[Federal Register Volume 67, Number 46 (Friday, March 8, 2002)]
[Proposed Rules]
[Pages 10818-10820]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-5524]



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Part III





Department of Housing and Urban Development





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24 CFR Part 17



Administrative Wage Garnishment; Proposed Rule

  Federal Register / Vol. 67, No. 46 / Friday, March 8, 2002 / Proposed 
Rules  

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DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

24 CFR Part 17

[Docket No. FR-4711-P-01]
RIN 2501-AC85


Administrative Wage Garnishment

AGENCY: Office of the Secretary, HUD.

ACTION: Proposed rule.

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SUMMARY: This proposed rule would implement the authority established 
under the Debt Collection Improvement Act of 1996 (DCIA) for HUD to 
collect the Department's past due indebtedness through administrative 
wage garnishment. The proposed rule would adopt, without change, the 
hearing procedures issued by the Department of the Treasury 
implementing administrative wage garnishment under the DCIA. This 
proposed rule would apply only to individuals who are not Federal 
employees. The proposed rule also would amend regulations on procedures 
for the collection of claims to conform HUD regulations to applicable 
provisions of the DCIA.

DATES: Comment Due Date: May 7, 2002.

ADDRESSES: Interested persons are invited to submit comments regarding 
this rule to the Rules Docket Clerk, Office of General Counsel, Room 
10276, Department of Housing and Urban Development, 451 Seventh Street, 
SW., Washington, DC 20410. Communications should refer to the above 
docket number and title. Facsimile (FAX) comments are not acceptable. A 
copy of each communication submitted will be available for public 
inspection and copying between 7:30 a.m. and 5:30 p.m. weekdays at the 
above address.

FOR FURTHER INFORMATION CONTACT: Samuel B. Rothman, Senior Attorney, 
Office of General Counsel, Room 9253, Department of Housing and Urban 
Development, 451 Seventh Street, SW., Washington, DC 20410; telephone 
(202) 708-4184 (this is not a toll-free number). Hearing and speech-
impaired persons may access this number via TTY by calling the Federal 
Information Relay Service at 1-800-877-8339.

SUPPLEMENTARY INFORMATION:

I. Background

    Since 1984 HUD has had regulations (subpart C of 24 CFR part 17) 
that govern various types of administrative offset (i.e., offset 
conducted administratively rather than through a court of record). 
These regulations, issued pursuant to the Debt Collection Act of 1982 
(31 U.S.C. 3701 et seq.) and the Federal Claims Collection Standards, 
were promulgated jointly by the General Accounting Office and the 
Department of Justice (4 CFR parts 101-105).
    In 1996, Congress enacted the Debt Collection Improvement Act of 
1996 (Pub. L. 104-134, 110 Stat. 1321-1358, approved April 26, 1996), 
which amended the Debt Collection Act of 1982. Section 31001(o) of the 
DCIA authorizes collection of Federal agency debt by administrative 
wage garnishment (section 31001(o) is codified at 31 U.S.C. 3720D). 
Wage garnishment is a legal process whereby an employer withholds 
amounts from an employee's wages and pays those amounts to the 
employee's creditor in satisfaction of a withholding order. The DCIA 
authorizes Federal agencies to garnish up to 15% of the disposable pay 
of a debtor to satisfy delinquent nontax debt owed to the United 
States. Prior to the enactment of the DCIA, agencies were required to 
obtain a court judgment before garnishing the wages of non-Federal 
employees.
    The DCIA directed the Secretary of the Treasury to issue 
implementing regulations (see 31 U.S.C. 3720D(h)). On May 6, 1998 (63 
FR 25136), the Department of the Treasury published a final rule 
implementing the statutory administrative wage garnishment requirements 
at 31 CFR 285.11. Paragraph (f) of 31 CFR 285.11 provides that 
``[a]gencies shall prescribe regulations for the conduct of 
administrative wage garnishment hearings consistent with this section 
or shall adopt this section without change by reference.''
    This proposed rule would amend HUD's regulations at 24 CFR part 17, 
subpart C to adopt 31 CFR 285.11 in its entirety. Specifically, the 
proposed rule would establish a new Sec. 17.170 that would contain a 
cross-reference to 31 CFR 285.11. New Sec. 17.170 also would provide 
that, to the extent situations arise that are not covered by 31 CFR 
285.11, those situations would be governed by the HUD hearing 
procedures in 24 CFR part 26, subpart A.
    Additionally, the proposed rule would amend the existing 
regulations that govern income tax refund offset to include offset 
against other eligible Federal payments. Under the DCIA the Treasury 
Department serves as a coordinator for Federal debt collection through 
its Treasury Offset Program. The proposed rule would recognize that 
status by adding the phrase ``and the Department of the Treasury'' 
immediately after references to the IRS in the existing regulations.

