[Federal Register Volume 65, Number 124 (Tuesday, June 27, 2000)]
[Proposed Rules]
[Pages 39567-39574]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-15923]


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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. 65, No. 124 / Tuesday, June 27, 2000 / 
Proposed Rules  

[[Page 39567]]



SMALL BUSINESS ADMINISTRATION

13 CFR Parts 134 and 140


Administrative Wage Garnishment

AGENCY: Small Business Administration.

ACTION: Notice of proposed rulemaking.

-----------------------------------------------------------------------

SUMMARY: SBA is issuing a proposed rule adopting administrative wage 
garnishment regulations to implement the Debt Collection Improvement 
Act of 1996. The rule would allow SBA to garnish the wages of a person 
indebted to the United States for any non-tax debt without first 
obtaining a judgment. The debtor generally would be entitled to a 
hearing before a Judge assigned to SBA's Office of Hearings and 
Appeals.

DATES: Submit comments on or before August 28, 2000.

ADDRESSES: Send 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.
    Submit electronic comments and other data to: 
[email protected]. See SUPPLEMENTARY INFORMATION for file 
formats and other information about electronic filing.

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

SUPPLEMENTARY INFORMATION:

Electronic Access and Filing

    You may submit comments and data by sending electronic mail (E-
mail) to: [email protected]. Submit comments as Microsoft Word 
97 or as ASCII files avoiding the use of special characters and any 
form of encryption. Identify all comments and data in electronic form 
with the title, ``Administrative Wage Garnishment Regulations.'' You 
may file electronic comments on this proposed rule online at many 
Federal Depository Libraries.

Public Review of Comments

    Whether you comment on paper or electronically, your comments, 
including name, street address, or other contact information (such as 
e-mail address, FAX, or phone number), will be available for public 
review at this address during regular business hours (8 a.m. to 5 
p.m.), Monday through Friday, except federal holidays. You may request 
confidentiality. If you want us to consider withholding your contact 
information from public review or from FOIA disclosure, you must state 
this prominently at the beginning of your comment. We will honor 
requests for confidentiality, to the extent the law allows, on a case-
by-case basis. If you are an organization or business, or identify 
yourself as a representative or official of an organization or 
business, we will make your entire submission available for public 
inspection.

Background

    SBA is issuing a proposed rule adopting administrative wage 
garnishment regulations implementing the Debt Collection Improvement 
Act (DCIA) of 1996. The Department of the Treasury garnishment 
regulations require agencies to publish regulations for administrative 
wage garnishment hearings.

Rulemaking History

    Department of the Treasury (Treasury) published its proposed rules, 
with detailed analysis, at 62 FR 62458, Nov. 21, 1997 (Treasury 
Proposed Rule). After receiving written comments, Treasury published 
its final rule, discussing comments and changes in the final rules, at 
63 FR 25136, May 6, 1998 (Treasury Final Rule). Treasury has since 
published a technical amendment at 64 FR 22906, April 28, 1999 
(Treasury Technical Amendment). The rule, with the technical amendment, 
is now published in the Code of Federal Regulations as 31 CFR 285.11.
    SBA issued a proposed rule amending its debt collection through 
offset regulations, 13 CFR part 140, to conform to the Debt Collection 
Procedures Act of 1996 and the DCIA, at 64 FR 3454, Jan 22, 1999 
(Proposed Offset Rule). In anticipation of the administrative wage 
garnishment regulations, the Proposed Offset Rule sets forth general 
rules, applicable to offset collections and administrative wage 
garnishments, at subpart A of 13 CFR part 140 and rules pertaining only 
to offset at subpart B of 13 CFR part 140. The comment period for the 
Proposed Offset Rule ended February 22, 1999, and the SBA anticipates 
issuing a final rule (Final Offset Rule) shortly. This proposed rule 
takes into account SBA's regulations as the Final Offset Rule would 
amend them; therefore, this proposed rule includes citations that now 
do not exist as such but will be effected by the Proposed Offset Rule.

Same Organization as Treasury Final Rule

    The core of this proposed rule, to be published in the Code of 
Federal Regulations as 13 CFR 140.11, is identical in subsection, 
paragraph, and subparagraph organization to 31 CFR 285.11. Thus, for 
example, section 285.11(f)(11) of the Treasury Final Rule corresponds 
to section 140.11(f)(11) of this proposed rule.

Conformity in Substance to Treasury Final Rule

    Except as stated below, this proposed rule is substantially 
identical to the Treasury Final Rule.

Variation in Substance From Treasury Final Rule

    This proposed rule provides for a hearing by a Judge assigned to 
the case by SBA's Assistant Administrator for Hearings and Appeals (AA/
OHA), rather than a hearing official designated by the Administrator. 
Additionally, it makes minor editorial changes in accordance with 
Administration plain-language directives.

Basic Provisions

    The rule would permit SBA to garnish the wages of a person indebted 
to the United States for any non-tax debt without first obtaining a 
judgment. SBA merely notifies the debtor it intends to garnish his/her 
wages. Subject to the exercise of appeal rights, SBA then may notify 
the debtor's employer (any state or local government or private 
employer, but not the federal government) to begin the garnishment. The 
OHA hearing, with a written decision by a Judge, will enhance the 
credibility and fairness of SBA's garnishment appeal procedure and will 
ensure due process.

[[Page 39568]]

Rules and Procedures

    Except as stated below, this proposed rule would establish for the 
SBA the substantive and procedural requirements of the Treasury Final 
Rule.

