[Federal Register Volume 65, Number 226 (Wednesday, November 22, 2000)]
[Rules and Regulations]
[Pages 70391-70405]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-29284]



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Part II





Department of the Treasury





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Department of Justice





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General Accounting Office





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31 CFR Chapter IX and Parts 900, et al.

4 CFR Chapter II

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Federal Claims Collection Standards; Federal Claims Collection Standards, Removal of Obsolete Chapter; Final Rules

  Federal Register / Vol. 65 , No. 226 / Wednesday, November 22, 2000 / 
Rules and Regulations  
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DEPARTMENT OF THE TREASURY

DEPARTMENT OF JUSTICE

31 CFR Chapter IX and Parts 900, 901, 902, 903, and 904

[A.G. Order No. 2325-2000]
RIN 1510-AA57 and 1105-AA31


Federal Claims Collection Standards

AGENCIES: Department of the Treasury; Department of Justice.

ACTION: Final rule.

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SUMMARY: The final rule revises the Federal Claims Collection Standards 
issued by the Department of Justice and the General Accounting Office 
on March 9, 1984. The revised Federal Claims Collection Standards 
clarify and simplify Federal debt collection procedures and reflect 
changes under the Debt Collection Improvement Act of 1996 and the 
General Accounting Office Act of 1996.

DATES: This rule is effective December 22, 2000.

FOR FURTHER INFORMATION CONTACT: Gerry Isenberg, Financial Program 
Specialist, Debt Management Services, Financial Management Service, 
Department of the Treasury, at (202) 874-0540; Ronda Kent or Ellen 
Neubauer, Senior Attorneys, Financial Management Service, Department of 
the Treasury, at (202) 874-6680; or John W. Showalter, Assistant 
Director, Commercial Litigation Branch, Civil Division, Department of 
Justice, at (202) 307-0244. This document is available for downloading 
from the Financial Management Service website at: http://www.fms.treas.gov/debt.

SUPPLEMENTARY INFORMATION:   

Background

    The Federal Claims Collection Standards (FCCS) provide Government-
wide debt collection procedures and policies. This final rule revises 
the FCCS issued by the Department of Justice (DOJ) and the General 
Accounting Office on March 9, 1984. The revised FCCS reflect 
legislative changes to Federal debt collection procedures enacted under 
the Debt Collection Improvement Act of 1996 (DCIA), Public Law 104-134, 
110 Stat. 1321, 1358 (Apr. 26, 1996), as part of the Omnibus 
Consolidated Rescissions and Appropriations Act of 1996. Detailed rules 
governing several of these new DCIA debt collection procedures have 
been published in the Federal Register. See, e.g., Transfer of Debts to 
Treasury for Collection (64 FR 22906, Apr. 28, 1999); Administrative 
Wage Garnishment (63 FR 25136, May 6, 1998); Offset of Federal Benefit 
Payments to Collect Past-Due, Legally Enforceable Nontax Debt (63 FR 
711204, Dec. 23, 1998); and Barring Delinquent Debtors From Obtaining 
Federal Loans or Loan Insurance or Guarantees (63 FR 67754, Dec. 8, 
1998). The Financial Management Service (FMS) of the Department of the 
Treasury (Treasury) will publish other detailed rules governing debt 
collection tools authorized by the DCIA, including additional 
centralized administrative offset rules, to be codified under 31 CFR 
part 285.
    The revised FCCS provide agencies with greater latitude to adopt 
agency-specific regulations, tailored to the legal and policy 
requirements applicable to the various types of Federal debt, to 
maximize the effectiveness of Federal debt collection procedures.
    The Secretary of the Treasury has been added as a co-promulgator of 
the FCCS in accordance with section 31001(g)(1)(C) of the DCIA. The 
Comptroller General has been removed as a co-promulgator in accordance 
with section 115(g) of the General Accounting Office Act of 1996, 
Public Law 104-316, 110 Stat. 3826 (Oct. 19, 1996). Treasury and DOJ 
are publishing the revised FCCS as a joint final rule under new chapter 
IX, Title 31, Code of Federal Regulations. The revised FCCS supersede 
the current FCCS codified at 4 CFR parts 101-105. On December 31, 1997, 
Treasury and DOJ requested public comment on a proposed revision of the 
FCCS. This final rule is being promulgated after consideration of the 
comments received. A final rule removing the current FCCS from Title 4 
of the Code of Federal Regulations is being published elsewhere in this 
issue of the Federal Register.

Discussion of Comments

    In response to the Notice of Proposed Rulemaking (NPRM) concerning 
revisions to the FCCS (62 FR 68476, Dec. 31, 1997), Treasury and DOJ 
received comments from various Federal agencies, a private law firm, a 
private collection agency, and a private citizen. Several agency 
commenters recommended changes pertinent to the requirements of 
specific agency programs. Since the FCCS focus on Government-wide debt 
collection procedures and policy, suggested changes pertinent only to 
specific agencies were not incorporated into the final rule. 
Nevertheless, the final rule provides sufficient flexibility for 
agencies to adopt agency-specific regulations tailored to the legal and 
policy requirements of their particular programs.
    Other commenters requested clarification of the applicability of 
the FCCS rules regarding debt collection and compromise when specific 
agency statutory or regulatory authorities address those activities. As 
noted in Sec. 900.1 (Prescription of Standards) of the revised FCCS, 
the FCCS apply unless agency-specific statutory or regulatory 
provisions specifically govern particular debt collection activities. 
Consequently, the FCCS govern when an agency has been given only 
general debt collection authority to manage debt obligations arising 
under its particular programs. See, e.g., 42 U.S.C. 3211(4) (generally 
authorizing the Secretary of Commerce to collect obligations arising 
under the Economic Opportunity Program; therefore, the FCCS apply).
    A few commenters recommended that the FCCS be reconciled with 
specific provisions of Treasury's ``Report on Receivables Due from the 
Public.'' Treasury's ``Report on Receivables'' has been revised for 
several reasons, one of which is to ensure consistency with the FCCS 
and the DCIA. Information concerning the revised ``Report on 
Receivables'' is available from FMS's website at http://www.fms.treas.gov.
    Several of the commenters suggested technical revisions to the 
proposed rule; pertinent or necessary technical suggestions were 
incorporated into the final rule. A review of the substantive comments 
received in response to the FCCS NPRM is provided in the following 
``Comment Analysis,'' which includes a discussion of Treasury and DOJ's 
determination whether to incorporate specific suggestions into the 
final rule. The Comment Analysis is organized by reference to the 
paragraphs in the NPRM that were the subject of public comment.

Comment Analysis

NPRM Sec. 900.1--Prescription of Standards

    One commenter recommended that Treasury publish an updated 
``Managing Federal Receivables,'' a supplement to the Treasury 
Financial Manual, to ensure consistency with the FCCS and the DCIA. 
NPRM Sec. 900.1(a) references the ``Managing Federal Receivables'' 
publication as a source for agencies to locate additional guidance on 
debt collection issues. Treasury will update this publication 
consistent with the final rule and the DCIA. The guidance in the 
current edition of ``Managing Federal Receivables'' applies to the

[[Page 70391]]

extent that it is not inconsistent with the final rule and the DCIA.
    The final rule does not incorporate one commenter's suggestion to 
prescribe a standard under the FCCS for the ``write-off'' of debts 
(i.e., removal of the debt from the agency's accounting records), 
consistent with ``Managing Federal Receivables'' guidance. The DCIA 
gives the Office of Management and Budget (OMB) the responsibility to 
review the standards and policies of Federal agencies regarding the 
``write-off'' of delinquent debts, which is an accounting process. See 
31 U.S.C. 3711 note. OMB Circular A-129, ``Policies for Federal Credit 
Programs and Nontax Receivables,'' is being revised to incorporate new 
policy guidelines for writing off uncollectible Federal debt.
    One commenter's recommendation to delete the reference in NPRM 
Sec. 900.1(a) to OMB Circular A-129 was not adopted. OMB Circular A-129 
continues to provide valuable guidance and applies to the extent not 
inconsistent with the final rule and DCIA requirements. OMB Circular A-
129 is being revised to incorporate new policy guidelines consistent 
with the final rule and the DCIA.

NPRM Sec. 900.2--Definitions and Construction

    Several commenters suggested that the definition of a 
``delinquent'' debt under NPRM Sec. 900.2(b) is too vague and that the 
date of delinquency should be more clearly defined. Under NPRM 
Sec. 900.2(b), a debt is delinquent ``if it has not been paid by the 
date specified in the agency's initial written demand for payment or 
applicable agreement or instrument (including a post-delinquency 
payment agreement), unless other satisfactory payment arrangements have 
been made.'' The final rule has not been amended to incorporate this 
comment. The ``delinquency'' definition applies to all agency programs 
and obligations owed to the United States. Agency-specific regulations 
may further clarify the definition of ``delinquency'' as applicable to 
specific agency program requirements and particular types of debt. See 
Treasury's final rule, Barring Delinquent Debtors From Obtaining 
Federal Loans or Loan Insurance or Guarantees (63 FR 67754, Dec. 8, 
1998), for an example of the term ``delinquent'' being defined for a 
specific, limited purpose.

NPRM Sec. 900.3--Antitrust, Fraud, and Tax and Interagency Claims 
Excluded

    One commenter suggested amending NPRM Sec. 900.3(a) to provide that 
the exclusion from the application of the FCCS to debts involving fraud 
(whereby DOJ retains authority over such debts) applies only to debts 
known to involve fraud at the time a debt is transferred to, or 
processed by, a private collection agency. No change has been made to 
the final rule to incorporate this comment since only DOJ has the 
authority to compromise, suspend, or terminate collection action on 
such claims. Accordingly, DOJ retains sole authority under the final 
rule over activity on all debts involving fraud. Private collection 
agencies that become aware of fraudulent activity on the part of the 
debtor (or any third party) at any time must cease collection activity 
and promptly return the debt back to the referring agency for 
coordination with DOJ.

NPRM Sec. 901.1--Aggressive Agency Collection Activity

    Comments involving the provisions under NPRM Sec. 901.1 related to 
the DCIA requirement that agencies transfer to Treasury nontax debts 
that have been delinquent for more than 180 days are outside the scope 
of the FCCS. A final rule, published by Treasury (64 FR 22906, Apr. 28, 
1999), provides guidance regarding the DCIA transfer of debt 
requirement. See also 31 U.S.C. 3711(g).
    One commenter suggested that the final rule be amended to clarify 
whether the 180-day delinquency period begins before or after the 30-
day period within which a debtor may pay a debt without penalties or 
interest. See NPRM Sec. 901.10(g). No change has been made to the final 
rule to incorporate this comment. The 180-day delinquency period begins 
to run on the date a debt becomes delinquent, that is, when the debt is 
not paid on the date due or the date as specified in accordance with 
Sec. 900.2(b) of the NPRM and final rule. A debt is delinquent 
notwithstanding any statutory or regulatory grace period for the 
assessment or payment of interest, administrative costs, or penalties.

