[Federal Register Volume 67, Number 208 (Monday, October 28, 2002)]
[Rules and Regulations]
[Pages 65844-65855]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-27006]



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Part III





Department of the Treasury





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31 CFR Part 5



Treasury Debt Collection; Final and Proposed Rules

  Federal Register / Vol. 67, No. 208 / Monday, October 28, 2002 / 
Rules and Regulations  

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DEPARTMENT OF THE TREASURY

31 CFR Part 5

RIN: 1505-AA90


Treasury Debt Collection

AGENCY: Department of the Treasury.

ACTION: Interim rule with request for comments.

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SUMMARY: This rule revises the Department of the Treasury's debt 
collection regulations to conform to the Debt Collection Improvement 
Act of 1996, the revised Federal Claims Collection Standards, and other 
laws applicable to the collection of nontax debts owed to Treasury. 
This rule also revises Treasury's regulations governing the offset of 
Treasury-issued payments to collect debts owed to other Federal 
agencies.

DATES: This rule is effective November 27, 2002; comments must be 
received on or before November 27, 2002.

ADDRESSES: Send comments to Cathy Thomas, Office of the Deputy Chief 
Financial Officer, Department of the Treasury, 1500 Pennsylvania 
Avenue, NW., Attention: Metropolitan Square, Room 6228, Washington, DC 
20220. Comments also may be submitted by electronic mail to 
[email protected].

FOR FURTHER INFORMATION CONTACT: Cathy Thomas, Office of the Deputy 
Chief Financial Officer, at (202) 622-0817, Department of the Treasury, 
1500 Pennsylvania Avenue, NW., Washington, DC 20220. This document is 
available for downloading from the Department of the Treasury's 
Financial Management Service web site at the following address: http://www.fms.treas.gov.

SUPPLEMENTARY INFORMATION:

Background

    This rule revises the Department of the Treasury's (Treasury 
Department's) debt collection regulations found at 31 CFR part 5 to 
conform to the Debt Collection Improvement Act of 1996 (DCIA), Public 
Law 104-134, 110 Stat. 1321, 1358 (Apr. 26, 1996), the revised Federal 
Claims Collection Standards, 31 CFR Chapter IX (parts 900 through 904), 
and other laws applicable to the collection of nontax debt owed to the 
Government.
    This regulation provides procedures for the collection of nontax 
debts owed to Treasury entities. Treasury adopts the Government-wide 
debt collection standards promulgated by the Departments of the 
Treasury and Justice, known as the Federal Claims Collection Standards 
(FCCS), as revised on November 22, 2000 (65 FR 70390), and supplements 
the FCCS by prescribing procedures consistent with the FCCS, as 
necessary and appropriate for Treasury Department operations. Treasury 
entities may, but are not required to, promulgate additional policies 
and procedures consistent with this regulation, the FCCS, and other 
applicable Federal laws, policies, and procedures. See, for example, 
the debt collection regulations governing the collection of 
overpayments under certain District of Columbia retirement plans (66 FR 
36703, July 13, 2001). This regulation also provides the procedures for 
the collection of debts owed to other Federal agencies when a request 
for offset is received by the Treasury Department.
    This regulation does not apply to the collection of tax debts, 
which is governed by the Internal Revenue Code of 1986 (26 U.S.C. 1 et 
seq.) and regulations, policies and procedures issued by the Internal 
Revenue Service. This regulation does not apply to the Treasury 
Department's Financial Management Service when acting on behalf of 
other Federal agencies and states to collect delinquent debt referred 
to the Financial Management Service as required or authorized by 
Federal law for collection action. See 31 U.S.C. 3711(g), 3716, and 
3720A. Regulations governing this centralized collection of debts by 
the Financial Management Service are found at 31 CFR part 285.
    Unlike the Treasury Department's current regulation (see, for 
example, 31 CFR 5.3), this regulation does not contain a section 
regarding the delegation of debt collection authority within the 
Treasury Department. The delegation is now contained in Treasury 
Directive 34-02, Credit Management and Debt Collection (see http://www.treas.gov/regs), and does not need to be included in the revised 
regulation.
    Nothing in this regulation precludes the use of collection remedies 
not contained in this regulation. For example, Treasury entities may 
collect unused travel advances through setoff of an employee's pay 
under 5 U.S.C. 5705. Treasury entities and other Federal agencies may 
simultaneously use multiple collection remedies to collect a debt, 
except as prohibited by law.