Section Analysis

    The following is a section-by-section analysis of how this proposed 
rule would affect SBA's regulations. This proposed rule would:

     Amend Section 134.101 (Definitions) to define 
``business day,'' used in Sec. 134.202(c)(ii);
     Amend Section 134.102(i) (Jurisdiction of OHA) to add 
collection of debts under DCIA to the jurisdiction of SBA's Office 
of Hearings and Appeals (OHA);
     Amend Section 134.202 (Commencement of cases) to 
specify the time limit for requesting a hearing on an administrative 
wage garnishment;
     Amend Section 134.222(a) (Availability of oral hearing) 
to add administrative wage garnishment to that group of cases in 
which a party might obtain an oral hearing;
     Amend Section 134.226(b) (Time limits for decision) to 
add collection of debts under DCIA to that group of cases in which 
OHA must render a decision within 60 days;
     Amend Section 134.227(a) (Final decisions) to add 
collection of debts under DCIA to that group of cases in which OHA's 
decision constitutes a final agency decision;
     Amend Section 140.1 (Coverage) to specify the coverage 
of subpart A of part 140;
     Amend Section 140.2 (Definitions) to add definitions 
pertaining to administrative wage garnishment;
     Add Section 140.3, a table showing features of part 
140's debt collection methods;
     Add Section 140.10 (Coverage) to specify the coverage 
of subpart C of part 140; and
     Add Section 140.11 (Administrative wage garnishment) to 
implement the Treasury Final Rule, with the following modifications:

1. Definitions.

    Section 285.11(c) of the Treasury Final Rule contains definitions. 
Section 140.11(c) contains no definitions, but incorporates by 
reference Sec. 140.2, which defines terms applicable to debt 
collections through both offset and administrative wage garnishment. 
Except as stated below, the definitions pertaining to administrative 
wage garnishment are substantially identical to those in the Treasury 
Final Rule.
    Business day. Section 285.11(c) of the Treasury Final Rule defines 
``business day'' as ``Monday through Friday,'' then tells the reader to 
count the last day of the period unless it was a Federal legal holiday. 
The SBA believes all federal legal holidays, not merely those on the 
last day of a given period, are properly excluded from the term 
``business day.'' Therefore, proposed Sec. 140.2(c) would define 
``business day'' as ``Monday through Friday, excluding federal legal 
holidays.''
    Certificate of service. Both the Treasury Final Rule, 31 CFR 
285.11(c), and SBA's procedural rules, 13 CFR 134.204 (d), define 
``certificate of service.'' In the Treasury Final Rule, ``Certificate 
of service'' refers only to documentation by the Agency, not by a party 
or by counsel, of which documents it mailed to the debtor and when it 
mailed them.
    Under SBA's procedural rules, such a certificate of service is 
inadequate to document service of pleadings: A party serving pleadings 
must prepare a certificate of service conforming with 13 CFR 
134.204(d).
    Therefore, proposed Sec. 140.11(d) applies only to a certificate 
signed by an SBA official and retained as evidence of mailing of a part 
140 document, such as a notice of proposed garnishment or a garnishment 
order. When, for example, a debtor serves a request for hearing under 
proposed Sec. 140.11(f)(2), the certificate of service must conform to 
Sec. 134.204(d).
    Debt or claim. The Treasury Final Rule defined ``debt'' or 
``claim'' as ``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.'' 31 CFR 
285.11(c). The SBA believes this definition raises more questions than 
it answers: For example, the meaning of ``appropriate official,'' which 
is defined neither in statute nor in case law. Because many SBA 
collections arise from loan defaults, proposed Sec. 140.2(g) defines 
``debt,'' in accordance with 31 U.S.C. Sec. 3701(b): ``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.''
    Additionally, the Treasury Final Rule defines ``delinquent'' and 
``non-tax'' under the definition for ``debt or claim.'' 31 CFR 
285.11(c). Proposed Secs. 140.2(n) and 140.2(m) would define these key 
terms separately.
    Delinquent or past due. The Treasury Final Rule uses 
``delinquent,'' while the offset regulations use ``past due.'' The 
garnishment statute, 31 U.S.C. Sec. 3720D, refers to neither. Because 
``past due'' is clearer than ``delinquent,'' the SBA adopted ``past 
due.'' However, the Treasury Final Rule's definition of ``delinquent'' 
for purposes of garnishment differs from that of ``past due'' for 
purposes of offset. Therefore, the SBA would adopt two definitions of 
``past due'': One, proposed Sec. 140.2(n)(1), would apply to offset 
only; the other, proposed Sec. 140.2(n)(2), would apply to garnishment 
only.
    Disposable pay. ``Disposable pay'' is defined differently in 5 
U.S.C. Sec. 5514 and in the Treasury Final Rule. The garnishment 
statute, 31 U.S.C. Sec. 3720D, defines ``disposable pay'' broadly, as 
does 5 U.S.C. Sec. 5514; however, the Treasury Final Rule excludes 
``health insurance premiums.'' 31 CFR 285.11(c). The analysis did not 
suggest a rationale. Treasury Final Rule, 63 FR 25136 at 25137; 
Treasury Proposed Rule, 62 FR 62458 at 62459.
    The SBA is reluctant to define ``disposable pay'' more broadly than 
in the Treasury Final Rule. Additionally, one could argue that sound 
public policy favors encouraging debtors to maintain health insurance, 
which may reduce time lost from work and promote healthy families and 
businesses. Therefore, and because this definition varies from that 
used in the offset regulations, the SBA would adopt two definitions: 
One, proposed Sec. 140.2(i)(1), would apply to offset only; the other, 
Sec. 140.2(i)(2), would apply to garnishment only.