NPRM Sec. 901.2--Demand for Payment

    One commenter recommended that the final rule clarify that the 
provision under NPRM Sec. 901.2(a) providing that ``[g]enerally, one 
demand letter should suffice'' does not prohibit agencies from sending 
progressively stronger demand letters. No change is necessary to the 
final rule to incorporate this comment. NPRM Sec. 901.2(a) does not 
prohibit agencies from sending more than one demand letter.
    In accordance with one commenter's suggestion, Sec. 901.2(b)(3) of 
the final rule has been amended to clarify that the term ``late 
charges'' refers to interest, penalties, and administrative costs.
    The final rule does not adopt one commenter's suggestion to delete 
the requirement under NPRM Sec. 901.2(d) that agency demand letters 
discuss alternative methods of payment. The NPRM did not include such a 
requirement. Contrary to the commenter's concern, NPRM Sec. 901.2(d) 
does not limit agency discretion; it merely provides that a demand 
letter should inform a debtor of the agency's ``willingness to 
consider'' alternative methods of payment to satisfy the debt. Many 
debt collection tools require agencies to give debtors the opportunity 
to enter into a written agreement with the head of an agency to repay 
the debt. See, e.g., 31 U.S.C. 3716(a)(4) (administrative offset 
authority); 31 U.S.C. 3720A (tax refund offset); 31 U.S.C. 3720D (wage 
garnishment); see also NPRM Sec. 901.9 (establishing standards for the 
collection of delinquent debts in installment payments).
    A related comment, recommending that agencies be given the 
flexibility to include only those provisions of demand letters listed 
in NPRM Sec. 901.2(d) ``as appropriate to the circumstances,'' has not 
been incorporated into the final rule. Section 901.2(d), as proposed, 
does not restrict an agency's discretion to tailor its use of 
particular debt collection tools in specific cases. NPRM Sec. 901.2(d) 
provides only that an agency should provide notice to a debtor in a 
demand letter of its willingness to discuss alternative methods of 
payment, the agency's remedies to enforce payment of the debt, 
information concerning the requirement that debts over 180 days 
delinquent be transferred to Treasury (see discussion involving NPRM 
Sec. 901.1 above), and applicable waiver consideration information. 
Demand letters also must satisfy the other requirements of NPRM 
Sec. 901.2, including, but not limited to, providing notice to the 
debtor of the basis of the indebtedness and the opportunity available 
to the debtor for a review within the agency.
    Another commenter suggested deleting the second reference to 
``collection agencies'' under NPRM Sec. 901.2(d) to avoid duplication. 
The final rule has not been amended to incorporate this suggested 
technical amendment. The first reference to ``collection agencies'' 
relates to an agency's policy with regard to the use of this debt 
collection tool. The second reference refers to the enforcement action 
that will be taken regarding the

[[Page 70392]]

specific debt referenced in the demand letter.
    One commenter suggested deleting the requirement under NPRM 
Sec. 901.2(g) that agencies advise litigation counsel for the 
Government that a debtor has been given notice that litigation may be 
initiated unless the debt can be collected administratively. The 
commenter incorrectly interprets this provision as requiring agencies 
to advise litigation counsel at the time the agency's notice is given 
to the debtor, rather than at the time the debt is referred to DOJ for 
litigation. No change has been made to the final rule to incorporate 
this comment.

NPRM Sec. 901.3--Collection by Administrative Offset

    The administrative offset section has been redrafted in the final 
rule to emphasize that disbursing official offset, which is renamed as 
centralized administrative offset in the final rule, is the primary 
administrative offset collection tool, consistent with the DCIA. See 31 
U.S.C. 3716(c)(6) (requiring Federal agencies to notify the Secretary 
of the Treasury of all debts over 180 days delinquent for purposes of 
conducting centralized administrative offset).
    Consistent with this approach, the final rule provides that the 
non-disbursing official administrative offset process, which is renamed 
as non-centralized administrative offset in the final rule, is a backup 
procedure to be used by creditor agencies on an ad hoc case-by-case 
basis when centralized administrative offset is otherwise not available 
or appropriate. For example, agencies should utilize the ad hoc non-
centralized offset process to offset payments that have not been 
incorporated into the centralized administrative offset process. In any 
event, an agency's collection by the non-centralized administrative 
offset process shall not provide the grounds to invalidate any offset 
on the basis that centralized offset was not used.
    In addition, NPRM Sec. 901.4 (authorizing creditor agencies to 
request the Office of Personnel Management (OPM) to conduct 
administrative offsets) has been merged into revised Sec. 901.3 of the 
final rule since the procedure described in NPRM Sec. 901.4 is a form 
of non-centralized administrative offset. Revised Sec. 901.3(d) of the 
final rule refers to OPM offsets of Civil Service Retirement and 
Disability Fund (Fund) payments. The Fund includes payments made under 
the Federal Employee Retirement System.
    One commenter suggested that NPRM Sec. 901.3(a)(5) is overly 
restrictive in that it permits administrative offset only after the 
debtor has been given written notice of the type and amount of debt, 
the intent to collect the debt by offset, an opportunity to inspect and 
copy agency records pertaining to the debt, an opportunity for review 
of indebtedness, and an opportunity to make a written repayment 
agreement. No change has been made to the final rule to incorporate 
this comment. NPRM Sec. 901.3(a)(5) and the final rule track the 
statutory due process requirements under 31 U.S.C. 3716(a).
    Another commenter noted that NPRM Sec. 901.3(a)(5) provides that 
agency regulations must specify that administrative offset can be 
initiated only after the debtor has ``received'' written notice of the 
due process requirements under 31 U.S.C. 3716(a). The commenter 
suggested that an agency would have no way of verifying that a debtor 
has actually received the notice required by NPRM Sec. 901.3(a)(5). 
Revised Sec. 901.3(b)(4)(ii) of the final rule has been changed to 
clarify that the required due process notice must be ``sent'' to the 
debtor. This is consistent with constitutional and statutory due 
process requirements, provided that creditor agencies ensure that 
reasonable steps are taken to send the notice to the debtor's last 
known address. See, e.g., Setlech v. United States, 816 F. Supp. 161 
(E.D.N.Y. 1993) (mailing of tax refund offset notice on behalf of 
Department of Education to debtor's last known address satisfied due 
process even though debtor did not receive notice prior to offset; 
notice was reasonably calculated to apprise debtor of impending 
action); see also United States v. 51 Pieces of Real Property, 17 F.3d 
1306, 1316 (10th Cir. 1996)(due process does not require actual receipt 
of notice provided Government acts reasonably in selecting means likely 
to inform the persons affected).
    Another commenter suggested that all references under NPRM 
Secs. 901.3(a) and 901.4(d) to pre-administrative offset ``oral 
hearings'' be deleted since the statutory authority for administrative 
offset under 31 U.S.C. 3716(a)(3) only provides the debtor with an 
``opportunity for a review'' within the agency. No change has been made 
to revised Sec. 901.3(e) of the final rule to incorporate this comment 
because oral hearings may be required in those instances where the 
determination of indebtedness cannot be made by a review of the written 
record. An oral hearing is not required when the question of 
indebtedness can be resolved by a review of the written record. See 
revised Sec. 901.3(e) of the final rule.
    A second commenter suggested deleting the provision under NPRM 
Sec. 901.3(a)(7)(i)(A) requiring an oral hearing under certain 
circumstances when a waiver statute authorizes or requires an agency to 
consider waiver of the indebtedness. This provision has been deleted 
from revised Sec. 901.3 of the final rule since oral hearing 
requirements involving waiver requests are governed by specific 
statutory and regulatory waiver authorities, rather than the FCCS.
    One commenter suggested revising NPRM Sec. 901.3(b)(1) to provide 
that the administrative offset of a reimbursement payment could 
substantially interfere with, or defeat the purposes of, the program 
giving rise to the payment. The final rule was not changed to 
incorporate this comment. Under the DCIA, the Secretary of Treasury 
determines whether a particular type of payment should be exempt from 
administrative offset. See 31 U.S.C. 3716(c)(3)(B). Therefore, 
exemption is not addressed in this rule.
    One commenter suggested that NPRM Sec. 901.3(c)(5) be revised to 
clarify its application to non-Treasury disbursing officials, such as 
the Department of Agriculture's Commodity Credit Corporation. No change 
to the final rule is necessary. The debtor/payee notification 
requirements under revised Sec. 901.3(b)(3) of the final rule apply to 
both Treasury and non-Treasury disbursing officials conducting 
centralized administrative offsets. As required by the DCIA, Treasury 
disbursing officials and non-Treasury disbursing officials, such as 
officials of the Department of Defense, United States Postal Service, 
any other Government corporation, or any Treasury-designated United 
States disbursing office, are required to conduct administrative 
offsets. See 31 U.S.C. 3716(c)(1)(A).
    Another commenter recommended adding a provision to NPRM 
Sec. 901.3(c)(5) requiring disbursing officials to notify payment and 
creditor agencies once an administrative offset of a payment has been 
made. This comment is beyond the scope of the final rule. Detailed 
regulations involving various types of DCIA administrative offset 
procedures are codified under 31 CFR part 285.

NPRM Sec. 901.4--Administrative Offset Against Amounts Payable From 
Civil Service Retirement and Disability Fund and the Federal Employee 
Retirement System

    NPRM Sec. 901.4 addresses ad hoc non-centralized administrative 
offsets conducted by OPM to satisfy debts that

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have not been referred for centralized administrative offset. Under the 
final rule, this provision has been merged into Sec. 901.3 since the 
procedure described under NPRM Sec. 901.4 is a type of non-centralized 
administrative offset that should be utilized when centralized 
administrative offset is not available or appropriate. Accordingly, 
NPRM Secs. 901.5, 901.6, 901.7, 901.8, 901.9, 901.10, 901.11, 901.12, 
901.13 have been redesignated in the final rule as Secs. 901.4, 901.5, 
901.6, 901.7, 901.8, 901.9, 901.10, 901.11, 901.12, respectively. This 
change properly emphasizes the requirement for centralized 
administrative offset under the DCIA. See, e.g., 31 U.S.C. 3716(c)(6) 
(mandating that Federal agencies notify the Secretary of the Treasury 
of all debts over 180 days delinquent for purposes of centralized 
administrative offset).

NPRM Sec. 901.5--Reporting Debts

    The final rule does not incorporate one commenter's suggestion to 
delete the requirement under NPRM Sec. 901.5(a) that agencies develop 
and implement procedures for reporting delinquent debts to credit 
bureaus. The commenter stated that this provision is not necessary 
because Treasury and Treasury-designated debt collection centers, not 
creditor agencies, will be responsible for reporting debts that have 
been transferred to Treasury or Treasury-designated debt collection 
centers, as required by the DCIA and NPRM Sec. 901.1(e). Creditor 
agencies are reminded that the DCIA mandates credit bureau reporting 
for delinquent debts (see 31 U.S.C. 3711(e)), and that debts should be 
reported early in the debt collection process. Nevertheless, agencies 
could develop procedures, consistent with this rule, to provide that 
credit bureau reporting will be handled by Treasury or Treasury-
designated debt collection centers for transferred debts.
    Another commenter suggested that the mandatory language of NPRM 
Sec. 901.5(a) requiring agencies to develop credit bureau reporting 
procedures should not apply to an agency whose statutory authority 
provides that the agency ``may,'' but is not required to, report 
delinquent debts to credit bureaus. No change is necessary to address 
this concern because Sec. 900.1 of the final rule specifically provides 
that the FCCS govern an agency's debt collection activity ``unless 
specific agency statutes or regulations apply to such activities.''
    Section 901.4(b) of the final rule has not been amended to 
incorporate a commenter's suggestion to mandate that agencies report 
delinquent debts to the Department of Housing and Urban Development's 
Credit Alert Interactive Voice Response System (CAIVRS). Agencies are 
strongly encouraged to report to CAIVRS when feasible. Reporting will 
assist agencies in complying fully with the DCIA provision, codified at 
31 U.S.C. 3720B, barring delinquent debtors from obtaining Federal 
financial assistance. Agencies can utilize CAIVRS to determine whether 
a loan applicant is delinquent on obligations owed the United States. 
However, because reporting to CAIVRS may not be feasible in every case, 
reporting, while strongly encouraged, is not mandatory.