II. Overview of the Administrative Wage Garnishment Process

    Readers should refer to the Department of the Treasury regulation 
at 31 CFR 285.11 for details regarding the administrative wage 
garnishment procedures that would be adopted by this proposed rule. For 
the convenience of readers, the following presents a very brief 
overview of the rules and procedures codified at 31 CFR 285.11.
    1. Notice to debtor. At least 30 days before the agency initiates 
garnishment proceedings, the agency will give the debtor written notice 
informing him or her of the nature and amount of the debt, the 
intention of the agency to collect the debt through deductions from 
pay, and an explanation of the debtor's rights regarding the proposed 
action.
    2. Rights of debtor. The agency will provide the debtor with an 
opportunity to inspect and copy records related to the debt, to 
establish a repayment agreement, and to receive a hearing concerning 
the existence or amount of the debt and the terms of a repayment 
schedule. A hearing must be held prior to the issuance of a withholding 
order if the debtor's request is timely received. For hearing requests 
that are not received in the specified timeframe, the agency need not 
delay the issuance of a withholding order prior to conducting a 
hearing. An agency may not garnish the wages of a debtor who has been 
involuntarily separated from employment until that individual has been 
reemployed continuously for at least 12 months. The debtor bears the 
responsibility of notifying the agency of the circumstances surrounding 
an involuntary separation from employment.
    3. Hearing official. The Department of the Treasury regulations 
authorize the head of each agency to designate any qualified individual 
as a hearing official. This proposed rule would provide that any 
hearing required to establish HUD's right to collect a debt through 
administrative wage garnishment will be conducted by an administrative 
judge of the HUD Board of Contract Appeals. The hearing official is 
required to issue a written decision no later than 60 days after the 
request for a hearing is made. The hearing official's decision is the 
final agency action for purposes of judicial review.
    4. Employer's responsibilities. The agency will send to the 
employer of a delinquent debtor a wage garnishment order directing that 
the employer pay a portion of the debtor's wages to the

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Federal Government. The employer is required to certify certain payment 
information about the debtor. Employers are not required to vary their 
normal pay cycles in order to comply with these requirements. Employers 
are prohibited from taking disciplinary actions against the debtor 
because the debtor's wages are subject to administrative garnishment. 
An agency may sue an employer for amounts not properly withheld from 
the wages payable to the debtor.
    5. Garnishment amounts. As provided in the DCIA, no more than 15% 
of the debtor's disposable pay for each pay period may be garnished. 
Special rules apply to calculating the amount to be withheld from a 
debtor's pay that is subject to multiple withholding orders. A debtor 
may request a review by the agency of the amount being garnished under 
a wage garnishment order based on materially changed circumstances, 
such as disability, divorce, or catastrophic illness, which result in 
financial hardship.

III. Findings and Certifications

Impact on Small Entities

    The Secretary, in accordance with the Regulatory Flexibility Act (5 
U.S.C. 605(b)), has reviewed and approved this proposed rule, and in so 
doing certifies that this proposed rule would not have a significant 
economic impact on a substantial number of small entities. Although 
many small employers will be subject to the requirements of this 
proposed rule, the requirements will not have a significant economic 
impact on these entities. Employers of delinquent debtors must certify 
certain information about the debtor such as the debtor's employment 
status and earnings. This information is contained in the employer's 
payroll records. Therefore, it will not take a significant amount of 
time or result in a significant cost for an employer to complete the 
certification form. Even if an employer is served withholding orders on 
several employees over the course of a year, the cost imposed on the 
employer to complete the certifications would not have a significant 
economic impact on an entity. Employers are not required to vary their 
normal pay cycles in order to comply with a withholding order issued 
pursuant to this proposed rule.
    Notwithstanding HUD's determination that this rule will not have a 
significant economic impact on small entities, HUD specifically invites 
comments regarding alternatives to this rule that would meet HUD's 
objectives as described in this preamble.