Section Analysis

Subpart A--Sections 5.1 through 5.3

    Subpart A of this regulation addresses the general provisions 
applicable to the collection of nontax debts owed to the bureaus of the 
Department of the Treasury, the Office of Inspector General, and the 
Office of Inspector General for Tax Administration (collectively 
referred to as ``Treasury entities''). The Departmental Offices, one of 
Treasury's bureaus, includes the Office of D.C. Pensions, the Community 
Development Financial Institution Fund, the Executive Office of Asset 
Forfeiture, and the Office of Foreign Assets Control. The other bureaus 
are the Bureau of Public Debt; Bureau of Engraving and Printing; U.S. 
Mint; Secret Service; Customs Service; Financial Management Service; 
Internal Revenue Service; Bureau of Alcohol, Tobacco, and Firearms; 
Office of Comptroller of the Currency; the Office of Thrift 
Supervision; the Federal Law Enforcement Training Center; and the 
Financial Crimes Enforcement Network.
    As stated in section 5.2 of this interim rule, nothing in this 
regulation requires a Treasury entity to duplicate notices or 
administrative proceedings required by contract, this regulation or 
other laws or regulations. Thus, for example, a Treasury entity is not 
required to provide a debtor with two hearings on the same issue merely 
because the entity uses two different collection tools, each of which 
requires that the debtor be provided with a hearing.

Subpart B--Sections 5.4 through 5.19

    Subpart B of this regulation describes the procedures to be 
followed by Treasury entities when collecting debts owed to the 
Treasury Department. Among other things, subpart B outlines the due 
process procedures Treasury entities are required to follow when using 
offset (administrative, tax refund and salary) to collect a debt, when 
garnishing a debtor's wages, or before reporting a debt to a credit 
bureau. Specifically, Treasury entities are required to provide debtors 
with notice of the amount and type of debt, the intended collection 
action to be taken, how a debtor may pay the debt or make alternate 
repayment arrangements, how a debtor may review documents related to 
the debt, how a debtor may dispute the debt, and the consequences to 
the debtor if the debt is not paid. Unlike the Treasury Department's 
current regulation (see, for example, 31 CFR 5.11), this regulation 
does not require Treasury entities to send notices by certified mail. 
The Treasury Department has determined that the certified mail 
requirement imposes an unnecessary administrative burden and expense. 
Notices may be sent by first-class mail, and if not returned by the 
United States Postal Service, Treasury entities may presume that the 
notice was received. See Rosenthal v. Walker, 111 U.S. 185 (1884); 
Mahon v. Credit Bureau of

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Placer County Incorporated, 171 F.3d 1197 (9th Cir. 1999). Nothing in 
this regulation precludes a Treasury entity from sending a notice by 
certified mail if appropriate or required by statute.
    Subpart B also explains the circumstances under which Treasury 
entities may waive interest, penalties and administrative costs.
    This regulation updates Treasury Department procedures to reflect 
changes required by the DCIA. For example, the DCIA centralized the use 
of offset by requiring agencies to refer debts delinquent more than 180 
days to the Financial Management Service for offset. See 31 U.S.C. 
3716(c)(6). The Financial Management Service disburses nearly 950 
million Federal payments annually and is required to offset payments to 
persons who owe delinquent debts to the Government. Prior to the DCIA, 
agencies were required to contact the particular agency issuing a 
payment in order to initiate the offset of a Federal payment. This 
regulation also incorporates procedures for several new collection 
remedies authorized by the DCIA, such as administrative wage 
garnishment and barring delinquent debtors from obtaining additional 
Federal loan assistance.
    Unlike the Treasury Department's current regulation (see, for 
example, 31 CFR 5.3), this regulation no longer specifies the dollar 
threshold for which legal approval of compromises or suspension or 
termination of debt collection activity is required. This information 
is contained in Treasury Directive 34-02, Credit Management and Debt 
Collection, which may be found at http://www.treas.gov/regs.