NPRM Sec. 901.6--Contracting for Private Collection Contractors and To 
Locate and Recover Unclaimed Assets

    NPRM Sec. 901.6(b) has been revised to clarify that Federal 
agencies may refer debts to private collection contractors pursuant to 
a contract between the agency and the private collection contractor 
only if such debts are not subject to the DCIA requirement to transfer 
debts to Treasury for debt collection services, e.g., debts are less 
than 180 days delinquent. See 31 U.S.C. 3711(g); 31 CFR 285.12(e). 
Agencies also may refer debts to a private collection contractor listed 
on FMS's schedule of private collection contractors provided they do so 
in accordance with procedures established by FMS.
    The final rule does not incorporate one commenter's recommendation 
that NPRM Sec. 901.6(a)(1) be amended to allow agencies to authorize 
private collection contractors to compromise, suspend, or terminate 
collection activity, and refer for litigation debts less than a 
specific threshold amount. Federal law requires agencies to retain the 
authority ``to resolve a dispute, compromise a debt, end collection 
action, and refer a matter to the Attorney General to bring a civil 
action.'' 31 U.S.C. 3718(a)(1). Nothing in Sec. 901.5(a)(1) of the 
final rule prohibits agencies from establishing agency-specific 
compromise review procedures within the scope of 31 U.S.C. 3718(a)(1). 
For example, agencies could set parameters within which private 
collection contractors could compromise debt.
    Another commenter suggested that the final rule clarify that 
private collection contractors collecting debts on behalf of creditor 
agencies are authorized to invoke certain agency rights, including 
cross-default on obligations, set-off, and certain Governmental 
defenses. No change has been made to incorporate this comment which is 
beyond the scope of the final rule. Private collection contractors 
should contact the creditor agency before invoking any rights with 
respect to the agency's debt.
    One commenter suggested that NPRM Sec. 901.6 be amended to clarify 
that agencies are authorized to contract for debtor asset and income 
search reports. Such reports could be used by DOJ litigation attorneys 
and other agencies to determine whether, and to what extent, debtors 
have assets which could be pursued to satisfy delinquent obligations. 
Section 901.5(e) has been added to the final rule to incorporate this 
comment.
    The final rule also provides that debtor asset and income search 
report contracts, private collection contractors contracts, and 
contracts to locate and recover unclaimed assets of the United States 
may be paid for out of amounts collected, consistent with 31 U.S.C. 
3718(d), unless otherwise prohibited by law.
    The final rule does not incorporate one commenter's suggestion to 
amend NPRM Sec. 901.6 to limit the time a debt may remain with a 
private collection contractor to a 180-day period, after which the debt 
should be referred to DOJ for enforced collection. The time period that 
a debt is at a private collection contractor is more appropriately a 
matter of contract between the private collection contractor and the 
Federal agency; the setting of a regulatory time limit would not 
further the goal of the FCCS to provide agencies with greater 
flexibility. In addition, debts are referred to DOJ after a private 
collection contractor has been unable to collect the debt, and only 
when it is appropriate to do so. See part 904 (Referrals to Department 
of Justice).

NPRM Sec. 901.9--Collection by Installments

    One commenter suggested amending NPRM Sec. 901.9(a) to allow 
agencies to accept installment payments without independent 
verification of the debtor's inability to pay. The commenter stated 
that the change would give agencies more flexibility in cases involving 
very small debts. The final rule does not incorporate this suggestion 
because the FCCS only require such verification ``whenever possible.''
    One commenter suggested amending NPRM Sec. 901.9 to clarify the 
application of installment payments to satisfy multiple debts as 
provided in the 1984 FCCS (4 CFR 102.11(b)). The application of 
installment payments under such circumstances varies depending on the 
type of debt. Agencies may address this issue in agency-specific 
regulations. In addition, further guidance will be issued in the 
Treasury Financial Manual

[[Page 70394]]

supplement ``Managing Federal Receivables.''

NPRM Sec. 901.10--Interest, Penalties, and Administrative Costs

    One commenter suggested that the final rule clarify whether NPRM 
Sec. 901.10(a) applies to Social Security Administration debts. Section 
204(f)(1) of the Social Security Act (Act) governs the charging of 
interest, penalties, and administrative costs for social security 
debts. The Act provides that the Social Security Administration 
``may,'' but is not required to, charge interest, penalties, and 
administrative costs. No change to the final rule is required since the 
FCCS do not apply when specific statutes or regulations govern 
particular agency debt collection activities. See NPRM Sec. 900.1 
(Prescription of Standards).
    Several commenters suggested that the final rule provide a more 
precise standard for the ``date of delinquency'' that triggers the 
charging of interest, penalties, and administrative costs under NPRM 
Sec. 901.10. One commenter recommended defining the ``date of 
delinquency'' as the ``day after the due date contained in the initial 
demand letter.'' A second commenter suggested retaining the current 
standard under 4 CFR 102.13(b) of the FCCS (``Interest shall accrue 
from the date on which notice of the debt and the interest requirements 
is first mailed or hand-delivered to the debtor.''). The final rule has 
not been changed to incorporate these comments. Consistent with the 
intent of the FCCS to provide Government-wide debt collection 
standards, the NPRM Sec. 900.2(b) general definition of ``delinquency'' 
is broad enough to apply to all Federal agency programs that give rise 
to delinquent debts. Federal agencies should promulgate debt collection 
regulations tailored to specific agency program requirements. Nothing 
in the FCCS prohibits an agency from specifying that, for purposes of a 
particular type of debt, ``date of delinquency'' is the date on which 
notice of the debt and the accrual of interest is first mailed or hand-
delivered to the debtor, or some other appropriate standard.

NPRM Sec. 902.2--Bases for Compromise

    As suggested by one commenter, the final rule amends NPRM 
Sec. 902.2(g) to clarify that, when evaluating a compromise proposal, 
agencies need only obtain a current financial statement from a debtor 
to assess the merits of a proposal that is based on the debtor's 
inability to pay.

NPRM Sec. 902.6--Consideration of Tax Consequences to the Government

    In response to one commenter's suggestion that NPRM Sec. 902.6 be 
amended to require agencies to report discharges of indebtedness to the 
Internal Revenue Service (IRS), new Sec. 903.5 (Discharge of 
indebtedness; reporting requirements) has been added to the final rule. 
Section 903.5(a) of the final rule requires agencies to make a 
determination that further collection action is not warranted before 
making a determination to discharge a debt (also referred to as ``close 
out'' for Federal government accounting purposes). Specifically, 
Sec. 903.5(a) of the final rule requires an agency to take all 
appropriate steps to collect a debt in accordance with 31 U.S.C. 
3711(g), as appropriate. It also provides that agencies may not 
discharge a debt until the requirements of 31 U.S.C. 3711(i) (sale of 
debt) have been met. After a debt has been reported to the IRS as 
discharged, the Federal government may not take any further legal 
action to collect such debt, including the filing or continuation of 
judgment liens. The IRS is responsible for the collection of taxes due, 
if any, when the discharge is reported as income to the debtor.
    Before discharging a debt, agencies must terminate debt collection 
action. The FCCS contain provisions related to the termination of debt 
collection action at Sec. 903.3 of the final rule. Policies and 
standards with respect to write-off, an accounting process outside the 
scope of the FCCS, are found in OMB Circular A-129, ``Policies for 
Federal Credit Programs and Nontax Receivables,'' which is being 
revised to incorporate new write-off policy guidelines.
    Section 903.5(c) provides that agencies must report a discharge of 
indebtedness in accordance with the requirements of 26 U.S.C. 6050P and 
26 CFR 1.6050P-1. Discharge of indebtedness is reported on IRS Form 
1099-C. An agency may request Treasury or Treasury-designated debt 
collection centers to file such a discharge report to the IRS on the 
agency's behalf. A cross reference to Sec. 903.5 has been added to 
Sec. 902.6 in the final rule.

NPRM Sec. 902.7--Mutual Releases of Debtor and the Government

    In response to one commenter's suggestion, NPRM Sec. 902.7 has been 
revised to emphasize the mutuality of the debtor and Government 
releases. Additional language has been added in the final rule to NPRM 
Sec. 902.7 to clarify the impact of a compromise on potential related 
claims against the Government when a mutual release has not been 
executed. Specifically, unless prohibited by law, when a debt is 
compromised but a mutual release has not been executed, the debtor is 
deemed to have waived any claims and causes of action against the 
Government or its officials arising from the same transaction related 
to the compromised debt.

NPRM Sec. 903.2--Suspension of Collection Activity

    The final rule does not incorporate one commenter's suggestion that 
NPRM Sec. 903.2(c)(2) be amended to give agencies the flexibility to 
suspend collection activity for groups or categories of debtors. NPRM 
Sec. 903.2(c)(2) addresses a request for waiver or administrative 
review of a debt when a statute does not mandate suspension of 
collection activity during the pendency of such requests. The 
determination of whether to suspend collection activity in these cases 
should be reviewed on a case-by-case basis. A case-by-case standard is 
appropriate because it ensures that agencies review individual cases to 
confirm that waiver or indebtedness reconsideration requests are not 
frivolous or made primarily for the purpose of delaying collection. 
Nothing in the FCCS prohibit suspension of collection activity by the 
agency for groups or categories of debtors when appropriate.

[NEW] Sec. 903.5--Discharge of Indebtedness; Reporting requirements

    See the discussion related to NPRM Sec. 902.6, above, for an 
analysis of new Sec. 903.5 of the final rule (Discharge of 
indebtedness; reporting requirements).

NPRM Sec. 904.1--Prompt Referral

    One commenter suggested amending NPRM Sec. 904.1 to provide that 
debts arising from audit exceptions taken by the General Accounting 
Office (GAO) be reviewed by GAO prior to referral to DOJ. No change has 
been made to incorporate this comment because the Comptroller General's 
role in the Federal debt collection process has been eliminated. 
Although the opinions and legal interpretations of the Comptroller 
General often provide helpful guidance on audit exception matters and 
related issues, they are not binding upon departments, agencies, or 
officers of the executive branch. See e.g., Bowsher v. Synar, 478 U.S. 
714, 727-32 (1986).

NPRM Sec. 904.3--Preservation of Evidence

    NPRM Sec. 904.3 requires agencies to provide original documents 
immediately upon request by DOJ. The

[[Page 70395]]

final rule does not incorporate one commenter's suggestion to amend 
NPRM Sec. 904.3 to authorize agencies to certify copies of essential 
documents related to a debt referred to DOJ instead of providing 
original documents in certain types of cases, such as in debts for fire 
suppression costs. The essential purpose behind NPRM Sec. 904.3 is to 
require agencies to ``take care to preserve all files and records that 
may be needed by the Department of Justice'' to prove debts in court. 
The amendment of Sec. 904.3 to incorporate the commenter's concern 
would not further this intent.

NPRM Sec. 904.4--Minimum Amount of Referrals to the Department of 
Justice

    One commenter suggested reducing the threshold amount of debts 
(exclusive of interest, penalties, and administrative costs) to be 
referred to DOJ for litigation from $2,500 to $1,500. No change has 
been made to the final rule to incorporate this comment. The DOJ may 
waive the minimum threshold amount in appropriate cases, including 
cases which are referred by DOJ to private counsel under 31 U.S.C. 
3718.

Regulatory Analysis

Executive Order 12866

    The Department of the Treasury and the Department of Justice have 
determined that this regulation is not a significant regulatory action 
as defined in Executive Order 12866 and, accordingly, this regulation 
has not been reviewed by the Office of Management and Budget.

Regulatory Flexibility Act

    It is hereby certified that this regulation will not have a 
significant economic impact on a substantial number of small entities 
because the regulation either (1) results in greater flexibility for 
Federal agencies to streamline their own debt collection regulations, 
or (2) reflects the statutory language contained in the DCIA. 
Accordingly, a Regulatory Flexibility Analysis is not required.

Executive Order 13132

    This regulation will not have a substantial direct effect on the 
states, on the relationship between the national government and the 
states, or on distribution of power and responsibilities among the 
various levels of government. Therefore, in accordance with Executive 
Order 13132, it is determined that this regulation does not have 
sufficient federalism implications to warrant the preparation of a 
Federalism Assessment.

Unfunded Mandates Reform Act of 1995

    This regulation will not result in the expenditure by state, local 
and tribal governments, in the aggregate, or by the private sector, of 
$100 million or more in any one year, and it will not significantly or 
uniquely affect small governments. Therefore, no actions were deemed 
necessary under the provisions of the Unfunded Mandates Reform Act of 
1995.

Small Business Regulatory Enforcement Fairness Act of 1996

    This rule is not a major rule as defined by section 251 of the 
Small Business Regulatory Enforcement Act. 5 U.S.C. 804. This rule will 
not result in an annual effect on the economy of $100 million or more; 
a major increase in costs or prices; or significant adverse effects on 
competition, employment, investment, productivity, innovation, or on 
the ability of United States-based companies to compete with foreign-
based companies in domestic or export markets.

List of Subjects

31 CFR Part 900

    Antitrust, Claims, Fraud.

31 CFR Part 901

    Administrative practice and procedure, Claims, Federal employees, 
Penalties, Privacy.

31 CFR Part 902

    Claims.

31 CFR Part 903

    Claims.

31 CFR Part 904

    Claims.

