[Federal Register Volume 66, Number 208 (Friday, October 26, 2001)]
[Rules and Regulations]
[Pages 54125-54135]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-26960]


=======================================================================
-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

17 CFR Part 204

[Release No. 34-44965]
RIN 3235-AI34


Debt Collection--Amendments to Collection Rules and Adoption of 
Wage Garnishment Rules

AGENCY: Securities and Exchange Commission.

ACTION: Final rule.

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

SUMMARY: The Securities and Exchange Commission (Commission) is 
amending its debt collection rules. The amendments update procedures 
and make technical amendments to the Commission's rules for debt 
collection by administrative offset, federal salary offset, and tax 
refund offset, and add new rules for administrative wage garnishment. 
The changes are required by the Debt Collection Improvement Act of 
1996.

EFFECTIVE DATE: November 26, 2001.

FOR FURTHER INFORMATION CONTACT: Kenneth H. Hall, Office of Chief 
Counsel, Division of Enforcement at (202) 942-4635, or at 450 5th 
Street, NW., Washington, DC 20549-0506.

SUPPLEMENTARY INFORMATION: We are amending the Commission's debt 
collection rules to conform them to the Debt Collection Improvement Act 
of 1996 (DCIA) and related rules adopted by federal agencies with 
responsibilities for government-wide debt collection. Currently, the 
Commission has rules for collecting its unpaid debts through three 
offset methods: administrative, salary and tax offset.\1\ The 
Commission also has rules concerning contracts for collection services 
to recover delinquent debts. The Commission adopted all of its debt 
collection rules in 1993 in accordance with then existing provisions of 
the Debt Collection Act, the Federal Claims Collection Standards 
(FCCS), and other authorities governing the collection of federal 
debts. On September 17, 1996, the Commission entered into an agreement 
with the Financial Management Service (FMS), a bureau of the Department 
of the

[[Page 54126]]

Treasury (Treasury), by which FMS performs collection services pursuant 
to the DCIA on the Commission's behalf. In November 2000, the Treasury 
and the Department of Justice (Justice) adopted a new version of the 
FCCS, governing the collection of federal debts generally.\2\ As a 
result of the promulgation of a series of rules issued since the 
passage of the DCIA, the Commission's existing rules for debt 
collection by offset need to be conformed and updated. In particular, 
the DCIA and revised government-wide regulations contemplate that 
Treasury will conduct centralized offset against amounts owed by the 
government to debtors. Under this centralized Treasury Offset Program 
(TOP), federal agencies are to refer delinquent debts to Treasury, 
which compares them to amounts to be paid out by the government. 
Treasury can then cause those amounts to be withheld in satisfaction of 
the debts. To participate in TOP, federal agencies are required to 
conform their debt collection rules to government-wide regulations 
regarding administrative, salary and tax refund offset.
---------------------------------------------------------------------------

    \1\ 17 CFR part 204.
    \2\ 65 FR 70390 (Nov. 22, 2000) (adopting 31 CFR parts 900 
through 904).
---------------------------------------------------------------------------

    The most significant change to the Commission's debt collection 
rules is the addition of administrative wage garnishment for non-
federal employee wages. \3\ Previously, administrative wage garnishment 
was available only against federal employees, through federal salary 
offset. To garnish the wages of non-federal employees, federal agencies 
had to obtain a court order. As a result of the DCIA and Treasury's 
implementing rules, \4\ the Commission, or a federal agency collecting 
debts on behalf of the Commission, has the authority to issue a wage 
garnishment order. Such an order could direct an employer to withhold 
an employee's wages and pay the amount withheld to the Commission, or 
the appropriate agency, to satisfy the delinquent debt. The DCIA 
authorizes federal agencies to garnish up to 15% of the disposable pay 
of a debtor to satisfy delinquent nontax debts owed to the United 
States.
---------------------------------------------------------------------------

    \3\ Garnishment refers to the process of withholding amounts 
from an employee's disposable pay and paying those amounts to a 
creditor in satisfaction of a debt. 31 CFR 285.11(c).
    \4\ The DCIA authorized Treasury to issue rules governing 
administrative wage garnishment. 31 U.S.C. 3720D. Treasury's 
implementing rules went into effect on June 5, 1998. 63 FR 25136 
(May 6, 1998) (adopting 31 CFR 285.11).
---------------------------------------------------------------------------

    Other changes to the Commission's debt collection rules are 
primarily technical in nature. The changes conform the Commission's 
rules to make them consistent with changes to federal debt collection 
law and regulations promulgated by Treasury, Justice, and the Office of 
Personnel Management (OPM).

I. Discussion of Amendments

A. Administrative Offset

    The Commission adopting amendments to Subpart A of its debt 
collection rules, which set forth procedures for collection by 
administrative offset. \5\ Administrative offset is the general 
procedure by which debts are collected through the withholding of funds 
payable to the debtor by the government. \6\ The Commission is amending 
its regulations to make clear that debts can be processed through TOP. 
\7\ As amended, Subpart A is consistent with the statutory procedures 
for administrative offset \8\ and the FCCS. \9\
---------------------------------------------------------------------------

    \5\ 17 CFR 204.1 through 204.11.
    \6\ 31 U.S.C. 3701(a)(1), 3716.
    \7\ 17 CFR 204.3 and 204.9.
    \8\ 31 U.S.C. 3716.
    \9\ 31 CFR 901.3.
---------------------------------------------------------------------------

B. Federal Salary Offset

    The Commission is amending Subpart B of its debt collection rules, 
which sets forth procedures for collection by federal salary offset. 
\10\ Federal salary offset is the collection of a debt owed by a 
federal employee by withholding up to 15% of the employee's disposable 
pay. \11\ The procedures for salary offset are governed by 5 U.S.C. 
5514, and by OPM regulations. \12\ OPM amended its rules to make clear 
that salary offset should be conducted through TOP, \13\ and the 
Commission is amending its regulations to reflect this preference. OPM 
also requires agencies to specify in their regulations that the notice 
and hearing provisions that are otherwise applicable to not apply when 
offset is effected within four pay periods to correct clerical errors 
or to collect amounts of $50 or less, \14\ and requires that agency 
rules specify the maximum percentage (15% of disposable pay) that can 
be withheld. \15\ As amended, the Commission's rules add conforming 
language. As amended, Subpart B is consistent with government-wide 
salary offset authorities.
---------------------------------------------------------------------------

    \10\ 17 CFR 204.30 through 204.44.
    \11\ 5 U.S.C. 5514(a).
    \12\ 5 CFR part 550, subpart K, 63 FR 72098 (Dec. 31, 1998).
    \13\ 5 CFR 550.1108, 1109.
    \14\ 5 CFR 550.1104(c).
    \15\ 5 CFR 550.1104(d).
---------------------------------------------------------------------------

C. Tax Refund Offset

    The Commission is amending Subpart C of its rules for collection by 
tax refund offset, \16\ which is the collection of a debt through the 
withholding of federal tax refunds owed to the debtor. \17\ This form 
of offset previously was addressed by Internal Revenue Service 
regulations, but is now governed by Treasury regulations, \18\ with 
which agency regulations must be consistent. \19\ As amended, the 
Commission's rules make clear that debts will be referred to Treasury, 
and hence may be processed through TOP. As amended, Subpart C is 
consistent with the DCIA and Treasury's regulations.
---------------------------------------------------------------------------

    \16\ 17 CFR 204.50 through 204.56.
    \17\ 31 U.S.C. 3720A.
    \18\ 31 CFR 285.2.
    \19\ 31 CFR 285.2(c).
---------------------------------------------------------------------------