Subpart C--Sections 5.20 and 5.21

    Subpart C of this regulation describes the procedures to be 
followed when a Federal agency, other than a Treasury entity, would 
like to use the offset process to collect a debt from a nontax payment 
issued by the Treasury Department as a payment agency. This is 
distinguished from the offset of payments disbursed by the Treasury 
Department's Financial Management Service in its capacity as disbursing 
agency for the Federal Government. The offset of payments disbursed by 
the Financial Management Service, including tax refund payments issued 
by the Internal Revenue Service and social security benefit payments 
issued by the Social Security Administration, is conducted through the 
Treasury Offset Program and is governed by regulations found at 31 CFR 
part 285, as well as agency-specific regulations. Subpart C of this 
regulation governs the process for offsets that occur on an ad hoc, 
case-by-case basis to collect debts from payments made by the Treasury 
Department to its employees, its vendors, and others to whom the 
Treasury Department is required or authorized to pay. While centralized 
offset through the Treasury Offset Program is the Government's primary 
offset collection tool, this regulation provides the procedures to be 
used when centralized offset is otherwise not available or appropriate. 
An agency's use of the non-centralized administrative offset process 
shall not provide grounds to invalidate any offset on the basis that 
centralized offset was not used.

Regulatory Analysis

E.O. 12866, Regulatory Review

    This rule is not a significant regulatory action as defined in 
Executive Order 12866. Because no notice of proposed rulemaking is 
required for this rule, the provisions of the Regulatory Flexibility 
Act do not apply.

Regulatory Flexibility Act

    Because no notice of proposed rulemaking is required for this rule, 
the provisions of the Regulatory Flexibility Act (5 U.S.C. 601 et seq.) 
do not apply. Moreover, the rule will only affect persons who owe 
delinquent nontax debts to the Treasury Department and other Federal 
agencies. Accordingly, a regulatory flexibility analysis is not 
required.

Special Analyses

    The Treasury Department is promulgating this interim rule without 
opportunity for prior public comment pursuant to the Administrative 
Procedure Act, 5 U.S.C. 553 (the ``APA''). The Treasury Department has 
determined that a comment period is unnecessary because the procedures 
contained in this interim rule are mandated by law and by regulations 
promulgated by the Departments of Treasury and Justice. The public is 
invited to submit comments on the interim rule, which will be taken 
into account before a final rule is issued.

List of Subjects in 31 CFR Part 5

    Administrative practice and procedure, Claims, Debts, Garnishment 
of wages, Government employee, Hearing and appeal procedures, Pay 
administration, Salaries, Wages.

Authority and Issuance

    For the reasons set forth in the preamble, 31 CFR part 5 is revised 
to read as follows:

PART 5--TREASURY DEBT COLLECTION

Subpart A--General Provisions
Sec.
5.1 What definitions apply to the regulations in this part?
5.2 Why is the Treasury Department issuing these regulations and 
what do they cover?
5.3 Do these regulations adopt the Federal Claims Collection 
Standards (FCCS)?
Subpart B--Procedures To Collect Treasury Debts
5.4 What notice will Treasury entities send to a debtor when 
collecting a Treasury debt?
5.5 How will Treasury entities add interest, penalty charges, and 
administrative costs to a Treasury debt?
5.6 When will Treasury entities allow a debtor to pay a Treasury 
debt in installments instead of one lump sum?
5.7 When will Treasury entities compromise a Treasury debt?
5.8 When will Treasury entities suspend or terminate debt collection 
on a Treasury debt?
5.9 When will Treasury entities transfer a Treasury debt to the 
Treasury Department's Financial Management Service for collection?
5.10 How will Treasury entities use administrative offset (offset of 
non-tax Federal payments) to collect a Treasury debt?
5.11 How will Treasury entities use tax refund offset to collect a 
Treasury debt?
5.12 How will Treasury entities offset a Federal employee's salary 
to collect a Treasury debt?
5.13 How will Treasury entities use administrative wage garnishment 
to collect a Treasury debt from a debtor's wages?
5.14 How will Treasury entities report Treasury debts to credit 
bureaus?
5.15 How will Treasury entities refer Treasury debts to private 
collection agencies?
5.16 When will Treasury entities refer Treasury debts to the 
Department of Justice?
5.17 Will a debtor who owes a Treasury debt be ineligible for 
Federal loan assistance or Federal licenses, permits or privileges?
5.18 How does a debtor request a special review based on a change in 
circumstances such as catastrophic illness, divorce, death, or 
disability?
5.19 Will Treasury entities issue a refund if money is erroneously 
collected on a debt?
Subpart C--Procedures for Offset of Treasury Department Payments To 
Collect Debts Owed to Other Federal Agencies
5.20 How do other Federal agencies use the offset process to collect 
debts from payments issued by a Treasury entity?
5.21 What does a Treasury entity do upon receipt of a request to 
offset the salary of a Treasury entity employee to collect a

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debt owed by the employee to another Federal agency?
Appendix A to Part 5--Treasury Directive 34-01--Waiving Claims 
Against Treasury Employees for Erroneous Payments


    Authority: 5 U.S.C. 5514; 26 U.S.C. 6402; 31 U.S.C. 321, 3701, 
3711, 3716, 3717, 3718, 3720A, 3720B, 3720D.

Subpart A--General Provisions


Sec.  5.1  What definitions apply to the regulations in this part?

    As used in this part:
    Administrative offset or offset 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 debt owed by the person. The term ``administrative 
offset'' includes, but is not limited to, the offset of Federal salary, 
vendor, retirement, and Social Security benefit payments. The terms 
``centralized administrative offset'' and ``centralized offset'' refer 
to the process by which the Treasury Department's Financial Management 
Service offsets Federal payments through the Treasury Offset Program.
    Administrative wage garnishment means the process by which a 
Federal agency orders a non-Federal employer to withhold amounts from a 
debtor's wages to satisfy a debt, as authorized by 31 U.S.C. 3720D, 31 
CFR 285.11, and this part.
    Agency or Federal agency means a department, agency, court, court 
administrative office, or instrumentality in the executive, judicial, 
or legislative branch of the Federal Government, including government 
corporations.
    Creditor agency means any Federal agency that is owed a debt.
    Debt means any amount of money, funds or property that has been 
determined by an appropriate official of the Federal Government to be 
owed to the United States by a person. As used in this part, the term 
``debt'' does not include debts arising under the Internal Revenue Code 
of 1986 (26 U.S.C. 1 et seq.).
    Debtor means a person who owes a debt to the United States.
    Delinquent debt means a debt that 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.
    Delinquent Treasury debt means a delinquent debt owed to a Treasury 
entity.
    Disposable pay has the same meaning as that term is defined in 5 
CFR 550.1103.
    Employee or Federal employee means a current employee of the 
Treasury Department or other Federal agency, including a current member 
of the Armed Forces, Reserve of the Armed Forces of the United States, 
or the National Guard.
    FCCS means the Federal Claims Collection Standards, which were 
jointly published by the Departments of the Treasury and Justice and 
codified at 31 CFR parts 900--904.
    Financial Management Service means the Financial Management 
Service, a bureau of the Treasury Department, which is responsible for 
the centralized collection of delinquent debts through the offset of 
Federal payments and other means.
    Payment agency or Federal payment agency means any Federal agency 
that transmits payment requests in the form of certified payment 
vouchers, or other similar forms, to a disbursing official for 
disbursement. The ``payment agency'' may be the agency that employs the 
debtor. In some cases, the Treasury Department may be both the creditor 
agency and payment agency.
    Person means an individual, corporation, partnership, association, 
organization, State or local government, or any other type of entity 
other than a Federal agency.
    Salary offset means a type of administrative offset to collect a 
debt owed by a Federal employee from the current pay account of the 
employee.
    Secretary means the Secretary of the Treasury.
    Tax refund offset is defined in 31 CFR 285.2(a).
    Treasury debt means a debt owed to a Treasury entity by a person.
    Treasury Department means the United States Department of the 
Treasury.
    Treasury entity means the Office of Inspector General, the Office 
of Inspector General for Tax Administration, or a bureau of the 
Treasury Department, including the Departmental Offices, responsible 
for the collection of the applicable Treasury debt. Departmental 
Offices include, but are not limited to, the Office of D.C. Pensions, 
the Community Development Financial Institution Fund, the Executive 
Office of Asset Forfeiture, and the Office of Foreign Assets Control. 
Other bureaus include, but are not limited to, the Bureau of Public 
Debt; Bureau of Engraving and Printing; U.S. Mint; U.S. Secret Service; 
Customs Service; Financial Management Service; Internal Revenue 
Service; Bureau of Alcohol, Tobacco, and Firearms; Office of 
Comptroller of the Currency; the Office of Thrift Supervision; Federal 
Law Enforcement Training Center; and the Financial Crimes Enforcement 
Network.