Authority and Issuance

    For the reasons set out in the preamble, chapter IX, consisting of 
parts 900 through 904, is established in title 31 of the Code of 
Federal Regulations to read as follows:

CHAPTER IX--FEDERAL CLAIMS COLLECTION STANDARDS (DEPARTMENT OF THE 
TREASURY--DEPARTMENT OF JUSTICE)

Part

900  Scope of standards
901  Standards for the administrative collection of claims
902  Standards for the compromise of claims
903  Standards for suspending or terminating collection activity
904  Referrals to the Department of Justice

PART 900--SCOPE OF STANDARDS

Sec.
900.1   Prescription of standards.
900.2   Definitions and construction.
900.3   Antitrust, fraud, and tax and interagency claims excluded.
900.4   Compromise, waiver, or disposition under other statutes not 
precluded.
900.5   Form of payment.
900.6   Subdivision of claims not authorized.
900.7   Required administrative proceedings.
900.8   No private rights created.

    Authority: 31 U.S.C. 3711.


Sec. 900.1  Prescription of standards.

    (a) The Secretary of the Treasury and the Attorney General of the 
United States are issuing the regulations in parts 900-904 of this 
chapter under the authority contained in 31 U.S.C. 3711(d)(2). The 
regulations in this chapter prescribe standards for Federal agency use 
in the administrative collection, offset, compromise, and the 
suspension or termination of collection activity for civil claims for 
money, funds, or property, as defined by 31 U.S.C. 3701(b), unless 
specific Federal agency statutes or regulations apply to such 
activities or, as provided for by Title 11 of the United States Code, 
when the claims involve bankruptcy. Federal agencies include agencies 
of the executive, legislative, and judicial branches of the Government, 
including Government corporations. The regulations in this chapter also 
prescribe standards for referring debts to the Department of Justice 
for litigation. Additional guidance is contained in the Office of 
Management and Budget's Circular A-129 (Revised), ``Policies for 
Federal Credit Programs and Non-Tax Receivables,'' the Department of 
the Treasury's ``Managing Federal Receivables,'' and other publications 
concerning debt collection and debt management. These publications are 
available from the Debt Management Services, Financial Management 
Service, Department of the Treasury, 401 14th Street SW., Room 151, 
Washington, DC 20227.
    (b) Additional rules governing centralized administrative offset 
and the transfer of delinquent debt to the Department of the Treasury 
(Treasury) or Treasury-designated debt collection centers for 
collection (cross-servicing) under the Debt Collection Improvement Act 
of 1996, Public Law 104-134, 110 Stat. 1321, 1358 (April 26, 1996), are 
issued in separate regulations by Treasury. Rules governing the use of 
certain debt collection tools created under the Debt Collection 
Improvement Act of 1996, such as administrative wage garnishment, also 
are issued in separate regulations by Treasury. See generally 31 CFR 
part 285.
    (c) Agencies are not limited to the remedies contained in parts 
900-904 of

[[Page 70396]]

this chapter and are encouraged to use all authorized remedies, 
including alternative dispute resolution and arbitration, to collect 
civil claims, to the extent that such remedies are not inconsistent 
with the Federal Claims Collection Act, as amended, Public Law 89-508, 
80 Stat. 308 (July 19, 1966), the Debt Collection Act of 1982, Public 
Law 97-365, 96 Stat. 1749 (October 25, 1982), the Debt Collection 
Improvement Act of 1996, or other relevant statutes. The regulations in 
this chapter are not intended to impair agencies' common law rights to 
collect debts.
    (d) Standards and policies regarding the classification of debt for 
accounting purposes (for example, write off of uncollectible debt) are 
contained in the Office of Management and Budget's Circular A-129 
(Revised), ``Policies for Federal Credit Programs and Non-Tax 
Receivables.''


Sec. 900.2  Definitions and construction.

    (a) For the purposes of the standards in this chapter, the terms 
``claim'' and ``debt'' are synonymous and interchangeable. They refer 
to an amount of money, funds, or property that has been determined by 
an agency official to be due the United States from any person, 
organization, or entity, except another Federal agency. For the 
purposes of administrative offset under 31 U.S.C. 3716, the terms 
``claim'' and ``debt'' include an amount of money, funds, or property 
owed by a person to a State (including past-due support being enforced 
by a State), the District of Columbia, American Samoa, Guam, the United 
States Virgin Islands, the Commonwealth of the Northern Mariana 
Islands, or the Commonwealth of Puerto Rico.
    (b) A debt is ``delinquent'' if it has not been paid by the date 
specified in the agency's initial written demand for payment or 
applicable agreement or instrument (including a post-delinquency 
payment agreement), unless other satisfactory payment arrangements have 
been made.
    (c) In parts 900-904 of this chapter, words in the plural form 
shall include the singular and vice versa, and words signifying the 
masculine gender shall include the feminine and vice versa. The terms 
``includes'' and ``including'' do not exclude matters not listed but do 
include matters that are in the same general class.
    (d) Recoupment is a special method for adjusting debts arising 
under the same transaction or occurrence. For example, obligations 
arising under the same contract generally are subject to recoupment.
    (e) For purposes of the standards in this chapter, unless otherwise 
stated, ``Secretary'' means the Secretary of the Treasury or the 
Secretary's delegate.


Sec. 900.3  Antitrust, fraud, and tax and interagency claims excluded.

    (a) The standards in parts 900-904 of this chapter relating to 
compromise, suspension, and termination of collection activity do not 
apply to any debt based in whole or in part on conduct in violation of 
the antitrust laws or to any debt involving fraud, the presentation of 
a false claim, or misrepresentation on the part of the debtor or any 
party having an interest in the claim. Only the Department of Justice 
has the authority to compromise, suspend, or terminate collection 
activity on such claims. The standards in parts 900-904 of this chapter 
relating to the administrative collection of claims do apply, but only 
to the extent authorized by the Department of Justice in a particular 
case. Upon identification of a claim based in whole or in part on 
conduct in violation of the antitrust laws or any claim involving 
fraud, the presentation of a false claim, or misrepresentation on the 
part of the debtor or any party having an interest in the claim, 
agencies shall promptly refer the case to the Department of Justice for 
action. At its discretion, the Department of Justice may return the 
claim to the forwarding agency for further handling in accordance with 
the standards in parts 900-904 of this chapter.
    (b) Parts 900-904 of this chapter do not apply to tax debts.
    (c) Parts 900-904 of this chapter do not apply to claims between 
Federal agencies. Federal agencies should attempt to resolve 
interagency claims by negotiation in accordance with Executive Order 
12146 (3 CFR, 1980 Comp., pp. 409-412).


Sec. 900.4  Compromise, waiver, or disposition under other statutes not 
precluded.

    Nothing in parts 900-904 of this chapter precludes agency 
disposition of any claim under statutes and implementing regulations 
other than subchapter II of chapter 37 of Title 31 of the United States 
Code (Claims of the United States Government) and the standards in this 
chapter. See, e.g., the Federal Medical Care Recovery Act, Public Law 
87-693, 76 Stat. 593 (September 25, 1962) (codified at 42 U.S.C. 2651 
et seq.), and applicable regulations, 28 CFR part 43. In such cases, 
the laws and regulations that are specifically applicable to claims 
collection activities of a particular agency generally take precedence 
over parts 900-904 of this chapter.


Sec. 900.5  Form of payment.

    Claims may be paid in the form of money or, when a contractual 
basis exists, the Government may demand the return of specific property 
or the performance of specific services.


Sec. 900.6  Subdivision of claims not authorized.

    Debts may not be subdivided to avoid the monetary ceiling 
established by 31 U.S.C. 3711(a)(2). A debtor's liability arising from 
a particular transaction or contract shall be considered a single debt 
in determining whether the debt is one of less than $100,000 (excluding 
interest, penalties, and administrative costs) or such higher amount as 
the Attorney General shall from time to time prescribe for purposes of 
compromise or suspension or termination of collection activity.


Sec. 900.7  Required administrative proceedings.

    Agencies are not required to omit, foreclose, or duplicate 
administrative proceedings required by contract or other laws or 
regulations.


Sec. 900.8  No private rights created.

    The standards in this chapter do not create any right or benefit, 
substantive or procedural, enforceable at law or in equity by a party 
against the United States, its agencies, its officers, or any other 
person, nor shall the failure of an agency to comply with any of the 
provisions of parts 900-904 of this chapter be available to any debtor 
as a defense.

PART 901--STANDARDS FOR THE ADMINISTRATIVE COLLECTION OF CLAIMS

Sec.
901.1   Aggressive agency collection activity.
901.2   Demand for payment.
901.3   Collection by administrative offset.
901.4   Reporting debts.
901.5   Contracting with private collection contractors and with 
entities that locate and recover unclaimed assets.
901.6   Suspension or revocation of eligibility for loans and loan 
guaranties, licenses, permits, or privileges.
901.7   Liquidation of collateral.
901.8   Collection in installments.
901.9   Interest, penalties, and administrative costs.
901.10   Analysis of costs.
901.11   Use and disclosure of mailing addresses.
901.12   Exemptions.

    Authority: 31 U.S.C. 3701, 3711, 3716, 3717, 3718, and 3720B.

[[Page 70397]]

Sec. 901.1  Aggressive agency collection activity.

    (a) Federal agencies shall aggressively collect all debts arising 
out of activities of, or referred or transferred for collection 
services to, that agency. Collection activities shall be undertaken 
promptly with follow-up action taken as necessary. Nothing contained in 
parts 900-904 of this chapter requires the Department of Justice, 
Treasury, or other Treasury-designated debt collection centers, to 
duplicate collection activities previously undertaken by other agencies 
or to perform collection activities that other agencies should have 
undertaken.
    (b) Debts referred or transferred to Treasury, or Treasury-
designated debt collection centers under the authority of 31 U.S.C. 
3711(g), shall be serviced, collected, or compromised, or the 
collection action will be suspended or terminated, in accordance with 
the statutory requirements and authorities applicable to the collection 
of such debts.
    (c) Agencies shall cooperate with one another in their debt 
collection activities.
    (d) Agencies should consider referring debts that are less than 180 
days delinquent to Treasury or to Treasury-designated ``debt collection 
centers'' to accomplish efficient, cost effective debt collection. 
Treasury is a debt collection center, is authorized to designate other 
Federal agencies as debt collection centers based on their performance 
in collecting delinquent debts, and may withdraw such designations. 
Referrals to debt collection centers shall be at the discretion of, and 
for a time period acceptable to, the Secretary. Referrals may be for 
servicing, collection, compromise, suspension, or termination of 
collection action.
    (e) Agencies shall transfer to the Secretary any debt that has been 
delinquent for a period of 180 days or more so that the Secretary may 
take appropriate action to collect the debt or terminate collection 
action. See 31 CFR 285.12 (Transfer of Debts to Treasury for 
Collection). This requirement does not apply to any debt that:
    (1) Is in litigation or foreclosure;
    (2) Will be disposed of under an approved asset sale program;
    (3) Has been referred to a private collection contractor for a 
period of time acceptable to the Secretary;
    (4) Is at a debt collection center for a period of time acceptable 
to the Secretary (see paragraph (d) of this section);
    (5) Will be collected under internal offset procedures within three 
years after the debt first became delinquent; or
    (6) Is exempt from this requirement based on a determination by the 
Secretary that exemption for a certain class of debt is in the best 
interest of the United States. Agencies may request that the Secretary 
exempt specific classes of debts.
    (f) Agencies operating Treasury-designated debt collection centers 
are authorized to charge a fee for services rendered regarding referred 
or transferred debts. The fee may be paid out of amounts collected and 
may be added to the debt as an administrative cost (see Sec. 901.10).


Sec. 901.2  Demand for payment.