2. Hearing

    Section 285.11(f)(1) allows agencies either to prescribe their own 
regulations or to adopt Sec. 285.11 without change. Proposed 
Sec. 140.11(f)(1) states that all procedures set forth in Sec. 140.11, 
as well as the provisions of part 134, subparts A and B, consistent 
with Sec. 140.11, will apply to any hearing on an administrative wage 
garnishment.
    Additionally, SBA is adding two sentences to proposed 
Sec. 140.11(f)(1). These sentences, now part of Sec. 285.11(f)(9), 
state that a hearing need not be a formal judicial hearing, but that 
witnesses who testify in oral hearings must do so under oath or 
affirmation. Because these statements more directly relate to hearings 
rather than to the record, SBA is placing them in proposed 
140.11(f)(1).
    Section 285.11(f)(2) allows the debtor to request a hearing 
concerning the existence or amount of the debt or the terms of the 
repayment schedule unless the repayment schedule is based on a written 
agreement under paragraph (e)(2)(ii). Proposed Sec. 140.11(f)(2) also 
contains this provision. In addition, it requires the debtor to 
specifically state in the request for hearing that the debtor deserves 
a hearing because of questions concerning the existence or amount of 
the debt or the terms of the repayment schedule. The debtor also must 
file the

[[Page 39569]]

request for hearing with OHA, serving a copy on the office initiating 
the garnishment action. Subsequent references to the entity to which a 
debtor directs a request for hearing (specifically, (f)(4), (f)(5), and 
(f)(10)) will substitute ``OHA'' for the Treasury Final Rule's 
``agency.''
    Section 285.11(f)(3)(i) states the agency will determine whether an 
oral hearing is required. To ensure a fair process and decision, 
proposed Sec. 140.11(f)(3)(i) requires the OHA Judge appointed to the 
case, rather than SBA, to determine whether an oral hearing is 
justified and to conduct any hearing. Subsequent paragraphs 
(specifically, (f)(4), (f)(5), (f)(6), (f)(7), (f)(9), (f)(10), 
(f)(11), (f)(12), and (n)(1)) substitute ``Judge'' for the Treasury 
Final Rule's ``hearing official.''
    Similarly, section 285.11(f)(3)(ii) requires the agency to set the 
time and location of any oral hearing. OHA's Judges have authority to 
``take all appropriate action to ensure the efficient, prompt, and fair 
determination of a case.'' 13 CFR 134.218(b). Therefore, proposed 
Sec. 140.11(f)(3)(ii) places this determination in the hands of the OHA 
Judge assigned to the case.
    If an oral hearing is not required, Sec. 285.11(f)(3)(iii) requires 
a ``paper hearing,'' defined as a resolution based on the written 
record. Proposed Sec. 140.11(f)(3)(iii) also requires a resolution 
based on the written record, but refers to it as a ``written hearing.''
    Additionally, section 285.11(f)(3)(iii) requires the agency to set 
the deadline for the submission of evidence. Proposed 
Sec. 140.11(f)(7)(iii) states the Judge will notify the debtor of this 
deadline, and proposed Sec. 140.11(f)(3)(iii) omits the requirement to 
set the deadline.
    Section 285.11(f)(4) provides that an agency will conduct a hearing 
before issuing a withholding order if the agency receives the debtor's 
request for a hearing within 15 business days after the agency mails 
the notice described in Sec. 285.11(e)(1) of this section. This 
deadline is inconsistent with proposed Sec. 134.202(b), which states 
that a pre-garnishment hearing will be given if the debtor files a 
petition within 15 business days after SBA mails the notification 
letter to the debtor. Filing is effective, not only on receipt of a 
pleading by personal delivery, express mail, or commercial delivery 
service, but also on the postmark date of first-class mail or the 
transmission date of a facsimile. 13 CFR 134.204(e). Therefore, 
proposed Sec. 140.11(f)(4) reads, ``if you file your written request,'' 
rather than, ``if [your written request] is received by [SBA].''
    Section 285.11(f)(5) provides that an agency need not delay issuing 
a withholding order unless the agency receives the debtor's request for 
a hearing within 15 business days after the agency mails the notice 
described in Sec. 285.11(e)(1). Like that in Sec. 285.11(f)(4), above, 
this deadline is inconsistent with proposed Sec. 134.202(b). Therefore, 
proposed Sec. 140.11(f)(5) reads, ``if you file your written request,'' 
rather than, ``if [your written request] is received by [SBA].''
    Section 185.11(f)(5) states the agency will determine whether a 
request for hearing was untimely for reasons beyond the debtor's 
control or whether other circumstances justify delaying or canceling 
the withholding order. Proposed 140.11(f)(5) authorizes the assigned 
Judge to make this decision.
    Section 285.11(f)(6) authorizes the head of the agency to designate 
any qualified individual as a hearing official, including an 
Administrative Law Judge (ALJ). Proposed Sec. 140.11(f)(6) states that 
a Judge assigned to OHA will conduct the hearing. The Assistant 
Administrator for Hearings and Appeals (AA/OHA) may assign any OHA case 
not subject to the Administrative Procedure Act to an ALJ or 
Administrative Judge or, if an attorney, may decide it personally, 13 
CFR 134.218(a). Therefore, proposed Sec. 140.11(f)(6) is substantially 
identical to Sec. 285.11(f)(6), except that the AA/OHA, rather than the 
SBA Administrator, actually assigns the Judge to each case.
    Paragraph (f)(8) describes the burden of proof on the respective 
parties to a hearing. Consistent with the Treasury Final Rule, proposed 
Sec. 140.11(f)(8) requires the debtor to show, by a preponderance of 
the evidence, that no debt exists or that the amount of the debt is 
incorrect. Proposed 140.11(f)(8) also briefly defines ``preponderance 
of the evidence'' in plain English.
    Section 285.11(f)(9), first sentence, requires the hearing official 
to maintain a summary record. The term ``summary'' is not defined; 
therefore, SBA is omitting it from proposed Sec. 140.11(f)(9). OHA's 
regulations require a verbatim record for oral hearings, and any party 
can purchase a transcript. 13 CFR 134.222(e). Thus, any record the 
Judge keeps will not be verbatim, but will consist of the entire 
written record on appeal.
    Additionally, Sec. 285.11(f)(9), in its second and third sentences, 
states that the hearing need not be a formal judicial hearing, but that 
witnesses who testify in oral hearings must do so under oath or 
affirmation. These statements more directly relate to hearings rather 
than to the record. Therefore, SBA is placing those sentences in 
proposed Sec. 140.11(f)(1).
    Section 285.11(f)(10) provides that the hearing official must issue 
a written decision within 60 days after receipt of a hearing request. 
This deadline is inconsistent with proposed Sec. 134.226(b), which 
provides that a decision pertaining to debt collection must be made 
within 60 days after a petition is filed. Filing is effective, not only 
on receipt of a pleading by personal delivery, express mail, or 
commercial delivery service, but also on the postmark date of first-
class mail or the transmission date of a facsimile. 13 CFR 134.204(e). 
Therefore, proposed Sec. 140.11(f)(10)) reads, ``after you filed your 
request for a hearing,'' rather than, ``after receipt of [your written 
request].'' Similarly, proposed Sec. 285.11(f)(10)(ii) requires SBA to 
suspend previously issued withholding orders beginning on the 61st day 
after filing, rather than receipt, of the hearing request.