D. Garnishment of Non-Federal Wages

    The Commission is adopting new administrative wage garnishment 
regulations, \20\ authorized by the DCIA. \21\ Prior law required 
federal agencies to obtain a court order for garnishment of non-federal 
wages, but the DCIA permits agencies to collect debts by ordering a 
non-federal employer to deduct amounts up to 15% of an employee's 
disposable pay (or a greater amount to which the employee consents). 
Treasury regulations require agencies to adopt regulations for the 
conduct of administrative wage garnishment hearings, \22\ The 
Commission's rules essentially track Treasury's regulations. A debtor 
will be provided 30 days notice of the Commission's intent to collect 
by garnishment, and will be provided an opportunity to inspect and copy 
records relating to the debt, an opportunity to enter into a written 
repayment agreement, and an opportunity for a hearing on the existence 
or amount of the debt. If the debtor does not request a hearing, a wage 
garnishment order will be sent to the debtor's employer within 30 days 
after the end of the 15-day period allowed for the debtor's response. 
If the debtor requests a hearing within 15 days of mailing of the 
Commission's initial notice, a hearing will be provided, and a decision 
will be rendered within 60 days after the hearing. If the Commission 
determines after the hearing to proceed with garnishment, a garnishment 
order will be sent to the debtor's employer within 30 days of its 
decision. The Commission's regulations are consistent with the DCIA and 
Treasury regulations. \23\
---------------------------------------------------------------------------

    \20\ 17 CFR 204.60 through 204.65.
    \21\ 31 U.S.C. 3720D.
    \22\ 31 CFR 285.11(f)(1).
    \23\ Under Treasury's garnishment rules, an employer receiving a 
garnishment order must return a certification, in a form determined 
by Treasury, that addresses matters such as information about the 
debtor's employment status and disposable pay available for 
withholding. 5 CFR 285.11(h). In addition, employers are forbidden 
to discharge, refuse to employ, or take disciplinary action against 
a debtor due to the issuance of a withholding order. 5 CFR 
285.11(m).

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

[[Page 54127]]

E. Miscellaneous

    The Commission is adopting technical amendments to its regulations 
concerning use of collection services and reporting of debts to 
consumer reporting agencies. These changes are principally to update 
statutory and regulatory references, and to conform to the DCIA and the 
FCCS.

II. Section-by-Section Analysis

A. Administrative Offset

    The following summarizes the contents of 17 CFR 204, Subpart A, as 
amended.
1. Section 204.1  Applicability and Scope
    This section states the authority for the administrative offset 
regulations. It is amended solely to update statutory references and to 
substitute the Department of the Treasury for the General Accounting 
Office as an agency responsible for the implementation of the FCCS.
2. Section 204.2  Definitions
    This section provides definitions of ``administrative offset'' and 
``person.'' It is amended solely to track the definition of 
``administrative offset'' in the Debt Collection Act.
3. Section 204.3  General
    This section sets forth the conditions for administrative offset. 
The considerations to be weighed in deciding whether to use 
administrative offset originally tracked requirements in the pre-DCIA 
version of the FCCS, which required agencies to determine the 
appropriateness of offset on a case-by-case basis. Because the TOP 
system contemplates automatic use of this form of offset, these 
conditions are removed. The regulation is also amended to permit 
referral of debts to Treasury for administrative offset through TOP.
4. Section 204.4  Demand for Payment--Notice
    The FCCS requires agencies to adopt regulations regarding notice to 
the debtor. The pre-DCIA version of the FCCS required three 
progressively stronger letters to the debtor prior to administrative 
offset, a requirement that has been dropped in the current FCCS as too 
restrictive. This requirement is deleted from the Commission's 
regulations as well, and the content of notice letters is conformed to 
the current FCCS.
5. Section 204.5  Debtor's Failure to Respond
    This provision alerts debtors that offset will be effected if no 
timely response is made. No substantive changes have been made.
6. Section 204.6  Agency Review
    This section is amended to make clear that no attempts to reargue 
or collaterally attack the findings that resulted in a judicial or 
administrative order establishing a debt will be considered. With 
respect to debts established by a judicial or administrative order, a 
debtor may request a hearing limited to consideration of the issue of 
payment or other discharge of the debt.
7. Section 204.7  Hearing
    This section describes the circumstances under which an oral 
hearing may be required. No substantive change has been made.
8. Section 204.8  Written Agreement for Repayment
    This section states that a debtor will be provided an opportunity 
to enter into a written repayment agreement. No substantive change has 
been made.
9. Section 204.9  Administrative Offset Procedures
    This section provides the basic procedures for effecting 
administrative offset after the debtor's due process rights have been 
exhausted. The rule continues to permit the Commission to engage in 
non-centralized offset with other federal agencies. Section 204.9(b), 
regarding travel advances, reflects a separate provision of law under 
which the Commission may offset such advances against other amounts due 
an employee. The rule is amended to permit the Commission to request 
that FMS collect the debt through TOP.
10. Section 204.10  Civil and Foreign Service Retirement Fund
    Prior to the DCIA, federal retirement payments were subject to 
separate offset rules. Such payments are now subject to the general 
rules for administrative offset, and thus there is no longer a need to 
address these payments separately. The entire section has been deleted.
11. Section 204.11  Jeopardy Procedure
    In some cases, there may be insufficient time to effect offset 
through TOP before a payment has been made to the debtor. In such 
cases, the FCCS permits a creditor agency to seek offset directly from 
the agency that is about to make the payment, and to omit the notice 
and opportunity for review otherwise required prior to offset. After 
offset is effected, the agency must provide notice and an opportunity 
for review, and must refund amounts found not to be owing to the 
government. Under the revised FCCS, this jeopardy provision applies 
only when an agency is conducting non-centralized offset under 31 CFR 
901.3(c). The section is amended to indicate that it applies only to 
non-centralized offset.

B. Salary Offset

    The following summarizes the contents of 17 CFR 204, Subpart B, as 
amended.
1. Section 204.30  Purpose and Scope
    This purpose section describes federal salary offset generally, and 
indicates that it applies both to the Commission's own employees and to 
employees of other agencies.
2. Section 204.31  Excluded Debts or Claims
    This section exempts certain types of debts from salary offset. The 
DCIA amended the Social Security Act to permit the Commissioner of 
Social Security to collect delinquent claims by salary offset; OPM has 
conformed its regulations by deleting the exemption for debts arising 
under the Social Security Act. The effect of the changes it that the 
Social Security Administration can now offset debts owed by Commission 
employees, either through TOP or by submitting a request directly to 
the Commission. The rule is amended to delete reference to the prior 
Social Security exemption.
3. Section 204.32  Definitions
    This section contains definitions applicable to this subpart. No 
substantive changes have been made.
4. Section 204.33  Pre-Offset Notice
    This section describes the rights of the debtor that must be 
included in the pre-offset notice. The DCIA amended the salary offset 
statute to permit agencies to omit notice when correcting a minor error 
within four pay periods of the error, or when collecting amounts of $50 
or less. OPM also amended its regulations to make clear that the amount 
of a salary offset may be expressed in the pre-offset notice to the 
debtor as a percentage of pay, not to exceed 15%, and to remove the 
requirement that agencies include in their notices information about 
the commencement date and duration of deductions. The amendments to the

[[Page 54128]]