    (a) Written demand as described in paragraph (b) of this section 
shall be made promptly upon a debtor of the United States in terms that 
inform the debtor of the consequences of failing to cooperate with the 
agency to resolve the debt. The specific content, timing, and number of 
demand letters shall depend upon the type and amount of the debt and 
the debtor's response, if any, to the agency's letters or telephone 
calls. Generally, one demand letter should suffice. In determining the 
timing of the demand letter(s), agencies should give due regard to the 
need to refer debts promptly to the Department of Justice for 
litigation, in accordance with Sec. 904.1 of this chapter or otherwise. 
When necessary to protect the Government's interest (for example, to 
prevent the running of a statute of limitations), written demand may be 
preceded by other appropriate actions under parts 900-904 of this 
chapter, including immediate referral for litigation.
    (b) Demand letters shall inform the debtor of:
    (1) The basis for the indebtedness and the rights, if any, the 
debtor may have to seek review within the agency;
    (2) The applicable standards for imposing any interest, penalties, 
or administrative costs;
    (3) The date by which payment should be made to avoid late charges 
(i.e. interest, penalties, and administrative costs) and enforced 
collection, which generally should not be more than 30 days from the 
date that the demand letter is mailed or hand-delivered; and
    (4) The name, address, and phone number of a contact person or 
office within the agency.
    (c) Agencies should exercise care to ensure that demand letters are 
mailed or hand-delivered on the same day that they are dated. There is 
no prescribed format for demand letters. Agencies should utilize demand 
letters and procedures that will lead to the earliest practicable 
determination of whether the debt can be resolved administratively or 
must be referred for litigation.
    (d) Agencies should include in demand letters such items as the 
agency's willingness to discuss alternative methods of payment; its 
policies with respect to the use of credit bureaus, debt collection 
centers, and collection agencies; the agency's remedies to enforce 
payment of the debt (including assessment of interest, administrative 
costs and penalties, administrative garnishment, the use of collection 
agencies, Federal salary offset, tax refund offset, administrative 
offset, and litigation); the requirement that any debt delinquent for 
more than 180 days be transferred to the Department of the Treasury for 
collection; and, depending on applicable statutory authority, the 
debtor's entitlement to consideration of a waiver.
    (e) Agencies should respond promptly to communications from 
debtors, within 30 days whenever feasible, and should advise debtors 
who dispute debts to furnish available evidence to support their 
contentions.
    (f) Prior to the initiation of the demand process or at any time 
during or after completion of the demand process, if an agency 
determines to pursue, or is required to pursue, offset, the procedures 
applicable to offset should be followed (see Sec. 901.3). The 
availability of funds or money for debt satisfaction by offset and the 
agency's determination to pursue collection by offset shall release the 
agency from the necessity of further compliance with paragraphs (a), 
(b), (c), and (d) of this section.
    (g) Prior to referring a debt for litigation, agencies should 
advise each person determined to be liable for the debt that, unless 
the debt can be collected administratively, litigation may be 
initiated. This notification should comply with Executive Order 12988 
(3 CFR, 1996 Comp., pp. 157-163) and may be given as part of a demand 
letter under paragraph (b) of this section or in a separate document. 
Litigation counsel for the Government should be advised that this 
notice has been given.
    (h) When an agency learns that a bankruptcy petition has been filed 
with respect to a debtor, before proceeding with further collection 
action, the agency should immediately seek legal advice from its agency 
counsel concerning the impact of the Bankruptcy Code on any pending or 
contemplated collection activities. Unless the agency determines that 
the automatic stay imposed at the time of

[[Page 70398]]

filing pursuant to 11 U.S.C. 362 has been lifted or is no longer in 
effect, in most cases collection activity against the debtor should 
stop immediately.
    (1) After seeking legal advice, a proof of claim should be filed in 
most cases with the bankruptcy court or the Trustee. Agencies should 
refer to the provisions of 11 U.S.C. 106 relating to the consequences 
on sovereign immunity of filing a proof of claim.
    (2) If the agency is a secured creditor, it may seek relief from 
the automatic stay regarding its security, subject to the provisions 
and requirements of 11 U.S.C. 362.
    (3) Offset is stayed in most cases by the automatic stay. However, 
agencies should seek legal advice from their agency counsel to 
determine whether their payments to the debtor and payments of other 
agencies available for offset may be frozen by the agency until relief 
from the automatic stay can be obtained from the bankruptcy court. 
Agencies also should seek legal advice from their agency counsel to 
determine whether recoupment is available.


Sec. 901.3  Collection by administrative offset.

    (a) Scope. (1) The term ``administrative offset'' has the meaning 
provided in 31 U.S.C. 3701(a)(1).
    (2) This section does not apply to:
    (i) Debts arising under the Social Security Act, except as provided 
in 42 U.S.C. 404;
    (ii) Payments made under the Social Security Act, except as 
provided for in 31 U.S.C. 3716(c) (see 31 CFR 285.4, Federal Benefit 
Offset);
    (iii) Debts arising under, or payments made under, the Internal 
Revenue Code (see 31 CFR 285.2, Tax Refund Offset) or the tariff laws 
of the United States;
    (iv) Offsets against Federal salaries to the extent these standards 
are inconsistent with regulations published to implement such offsets 
under 5 U.S.C. 5514 and 31 U.S.C. 3716 (see 5 CFR part 550, subpart K, 
and 31 CFR 285.7, Federal Salary Offset);
    (v) Offsets under 31 U.S.C. 3728 against a judgment obtained by a 
debtor against the United States;
    (vi) Offsets or recoupments under common law, State law, or Federal 
statutes specifically prohibiting offsets or recoupments of particular 
types of debts; or
    (vii) Offsets in the course of judicial proceedings, including 
bankruptcy.
    (3) Unless otherwise provided for by contract or law, debts or 
payments that are not subject to administrative offset under 31 U.S.C. 
3716 may be collected by administrative offset under the common law or 
other applicable statutory authority.
    (4) Unless otherwise provided by law, administrative offset of 
payments under the authority of 31 U.S.C. 3716 to collect a debt may 
not be conducted more than 10 years after the Government's right to 
collect the debt first accrued, unless facts material to the 
Government's right to collect the debt were not known and could not 
reasonably have been known by the official or officials of the 
Government who were charged with the responsibility to discover and 
collect such debts. This limitation does not apply to debts reduced to 
a judgment.
    (5) In bankruptcy cases, agencies should seek legal advice from 
their agency counsel concerning the impact of the Bankruptcy Code, 
particularly 11 U.S.C. 106, 362, and 553, on pending or contemplated 
collections by offset.
    (b) Mandatory centralized administrative offset. (1) Creditor 
agencies are required to refer past due, legally enforceable nontax 
debts which are over 180 days delinquent to the Secretary for 
collection by centralized administrative offset. Debts which are less 
than 180 days delinquent also may be referred to the Secretary for this 
purpose. See Sec. 901.3(b)(5) for debt certification requirements.
    (2) The names and taxpayer identifying numbers (TINs) of debtors 
who owe debts referred to the Secretary as described in paragraph 
(b)(1) of this section shall be compared to the names and TINs on 
payments to be made by Federal disbursing officials. Federal disbursing 
officials include disbursing officials of Treasury, the Department of 
Defense, the United States Postal Service, other Government 
corporations, and disbursing officials of the United States designated 
by the Secretary. When the name and TIN of a debtor match the name and 
TIN of a payee and all other requirements for offset have been met, the 
payment will be offset to satisfy the debt.
    (3) Federal disbursing officials will notify the debtor/payee in 
writing that an offset has occurred to satisfy, in part or in full, a 
past due, legally enforceable delinquent debt. The notice shall include 
a description of the type and amount of the payment from which the 
offset was taken, the amount of offset that was taken, the identity of 
the creditor agency requesting the offset, and a contact point within 
the creditor agency who will respond to questions regarding the offset.
    (4)(i) Before referring a delinquent debt to the Secretary for 
administrative offset, agencies must have prescribed administrative 
offset regulations consistent with this section or have adopted this 
section without change by cross-reference.
    (ii) Such regulations shall provide that offsets may be initiated 
only after the debtor:
    (A) Has been sent written notice of the type and amount of the 
debt, the intention of the agency to use administrative offset to 
collect the debt, and an explanation of the debtor's rights under 31 
U.S.C. 3716; and
    (B) The debtor has been given:
    (1) The opportunity to inspect and copy agency records related to 
the debt;
    (2) The opportunity for a review within the agency of the 
determination of indebtedness; and
    (3) The opportunity to make a written agreement to repay the debt.
    (iii) Agency regulations may provide for the omission of the 
procedures set forth in paragraph (a)(4)(ii) of this section when:
    (A) The offset is in the nature of a recoupment;
    (B) The debt arises under a contract as set forth in Cecile 
Industries, Inc. v. Cheney, 995 F.2d 1052 (Fed. Cir. 1993) (notice and 
other procedural protections set forth in 31 U.S.C. 3716(a) do not 
supplant or restrict established procedures for contractual offsets 
accommodated by the Contracts Disputes Act); or
    (C) In the case of non-centralized administrative offsets conducted 
under paragraph (c) of this section, the agency first learns of the 
existence of the amount owed by the debtor when there is insufficient 
time before payment would be made to the debtor/payee to allow for 
prior notice and an opportunity for review. When prior notice and an 
opportunity for review are omitted, the agency shall give the debtor 
such notice and an opportunity for review as soon as practicable and 
shall promptly refund any money ultimately found not to have been owed 
to the Government.
    (iv) When an agency previously has given a debtor any of the 
required notice and review opportunities with respect to a particular 
debt (see, e.g., Sec. 901.2), the agency need not duplicate such notice 
and review opportunities before administrative offset may be initiated.
    (5) Agencies referring delinquent debts to the Secretary must 
certify, in a form acceptable to the Secretary, that:
    (i) The debt(s) is (are) past due and legally enforceable; and
    (ii) The agency has complied with all due process requirements 
under 31 U.S.C. 3716(a) and the agency's regulations.
    (6) Payments that are prohibited by law from being offset are 
exempt from centralized administrative offset. The Secretary shall 
exempt payments under means-tested programs from centralized

[[Page 70399]]

administrative offset when requested in writing by the head of the 
payment certifying or authorizing agency. Also, the Secretary may 
exempt other classes of payments from centralized offset upon the 
written request of the head of the payment certifying or authorizing 
agency.
    (7) Benefit payments made under the Social Security Act (42 U.S.C. 
301 et seq.), part B of the Black Lung Benefits Act (30 U.S.C. 921 et 
seq.), and any law administered by the Railroad Retirement Board (other 
than tier 2 benefits), may be offset only in accordance with Treasury 
regulations, issued in consultation with the Social Security 
Administration, the Railroad Retirement Board, and the Office of 
Management and Budget. See 31 CFR 285.4.
    (8) In accordance with 31 U.S.C. 3716(f), the Secretary may waive 
the provisions of the Computer Matching and Privacy Protection Act of 
1988 concerning matching agreements and post-match notification and 
verification (5 U.S.C. 552a(o) and (p)) for centralized administrative 
offset upon receipt of a certification from a creditor agency that the 
due process requirements enumerated in 31 U.S.C. 3716(a) have been met. 
The certification of a debt in accordance with paragraph (b)(5) of this 
section will satisfy this requirement. If such a waiver is granted, 
only the Data Integrity Board of the Department of the Treasury is 
required to oversee any matching activities, in accordance with 31 
U.S.C. 3716(g). This waiver authority does not apply to offsets 
conducted under paragraphs (c) and (d) of this section.
    (c) Non-centralized administrative offset. (1) Generally, non-
centralized administrative offsets are ad hoc case-by-case offsets that 
an agency conducts, at the agency's discretion, internally or in 
cooperation with the agency certifying or authorizing payments to the 
debtor. Unless otherwise prohibited by law, when centralized 
administrative offset is not available or appropriate, past due, 
legally enforceable nontax delinquent debts may be collected through 
non-centralized administrative offset. In these cases, a creditor 
agency may make a request directly to a payment authorizing agency to 
offset a payment due a debtor to collect a delinquent debt. For 
example, it may be appropriate for a creditor agency to request that 
the Office of Personnel Management (OPM) offset a Federal employee's 
lump sum payment upon leaving Government service to satisfy an unpaid 
advance.
    (2) Before requesting a payment authorizing agency to conduct a 
non-centralized administrative offset, agencies must adopt regulations 
providing that such offsets may occur only after:
    (i) The debtor has been provided due process as set forth in 
paragraph (b)(4) of this section; and
    (ii) The payment authorizing agency has received written 
certification from the creditor agency that the debtor owes the past 
due, legally enforceable delinquent debt in the amount stated, and that 
the creditor agency has fully complied with its regulations concerning 
administrative offset.
    (3) Payment authorizing agencies shall comply with offset requests 
by creditor agencies to collect debts owed to the United States, unless 
the offset would not be in the best interests of the United States with 
respect to the program of the payment authorizing agency, or would 
otherwise be contrary to law. Appropriate use should be made of the 
cooperative efforts of other agencies in effecting collection by 
administrative offset.
    (4) When collecting multiple debts by non-centralized 
administrative offset, agencies should apply the recovered amounts to 
those debts in accordance with the best interests of the United States, 
as determined by the facts and circumstances of the particular case, 
particularly the applicable statute of limitations.
    (d) Requests to OPM to offset a debtor's anticipated or future 
benefit payments under the Civil Service Retirement and Disability 
Fund. Upon providing OPM written certification that a debtor has been 
afforded the procedures provided in paragraph (b)(4) of this section, 
creditor agencies may request OPM to offset a debtor's anticipated or 
future benefit payments under the Civil Service Retirement and 
Disability Fund (Fund) in accordance with regulations codified at 5 CFR 
831.1801-831.1808. Upon receipt of such a request, OPM will identify 
and ``flag'' a debtor's account in anticipation of the time when the 
debtor requests, or becomes eligible to receive, payments from the 
Fund. This will satisfy any requirement that offset be initiated prior 
to the expiration of the time limitations referenced in paragraph 
(a)(4) of this section.
    (e) Review requirements. (1) For purposes of this section, whenever 
an agency is required to afford a debtor a review within the agency, 
the agency shall provide the debtor with a reasonable opportunity for 
an oral hearing when the debtor requests reconsideration of the debt 
and the agency determines that the question of the indebtedness cannot 
be resolved by review of the documentary evidence, for example, when 
the validity of the debt turns on an issue of credibility or veracity.
    (2) Unless otherwise required by law, an oral hearing under this 
section is not required to be a formal evidentiary hearing, although 
the agency should carefully document all significant matters discussed 
at the hearing.
    (3) This section does not require an oral hearing with respect to 
debt collection systems in which a determination of indebtedness rarely 
involves issues of credibility or veracity and the agency has 
determined that review of the written record is ordinarily an adequate 
means to correct prior mistakes.
    (4) In those cases when an oral hearing is not required by this 
section, an agency shall accord the debtor a ``paper hearing,'' that 
is, a determination of the request for reconsideration based upon a 
review of the written record.