3. Wage Garnishment Order.

    Section 285.11(g)(1) requires the agency to send a garnishment 
order within specified time limits unless it receives ``information 
that the agency believes justifies a delay or cancellation of the 
withholding order.'' This wording appears to render the Judge's 
decision irrelevant or, at best, advisory. Therefore, proposed 
Sec. 140.11(g)(1) requires the SBA to send a garnishment order within 
specified time limits unless it receives ``an adverse decision from the 
Judge or other justification to delay or cancel the withholding 
order.''
    In the Treasury Final Rule, Sec. 285.11(g)(2) provided in part that 
the withholding order sent to an employer must be on the garnishing 
agency's letterhead. The Treasury Technical Amendment deleted the words 
``on the agency's letterhead'' from Sec. 285.11(g)(2). This amendment 
``allows * * * agencies to use [Standard Form (SF) 329 (11-98),] 
prescribed by [Treasury] for the issuance of an administrative wage 
garnishment order[,] without preparing the form on agency letterhead.'' 
Treasury Technical Amendment, 64 FR 22906, 22908 (1999). Because the 
form will clearly identify SBA as the garnishing agency and requiring 
SBA letterhead would interfere with use of SF 329, SBA is adopting this 
amendment.
    Section 285.11(g)(3), second sentence, allows the agency to retain 
an electronic copy of the certificate of service. Because the SBA 
chooses not to exercise this option, the second sentence does not 
appear in proposed Sec. 140.11(g)(3).

[[Page 39570]]

4. Amounts Withheld.

    Section 285.11(i)(2)(i)(B) clarifies that the amount of garnishment 
is limited by the Consumer Credit Protection Act (CCPA). The CCPA, 
Sec. 303(a)(2), codified at 15 U.S.C. 1673(a)(2) (maximum allowable 
garnishment), sets an additional limit on the amount of disposable pay 
that may be collected from a debtor's wages: The difference between 30 
times the minimum hourly wage and the debtor's weekly disposable pay. 
This subparagraph did not appear in the Treasury Proposed Rule; 
Treasury added it to the final rule based upon the recommendations of 
two commenters. Treasury Final Rule, 63 FR 25136, 25138-39 (1998). 
However, the terms ``hourly'' and ``weekly'' do not appear in 
Sec. 285.11(i)(2)(i)(B). Because both the comments on the final rule, 
63 FR at 25139, and SF 329C (Wage Garnishment Worksheet), block 9, 
clearly indicate those terms are necessary to understand the limit set 
by CCPA, the SBA is inserting them in proposed Sec. 285.11(i)(2)(i)(B).
    Section 285.11(i)(3), introductory clause, purports to discuss 
``withholding orders with priority.'' However, the subparagraphs of 
Sec. 285.11(i)(3) describe how to determine whether another withholding 
order has priority. Therefore, proposed Sec. 140.11(i)(3) replaces 
``withholding orders with priority'' with ``other withholding orders.''

Compliance With the Regulatory Flexibility Act (5 U.S.C. 601-12); 
the Paperwork Reduction Act (44 U.S.C. ch. 35); and Executive 
Orders 12866, 12988, and 13132

1. Regulatory Flexibility Act

    The Administrator, in accordance with the Regulatory Flexibility 
Act (5 U.S.C. Secs. 601-12), has reviewed this regulation and certifies 
that this rule, including the certification contained in proposed 
section 140.11(h), would not have a significant economic impact on a 
substantial number of small entities within the meaning of the 
Regulatory Flexibility Act, 5 U.S.C. 601-12.
    This proposed rule applies only to individuals, as well as 
employers of such individuals, with outstanding debts to the United 
States. Though a substantial number of small entities will be subject 
to this proposed regulation and to its certification requirement, the 
requirements will not have a significant economic impact on these 
entities. Though a delinquent debtor's employer must certify certain 
information about the debtor, including the debtor's employment status 
and earnings, the employer's payroll records already contain this 
information. Therefore, an employer will not expend significant time or 
expense completing the certification form. Even if an employer received 
withholding orders on several employees during the year, the cost 
imposed on the employer to complete the certifications would not be 
significant. Employers need not vary normal pay cycles to comply with 
withholding orders issued under this proposed rule.