Commission's rules adopt the language of the OPM amendments.
5. Section 204.34  Employee Response
    This section provides guidance on employee responses to pre-offset 
notices. Employees must be given 15 days to request a hearing, and a 
timely request stays offset until after the hearing. The employee must 
be given an opportunity to enter into a written repayment agreement. No 
amendments to this section have been made.
6. Section 204.35  Petition for Pre-Offset Hearing
    this section provides that an employee's request for pre-offset 
review must state with reasonable specificity the basis for the 
employee's belief that the Commission's determination on the debt is in 
error, and must identify facts, evidence and witnesses. This section is 
amended solely to clarify that no attempts to reargue or collaterally 
attack the findings that resulted in a judicial or administrative order 
establishing a debt will be considered. With respect to debts 
established by a judicial or administrative order, a debtor may request 
a hearing limited to consideration of the issue of payment or other 
discharge of the debt.
7. Section 204.36  Granting of a Pre-offset Hearing
    This section provides that the Commission will arrange for an 
independent hearing official (who may be an Administrative Law Judge) 
to conduct pre-offset hearings. No substantive amendments have been 
made.
8. Section 204.37  Extensions of time
    This section provides the hearing official with discretion to 
control the time limits set in the Commission's salary offset 
regulations, except for the 30-day initial notice and 60-day final 
decision periods that are established by law. No amendments have been 
made.
9. Section 204.38  Pre-offset Hearing
    This section permits the hearing official to determine the form and 
content of hearings, consistent with the FCCS. No substantive 
amendments have been made.
10. Section 204.39  Written Decision
    This section provides that the hearing official must issue a 
written opinion within 60 days of he filing of a petition for a pre-
offset hearing. No amendments have been made.
11. Section 204.40  Deductions
    This section provides guidance on when deductions may begin, the 
source of deductions, and the duration of deductions. It also provides 
that any interest, penalties or administrative costs of collection will 
be imposed according to provisions of the FCCS. No substantive 
amendments have been made.
12. Section 204.41  Non-waiver of Rights.
    The section provides that involuntary collection by offset does not 
constitute a waiver of an employee's rights under the offset law or any 
other applicable law. No amendment has been made.
13. Section 204.42  Refunds
    This section provides that the Commission will promptly refund 
amounts if a debt is waived or found not to be owing, but that such 
refunds will not bear interest unless required by law. No amendments 
have been made.
14. Section 204.43  Coordinating Offset with Another Federal Agency
    This section provides guidance on requesting offset by another 
federal employer. The DCIA contemplates that agencies will normally 
process requests for salary offset through TOP, and OPM has amended its 
regulations to require that preference be given to centralized offset 
through TOP. However, there may be circumstances in which direct 
coordination with another agency may be preferable, and this method of 
conducting offset has been retained. This section is amended to make 
clear that centralized offset under the OPM regulations is to be 
attempted whenever possible; no other substantive changes have been 
made.
15. Section 204.44  Interest, Penalties, and Administrative Costs
    This section provides that interest, penalties and administrative 
costs of collection are to be assessed in accordance with the FCCS. No 
substantive amendments have been made.

C. Tax Refund Offset.

    The following summarizes the contents of CFR part 204, Subpart C, 
as amended.
1. Section 204.50  Purpose
    This purpose section is amended to reflect the requirement that tax 
refunds be sought through Treasury and not directly through the IRS. 
References to pre-DCIA provisions are deleted.
2. Section 204.51  Past-due Legally Enforceable Debt
    This section stated the preconditions for referral to IRS under 
prior law. Because tax refund offset will be processed through the TOP 
system, these provisions are no longer needed. The section is deleted 
in its entirety.
3. Section 204.52  Notification of Intent to Collect
    This section describes the content of the Commission's notice to 
the debtor. This section is amended to make clear that no attempts to 
reargue or collaterally attack the findings that resulted in a judicial 
or administrative order establishing a debt will be considered. With 
respect to debts established by a judicial or administrative order, a 
debtor may request a hearing limited to consideration of the issue of 
payment or other discharge of the debt.
4. Section 204.53  Reasonable Attempt to Notify
    This section reflects prior IRS regulations that required agencies 
to rely solely upon addresses obtained from the IRS when sending pre-
offset notices. Treasury has determined that agencies may in fact have 
better addresses in their debt files, and thus has not make this a 
requirement in its regulations. This section is deleted in its 
entirety.
5. Section 204.54  Commission Action as a Result of Consideration of 
Evidence Submitted in Response to the Notice of Intent
    Before a tax refund offset can be effected, agencies are required 
to consider evidence submitted by the debtor, and to determine that the 
debt is in fact past due and legally enforceable. Prior IRS regulations 
required that debtors be provided with the opportunity to dispute a 
debt before the debt was referred to IRS for tax refund offset. 
Agencies are now to refer all delinquent debt to Treasury for 
processing through TOP. This regulation is amended to reflect the 
changes in processing of requests for tax refund offset.
6. Section 204.55  Change in Notification to Internet Revenue Service
    In some cases, the amount referred for tax refund offset may be 
subject to change (for example, as a result of payments by the debtor 
or clerical errors by an agency). This section governs the Commission's 
requests for changes in the amount referred for tax refund offset. 
Treasury's regulations permit upward adjustments, so long as the debtor 
is provided additional notice and opportunity to be heard as to the 
amount of the increase. The Section has been amended to remove 
references to

[[Page 54129]]

the IRS and to conform to Treasury regulations.
7. Section 204.56  Administrative Charges
    The DCIA requires Treasury to specify in government-wide 
regulations that agencies are to pay a fee to reimburse Treasury for 
conducting tax refund offset. Treasury's tax refund offset fee 
provision allows agencies, to the extent permitted by law, to add this 
fee to the amount of the debt. This section is amended to conform to 
Treasury's regulation.

D. Administrative Wage Garnishment.

    The following summarizes the contents of 17 CFR part 204, Subpart 
D.
1. Section 204.60  Purpose.
    This purpose section states that the Commission may use 
administrative wage garnishment to collect debts. The provisions tracks 
the language of the corresponding purpose section in Treasury's 
regulations.
2. Section 204.61  Scope.
    This scope section makes clear that administrative wage garnishment 
may be conducted in conjunction with other methods of collection, 
including other forms of offset. The section excludes collection from 
the salaries of federal employees governed by the federal salary offset 
statute.
3. Section 204.62  Definitions
    Key definitions of ``disposable pay,'' ``employer,'' 
``garnishment,'' and ``withholding order'' are taken verbatim from the 
Treasury regulations. A definition of ``debt or delinquent nontax 
debt'' has been added.
4. Section 204.63  Notice
    This section requires notice to the debtor at least 30 days prior 
to the initiation of garnishment, and specifies the contents of the 
notice and the rights to be provided the debtor. This section provides 
that no attempts to reargue or collaterally attack the findings that 
resulted in a judicial or administrative order establishing a debt will 
be considered. With respect to debts established by a judicial or 
administrative order, a debtor may request a hearing limited to 
consideration of the issue of payment or other discharge of the debt.
5. Section 204.64  Hearing
    This section describes the form and content of the hearing that may 
be sought by a debtor to contest administrative wage garnishment. A 
hearing must be sought within 15 days of the Commission's notice to the 
debtor. A hearing may be presided over by the Commission or by a 
hearing official such as an administrative law judge. It is anticipated 
that should any hearings be sought, they would routinely be assigned to 
an administrative law judge. A decision must be rendered within 60 days 
after the request for a hearing. These provisions are derived from the 
corresponding hearing provisions in Treasury's regulations.
6. Section 204.65  Wage Garnishment Order
    This section describes the procedures for issuing a wage 
garnishment order. If the debtor does not respond within 15 days of the 
Commission's initial notice, the Commission may send a garnishment 
order to the debtor's employer. The order must be sent within 30 days 
after the end of the 15-day period allowed for the debtor's response. 
Alternatively, if the debtor requests a hearing, the garnishment order 
must be sent to the debtor's employer within 30 days of the final 
decision to proceed with garnishment. These provisions, as well as the 
provisions regarding the form of the withholding order, the guidance on 
the amounts to be withheld, exclusions, financial hardship, ending 
garnishment, and refunds are derived from the corresponding provisions 
in Treasury's regulations.