Sec.  5.2  Why is the Treasury Department issuing these regulations and 
what do they cover?

    (a) Scope. This part provides procedures for the collection of 
Treasury debts. This part also provides procedures for collection of 
other debts owed to the United States when a request for offset of a 
Treasury payment is received by the Treasury Department from another 
agency (for example, when a Treasury Department employee owes a debt to 
the United States Department of Education).
    (b) Applicability. (1) This part applies to the Treasury Department 
when collecting a Treasury debt, to persons who owe Treasury debts, and 
to Federal agencies requesting offset of a payment issued by the 
Treasury Department as a payment agency (including salary payments to 
Treasury Department employees).
    (2) This part does not apply to tax debts nor to any debt for which 
there is an indication of fraud or misrepresentation, as described in 
Sec.  900.3 of the FCCS, unless the debt is returned by the Department 
of Justice to the Treasury Department for handling.
    (3) This part does not apply to the Financial Management Service 
when acting on behalf of other Federal agencies and states to collect 
delinquent debt referred to the Financial Management Service for 
collection action as required or authorized by Federal law. See 31 CFR 
part 285.
    (4) Nothing in this part precludes collection or disposition of any 
debt under statutes and regulations other than those described in this 
part. See, for example, 5 U.S.C. 5705, Advancements and Deductions, 
which authorizes Treasury entities to recover travel advances by offset 
of up to 100% of a Federal employee's accrued pay. See, also, 5 U.S.C. 
4108, governing the collection of training expenses. To the extent that 
the provisions of laws, other regulations, and Treasury Department 
enforcement policies differ from the provisions of this part, those 
provisions of law, other regulations, and Treasury Department 
enforcement policies apply to the remission or mitigation of fines, 
penalties, and forfeitures, and debts arising under the tariff laws of 
the United States, rather than the provisions of this part.
    (c) Additional policies and procedures. Treasury entities may, but

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are not required to, promulgate additional policies and procedures 
consistent with this part, the FCCS, and other applicable Federal law, 
policies, and procedures.
    (d) Duplication not required. Nothing in this part requires a 
Treasury entity to duplicate notices or administrative proceedings 
required by contract, this part, or other laws or regulations.
    (e) Use of multiple collection remedies allowed. Treasury entities 
and other Federal agencies may simultaneously use multiple collection 
remedies to collect a debt, except as prohibited by law. This part is 
intended to promote aggressive debt collection, using for each debt all 
available collection remedies. These remedies are not listed in any 
prescribed order to provide Treasury entities with flexibility in 
determining which remedies will be most efficient in collecting the 
particular debt.