Sec. 901.4  Reporting debts.

    (a) Agencies shall develop and implement procedures for reporting 
delinquent debts to credit bureaus and other automated databases. 
Agencies also may develop procedures to report non-delinquent debts to 
credit bureaus. See 31 U.S.C. 3711(e).
    (1) In developing procedures for reporting debts to credit bureaus, 
agencies shall comply with the Bankruptcy Code and the Privacy Act of 
1974, 5 U.S.C. 552a, as amended. The provisions of the Privacy Act do 
not apply to credit bureaus.
    (2) Agency procedures for reporting delinquent consumer debts to 
credit bureaus shall be consistent with the due process and other 
requirements contained in 31 U.S.C. 3711(e). When an agency has given a 
debtor any of the required notice and review opportunities with respect 
to a particular debt, the agency need not duplicate such notice and 
review opportunities before reporting that delinquent consumer debt to 
credit bureaus.
    (b) Agencies should report delinquent debts to the Department of 
Housing and Urban Development's Credit Alert Interactive Voice Response 
System (CAIVRS). For information about the CAIVRS program, agencies 
should contact the Director of Information Resources Management Policy 
and Management Division, Office of Information Technology, Department 
of Housing and Urban Development, 451 7th Street, SW., Washington, DC 
20410.

[[Page 70400]]

Sec. 901.5  Contracting with private collection contractors and with 
entities that locate and recover unclaimed assets.

    (a) Subject to the provisions of paragraph (b) of this section, 
Federal agencies may contract with private collection contractors, as 
defined in 31 U.S.C. 3701(f), to recover delinquent debts provided 
that:
    (1) Agencies retain the authority to resolve disputes, compromise 
debts, suspend or terminate collection activity, and refer debts for 
litigation;
    (2) The private collection contractor is not allowed to offer the 
debtor, as an incentive for payment, the opportunity to pay the debt 
less the private collection contractor's fee unless the agency has 
granted such authority prior to the offer;
    (3) The contract provides that the private collection contractor is 
subject to the Privacy Act of 1974 to the extent specified in 5 U.S.C. 
552a(m), and to applicable Federal and state laws and regulations 
pertaining to debt collection practices, including but not limited to 
the Fair Debt Collection Practices Act, 15 U.S.C. 1692; and
    (4) The private collection contractor is required to account for 
all amounts collected.
    (b) Agencies shall use government-wide debt collection contracts to 
obtain debt collection services provided by private collection 
contractors. However, agencies may refer debts to private collection 
contractors pursuant to a contract between the agency and the private 
collection contractor only if such debts are not subject to the 
requirement to transfer debts to Treasury for debt collection. See 31 
U.S.C. 3711(g); 31 CFR 285.12(e).
    (c) Agencies may fund private collection contractor contracts in 
accordance with 31 U.S.C. 3718(d), or as otherwise permitted by law.
    (d) Agencies may enter into contracts for locating and recovering 
assets of the United States, such as unclaimed assets. Agencies must 
establish procedures that are acceptable to the Secretary before 
entering into contracts to recover assets of the United States held by 
a state government or a financial institution.
    (e) Agencies may enter into contracts for debtor asset and income 
search reports. In accordance with 31 U.S.C. 3718(d), such contracts 
may provide that the fee a contractor charges the agency for such 
services may be payable from the amounts recovered, unless otherwise 
prohibited by statute.


Sec. 901.6  Suspension or revocation of eligibility for loans and loan 
guaranties, licenses, permits, or privileges.

    (a) Unless waived by the head of the agency, agencies are not 
permitted to extend financial assistance in the form of a loan, loan 
guarantee, or loan insurance to any person delinquent on a nontax debt 
owed to a Federal agency. This prohibition does not apply to disaster 
loans. The authority to waive the application of this section may be 
delegated to the Chief Financial Officer and redelegated only to the 
Deputy Chief Financial Officer of the agency. Agencies may extend 
credit after the delinquency has been resolved. The Secretary may 
exempt classes of debts from this prohibition and has prescribed 
standards defining when a ``delinquency'' is ``resolved'' for purposes 
of this prohibition. See 31 CFR 285.13 (Barring Delinquent Debtors From 
Obtaining Federal Loans or Loan Insurance or Guarantees).
    (b) In non-bankruptcy cases, agencies seeking the collection of 
statutory penalties, forfeitures, or other types of claims should 
consider the suspension or revocation of licenses, permits, or other 
privileges for any inexcusable or willful failure of a debtor to pay 
such a debt in accordance with the agency's regulations or governing 
procedures. The debtor should be advised in the agency's written demand 
for payment of the agency's ability to suspend or revoke licenses, 
permits, or privileges. Any agency making, guaranteeing, insuring, 
acquiring, or participating in, loans should consider suspending or 
disqualifying any lender, contractor, or broker from doing further 
business with the agency or engaging in programs sponsored by the 
agency if such lender, contractor, or broker fails to pay its debts to 
the Government within a reasonable time or if such lender, contractor, 
or broker has been suspended, debarred, or disqualified from 
participation in a program or activity by another Federal agency. The 
failure of any surety to honor its obligations in accordance with 31 
U.S.C. 9305 should be reported to the Treasury. The Treasury will 
forward to all interested agencies notification that a surety's 
certificate of authority to do business with the Government has been 
revoked by the Treasury.
    (c) The suspension or revocation of licenses, permits, or 
privileges also should extend to Federal programs or activities that 
are administered by the states on behalf of the Federal Government, to 
the extent that they affect the Federal Government's ability to collect 
money or funds owed by debtors. Therefore, states that manage Federal 
activities, pursuant to approval from the agencies, should ensure that 
appropriate steps are taken to safeguard against issuing licenses, 
permits, or privileges to debtors who fail to pay their debts to the 
Federal Government.
    (d) In bankruptcy cases, before advising the debtor of an agency's 
intention to suspend or revoke licenses, permits, or privileges, 
agencies should seek legal advice from their agency counsel concerning 
the impact of the Bankruptcy Code, particularly 11 U.S.C. 362 and 525, 
which may restrict such action.


Sec. 901.7  Liquidation of collateral.

    (a) Agencies should liquidate security or collateral through the 
exercise of a power of sale in the security instrument or a nonjudicial 
foreclosure, and apply the proceeds to the applicable debt(s), if the 
debtor fails to pay the debt(s) within a reasonable time after demand 
and if such action is in the best interest of the United States. 
Collection from other sources, including liquidation of security or 
collateral, is not a prerequisite to requiring payment by a surety, 
insurer, or guarantor unless such action is expressly required by 
statute or contract.
    (b) When an agency learns that a bankruptcy petition has been filed 
with respect to a debtor, the agency should seek legal advice from its 
agency counsel concerning the impact of the Bankruptcy Code, including, 
but not limited to, 11 U.S.C. 362, to determine the applicability of 
the automatic stay and the procedures for obtaining relief from such 
stay prior to proceeding under paragraph (a) of this section.


Sec. 901.8  Collection in installments.

    (a) Whenever feasible, agencies shall collect the total amount of a 
debt in one lump sum. If a debtor is financially unable to pay a debt 
in one lump sum, agencies may accept payment in regular installments. 
Agencies should obtain financial statements from debtors who represent 
that they are unable to pay in one lump sum and independently verify 
such representations whenever possible (see Sec. 902.2(g) of this 
chapter). Agencies that agree to accept payments in regular 
installments should obtain a legally enforceable written agreement from 
the debtor that specifies all of the terms of the arrangement and that 
contains a provision accelerating the debt in the event of default.
    (b) The size and frequency of installment payments should bear a 
reasonable relation to the size of the debt and the debtor's ability to 
pay. If possible, the installment payments should be sufficient in size 
and frequency to liquidate the debt in three years or less.
    (c) Security for deferred payments should be obtained in 
appropriate cases.

[[Page 70401]]

Agencies may accept installment payments notwithstanding the refusal of 
the debtor to execute a written agreement or to give security, at the 
agency's option.


Sec. 901.9  Interest, penalties, and administrative costs.