E. Miscellaneous: Credit Bureau Reporting, Collection Services

    The following summarizes the contents of 17 CFR part 204, Subpart 
E, as amended.
1. Section 204.75  Collection Services
    This section states generally that the Commission may enter into 
collection contracts, provided that authority to resolve disputes about 
debts or to end collection rests with the Commission, and that any 
contractor will be subject to the Privacy Act of 1974 and other debt 
collection statutes. No substantive amendments have been made.
2. Section 204.76  Use of Credit Bureau or Consumer Reporting Agencies
    This section provides that the Commission may refer debts to 
consumer reporting agencies. No substantive amendments have been made.
3. Section 204.77  Referrals to Collection Agencies.
    This section provides that the Commission may employ collection 
agencies. The section is revised to clear that contractors must provide 
any data requested by the Commission in connection with a referral to 
Justice. The section has also been revised to delete a provision 
stating that the Commission would not use collection agencies to 
collect a debt from current or retired employees when salary or annuity 
offset was available. Annuity offset is no longer a distinct form of 
offset, and requests for salary offset are to be processed through 
Treasury, which is authorized to employ collection agencies to act on 
the Commission's behalf.

III. Related Matters

A. Administrative Procedure Act

    No notice of proposed rulemaking is required under the 
Administrative Procedure Act (APA) because these rules relate solely to 
agency procedure and practice. \24\
---------------------------------------------------------------------------

    \24\ 5 U.S.C. 553(b)(3)(A).
---------------------------------------------------------------------------

B. Regulatory Flexibility Act

    A regulatory flexibility analysis under the Regulatory Flexibility 
Act (RFA) \25\ is required only when an agency must publish a general 
notice of proposed rulemaking. As already noted, the APA's notice and 
comment procedures are not required for these amendments. Thus, the RFA 
does not require a regulatory flexibility analysis. \26\
---------------------------------------------------------------------------

    \25\ 5 U.S.C. 603.
    \26\ 5 U.S.C. 601-12.
---------------------------------------------------------------------------

C. Paperwork Reduction Act

    The Paperwork Reduction Act does not apply to collections of 
information during the conduct of administrative actions by an agency 
against specific individuals or entities. Commissions debt collection 
actions are taken only against specifically identified individuals or 
entities. Thus, Office of Management and Budget review is not required.

D. Cost-Benefit Analysis

    The Commission's amendments to its debt collection rules merely 
conform those rules in accordance with the requirements of the DCIA and 
related federal regulations including rules adopted by the Department 
of the Treasury and the Department of Justice. Upon adoption of the 
DCIA, Congress determined that the adopted changes would maximize 
collection of delinquent debts while minimizing the costs of debt 
collections. \27\
---------------------------------------------------------------------------

    \27\ Debt Collection Improvements, Pub. L. No. 104-134, 
Sec. 31001(b), 110 Stat. 1321 (1996).
---------------------------------------------------------------------------

    Any costs that might be incurred are attributable to changes in the 
statutory provisions. Because the Commission

[[Page 54130]]

already has in place rules for administrative offset of debts owed, the 
principal costs of the rule will be in connection with administrative 
wage garnishment rules and will mainly be imposed on employers. \28\ An 
employer served with a withholding order will be required to complete 
and return a certification form to the agency. \29\
---------------------------------------------------------------------------

    \28\ Administrative offset applies when collecting debt owned 
both by entities and individuals. Administrative wage garnishment 
applies only when collecting debts from individuals.
    \29\ 31 CFR 285.11(h).
---------------------------------------------------------------------------

    The Commission reviewed civil and administrative judgments in 
enforcement actions in which a monetary sanction was ordered in 
calendar year 2000, to approximate the number of employers that might 
receive garnishment orders in a given year. \30\ In 2000, the 
Commission obtained orders for 707 monetary sanctions, including 
disgorgement, penalties assessed under the Securities Enforcement 
Remedies and Penny Stock Reform Act of 1990, and/or insider trading 
penalties. Currently, 146 individuals owing monetary sanctions have yet 
to pay either all or some portion of the amounts imposed upon them. 
Thus, if each unpaid sanction pertained to an employee of a different 
employer, no more than 146 employers could potentially receive 
garnishment orders.
---------------------------------------------------------------------------

    \30\ We choose calendar year 2000 as the appropriate base year 
because these amendments require a minimum of 180 days non-payment 
before the case can be transferred to the TOP program. Therefore, 
monetary sanctions imposed in December 2000 would only have become 
eligible for the program in June 2001.
---------------------------------------------------------------------------

    In its analysis of the DCIA's administrative wage garnishment 
program for the entire federal government, the Department of the 
Treasury determined that even if an employer were served withholding 
orders on several employees over the course of a year, the cost imposed 
on the employer to comply with the orders would not have a significant 
impact on that entity. \31\ In adopting government-wide regulations, 
Treasury also stated that although a substantial number of employees 
from small entities will be subject to the garnishment regulations, 
\32\ its rules ``will not have a significant economic impact on these 
entities.'' \33\ Based on the Department of Treasury's analysis, we do 
not anticipate that the Commission's regulations will result in 
significant costs to employers. The benefit provided by administrative 
wage garnishment will be enhanced recovery of delinquent debts owned to 
the government.
---------------------------------------------------------------------------

    \31\ 63 FR 25136, 25139 (May 6, 1998).
    \32\ Id.
    \33\ Id.
---------------------------------------------------------------------------

List of Subjects in 17 CFR Part 204

    Claims, Debt collection, Government employees, Wages.

Text of Amendments

    For the reasons stated in the preamble, part 204 of title 17 of the 
Code of Federal Regulations is amended as follows:

PART 204--RULES RELATING TO DEBT COLLECTION

Subpart A--Administrative Offset

    1. The authority citation for Subpart A is revised to read as 
follows:

    Authority: 31 U.S.C. 3716, 31 CFR 901.3.


    2. Section 204.1 is amended by revising paragraph (b) to read as 
follows:


Sec. 204.1  Applicability and scope.

* * * * *
    (b) The provisions of this subpart apply to the collection of debts 
owed to the United States arising from transactions with the Securities 
and Exchange Commission (Commission). These regulations are consistent 
with the Debt Collection Act and the Federal Claims Collection 
Standards on administrative offset issued jointly by the Department of 
Justice and the Department of the Treasury (31 CFR 901.3).


Sec. 204.2  [Amended]

    3. Section 204.2 is amended by revising paragraph (a) to read as 
follows:
    (a) Administrative offset as defined in 31 U.S.C. 3701(a)(1) means 
withholding funds payable by the United States (including funds payable 
by the United States on behalf of a State government) to, or held by 
the United States for, a person to satisfy a claim.
* * * * *

    4. Section 204.3 is amended by:
    a. Removing paragraph (a);
    b. Redesignating paragraphs (b) through (f) as paragraphs (a) 
through (e); and
    c. Revising newly redesignated paragraphs (b), (c), and (e) to read 
as follows:


Sec. 204.3  General.