2. Paperwork Reduction Act of 1995

    For purposes of the Paperwork Reduction Act (44 U.S.C. ch. 35), we 
certify this proposed rule would impose no new reporting or record-
keeping requirements on employers. As noted at 1, above, though an 
employer of a delinquent debtor must certify certain information about 
the debtor, the employer's payroll records already contain this 
information; and, even if an employer received withholding orders on 
several employees, the burden of completing the certifications would 
not be significant.

3. Executive Order 12866

a. Significance of This Regulation
    We have drafted and reviewed this regulation in accordance with 
Executive Order 12866, section 1(b), Principles of Regulation. This 
regulation falls within a category of regulatory actions that the 
Office of Management and Budget (OMB) does not constitute as 
``significant'' within the meaning of section 3(f) of Executive Order 
12866. Accordingly, OMB did not require review of this regulation.
b. Clarity of This Regulation
    Executive Order 12866 and the President's memorandum of June 1, 
1998, require us to write all rules in plain language. Other ``Plain 
Language'' directives include Writing User-Friendly Documents (visited 
March 22, 2000) http://www.blm.gov/nhp/NPR/pe_toc.html>; and the 
Federal Register Document Drafting Handbook, October 1998 Revision 
(visited March 22, 2000) http://www.nara.gov/fedreg/ddhhome.html#top>. 
Following these directives, we have reworded many provisions to help 
you understand them.

4. Executive Order 12988

    For purposes of Executive Order 12988, we certify we drafted this 
rule, to the extent practicable, in accordance with the standards set 
forth in Section 3 of that Order.

5. Executive Order 13132

    For purposes of Executive Order 13132, we determine this proposed 
rule does not have federalism implications to justify preparing a 
Federalism Assessment.

List of Subjects

13 CFR Part 134

    Administrative practice and procedure, Claims, Equal access to 
justice, Lawyers, Organization and functions (Government agencies).

13 CFR Part 140

    Administrative practice and procedure, Claims, Debts, Hearing and 
appeal procedures, Salaries, 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--RULES OF PROCEDURE GOVERNING CASES BEFORE THE OFFICE OF 
HEARINGS AND APPEALS

    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. Amend Sec. 134.101 by adding a new definition for ``Business 
day'' in alphabetical order to read as follows:


Sec. 134.101  Definitions.

* * * * *
    Business day means Monday through Friday, excluding federal legal 
holidays.
* * * * *
    3. Revise Sec. 134.102(i) to read as follows:


Sec. 134.102  Jurisdiction of OHA.

* * * * *
    (i) Collection of debts owed to SBA and the United States under the 
Debt Collection Act of 1982, the Debt Collection Improvement Act of 
1996, and part 140 of this chapter;
* * * * *
    4. Amend Sec. 134.202 as follows:
    a. Redesignate paragraphs (c) and (d) as paragraphs (d) and (e), 
respectively.
    b. Add a new paragraph (c) to read as follows:


Sec. 134.202  Commencement of cases.

* * * * *
    (c) In proceedings for debt collection by administrative wage 
garnishment under part 140, subpart B, of this chapter:
    (1) At any time after SBA mails to you, as the debtor, the 
notification letter described in Sec. 140.11(e)(1);
    (2) But no later than 15 business days after SBA mails the 
notification letter to

[[Page 39571]]

you, if you desire a hearing before SBA issues the withholding order to 
your employer;
* * * * *
    5. Amend Sec. 134.222(a) by adding paragraph (a)(3) to read as 
follows:


Sec. 134.222  Oral hearing.

* * * * *
    (a) * * *
    (3) In administrative wage garnishment proceedings under the Debt 
Collection Improvement Act of 1996 and part 140, subpart C, of this 
chapter, you make a timely request under Sec. 140.11(f)(3)(i) of this 
chapter, and the Judge finds a genuine dispute as to a material fact 
that cannot be resolved solely by reviewing documents.
* * * * *
    6. Revise Sec. 134.226(b) to read as follows:


Sec. 134.226  The decision.

* * * * *
    (b) Time limits. Decisions pertaining to the collection of debts 
owed to SBA and the United States under the Debt Collection Act of 
1982, the Debt Collection Improvement Act of 1996, and part 140 of this 
chapter must be made within 60 days after a petition is filed.
* * * * *
    7. Revise Sec. 134.227(a) to read as follows:


Sec. 134.227  Finality of decisions.

    (a) Final decisions. A decision on the merits will be a final 
decision, when issued, in proceedings concerning the collection of 
debts owed to SBA and the United States, under the Debt Collection Act 
of 1982, the Debt Collection Improvement Act of 1996, and part 140 of 
this chapter.
* * * * *

PART 140--DEBT COLLECTION

    8. Revise part 140 to read as follows:

PART 140--DEBT COLLECTION

Subpart A--General Rules
Sec.
140.1   What does this subpart cover?
140.2   Definitions.
140.3   What debt collection methods does part 140 provide?
Subpart B--Debt Collection Through Offset [Reserved]
140.5   What does this subpart cover? [Reserved]
140.6   How does SBA verify whether I owe a debt, or collect a debt 
from me through offset? [Reserved]
Subpart C--Debt Collection Through Administrative Wage Garnishment
140.10   What does this subpart cover?
140.11   What type of debt is subject to administrative wage 
garnishment, and how can the SBA get an administrative wage 
garnishment of my pay?

    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, Collection of payments; 31 U.S.C. 
3720D, Garnishment.

Subpart A--General Rules


Sec. 140.1  What does this subpart cover?

    This subpart establishes general rules for subparts B and C of this 
part.


Sec. 140.2  Definitions.

