of the debt, you must submit to the designated 
official, within 60 days of the notice, the evidence showing the debt 
is not past due or legally enforceable. By failing to request review 
within this period, you waive any objection to the offset action. If 
you request review of the debt, the relevant SBA official will notify 
you in writing of the final decision and whether we will continue with 
the offset action or refer your debt to another agency for offset.
    (6) We need not follow these procedures to verify that a debt is 
past due and legally enforceable if another Federal agency already has 
made this determination.
    (b) Actions after SBA verifies a past-due, legally enforceable 
debt. (1) After verifying a past-due, legally enforceable debt, we 
may--
    (i) Begin an offset action to recover the debt;
    (ii) Refer the debt to another agency for offset;
    (iii) Notify consumer reporting agencies of the debt; or
    (iv) Begin other appropriate action to attempt collection of the 
debt.
    (2) If you are subject to an offset action, you may be required to 
pay, in addition to your debt, interest, penalties, and administrative 
costs, such as the costs of collection. We or another Federal agency 
will provide notice of any such interest, penalties, and administrative 
costs.
    (3) If another Federal agency asks us to offset a debt, we may rely 
on the creditor agency's determination that a debt is past due and 
legally enforceable. We will not begin an offset until the creditor 
agency has provided written notice that you owe a past-due, legally 
enforceable debt, and of its amount, and that the agency has fully 
complied with its regulations concerning administrative offsets. After 
receiving such notice, we will provide you notice that we will begin an 
offset. You are not entitled to further review from us that the debt is 
valid or the offset proper.
    (4) If we refer the debt to a consumer reporting agency and the 
status or amount of your debt substantially changes, we will report 
that change promptly to each consumer reporting agency we originally 
contacted. We will obtain satisfactory assurances from each consumer 
reporting agency that the consumer reporting agency has complied with 
all Federal laws relating to provision of consumer credit information.
    (5) If another agency is beginning an offset of your debt and you 
make any additional payments to us, we will notify the other agency of 
these payments and your new balance as soon as reasonably possible.
    (c) We or another Federal agency may make an offset prior to 
completing the procedures described in this part, if failure to make an 
offset would substantially prejudice the Government's ability to 
collect the debt; and the time before the Government otherwise would 
make payment to you does not reasonably permit the completion of the 
procedures. If we initiate the offset action, we then must provide you 
with an opportunity to present evidence that the debt is not past due 
or legally enforceable and take appropriate action in response to this 
evidence.
    (d) If you owe us a past-due, legally enforceable debt that is over 
180 days delinquent, including non-tax debt administered by a third 
party acting as an agent for the Federal Government, we must, as 
required by 31 U.S.C. 3716(c)(6), notify the Treasury of all such non-
tax debts for purposes of administrative offset.

    Dated: January 6, 1999.
Aida Alvarez,
Administrator.
[FR Doc. 99-1240 Filed 1-21-99; 8:45 am]
BILLING CODE 8025-01-P