* * * * *
    (b) The Chairperson (or designee) may notify the Department of the 
Treasury of delinquent debts for purposes of administrative offset, and 
may request another agency which holds funds payable to a Commission 
debtor to offset that debt against the funds held; the Commission will 
provide certification that:
    (1) The debt is past due and legally enforceable; and
    (2) The person has been afforded the necessary due process rights.
    (c) No collection by administrative offset shall be made on any 
debt that has been outstanding for more than 10 years unless facts 
material to the Government's right to collect the debt were not known, 
and reasonably could not have been known, by the official or officials 
responsible for discovering the debt. This limitation does not apply to 
debts reduced to judgment.
* * * * *
    (e) The procedures for administrative offset in this subpart do not 
apply to the offset of Federal salaries under 5 U.S.C. 5514 or Federal 
tax refunds under 31 U.S.C. 3720A and 31 CFR 285.2.

    5. Section 204.4 is amended by:
    a. Removing paragraphs (a) and (b);
    b. Redesignating paragraphs (c) and (d) as paragraphs (a) and (b); 
and
    c. Revising newly redesignated paragraph (a) to read as follows:


Sec. 204.4  Demand for payment--notice.

    (a) Before offset is made, a written notice will be sent to the 
debtor. This notice will include:
    (1) The type and amount of the debt;
    (2) The date when payment is due (not less than thirty days from 
the date of mailing or hand delivery of the notice);
    (3) The agency's intention to collect the debt by administrative 
offset, including asking the assistance of other Federal agencies to 
help in the offset whenever possible, if the debtor has not made 
payment by the payment due date or has not made an arrangement for 
payment by the payment due date;
    (4) The right of the debtor to inspect and copy the Commission's 
records related to the claim;
    (5) The right of the debtor to request a review of the 
determination of indebtedness and, in the circumstances described in 
Sec. 204.7, to request an oral hearing from the Commission's designee; 
and
    (6) The right of the debtor to enter into a written agreement with 
the agency to repay the debt in some other way.
* * * * *

    6. The introductory text of Sec. 204.5 is revised to read as 
follows:


Sec. 204.5  Debtor's failure to respond.

    If the debtor fails to respond to the notice described in 
Sec. 204.4(a) by the proposed effective date specified in the notice, 
the Commission may take further

[[Page 54131]]

action under this section or under the Federal Claims Collection 
Standards (31 CFR 901.3). The commission may collect by administrative 
offset if the debtor:
* * * * *

    7. Section 204.6 is amended by revising paragraphs (a) and (d) to 
read as follows:


Sec. 204.6  Agency reviews.

    (a) To the extent that a debt owed has not been established by 
judicial or administrative order, a debtor may request a hearing 
concerning the existence or amount of the debt or the terms of 
repayment. With respect to debts established by a judicial or 
administrative order, a debtor may request a hearing concerning the 
payment or other discharge of the debt. A request to review a disputed 
debt must be submitted to the Commission official who provided 
notification within 30 calendar days of the receipt of the written 
notice described in Sec. 204.4(c).
* * * * *
    (d) During the review period, interest, penalties, and 
administrative costs will continue to accrue.

    8. Section 204.7 is amended by revising the word ``creditability'' 
to read ``credibility`` in paragraph (a)(1)(iii).

    9. Section 204.8 is amended by revising the first and last 
sentences of the section to read as follows:


Sec. 204.8  Written agreement for repayment.

    If the debtor requests a repayment agreement in place of offset, 
the Commission has discretion to determine whether to accept a 
repayment agreement in place of offset. * * * Notwithstanding the 
provisions of this section, any reduction or compromise of a claim will 
be governed by the Debt Collection Act, 31 U.S.C. 3711-3720E, and the 
Federal Claims Collection Standards, 31 CFR 900.1-904.4.

    10. Section 204.9 is amended by revising paragraphs (c) and (d) to 
read as follows:


Sec. 204.9  Administrative offset procedures.

* * * * *
    (c) Requests for offset to the Department of the Treasury or other 
Federal agencies. The Chairperson (or his or her designee) may notify 
the Department of the Treasury of delinquent debts for purposes of 
administrative offset, and may request that a debt owed to the 
Commission be administratively offset against funds due and payable to 
a debtor by another Federal agency. In requesting administrative 
offset, the Commission, as creditor, will certify in writing to the 
Federal agency holding funds of the debtor that:
    (1) The debtor owes the past due and legally enforceable debt; and
    (2) The debtor has been afforded the necessary due process rights.
    (d) Requests for offset from other Federal agencies. Any Federal 
agency may request that funds due and payable to its debtor by the 
Commission be administratively offset in order to collect a debt owed 
to such Federal agency by the debtor. The Commission shall initiate the 
requested offset only upon:
    (1) Receipt of written certification from the crecitor agency that:
    (i) The debtor owes the past due and legally enforceable debt; and
    (ii) The debtor has been afforded the necessary due process rights.
    (2) A determination by the Commission that collection by offset 
against funds payable by the Commission would be in the best interest 
of the United States as determined by the facts and circumstances of 
the particular case, and that such offset would not otherwise be 
contrary to law.

    11. Section 204.10 is removed and reserved.


Sec. 204.10  [Removed]

    12. Section 204.11 is amended by revising the reference 
``Sec. 204.4(c)'' in the first sentence to read ``Sec. 204.4(a)'', and 
by adding a sentence to the end of the section to read as follows:


Sec. 204.11  Jeopardy procedure.

    * * * This section applies only to administrative offset pursuant 
to 31 CFR 901.3(c), and does not apply when debts are referred to the 
Department of the Treasury for mandatory centralized administrative 
offset under 31 CFR 901.3(b)(1).

Subpart B--Salary Offset

    13. The authority citation for Subpart B is revised to read as 
follows:

    Authority:  5 U.S.C. 5514, 5 CFR 550.1104.


    14. Section 204.31(a) is amended by removing the words ``the Social 
Security Act (42 U.S.C. 301)''.


Sec. 204.32  [Amended]

    15. Section 204.32 is amended by revising the phrase ``General 
Accounting Office at 4 CFR part 101'' in the definition of FCCS to read 
``Department of the Treasury at 31 CFR parts 900-904''.

    16. Section 204.33 is amended by revising the introductory text and 
paragraph (c) and, in the second sentence of paragraph (f), by revising 
the reference ``4 CFR 102.2(e)'' to read ``31 CFR 901.3(b)''. The 
revisions read as follows:


Sec. 204.33  Pre-offset notice.

    A program official must provide an employee with written notice at 
least 30 calendar days prior to offseting his/her salary. A program 
official need not notify an employee of: any adjustment to pay arising 
out of an employee's election of coverage or a change in coverage under 
a Federal benefits program requiring periodic deductions from pay, it 
the amount to be recovered was accumulated over four pay periods or 
less; a routine intra-agency adjustment of pay that is made to correct 
an overpayment of pay attributable to clerical or administrative errors 
or delays in processing pay documents, if the overpayment occurred 
within the four pay periods preceding the adjustment and, at the time 
of such adjustment, or as soon thereafter as practical, the individual 
is provided written notice of the nature and the amount of the 
adjustment and point of contact for contesting such adjustment; or any 
adjustment to collect a debt amounting to $50 or less, if, at the time 
of such adjustment, or as soon thereafter as practical, the individual 
is provided written notice of the nature and the amount of the 
adjustment and a point of contact for contesting such adjustment. When 
required, the written notice must include the following:
* * * * *
    (c) The frequency and amount of the intended deductions (stated as 
a fixed dollar amount or as a percentage of pay, not to exceed 15 
percent of disposable pay) and the intention to continue the deductions 
until the debt is paid in full or otherwise resolved;
* * * * *

    17. Section 204.35, paragraph (a) is amended by adding two 
sentences to the end to read as follows:


Sec. 204.35  Petition for pre-offset hearing.