    (a) Except as provided in paragraphs (g), (h), and (i) of this 
section, agencies shall charge interest, penalties, and administrative 
costs on debts owed to the United States pursuant to 31 U.S.C. 3717. An 
agency shall mail or hand-deliver a written notice to the debtor, at 
the debtor's most recent address available to the agency, explaining 
the agency's requirements concerning these charges except where these 
requirements are included in a contractual or repayment agreement. 
These charges shall continue to accrue until the debt is paid in full 
or otherwise resolved through compromise, termination, or waiver of the 
charges.
    (b) Agencies shall charge interest on debts owed the United States 
as follows:
    (1) Interest shall accrue from the date of delinquency, or as 
otherwise provided by law.
    (2) Unless otherwise established in a contract, repayment 
agreement, or by statute, the rate of interest charged shall be the 
rate established annually by the Secretary in accordance with 31 U.S.C. 
3717. Pursuant to 31 U.S.C. 3717, an agency may charge a higher rate of 
interest if it reasonably determines that a higher rate is necessary to 
protect the rights of the United States. The agency should document the 
reason(s) for its determination that the higher rate is necessary.
    (3) The rate of interest, as initially charged, shall remain fixed 
for the duration of the indebtedness. When a debtor defaults on a 
repayment agreement and seeks to enter into a new agreement, the agency 
may require payment of interest at a new rate that reflects the current 
value of funds to the Treasury at the time the new agreement is 
executed. Interest shall not be compounded, that is, interest shall not 
be charged on interest, penalties, or administrative costs required by 
this section. If, however, a debtor defaults on a previous repayment 
agreement, charges that accrued but were not collected under the 
defaulted agreement shall be added to the principal under the new 
repayment agreement.
    (c) Agencies shall assess administrative costs incurred for 
processing and handling delinquent debts. The calculation of 
administrative costs should be based on actual costs incurred or upon 
estimated costs as determined by the assessing agency.
    (d) Unless otherwise established in a contract, repayment 
agreement, or by statute, agencies shall charge a penalty, pursuant to 
31 U.S.C. 3717(e)(2), not to exceed six percent a year on the amount 
due on a debt that is delinquent for more than 90 days. This charge 
shall accrue from the date of delinquency.
    (e) Agencies may increase an ``administrative debt'' by the cost of 
living adjustment in lieu of charging interest and penalties under this 
section. ``Administrative debt'' includes, but is not limited to, a 
debt based on fines, penalties, and overpayments, but does not include 
a debt based on the extension of Government credit, such as those 
arising from loans and loan guaranties. The cost of living adjustment 
is the percentage by which the Consumer Price Index for the month of 
June of the calendar year preceding the adjustment exceeds the Consumer 
Price Index for the month of June of the calendar year in which the 
debt was determined or last adjusted. Increases to administrative debts 
shall be computed annually. Agencies should use this alternative only 
when there is a legitimate reason to do so, such as when calculating 
interest and penalties on a debt would be extremely difficult because 
of the age of the debt.
    (f) When a debt is paid in partial or installment payments, amounts 
received by the agency shall be applied first to outstanding penalties, 
second to administrative charges, third to interest, and last to 
principal.
    (g) Agencies shall waive the collection of interest and 
administrative charges imposed pursuant to this section on the portion 
of the debt that is paid within 30 days after the date on which 
interest began to accrue. Agencies may extend this 30-day period on a 
case-by-case basis. In addition, agencies may waive interest, 
penalties, and administrative costs charged under this section, in 
whole or in part, without regard to the amount of the debt, either 
under the criteria set forth in these standards for the compromise of 
debts, or if the agency determines that collection of these charges is 
against equity and good conscience or is not in the best interest of 
the United States.
    (h) Agencies shall set forth in their regulations the circumstances 
under which interest and related charges will not be imposed for 
periods during which collection activity has been suspended pending 
agency review.
    (i) Agencies are authorized to impose interest and related charges 
on debts not subject to 31 U.S.C. 3717, in accordance with the common 
law.


Sec. 901.10  Analysis of costs.

    Agency collection procedures should provide for periodic comparison 
of costs incurred and amounts collected. Data on costs and 
corresponding recovery rates for debts of different types and in 
various dollar ranges should be used to compare the cost effectiveness 
of alternative collection techniques, establish guidelines with respect 
to points at which costs of further collection efforts are likely to 
exceed recoveries, assist in evaluating offers in compromise, and 
establish minimum debt amounts below which collection efforts need not 
be taken.


Sec. 901.11  Use and disclosure of mailing addresses.

    (a) When attempting to locate a debtor in order to collect or 
compromise a debt under parts 900-904 of this chapter or other 
authority, agencies may send a request to the Secretary (or designee) 
to obtain a debtor's mailing address from the records of the Internal 
Revenue Service.
    (b) Agencies are authorized to use mailing addresses obtained under 
paragraph (a) of this section to enforce collection of a delinquent 
debt and may disclose such mailing addresses to other agencies and to 
collection agencies for collection purposes.


Sec. 901.12  Exemptions.

    (a) The preceding sections of this part, to the extent they reflect 
remedies or procedures prescribed by the Debt Collection Act of 1982 
and the Debt Collection Improvement Act of 1996, such as administrative 
offset, use of credit bureaus, contracting for collection agencies, and 
interest and related charges, do not apply to debts arising under, or 
payments made under, the Internal Revenue Code of 1986, as amended (26 
U.S.C. 1 et seq.); the Social Security Act (42 U.S.C. 301 et seq.), 
except to the extent provided under 42 U.S.C. 404 and 31 U.S.C. 
3716(c); or the tariff laws of the United States. These remedies and 
procedures, however, may be authorized with respect to debts that are 
exempt from the Debt Collection Act of 1982 and the Debt Collection 
Improvement Act of 1996, to the extent that they are authorized under 
some other statute or the common law.
    (b) This section should not be construed as prohibiting the use of 
these authorities or requirements when collecting debts owed by persons 
employed by agencies administering the laws cited in paragraph (a) of 
this section unless the debt arose under those laws.

[[Page 70402]]

PART 902--STANDARDS FOR THE COMPROMISE OF CLAIMS

Sec.
902.1   Scope and application.
902.2   Bases for compromise.
902.3   Enforcement policy.
902.4   Joint and several liability.
902.5   Further review of compromise offers.
902.6   Consideration of tax consequences to the Government.
902.7   Mutual releases of the debtor and the Government.

    Authority: 31 U.S.C. 3711.


Sec. 902.1  Scope and application.

    (a) The standards set forth in this part apply to the compromise of 
debts pursuant to 31 U.S.C. 3711. An agency may exercise such 
compromise authority for debts arising out of activities of, or 
referred or transferred for collection services to, that agency when 
the amount of the debt then due, exclusive of interest, penalties, and 
administrative costs, does not exceed $100,000 or any higher amount 
authorized by the Attorney General. Agency heads may designate 
officials within their respective agencies to exercise the authorities 
in this section.
    (b) Unless otherwise provided by law, when the principal balance of 
a debt, exclusive of interest, penalties, and administrative costs, 
exceeds $100,000 or any higher amount authorized by the Attorney 
General, the authority to accept the compromise rests with the 
Department of Justice. The agency should evaluate the compromise offer, 
using the factors set forth in this part. If an offer to compromise any 
debt in excess of $100,000 is acceptable to the agency, the agency 
shall refer the debt to the Civil Division or other appropriate 
litigating division in the Department of Justice using a Claims 
Collection Litigation Report (CCLR). Agencies may obtain the CCLR from 
the Department of Justice's National Central Intake Facility. The 
referral shall include appropriate financial information and a 
recommendation for the acceptance of the compromise offer. Justice 
Department approval is not required if the agency rejects a compromise 
offer.


Sec. 902.2  Bases for compromise.

    (a) Agencies may compromise a debt if the Government cannot collect 
the full amount because:
    (1) The debtor is unable to pay the full amount in a reasonable 
time, as verified through credit reports or other financial 
information;
    (2) The Government is unable to collect the debt in full within a 
reasonable time by enforced collection proceedings;
    (3) The cost of collecting the debt does not justify the enforced 
collection of the full amount; or
    (4) There is significant doubt concerning the Government's ability 
to prove its case in court.
    (b) In determining the debtor's inability to pay, agencies should 
consider relevant factors such as the following:
    (1) Age and health of the debtor;
    (2) Present and potential income;
    (3) Inheritance prospects;
    (4) The possibility that assets have been concealed or improperly 
transferred by the debtor; and
    (5) The availability of assets or income that may be realized by 
enforced collection proceedings.
    (c) Agencies should verify the debtor's claim of inability to pay 
by using a credit report and other financial information as provided in 
paragraph (g) of this section. Agencies should consider the applicable 
exemptions available to the debtor under state and Federal law in 
determining the Government's ability to enforce collection. Agencies 
also may consider uncertainty as to the price that collateral or other 
property will bring at a forced sale in determining the Government's 
ability to enforce collection. A compromise effected under this section 
should be for an amount that bears a reasonable relation to the amount 
that can be recovered by enforced collection procedures, with regard to 
the exemptions available to the debtor and the time that collection 
will take.
    (d) If there is significant doubt concerning the Government's 
ability to prove its case in court for the full amount claimed, either 
because of the legal issues involved or because of a bona fide dispute 
as to the facts, then the amount accepted in compromise of such cases 
should fairly reflect the probabilities of successful prosecution to 
judgment, with due regard given to the availability of witnesses and 
other evidentiary support for the Government's claim. In determining 
the litigative risks involved, agencies should consider the probable 
amount of court costs and attorney fees pursuant to the Equal Access to 
Justice Act, 28 U.S.C. 2412, that may be imposed against the Government 
if it is unsuccessful in litigation.
    (e) Agencies may compromise a debt if the cost of collecting the 
debt does not justify the enforced collection of the full amount. The 
amount accepted in compromise in such cases may reflect an appropriate 
discount for the administrative and litigative costs of collection, 
with consideration given to the time it will take to effect collection. 
Collection costs may be a substantial factor in the settlement of small 
debts. In determining whether the cost of collecting justifies enforced 
collection of the full amount, agencies should consider whether 
continued collection of the debt, regardless of cost, is necessary to 
further an enforcement principle, such as the Government's willingness 
to pursue aggressively defaulting and uncooperative debtors.
    (f) Agencies generally should not accept compromises payable in 
installments. This is not an advantageous form of compromise in terms 
of time and administrative expense. If, however, payment of a 
compromise in installments is necessary, agencies should obtain a 
legally enforceable written agreement providing that, in the event of 
default, the full original principal balance of the debt prior to 
compromise, less sums paid thereon, is reinstated. Whenever possible, 
agencies also should obtain security for repayment in the manner set 
forth in part 901 of this chapter.
    (g) To assess the merits of a compromise offer based in whole or in 
part on the debtor's inability to pay the full amount of a debt within 
a reasonable time, agencies should obtain a current financial statement 
from the debtor, executed under penalty of perjury, showing the 
debtor's assets, liabilities, income and expenses. Agencies also may 
obtain credit reports or other financial information to assess 
compromise offers. Agencies may use their own financial information 
form or may request suitable forms from the Department of Justice or 
the local United States Attorney's Office.


Sec. 902.3  Enforcement policy.

    Pursuant to this part, agencies may compromise statutory penalties, 
forfeitures, or claims established as an aid to enforcement and to 
compel compliance, if the agency's enforcement policy in terms of 
deterrence and securing compliance, present and future, will be 
adequately served by the agency's acceptance of the sum to be agreed 
upon.


Sec. 902.4  Joint and several liability.

    (a) When two or more debtors are jointly and severally liable, 
agencies should pursue collection activity against all debtors, as 
appropriate. Agencies should not attempt to allocate the burden of 
payment between the debtors but should proceed to liquidate the 
indebtedness as quickly as possible.
    (b) Agencies should ensure that a compromise agreement with one 
debtor does not release the agency's claim against the remaining 
debtors. The

[[Page 70403]]

amount of a compromise with one debtor shall not be considered a 
precedent or binding in determining the amount that will be required 
from other debtors jointly and severally liable on the claim.


Sec. 902.5  Further review of compromise offers.

    If an agency is uncertain whether to accept a firm, written, 
substantive compromise offer on a debt that is within the agency's 
delegated compromise authority, it may refer the offer to the Civil 
Division or other appropriate litigating division in the Department of 
Justice, using a CCLR accompanied by supporting data and particulars 
concerning the debt. The Department of Justice may act upon such an 
offer or return it to the agency with instructions or advice.


Sec. 902.6  Consideration of tax consequences to the Government.

    In negotiating a compromise, agencies should consider the tax 
consequences to the Government. In particular, agencies should consider 
requiring a waiver of tax-loss-carry-forward and tax-loss-carry-back 
rights of the debtor. For information on discharge of indebtedness 
reporting requirements see Sec. 903.5 of this chapter.


Sec. 902.7  Mutual releases of the debtor and the Government.

    In all appropriate instances, a compromise that is accepted by an 
agency should be implemented by means of a mutual release, in which the 
debtor is released from further non-tax liability on the compromised 
debt in consideration of payment in full of the compromise amount and 
the Government and its officials, past and present, are released and 
discharged from any and all claims and causes of action arising from 
the same transaction that the debtor may have. In the event a mutual 
release is not executed when a debt is compromised, unless prohibited 
by law, the debtor is still deemed to have waived any and all claims 
and causes of action against the Government and its officials related 
to the transaction giving rise to the compromised debt.

PART 903--STANDARDS FOR SUSPENDING OR TERMINATING COLLECTION 
ACTIVITY

Sec.
903.1   Scope and application.
903.2   Suspension of collection activity.
903.3   Termination of collection activity.
903.4   Exception to termination.
903.5   Discharge of indebtedness; reporting requirements.

    Authority: 31 U.S.C. 3711.


Sec. 903.1  Scope and application.