    Unless otherwise noted, the following definitions apply to both 
subpart B and subpart C of this part.
    (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) Business day. Business day means Monday through Friday, 
excluding federal legal holidays. To count business days after an 
event, count every day from the day after the event through the last 
day, but exclude Saturdays, Sundays, and federal legal holidays.
    (d) Certificate of service. For purposes of this part only, 
certificate of service means a certificate signed by an agency official 
showing the type of document being sent, the mailing date, and to whom 
it was sent. When preparing a certificate of service for any other 
purpose, see Sec. 134.204(d) of this chapter.
    (e) Creditor agency. Creditor agency means any agency owed a debt 
that seeks to collect that debt through administrative offset.
    (f) Day. Day means calendar day. To count days after an event, 
count every day from the day after the event through the last day, 
unless the last day is a Saturday, a Sunday, or a federal legal 
holiday; if so, the next working day will be the last day.
    (g) 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.
    (h) Debtor/You/Your. Debtor/You/Your means a person, organization, 
or entity, other than a federal, state, or local agency, that owes a 
debt.
    (i) Disposable pay. (1) 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.
    (2) As used in subpart C of this part (garnishment), disposable pay 
means what remains of your pay (including salary, bonuses, commissions, 
and vacation pay) after health insurance premiums and any amounts 
required by law are deducted. ``Amounts required by law'' include 
social security deductions and withholding taxes, but do not include 
amounts withheld because of a court order.
    (j) Employer. Employer means a person or entity that employs the 
services of others and pays their wages or salaries. The term employer 
includes state and local governments, but does not include a federal 
agency.
    (k) Garnishment. Garnishment means the process of withholding 
amounts from your disposable pay and then paying those amounts to a 
creditor to satisfy a withholding order.
    (l) 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 ten 
years.
    (m) Non-tax. Non-tax means not related to an obligation under the 
Internal Revenue Code of 1986, as amended.
    (n) Past due. (1) 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.
    (2) As used in subpart C of this part (garnishment), a past-due 
debt is one you have not paid by the date specified in our initial 
written demand for payment or applicable agreement, unless you have 
made other satisfactory payment arrangements.
    (o) 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

[[Page 39572]]

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, 31 
U.S.C. 3716, and subpart B of this part.
    (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 subject to the 15-percent limitation in paragraph 
(o)(1) of this section.
    (p) 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 six months of the initial 
notice), it must review your debt only once under subpart B and its 
authorizing statutes.
    (q) Treasury Offset Program. The Treasury Offset Program, operated 
through the Financial Management Service, is a centralized process that 
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.
    (r) We/Our/Us. We/Our/Us refers to the SBA.
    (s) Withholding order/wage garnishment order/garnishment order. 
Withholding order/wage garnishment order/garnishment order refers to an 
order issued by an agency or a judicial or administrative body for 
withholding or garnishing pay.


Sec. 140.3  What debt collection methods does part 140 provide?.

    This table shows some features of the debt collection methods 
discussed in this part.

----------------------------------------------------------------------------------------------------------------
             SBA may use                   To collect from        Under provisions of      Subject to review by
----------------------------------------------------------------------------------------------------------------
(a) Salary offset....................  Paychecks (including     Part 140, subparts A     Administrative Law
                                        travel advances,         and B, especially Sec.   Judge, Office of
                                        training expenses,        140.2(o), Sec.          Hearings and Appeals
                                        disallowed payments,     140.6(a)(4) & (b)-(d);   (OHA).
                                        retirement benefits,     part 134, subparts A
                                        and lump sum payments)   and B).
                                        of active or retired
                                        federal employees or
                                        members, including
                                        those U.S. Postal
                                        Service, Postal Rate
                                        Commission, and active
                                        or reserve uniformed
                                        services.
(b) Administrative offset............  Money any agency owes    Part 140, subparts A     SBA official identified
                                        to the debtor.           and B, especially Sec.   in notice.
                                                                  140.2(a), Sec.
                                                                 140.6(a)(5) & (b)-(d).
(c) Administrative wage garnishment..  Disposable pay from      Part 140, subparts A     Judge, Office of
                                        employer (including      and C, especially Sec.   Hearings and Appeals
                                        state or local            140.2(i), (k); Sec.     (OHA).
                                        government, but not      140.11; part 134,
                                        federal government).     subparts A and B.
----------------------------------------------------------------------------------------------------------------

Subpart B--Debt Collection Through Offset [Reserved]


Sec. 140.5  What does this subpart cover? [Reserved]


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

Subpart C--Debt Collection Through Administrative Wage Garnishment


Sec. 140.10  What does this subpart cover?

    This subpart establishes procedures we may use when we undertake an 
administrative wage garnishment. An administrative wage garnishment 
allows us to collect money for past-due non-tax debt owed to the United 
States. You cannot use our failure to follow these regulations to 
defend against a suit to collect a debt.


Sec. 140.11  What type of debt is subject to administrative wage 
garnishment, and how can the SBA get an administrative wage garnishment 
of my pay?

    (a) We may collect money from your disposable pay by an 
administrative wage garnishment. This money is used to satisfy past-due 
non-tax debt you owe the United States.
    (b) Scope. (1) This section applies to past-due non-tax debt owed 
to the United States arising from an SBA program or being collected by 
us.
    (2) This section applies despite any State law.
    (3) Nothing in this section prevents us from settling for less than 
the full amount of a debt or suspending or stopping a debt collection 
action authorized by law. See, for example, the Federal Claims 
Collection Standards (FCCS), 4 CFR parts 101-105; see also part 140, 
subpart A, of this chapter.
    (4) Our receipt of payments under this section does not prevent us 
from pursuing other debt collection remedies. We may do so separately 
or together with administrative wage garnishment.
    (5) This section does not apply to the collection of past-due non-
tax debt owed to the United States from the wages of federal employees. 
Federal pay is subject to the federal salary offset procedures set 
forth in 5 U.S.C. 5514 and other laws, including subpart B of this 
part.
    (6) Nothing in this section requires us to duplicate notices or 
hold administrative proceedings required by contract, other laws, or 
regulations.
    (c) Definitions. Unless otherwise stated, the definitions in 
Sec. 140.2 apply to terms used in this section.
    (d) When may the SBA initiate administrative wage garnishment 
proceedings? When we determine you owe a past-due non-tax debt, we may 
initiate administrative wage garnishment proceedings to withhold a 
portion of your wages to satisfy the debt.
    (e) What notice must the SBA give the debtor before beginning an 
administrative wage garnishment? (1) We must send a written notice by 
first-class mail to your last known address at least 30 days before we 
begin garnishment proceedings. The notice must inform you of:
    (i) The type and amount of the debt;
    (ii) SBA's plans to collect the debt by making deductions from your 
pay until the debt and all interest, penalties, and administrative 
costs are paid in full; and
    (iii) An explanation of your rights, including those in paragraph 
(e)(2) of