    (a) * * * To the extent that a debt has not been established by 
judicial or administrative order, a debtor may request a pre-offset 
hearing concerning the existence or amount of the debt or the terms of 
repayment. With respect to debts established by a judicial or 
administrative order, a debtor may request a pre-offset hearing 
concerning the payment or other discharge of the debt.


Sec. 204.36  [Amended]

    18. Section 204.36, paragraph (b), second sentence, is amended by 
revising

[[Page 54132]]

the reference ``4 CFR 102.3(c)'' to read ``31 CFR 901.3(e)''.


Sec. 204.38  [Amended]

    19. Section 204.38, paragraph (a), first sentence, is amended by 
revising the reference ``4 CFR 102.3(c)'' to read ``31 CFR 901.3(e)''.


Sec. 204.40  [Amended]

    20. Section 204.40 is amended by:
    a. Revising the reference ``4 CFR part 101'' in the introductory 
text of paragraph (b) to read ``the FCCS'';
    b. Revising the reference ``4 CFR 102.13'' in paragraph (b)(2) to 
read ``the FCCS''; and
    c. Revising the reference ``4 CFR 102.13'' in paragraph (e) to read 
``31 CFR 901.9''.

    21. Section 204.43 is amended by revising the reference ``4 CFR 
part 101'' in paragraph (a)(6) to read ``the FCCS'', and by revising 
the introductory text of paragraph (a) to read as follows:


Sec. 204.43  Coordinating offset with another federal agency.

    (a) Responsibility of the Commission as the Creditor Agency. When 
possible, salary offset through the centralized administrative offset 
procedures in 5 CFR 550.1108 shall be attempted before applying the 
procedures in this section. If centralized administrative offset is not 
possible, the Commission shall request recovery from the current paying 
agency. Upon completion of the procedures established in these 
regulations and pursuant to 5 U.S.C. 5514, 5 CFR 550.1109 the 
Commission must:
* * * * *


Sec. 204.44  [Amended]

    22. Section 204.44 is amended by revising the reference ``4 CFR 
102.13'' to read ``31 CFR 901.9''.

Subpart C--Tax Refund Offset

    23. The authority citation for Subpart C is revised to read as 
follows:

    Authority: 31 U.S.C. 3720A, 31 CFR 285.2(c).


    24. Section 204.50 is revised to read as follows:


Sec. 204.50  Purpose.

    This subpart establishes procedures for the Commission's referral 
of past-due legally enforceable debts to the Department of the 
Treasury's Financial Management Service (FMS) for offset against the 
income tax refunds of the debtor.

    25. Section 204.51 is removed and reserved.


Sec. 204.51  [Reserved]

    26. Section 204.52 is amended by:
    a. Revising paragraph (a);
    b. Removing ``IRS'' in the introductory text of paragraph (b);
    c. Revising the phrase ``the IRS to reduce'' to read ``a reduction 
of'' in paragraph (b)(2); and
    d. Adding paragraph (c) to read as follows:


Sec. 204.52  Notification of intent to collect.

    (a) Notification before tax refund offset. Reduction of an income 
tax refund will be made only after the Commission makes a determination 
that an amount is owed and past-due and gives or makes a reasonable 
attempt to give the debtor 60 days written notice of the intent to 
collect by tax refund offset.
* * * * *
    (C) To the extent that a debt owed has not been established by 
judicial or administrative order, a debtor may dispute the existence or 
amount of the debt or the terms of repayment. With respect to debts 
established by a judicial or administrative order, Commission review 
will be limited to issues concerning the payment or other discharge of 
the debt.

    27. Section 24.53 is removed and reserved.


Sec. 204.53  [Removed and reserved]

    28. Section 204.54 is amended by:
    a. Revising the phrase ``any notice to the IRS'' ``tax refund 
offset'' in the introductory text of paragraph (a);
    b. Removing paragraph (b); and
    c. Redesignating paragraph (c) as paragraph (b) and revising newly 
redesignated paragraph (b) to read as follows:


Sec. 204.54  Commission action as a result of consideration of evidence 
submitted in response to the notice of intent.

* * * * *
    (b) Commission action on the debt. (1) The Commission will notify 
the debtor of its intent to offset against the debtor's Federal income 
tax refund if it sustains its decision that the debt is past-due and 
legally enforceable. The Commission will also notify the debtor whether 
the amount of debt remains the same or is modified; and
    (2) The Commission will not request offset against the debtor's 
Federal income tax refund if it reverses its decision that the debt is 
past due and legally enforceable.

    29. Section 204.55 is revised to read as follows:


Sec. 204.55  Change in notification to Financial Management Service.

    After the Commission sends FMS notification of an individual's 
liability for a debt, the Commission will promptly notify FMS of any 
change in the notification, if the Commission:
    (a) Determines that an error has been made with respect to the 
information contained in the notification;
    (b) Receives a payment or credits a payment to the account of the 
debtor named in the notification that reduces the amount of the debt 
referred to FMS for offset; or
    (c) If the debt amount is otherwise incorrect, except that the 
amount of a debt referred to FMS will not be increased unless the 
Commission has complied with the due process requirements of this 
subpart and the Federal Claims Collection Standards as to the amount of 
the increase.

    30. Section 204.56 is revised to read as follows:


Sec. 204.56  Administrative charges.

    To the extent permitted by law, all administrative charges incurred 
in connection with the referral of the debts for tax refund offset will 
be assessed on the debt and thus increase the amount of the offset.


Secs. 204.57-204.59  [Reserved]

    31. Subpart D is redesignated as Subpart E, and new Subpart D is 
added to read as follows:

Subpart D--Administrative Wage Garnishment

Sec.
204.60  Purpose.
204.61  Scope.
204.62  Definitions.
204.63  Notice.
204.64  Hearing.
204.65  Wage Garnishment Order.

    Authority: 31 U.S.C. 3720D, 31 CFR 285.11(f).


Sec. 204.60  Purpose.

    This subpart provides procedures for the Commission to collect 
money from a debtor's disposable pay by means of administrative wage 
garnishment to satisfy a delinquent nontax debt owed to the United 
States.


Sec. 204.61  Scope.

    (a) The receipt of payments pursuant to this subpart does not 
preclude the Commission from pursuing other debt collection remedies, 
including the offset of Federal payments to satisfy a delinquent nontax 
debt owed to the United States. The Commission may pursue such debt 
collection remedies separately or in conjunction with administrative 
wage garnishment.
    (b) This subpart does not apply to the collection of delinquent 
nontax debt owed to the United States from the

[[Page 54133]]

wages of Federal employees from their Federal employment. Federal pay 
is subject to the Federal salary offset procedures set forth in 5 
U.S.C. 5514 and other applicable laws.


Sec. 204.62  Definitions.