Environmental Impact

    In accordance with 24 CFR 50.19(c)(1) of the Department's 
regulations, this proposed rule does not direct, provide for assistance 
or loan and mortgage insurance for, or otherwise govern or regulate, 
real property acquisition, disposition, leasing, rehabilitation, 
alteration, demolition, or new construction, or establish, revise, or 
provide for standards for construction or construction materials, 
manufactured housing, or occupancy. Therefore, this proposed rule is 
categorically excluded from the requirements of the National 
Environmental Policy Act (42 U.S.C. 4321 et seq.).

Executive Order 13132, Federalism

    Executive Order 13132 (entitled ``Federalism'') prohibits an agency 
from publishing any rule that has federalism implications if the rule 
either imposes substantial direct compliance costs on State and local 
governments and is not required by statute, or the rule preempts State 
law, unless the agency meets the consultation and funding requirements 
of section 6 of the Executive Order. This proposed rule does not have 
federalism implications and does not impose substantial direct 
compliance costs on State and local governments or preempt State law 
within the meaning of the Executive Order.

Unfunded Mandates Reform Act

    Title II of the Unfunded Mandates Reform Act of 1995 establishes 
requirements for Federal agencies to assess the effects of their 
regulatory actions on State, local, and tribal governments and the 
private sector. This rule would not impose a Federal mandate on any 
State, local, or tribal government, or on the private sector, within 
the meaning of the Unfunded Mandates Reform Act of 1995.

List of Subjects in 24 CFR Part 17

    Administrative practice and procedure, Claims, Government 
employees, Income taxes, Wages.

    Accordingly, for the reasons described in the preamble, HUD 
proposes to amend 24 CFR part 17 as follows:

PART 17--ADMINISTRATIVE CLAIMS

    1. The authority citation for 24 CFR part 17, subpart C is revised 
to read as follows:

    Authority: 5 U.S.C. 5514; 31 CFR 3711, 3716-3720E; and 42 U.S.C. 
3535(d).

    2. The undesignated center heading immediately preceding 
Sec. 17.150 is revised to read as follows:

IRS Tax Refund and Federal Payment Offset Provisions and 
Administrative Wage Garnishment

    3. Revise Sec. 17.150 to read as follows:


Sec. 17.150  Scope.

    (a) The standards set forth in Secs. 17.150 through 17.161 are the 
Department's procedures for requesting the Internal Revenue Service 
(IRS) and the Department of the Treasury to offset tax refunds and 
Federal payments due taxpayers who have a past-due debt obligation to 
the Department. These procedures are authorized by the Deficit 
Reduction Act of 1984 (31 U.S.C. 3720A) and apply to the collection of 
debts as authorized by common law, by 31 U.S.C. 3716, or under other 
statutory authority.
    (b) The Secretary will use the IRS tax refund and the Department of 
the Treasury Federal payment offset to collect claims which are certain 
in amount, past due and legally enforceable, and which are eligible for 
tax refund or Federal payment offset under regulations issued by the 
Secretary of the Treasury.
    (c) The Secretary will not report debts to the IRS and the 
Department of the Treasury except for the purpose of using the offset 
procedures described in Secs. 17.150 through 17.161. Debts of less than 
$100.00, exclusive of interest and other charges, will not be reported.
    (d) If not legally enforceable because of lapse of statute of 
limitations but otherwise valid, the debt will be reported to the IRS 
and the Department of the Treasury as a forgiven debt on Form 1099C. 
(Form 1099C is an information return which Government agencies file 
with the IRS and the Department of the Treasury to report forgiven 
debt, and the forgiven amount is considered income to the taxpayer.) 
(See Sec. 17.159.)
    4. Amend Sec. 17.151 by revising the introductory text and 
paragraph (b) to read as follows:


Sec. 17.151  Notice requirements before offset.

    A request for deduction from an IRS tax refund or Federal payment 
will be made only after the Secretary makes a determination that an 
amount is owed and past due and provides the debtor with 65 calendar 
days written notice. This Notice of Intent to Collect by IRS Tax Refund 
or Federal Payment Offset (Notice of Intent) will state:
* * * * *
    (b) That unless the debt is repaid within 65 days from the date of 
the Notice, the Secretary intends to collect the debt by requesting the 
IRS and the Department of Treasury to reduce any

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amounts payable to the debtor by an amount equal to the amount of the 
debt and all accumulated interest and other charges;
* * * * *
    5. Amend Sec. 17.153 by revising paragraph (c) to read as follows:


Sec. 17.153  Determination of the Administrative Judge.