[[Page 39573]]

this section, and a statement about the amount of time you have to take 
action before wage garnishment begins.
    (2) We must give you the opportunity to:
    (i) Inspect and copy our records related to the debt;
    (ii) Enter into a written repayment agreement with us under terms 
agreeable to us; and
    (iii) Have a hearing as described in paragraph (f) of this section. 
The hearing may address the existence of the debt, the amount of the 
debt, or the terms of the proposed repayment schedule under the 
withholding order. You are not entitled to a hearing about the terms of 
a written repayment schedule, as described in paragraph (e)(2)(ii) of 
this section.
    (3) We will retain a copy of a certificate of service showing when 
we mailed the notice of wage garnishment proceedings.
    (f) Hearing. (1) What type of hearing must SBA give me? The 
procedures in this section, as well as procedures in part 134, subparts 
A and B of this chapter (Rules of Procedure Governing Cases Before the 
Office of Hearings and Appeals) that are consistent with this section, 
apply to your SBA hearing. A hearing need not be a formal judicial 
hearing. However, witnesses who testify in oral hearings must do so 
under oath or affirmation.
    (2) Request for hearing. We must provide you with a hearing if you 
request one. Your request for a hearing must be in writing. You must 
send the original request to SBA's Office of Hearings and Appeals (OHA) 
and a copy to the office initiating the garnishment action. Your 
written request must state you deserve a hearing because of questions 
about whether the debt exists, the amount of the debt, or the repayment 
terms. You must specifically describe the basis for each of these 
questions. You cannot raise questions about a written debt repayment 
agreement under paragraph (e)(2)(ii) of this section.
    (3) Type of hearing. (i) We must provide you with an oral hearing 
when the Judge appointed to conduct the hearing determines that he or 
she cannot resolve the issues by reviewing documents.
    (ii) If the Judge determines that you should have an oral hearing, 
he or she will set the time and location. You may choose whether the 
oral hearing is conducted in person or by telephone. You must pay all 
travel expenses resulting from an in-person hearing. We will pay 
telephone charges for telephone hearings.
    (iii) When an oral hearing is not required, the Judge must conduct 
a ``written hearing,'' after which the Judge decides the issues based 
upon a review of documents.
    (4) Effect of a timely request for a hearing. We will not issue a 
withholding order if you file your written request for a hearing on or 
before the 15th business day after we mailed the notice informing you 
of the wage garnishment. We will not issue the withholding order until 
a Judge conducts a hearing and makes a decision, as required in 
paragraphs (f)(10) and (f)(11) of this section.
    (5) Effect of an untimely request for a hearing. If you file your 
written request for a hearing more than 15 business days after we 
mailed your garnishment notice, the Judge still will give you a 
hearing. However, we will not delay issuing the withholding order to 
your employer. We will delay issuing a withholding order only if the 
Judge decides your request was untimely for reasons beyond your control 
or other information justifies delaying or canceling the withholding 
order.
    (6) Hearing official. An OHA Judge will conduct the hearing.
    (7) Procedure. After you request a hearing, the Judge must notify 
you of the following:
    (i) The date and time of any telephone oral hearing;
    (ii) The date, time, and location of any in-person oral hearing; 
and
    (iii) The deadline to send evidence for a written hearing.
    (8) Burden of proof. (i) We have the burden of first showing that 
you probably have a past-due non-tax debt and the amount of the debt.
    (ii) If we show the probable existence and amount of the debt, you 
must prove by a preponderance of the evidence (meaning that it is more 
likely than not) that no debt exists or that the debt amount is 
incorrect. In addition, you may present evidence proving by a 
preponderance of the evidence that the terms of the repayment schedule 
are illegal or would cause you a financial hardship; or that collection 
of the debt is illegal.
    (9) Record. The Judge must maintain a record of any hearing 
provided under this section.
    (10) Date of decision. The Judge must issue a written opinion 
stating his or her decision as soon as possible but no later than sixty 
(60) days after you filed your request for a hearing. If the Judge does 
not do so--
    (i) We cannot issue a withholding order until the Judge holds a 
hearing and makes a decision; or
    (ii) We must suspend any previously issued withholding orders 
beginning on the 61st day after you filed your hearing request. This 
suspension must continue until the Judge holds a hearing and makes a 
decision.
    (11) Content of the decision. The Judge's written decision must 
include:
    (i) A summary of the facts presented;
    (ii) The findings, analysis, and conclusions; and
    (iii) The terms of any repayment schedule.
    (12) Final SBA action. The Judge's decision will be our final 
action for the purposes of judicial review under the Administrative 
Procedure Act, 5 U.S.C. 701-706.
    (13) Failure to appear. If you fail to appear at a hearing without 
a good reason, we will treat you as if you did not file a timely 
request for a hearing, as described in paragraph (f)(5) of this 
section.
    (g) Wage garnishment order. (1) Unless we receive an adverse 
decision from the Judge or other justification to delay or cancel the 
withholding order, we will send a withholding order to your employer by 
first-class mail. If you made a timely request for a hearing, we would 
mail the withholding order within 30 days after the final SBA action, 
as stated in paragraph (f)(12) of this section. If you did not make a 
timely request for a hearing, we would mail the withholding order 
within 30 days after the time in paragraphs (f)(4) and (f)(5) of this 
section had ended (that is, 15 business days after we mailed you the 
notice described in paragraph (e)(1) of this section).
    (2) The withholding order we send to your employer under paragraph 
(g)(1) of this section must be in a form determined by the Secretary of 
the Treasury. It must be signed by the SBA's Administrator or someone 
he or she designates. The withholding order must contain the 
information your employer needs to comply with it. Such information 
includes your name, address, and social security number; instructions 
for withholding pay; and the address for payments.
    (3) We will retain a copy of a certificate of service showing when 
we mailed the withholding order.
    (h) Certification by employer. Along with the withholding order, we 
will send your employer a certification, in a form determined by the 
Secretary of the Treasury. Your employer must complete and return this 
certification to us within the time stated in the certification 
instructions. The certification will include information about your 
employment status and the amount of