    The following definitions apply to this subpart:
    Debt or delinquent nontax debt means any money, funds or property 
that has been determined to be owed to the Commission by an individual 
that has not been paid by the date specified in the demand or order for 
payment, or applicable agreement. For purposes of this subpart, the 
terms ``debt'' and ``claim'' are synonymous.
    Disposable pay means that part of the debtor's compensation 
(including, but not limited to, salary, bonuses, commissions, and 
vacation pay) from an employer remaining after the deduction of health 
insurance premiums and any amounts required by law to be withheld. For 
purposes of this subpart, ``amounts required by law to be withheld'' 
include amounts for deductions such as social security taxes and 
withholding taxes, but do not include any amount withheld pursuant to a 
court order.
    Employer means a person or entity that employs the services of 
others and that pays their wages or salaries. The term employer 
includes, but is not limited to, State and local Governments, but does 
not include an agency of the Federal Government.
    Garnishment means the process of withholding amounts from an 
employee's disposable pay and the paying of those amounts to a creditor 
in satisfaction of a withholding order.
    Withholding order means any order for withholding or garnishment of 
pay issued by an agency, or judicial or administrative body. For 
purposes of this subpart, the terms ``wage garnishment order'' and 
``garnishment order'' have the same meaning as ``withholding order.''


Sec. 204.63  Notice.

    (a) At least 30 days before the initiation of garnishment 
proceedings, the Commission will mail, by first class mail to the 
debtor's last known address, a written notice informing the debtor of:
    (1) The nature and amount of the debt;
    (2) The Commission's intention to initiate proceedings to collect 
the debt through deductions from pay until the debt and all accumulated 
interest, penalties and administrative costs are paid in full; and
    (3) An explanation of the debtor's rights, including those set 
forth in paragraph (b) of this section, and the time frame within which 
the debtor may exercise these rights.
    (b) The debtor will be afforded the opportunity:
    (1) To inspect and copy records related to the debt;
    (2) To enter into a written repayment agreement with the 
Commission, under terms agreeable to the Commission; and
    (3) To the extent that a debt owed has not been established by 
judicial or administrative order, to request a hearing concerning the 
existence or amount of the debt or the terms of the debt's repayment 
schedule. With respect to debts established by a judicial or 
administrative order, a debtor may request a hearing concerning the 
payment or other discharge of the debt. The debtor is not entitled to a 
hearing concerning the terms of the proposed repayment schedule if 
these terms have been established by written agreement under paragraph 
(b)(2) of this section.
    (c) The notice required by this section may be included with the 
Commission's demand letter required by subpart A of this part.
    (d) The Commission will keep a copy of the certificate of service 
indicating the date of mailing of the notice.


Sec. 204.64  Hearing.

    (a) Request for hearing. The Commission will order a hearing, which 
at the Commission's option may be oral or written, if the debtor 
submits a written request for a hearing concerning, for debts not 
previously established by judicial or administrative order, the 
existence or amount of the debt or the terms of the repayment schedule 
(for repayment schedules established other than by written agreement 
under Sec. 204.63(b)(2)), or for debts established by judicial or 
administrative order, the payment or other discharge of the debt.
    (b) Type of hearing or review. (1) For purposes of this subpart, 
whenever the Commission is required to afford a debtor a hearing, the 
Commission will provide the debtor with a reasonable opportunity for an 
oral hearing when the Commission determined that the issues in dispute 
cannot be resolved by review of the documentary evidence, for example, 
when the validity of the claim turns on the issue of credibility or 
veracity.
    (2) If the Commission determines that an oral hearing is 
appropriate, the time and location of the hearing shall be established 
by the Commission. An oral hearing may, at the debtor's option, be 
conducted either in-person or by telephone conference. All travel 
expenses incurred by the debtor in connection with an in-person hearing 
will be borne by the debtor. All telephonic charges incurred during the 
hearing will be the responsibility of the agency.
    (3) In those cases when an oral hearing is not required by this 
section, the Commission will nevertheless accord the debtor a ``paper 
hearing,'' that is, the Commission will decide the issues in dispute 
based upon a review of the written record.
    (c) Effect of timely request. Subject to paragraph (l) of this 
section, if the debtor's written request is received by the Commission 
on or before the 15th business day following the mailing of the notice 
of the Commission's intent to seek garnishment, the Commission will not 
issue a withholding order until the debtor has been provided the 
requested hearing, and a decision in accordance with paragraphs (i) and 
(j) of this section has been rendered.
    (d) Failure to timely request a hearing. If the debtor's written 
request is received by the agency after the 15th business day following 
the mailing of the notice of the Commission's intent to seek 
garnishment, the Commission shall provide a hearing to the debtor. 
However, the Commission will not delay issuance of a withholding order 
unless the Commission determines that the delay in filing the request 
was caused by factors over which the debtor had no control, or the 
Commission receives information that the Commission believes justifies 
a delay or cancellation of the withholding order.
    (e) Hearing official. All hearings shall be presided over by the 
Commission, or if the Commission so orders, by a hearing official. When 
the Commission designates that the hearing official shall be an 
administrative law judge, the Chief Administrative Law Judge shall 
select, pursuant to 17 CFR 200.30-10, the administrative law judge to 
preside.
    (f) Procedure. After the debtor requests a hearing, the hearing 
official shall notify the debtor of:
    (1) The date and time of a telephonic hearing;
    (2) The date, time, and location of an in-person oral hearing; or
    (3) The deadline for the submission of evidence for a written 
hearing.
    (g) Burden of proof. (1) The Commission will have the burden of 
going forward to prove the existence or amount of the debt.
    (2) Thereafter, if the debtor disputes the existence or amount of 
the debt, the debtor must prove by a preponderance of the evidence that 
no debt exists or that the amount of the debt is incorrect. In 
addition, the debtor may present evidence that the terms of the 
repayment schedule are unlawful, would cause a financial hardship to 
the

[[Page 54134]]

debtor, or that collection of the debt may not be pursued due to 
operation of law.
    (h) Record. The hearing official will maintain a record of any 
hearing provided under this section. A hearing is not required to be a 
formal evidentiary-type hearing, however, witnesses who testify in oral 
hearings will do so under oath or affirmation.
    (i) Date of decision. The hearing official shall issue a written 
opinion stating his or her decision, as soon as practicable, but not 
later than sixty (60) days after the date on which the request for such 
hearing was received by the Commission. If the Commission is unable to 
provide the debtor with a hearing and a decision is not rendered within 
sixty (60) days after the receipt of the request for such hearing:
    (1) A withholding order will not be issued until the hearing is 
held and a decision rendered; or
    (2) If a withholding order had previously been issued to the 
debtor's employer, the withholding order will be suspended beginning on 
the 61st day after the receipt of the hearing request and continuing 
until a hearing is held and a decision is rendered.
    (j) Content of decision. The written decision shall include:
    (1) A summary of the facts presented;
    (2) The findings, analysis and conclusions; and
    (3) The terms of any repayment schedules, if applicable.
    (k) Finality of agency action. Unless the Commission on its own 
initiative orders review of a decision by a hearing official pursuant 
to 17 CFR 201.431(c), a decision by a hearing official shall become the 
final decision of the Commission for the purpose of judicial review 
under the Administrative Procedure Act.
    (l) Failure to appear. In the absence of good cause shown, a debtor 
who fails to appear at a scheduled hearing will be deemed as not having 
timely filed a request for a hearing.


Sec. 204.65  Wage garnishment order.