* * * * *
    (c) If the Administrative Judge's decision affirms that all or part 
of the debt is past due and legally enforceable, the Secretary will 
notify the IRS and the Department of the Treasury after the 
Administrative Judge's determination has been issued under paragraph 
(a) of this section and a copy of the determination is received by the 
Department's Chief Financial Officer. No referral will be made to the 
IRS and the Department of the Treasury if review of the debt by the 
Administrative Judge reverses the initial decision that the debt is 
past due and legally enforceable.
    6. Amend Sec. 17.154 by revising paragraph (a) to read as follows:


Sec. 17.154  Postponements, withdrawals and extensions of time.

    (a) Postponements and withdrawals. The Secretary may, for good 
cause, postpone or withdraw referral of the debt to the IRS and the 
Department of Treasury. (For example, a delay in the mail between the 
debtor and the Secretary could normally warrant a postponement; a 
mathematical error or computer malfunction could be the reason for a 
withdrawal.)
* * * * *
    7. Revise Sec. 17.156 to read as follows:


Sec. 17.156  Stay of offset.

    If the debtor timely notifies the Secretary that he or she is 
exercising a right described in Sec. 17.152(a) and timely submits 
evidence in accordance with Sec. 17.152(b), any notice to the IRS and 
the Department of the Treasury will be stayed until the issuance of a 
written decision by the Administrative Judge which determines that a 
debt or part of a debt is past-due and legally enforceable.
    8. Revise Sec. 17.157 to read as follows:


Sec. 17.157  Application of offset funds: Single debt.

    If the debtor does not timely notify the Secretary that he or she 
is exercising a right described in Sec. 17.152, the Secretary will 
notify the IRS and the Department of the Treasury of the debt no 
earlier than 65 calendar days from the date of the Department's Notice 
of Intent, and will request that the amount of the debt be offset 
against any amount payable by the IRS as refund of Federal taxes or by 
the Department of the Treasury as a Federal payment. Normally, 
recovered funds will be applied first to costs of collection, then to 
any special charges provided for in HUD regulations or contracts, then 
to interest and finally, to the principal owed by the debtor.
    9. Revise Sec. 17.159 to read as follows:


Sec. 17.159  Application of offset funds: Tax refund or other Federal 
payment is insufficient to cover amount of debt.

    If a tax refund or Federal payment is insufficient to satisfy a 
debt in a given tax year, the Secretary will recertify to the IRS and 
the Department of the Treasury the following year to collect further on 
the debt. If, in the following year, the debt has become legally 
unenforceable because of the lapse of the statute of limitations, the 
debt will be reported to the IRS and the Department of the Treasury as 
a forgiven debt in accordance with Sec. 17.150(d).
    10. Amend Sec. 17.160 by revising the section heading and paragraph 
(a) to read as follows:


Sec. 17.160  Time limitation for notifying the IRS or the Department of 
the Treasury to request offset of tax refunds or Federal payments due.

    (a) The Secretary may not initiate offset of tax refunds or Federal 
payments due to collect a debt for which authority to collect arises 
under 31 U.S.C. 3716 more than 10 years after the Secretary's right to 
collect the debt first accrued, unless facts material to the 
Secretary's right to collect the debt were not known and could not 
reasonably have been known by the officials of the Department who were 
responsible for discovering and collecting such debts.
* * * * *
    11. Add new undesignated center heading following Sec. 17.161 and 
add new Sec. 17.170 to read as follows:

Administrative Wage Garnishment


Sec. 17.170  Administrative wage garnishment.

    (a) General. The Secretary may collect a debt by using 
administrative wage garnishment. Regulations in 31 CFR 285.11 governs 
collection through administrative wage garnishment. To the extent 
situations arise that are not covered by 31 CFR 285.11, those 
situations shall be governed by part 26, subpart A of this title.
    (b) Hearing official. Any hearing required to establish the 
Secretary's right to collect a debt through administrative wage 
garnishment shall be conducted by an Administrative Judge of the HUD 
Board of Contract Appeals.

    Dated: February 6, 2002.
Mel Martinez,
Secretary.
[FR Doc. 02-5524 Filed 3-7-02; 8:45 am]
BILLING CODE 4210-77-P