[[Page 39574]]

your disposable pay available for withholding.
    (i) Amounts withheld. (1) Your employer must deduct from your 
disposable pay during each pay period the garnishment amount described 
in paragraph (i)(2) of this section.
    (2) Except as shown in paragraphs (i)(3) and (i)(4) of this 
section, the amount of garnishment will be the lesser of:
    (i) The amount stated on the garnishment order, not to exceed 15% 
of your disposable pay; or
    (ii) The amount in 15 U.S.C. 1673(a)(2) (Restriction on 
Garnishment). The amount in 15 U.S.C. 1673(a)(2) is the amount by which 
your weekly disposable pay is greater than thirty times the minimum 
hourly wage. See 29 CFR 870.10.
    (3) If your pay is subject to other withholding orders, the 
following applies:
    (i) Unless otherwise provided by federal law, withholding orders 
issued by us must be paid in the amounts in paragraph (i)(2) of this 
section, and will have priority over other withholding orders issued 
later. However, withholding orders for family support have priority 
over withholding orders issued by us.
    (ii) If amounts are being withheld from your pay because of a 
withholding order issued before we issued our withholding order, or 
because of a withholding order for family support issued at any time, 
the earlier or family support order will have priority, and the amount 
withheld because of the SBA withholding order will be the lesser of:
    (A) The amount calculated under paragraph (i)(2) of this section, 
or
    (B) An amount equal to 25% of your disposable pay minus the amount 
withheld under the withholding order with priority.
    (iii) If you owe more than one debt to an agency, we may issue 
multiple withholding orders if the amount withheld from your pay does 
not exceed the amount in paragraph (i)(2) of this section.
    (4) You may give written consent for us to withhold from your pay 
an amount greater than that in paragraphs (i)(2) and (i)(3) of this 
section.
    (5) Your employer must pay to us as soon as possible all amounts 
withheld under a withholding order.
    (6) Your employer is not required to change normal pay cycles to 
provide for the withholding order.
    (7) No assignment or allotment of your earnings you have requested 
may interfere with or prohibit our withholding order. The one exception 
to this rule is that you may assign or allot earnings because of a 
family support judgment or order.
    (8) The withholding order will state a reasonable time period 
within which your employer must begin wage withholding. Your employer 
must withhold the designated amount from your wages each pay period 
until we notify your employer to stop wage withholding.
    (j) Exclusions from garnishment. We may not garnish your wages if 
we know you have been involuntarily unemployed at any time during the 
last 12 months. You are responsible for informing us of the facts and 
circumstances of your unemployment.
    (k) Financial hardship. (1) You may request us to review the amount 
being withheld from your wages. You must base this request on a 
material change in circumstances that causes you financial hardship, 
such as disability, divorce, or catastrophic illness.
    (2) If you request review under paragraph (k)(1) of this section, 
you must specifically state why the current amount of garnishment 
causes you financial hardship and you must send documentation 
supporting your claim.
    (3) If we find financial hardship, we will decide how much and how 
long to reduce the amount withheld from your pay. We will notify your 
employer of any reductions.
    (l) Ending garnishment. (1) After we have recovered the amount you 
owe, including interest, penalties, and administrative costs consistent 
with the FCCS, we will send a notice to your employer to stop wage 
withholding.
    (2) At least annually, we will review your account to ensure that 
withholding has stopped if you have paid your debt in full.
    (m) Prohibited actions by the employer. No employer may fire, 
refuse to employ, or take disciplinary action against you because of a 
withholding order.
    (n) Refunds. (1) We must promptly refund any amount collected by 
administrative wage garnishment if either--
    (i) A Judge, after a hearing held under paragraph (f)(3) of this 
section, determines you do not owe a debt to the United States; or
    (ii) We determine that your employer continued withholding wages 
after you had paid your debt in full.
    (2) Refunds of amounts collected will not earn interest unless 
required by federal law or contract.
    (o) Right of action. We may sue your employer if your employer 
fails to comply with the order to withhold from your wages. However, we 
may not file a suit until your collection action has ended unless the 
expiration of a statute of limitations period requires action. Your 
collection action ends when we stop the collection action as required 
by the FCCS or other applicable standards. Your collection action also 
ends if we do not receive any garnishment payments from your employer 
for one (1) year.

    Dated: June 7, 2000.
Aida Alvarez,
Administrator.
[FR Doc. 00-15923 Filed 6-26-00; 8:45 am]
BILLING CODE 8025-01-U