    (a) Unless the Commission receives information that the Commission 
believes justifies a delay or cancellation of the withholding order, 
the Commission will send, by first class mail, a withholding order to 
the debtor's employer within 30 days after the debtor fails to make a 
timely request for a hearing (i.e., within 15 business days after the 
mailing of the notice of the Commission's intent to seek garnishment) 
or, if a timely request for a hearing is made by the debtor, within 30 
days after a decision to issue a withholding order becomes final.
    (b) The withholding order sent to the employer will be in the form 
prescribed by the Secretary of the Treasury, on the Commission's 
letterhead, and signed by the Chairperson or his or her delegatee. The 
order will contain the information necessary for the employer to comply 
with the withholding order. This information includes the debtor's 
name, address, and social security number, as well as instructions for 
withholding and information as to where payments should be sent.
    (c) The Commission will keep a copy of the certificate of service 
indicating the date of mailing of the order.
    (d) Certification by employer. Along with the withholding order, 
the Commission will send to the employer a certification in a form 
prescribed by the Secretary of the Treasury. The employer shall 
complete and return the certification to the Commission within the time 
frame prescribed in the instructions to the form. The certification 
will address matters such as information about the debtor's employment 
status and disposable pay available for withholding.
    (e) Amounts withheld. (1) After receipt of the garnishment order 
issued under this section, the employer shall deduct from all 
disposable pay paid to the applicable debtor during each pay period the 
amount of garnishment described in paragraph (e)(2) of this section.
    (2) Subject to the provisions of paragraphs (e)(3) and (e)(4) of 
this section, the amount of garnishment shall be the lesser of:
    (i) The amount indicated on the garnishment order up to 15% of the 
debtor's disposable pay; or
    (ii) The amount set forth in 15 U.S.C. 1673(a)(2) (Restriction on 
Garnishment). The amount set forth at U.S.C. 1673(a)(2) is the amount 
by which the debtor's disposable pay exceeds an amount equivalent to 
thirty times the minimum wage See 29 CFR 870.10.
    (3) When a debtor's pay is subject to withholding orders with 
priority, the following shall apply:
    (i) Unless otherwise provided by Federal law, withholding orders 
issued under this section shall be paid in the amounts set forth under 
paragraph (e)(2) of this section and shall have priority over other 
withholding orders which are served later in time. However, withholding 
orders for family support shall have priority over withholding orders 
issued under this section.
    (ii) If amounts are being withheld from a debtor's pay pursuant to 
a withholding order served on an employer before a withholding order 
issued pursuant to this section, or if a withholding order for family 
support is served on an employer at any time, the amounts withheld 
pursuant to the withholding order issued under this section shall be 
the lesser of:
    (A) The amount calculated under paragraph (e)(2) of this section; 
or
    (B) An amount equal to 25% of the debtor's disposable pay less the 
amount(s) withheld under the withholding order(s) with priority.
    (iii) If a debtor owes more than one debt to the Commission, the 
Commission may issue multiple withholding orders. The total amount 
garnished from the debtor's pay for such orders will not exceed the 
amount set forth in paragraph (e)(2) of this section.
    (4) An amount greater than that set forth in paragraphs (e)(2) and 
(e)(3) of this section may be withheld upon the written consent of the 
debtor.
    (5) The employer shall promptly pay to the Commission all amounts 
withheld in accordance with the withholding order issued pursuant to 
this section.
    (6) An employer shall not be required to vary its normal pay and 
disbursement cycles in order to comply with the withholding order.
    (7) Any assignment or allotment by the employee of the employee's 
earnings shall be void to the extent it interferes with or prohibits 
execution of the withholding order under this section, except for any 
assignment or allotment made pursuant to a family support judgment or 
order.
    (8) The employer shall withhold the appropriate amount from the 
debtor's wages for each pay period until the employer receives 
notification from the Commission to discontinue wage withholding. The 
garnishment order shall indicate a reasonable period of time within 
which the employer is required to commence wage withholding.
    (f) Exclusions from garnishment. The Commission will not garnish 
the wages of a debtor it knows has been involuntarily separated from 
employment until the debtor has been reemployed continuously for at 
least 12 months. The debtor has the burden of informing the Commission 
of the circumstances surrounding an involuntary separation from 
employment.
    (g) Financial hardship. (1) A debtor whose wages are subject to a 
wage withholding order under this section, may, at any time, request a 
review by the Commission of the amount garnished, based on materially 
changed circumstances such as disability, divorce, or catastrophic 
illness which result in financial hardship.

[[Page 54135]]

    (2) A debtor requesting a review under this section shall submit 
the basis for claiming that the current amount of garnishment results 
in a financial hardship to the debtor, along with supporting 
documentation.
    (3) If a financial hardship is found, the Commission will 
downwardly adjust, by an amount and for a period of time agreeable to 
the Commission, the amount garnished to reflect the debtor's financial 
condition. The Commission will notify the employer of any adjustments 
to the amounts to be withheld.
    (h) Ending garnishment. (2) Once the Commission has fully recovered 
the amounts owed by the debtor, including interest, penalties, and 
administrative costs consistent with the Federal Claims Collection 
Standards (31 CFR 901.9), the Commission will send the debtor's 
employer notification to discontinue wage withholding.
    (2) At least annually, the Commission will review its debtors' 
accounts to ensure that garnishment has been terminated for accounts 
that have been paid in full.
    (i) Actions prohibited by the employer. The Debt Collection Act 
prohibits an employer from discharging, refusing to employ, or taking 
disciplinary action against the debtor due to the issuance of a 
withholding order under this section (31 U.S.C. 3720D(e)).
    (j) Refunds. (1) If a hearing official determines that a debt is 
not legally due and owing to the United States, the Commission shall 
promptly refund any amount collected by means of administrative wage 
garnishment.
    (2) Unless required by Federal law or contract, refunds under this 
section shall not bear interest.
    (k) Right of action. The Commission may sue any employer for any 
amount that the employer fails to withhold from wages owed and payable 
to an employee in accordance with this section. However, a suit will 
not be filed before the termination of the collection action involving 
a particular debtor, unless earlier filing is necessary to avoid 
expiration of any applicable statute of limitations. For purposes of 
this section, ``termination of the collection action'' occurs when the 
agency has terminated collection action in accordance with the Federal 
Claims Collection Standards (31 CFR 903.1-903.5) or other applicable 
standards. In any event, termination of the collection action will have 
been deemed to occur if the Commission has not received any payments to 
satisfy the debt from the particular debtor whose wages were subject to 
garnishment, in whole or in part, for a period of one (1) year.

Subpart E--Miscellaneous: Credit Bureau Reporting, Collection 
Services

    32. The authority citation for newly redesignated Subpart E 
continues to read as follows:

    Authority: 31 U.S.C. 3701, 3711, 3718.

Sec. 204.76  [Amended]

    33. Section 204.76, paragraph (a), fourth sentence, is amended by 
revising the reference ``31 U.S.C. 3711(f)'' to read ``31 U.S.C. 
3711(e)''.

    34. Section 204.77 is amended by removing paragraph (c) and by 
revising paragraphs (a) and (b)(5) to read as follows:


Sec. 204.77  Referrals to collection agencies.

    (a) The Commission has authority to contract for collection 
services to recover delinquent debts in accordance with 31 U.S.C. 
3718(a) and the Federal Claims Collection Standards (31 CFR 901.5).
    (b) * * *
    (5) The contractor must agree to provide any data in its files 
requested by the Commission upon returning the account to the 
Commission for subsequent referral to the Department of Justice for 
litigation.

    By the Commission.

    Dated: October 22, 2001.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 01-26960 Filed 10-25-01; 8:45 am]
BILLING CODE 8010-01-M