    (a) The standards set forth in this part apply to the suspension or 
termination of collection activity pursuant to 31 U.S.C. 3711 on debts 
that do not exceed $100,000, or such other amount as the Attorney 
General may direct, exclusive of interest, penalties, and 
administrative costs, after deducting the amount of partial payments or 
collections, if any. Prior to referring a debt to the Department of 
Justice for litigation, agencies may suspend or terminate collection 
under this part with respect to debts arising out of activities of, or 
referred or transferred for collection services to, that agency.
    (b) If, after deducting the amount of any partial payments or 
collections, the principal amount of a debt exceeds $100,000, or such 
other amount as the Attorney General may direct, exclusive of interest, 
penalties, and administrative costs, the authority to suspend or 
terminate rests solely with the Department of Justice. If the agency 
believes that suspension or termination of any debt in excess of 
$100,000 may be appropriate, the agency shall refer the debt to the 
Civil Division or other appropriate litigating division in the 
Department of Justice, using the CCLR. The referral should specify the 
reasons for the agency's recommendation. If, prior to referral to the 
Department of Justice, an agency determines that a debt is plainly 
erroneous or clearly without legal merit, the agency may terminate 
collection activity regardless of the amount involved without obtaining 
Department of Justice concurrence.


Sec. 903.2  Suspension of collection activity.

    (a) Agencies may suspend collection activity on a debt when:
    (1) The agency cannot locate the debtor;
    (2) The debtor's financial condition is expected to improve; or
    (3) The debtor has requested a waiver or review of the debt.
    (b) Based on the current financial condition of the debtor, 
agencies may suspend collection activity on a debt when the debtor's 
future prospects justify retention of the debt for periodic review and 
collection activity and:
    (1) The applicable statute of limitations has not expired; or
    (2) Future collection can be effected by administrative offset, 
notwithstanding the expiration of the applicable statute of limitations 
for litigation of claims, with due regard to the 10-year limitation for 
administrative offset prescribed by 31 U.S.C. 3716(e)(1); or
    (3) The debtor agrees to pay interest on the amount of the debt on 
which collection will be suspended, and such suspension is likely to 
enhance the debtor's ability to pay the full amount of the principal of 
the debt with interest at a later date.
    (c)(1) Agencies shall suspend collection activity during the time 
required for consideration of the debtor's request for waiver or 
administrative review of the debt if the statute under which the 
request is sought prohibits the agency from collecting the debt during 
that time.
    (2) If the statute under which the request is sought does not 
prohibit collection activity pending consideration of the request, 
agencies may use discretion, on a case-by-case basis, to suspend 
collection. Further, an agency ordinarily should suspend collection 
action upon a request for waiver or review if the agency is prohibited 
by statute or regulation from issuing a refund of amounts collected 
prior to agency consideration of the debtor's request. However, an 
agency should not suspend collection when the agency determines that 
the request for waiver or review is frivolous or was made primarily to 
delay collection.
    (d) When an agency learns that a bankruptcy petition has been filed 
with respect to a debtor, in most cases the collection activity on a 
debt must be suspended, pursuant to the provisions of 11 U.S.C. 362, 
1201, and 1301, unless the agency can clearly establish that the 
automatic stay has been lifted or is no longer in effect. Agencies 
should seek legal advice immediately from their agency counsel and, if 
legally permitted, take the necessary legal steps to ensure that no 
funds or money are paid by the agency to the debtor until relief from 
the automatic stay is obtained.


Sec. 903.3  Termination of collection activity.

    (a) Agencies may terminate collection activity when:
    (1) The agency is unable to collect any substantial amount through 
its own efforts or through the efforts of others;
    (2) The agency is unable to locate the debtor;
    (3) Costs of collection are anticipated to exceed the amount 
recoverable;
    (4) The debt is legally without merit or enforcement of the debt is 
barred by any applicable statute of limitations;
    (5) The debt cannot be substantiated; or
    (6) The debt against the debtor has been discharged in bankruptcy.
    (b) Before terminating collection activity, the agency should have 
pursued all appropriate means of collection and determined, based upon

[[Page 70404]]

the results of the collection activity, that the debt is uncollectible. 
Termination of collection activity ceases active collection of the 
debt. The termination of collection activity does not preclude the 
agency from retaining a record of the account for purposes of:
    (1) Selling the debt, if the Secretary determines that such sale is 
in the best interests of the United States;
    (2) Pursuing collection at a subsequent date in the event there is 
a change in the debtor's status or a new collection tool becomes 
available;
    (3) Offsetting against future income or assets not available at the 
time of termination of collection activity; or
    (4) Screening future applicants for prior indebtedness.
    (c) Generally, agencies shall terminate collection activity on a 
debt that has been discharged in bankruptcy, regardless of the amount. 
Agencies may continue collection activity, however, subject to the 
provisions of the Bankruptcy Code, for any payments provided under a 
plan of reorganization. Offset and recoupment rights may survive the 
discharge of the debtor in bankruptcy and, under some circumstances, 
claims also may survive the discharge. For example, the claims of an 
agency that it is a known creditor of a debtor may survive a discharge 
if the agency did not receive formal notice of the proceedings. 
Agencies should seek legal advice from their agency counsel if they 
believe they have claims or offsets that may survive the discharge of a 
debtor.


Sec. 903.4  Exception to termination.

    When a significant enforcement policy is involved, or recovery of a 
judgment is a prerequisite to the imposition of administrative 
sanctions, agencies may refer debts for litigation even though 
termination of collection activity may otherwise be appropriate.


Sec. 903.5  Discharge of indebtedness; reporting requirements.

    (a) Before discharging a delinquent debt (also referred to as a 
close out of the debt), agencies shall take all appropriate steps to 
collect the debt in accordance with 31 U.S.C. 3711(g), including, as 
applicable, administrative offset, tax refund offset, Federal salary 
offset, referral to Treasury, Treasury-designated debt collection 
centers or private collection contractors, credit bureau reporting, 
wage garnishment, litigation, and foreclosure. Discharge of 
indebtedness is distinct from termination or suspension of collection 
activity under part 903 of this title and is governed by the Internal 
Revenue Code. When collection action on a debt is suspended or 
terminated, the debt remains delinquent and further collection action 
may be pursued at a later date in accordance with the standards set 
forth in this chapter. When an agency discharges a debt in full or in 
part, further collection action is prohibited. Therefore, agencies 
should make the determination that collection action is no longer 
warranted before discharging a debt. Before discharging a debt, 
agencies must terminate debt collection action.
    (b) Section 3711(i), title 31, United States Code, requires 
agencies to sell a delinquent nontax debt upon termination of 
collection action if the Secretary determines such a sale is in the 
best interests of the United States. Since the discharge of a debt 
precludes any further collection action (including the sale of a 
delinquent debt), agencies may not discharge a debt until the 
requirements of 31 U.S.C. 3711(i) have been met.
    (c) Upon discharge of an indebtedness, agencies must report the 
discharge to the IRS in accordance with the requirements of 26 U.S.C. 
6050P and 26 CFR 1.6050P-1. An agency may request Treasury or Treasury-
designated debt collection centers to file such a discharge report to 
the IRS on the agency's behalf.
    (d) When discharging a debt, agencies must request that litigation 
counsel release any liens of record securing the debt.

PART 904--REFERRALS TO THE DEPARTMENT OF JUSTICE

Sec.
904.1   Prompt referral.
904.2   Claims Collection Litigation Report.
904.3   Preservation of evidence.
904.4   Minimum amount of referrals to the Department of Justice.

    Authority: 31 U.S.C. 3711.


Sec. 904.1  Prompt referral.

    (a) Agencies shall promptly refer to the Department of Justice for 
litigation debts on which aggressive collection activity has been taken 
in accordance with part 901 of this chapter and that cannot be 
compromised, or on which collection activity cannot be suspended or 
terminated, in accordance with parts 902 and 903 of this chapter. 
Agencies may refer those debts arising out of activities of, or 
referred or transferred for collection services to, that agency. Debts 
for which the principal amount is over $1,000,000, or such other amount 
as the Attorney General may direct, exclusive of interest and 
penalties, shall be referred to the Civil Division or other division 
responsible for litigating such debts at the Department of Justice, 
Washington, D.C. Debts for which the principal amount is $1,000,000, or 
less, or such other amount as the Attorney General may direct, 
exclusive of interest or penalties, shall be referred to the Department 
of Justice's Nationwide Central Intake Facility as required by the CCLR 
instructions. Debts should be referred as early as possible, consistent 
with aggressive agency collection activity and the observance of the 
standards contained in parts 900-904 of this chapter, and, in any 
event, well within the period for initiating timely lawsuits against 
the debtors. Agencies shall make every effort to refer delinquent debts 
to the Department of Justice for litigation within one year of the date 
such debts last became delinquent. In the case of guaranteed or insured 
loans, agencies should make every effort to refer these delinquent 
debts to the Department of Justice for litigation within one year from 
the date the loan was presented to the agency for payment or re-
insurance.
    (b) The Department of Justice has exclusive jurisdiction over the 
debts referred to it pursuant to this section. The referring agency 
shall immediately terminate the use of any administrative collection 
activities to collect a debt at the time of the referral of that debt 
to the Department of Justice. The agency should advise the Department 
of Justice of the collection activities which have been utilized to 
date, and their result. The referring agency shall refrain from having 
any contact with the debtor and shall direct all debtor inquiries 
concerning the debt to the Department of Justice. The referring agency 
shall immediately notify the Department of Justice of any payments 
credited by the agency to the debtor's account after referral of a debt 
under this section. The Department of Justice shall notify the 
referring agency, in a timely manner, of any payments it receives from 
the debtor.


Sec. 904.2  Claims Collection Litigation Report.

    (a) Unless excepted by the Department of Justice, agencies shall 
complete the CCLR (see Sec. 902.1(b) of this chapter), accompanied by a 
signed Certificate of Indebtedness, to refer all administratively 
uncollectible claims to the Department of Justice for litigation. 
Referring agencies shall complete all of the sections of the CCLR 
appropriate to each claim as required by the CCLR instructions and 
furnish such other information as may be required in specific cases.
    (b) Agencies shall indicate clearly on the CCLR the actions they 
wish the Department of Justice to take with

[[Page 70405]]

respect to the referred claim. The CCLR permits the agency to indicate 
specifically any of a number of litigative activities which the 
Department of Justice may pursue, including enforced collection, 
judgment lien only, renew judgment lien only, renew judgment lien and 
enforce collection, program enforcement, foreclosure only, and 
foreclosure and deficiency judgment.
    (c) Agencies also shall use the CCLR to refer claims to the 
Department of Justice to obtain approval of any proposals to compromise 
the claims or to suspend or terminate agency collection activity.


Sec. 904.3  Preservation of evidence.

    Referring agencies must take care to preserve all files and records 
that may be needed by the Department of Justice to prove their claims 
in court. Agencies ordinarily should include certified copies of the 
documents that form the basis for the claim in the packages referring 
their claims to the Department of Justice for litigation. Agencies 
shall provide originals of such documents immediately upon request by 
the Department of Justice.


Sec. 904.4  Minimum amount of referrals to the Department of Justice.

    (a) Agencies shall not refer for litigation claims of less than 
$2,500, exclusive of interest, penalties, and administrative costs, or 
such other amount as the Attorney General shall from time to time 
prescribe. The Department of Justice shall promptly notify referring 
agencies if the Attorney General changes this minimum amount.
    (b) Agencies shall not refer claims of less than the minimum amount 
unless:
    (1) Litigation to collect such smaller claims is important to 
ensure compliance with the agency's policies or programs;
    (2) The claim is being referred solely for the purpose of securing 
a judgment against the debtor, which will be filed as a lien against 
the debtor's property pursuant to 28 U.S.C. 3201 and returned to the 
referring agency for enforcement; or
    (3) The debtor has the clear ability to pay the claim and the 
Government effectively can enforce payment, with due regard for the 
exemptions available to the debtor under state and Federal law and the 
judicial remedies available to the Government.
    (c) Agencies should consult with the Financial Litigation Staff of 
the Executive Office for United States Attorneys in the Department of 
Justice prior to referring claims valued at less than the minimum 
amount.

    Dated: November 6, 2000.
Lawrence H. Summers,
Secretary of the Treasury.

    Dated: September 21, 2000.
Janet Reno,
Attorney General of the United States.
[FR Doc. 00-29284 Filed 11-21-00; 8:45 am]
BILLING CODE 4810-35-P; 4410-26-P