Sec.  5.3  Do these regulations adopt the Federal Claims Collection 
Standards (FCCS)?

    This part adopts and incorporates all provisions of the FCCS. This 
part also supplements the FCCS by prescribing procedures consistent 
with the FCCS, as necessary and appropriate for Treasury Department 
operations.

Subpart B--Procedures To Collect Treasury Debts


Sec.  5.4  What notice will Treasury entities send to a debtor when 
collecting a Treasury debt?

    (a) Notice requirements. Treasury entities shall aggressively 
collect Treasury debts. Treasury entities shall promptly send at least 
one written notice to a debtor informing the debtor of the consequences 
of failing to pay or otherwise resolve a Treasury debt. The notice(s) 
shall be sent to the debtor at the most current address of the debtor 
in the records of the Treasury entity collecting the debt. Generally, 
before starting the collection actions described in Sec. Sec.  5.5 and 
5.9 through 5.17 of this part, Treasury entities will send no more than 
two written notices to the debtor. The purpose of the notice(s) is to 
explain why the debt is owed, the amount of the debt, how a debtor may 
pay the debt or make alternate repayment arrangements, how a debtor may 
review documents related to the debt, how a debtor may dispute the 
debt, the collection remedies available to Treasury entities if the 
debtor refuses to pay the debt, and other consequences to the debtor if 
the debt is not paid. Except as otherwise provided in paragraph (b) of 
this section, the written notice(s) shall explain to the debtor:
    (1) The nature and amount of the debt, and the facts giving rise to 
the debt;
    (2) How interest, penalties, and administrative costs are added to 
the debt, the date by which payment should be made to avoid such 
charges, and that such assessments must be made unless excused in 
accordance with 31 CFR 901.9 (see Sec.  5.5 of this part);
    (3) The date by which payment should be made to avoid the enforced 
collection actions described in paragraph (a)(6) of this section;
    (4) The Treasury entity's willingness to discuss alternative 
payment arrangements and how the debtor may enter into a written 
agreement to repay the debt under terms acceptable to the Treasury 
entity (see Sec.  5.6 of this part);
    (5) The name, address, and telephone number of a contact person or 
office within the Treasury entity;
    (6) The Treasury entity's intention to enforce collection if the 
debtor fails to pay or otherwise resolve the debt, by taking one or 
more of the following actions:
    (i) Offset. Offset the debtor's Federal payments, including income 
tax refunds, salary, certain benefit payments (such as Social 
Security), retirement, vendor, travel reimbursements and advances, and 
other Federal payments (see Sec. Sec.  5.10 through 5.12 of this part);
    (ii) Private collection agency. Refer the debt to a private 
collection agency (see Sec.  5.15 of this part);
    (iii) Credit bureau reporting. Report the debt to a credit bureau 
(see Sec.  5.14 of this part);
    (iv) Administrative wage garnishment. Garnish the debtor's wages 
through administrative wage garnishment (see Sec.  5.13 of this part);
    (v) Litigation. Refer the debt to the Department of Justice to 
initiate litigation to collect the debt (see Sec.  5.16 of this part);
    (vi) Treasury Department's Financial Management Service. Refer the 
debt to the Financial Management Service for collection (see Sec.  5.9 
of this part);
    (7) That Treasury debts over 180 days delinquent must be referred 
to the Financial Management Service for the collection actions 
described in paragraph (a)(6) of this section (see Sec.  5.9 of this 
part);
    (8) How the debtor may inspect and copy records related to the 
debt;
    (9) How the debtor may request a review of the Treasury entity's 
determination that the debtor owes a debt and present evidence that the 
debt is not delinquent or legally enforceable (see Sec. Sec.  5.10(c) 
and 5.11(c) of this part);
    (10) How a debtor may request a hearing if the Treasury entity 
intends to garnish the debtor's private sector (i.e., non-Federal) 
wages (see Sec.  5.13(a) of this part), including:
    (i) The method and time period for requesting a hearing;
    (ii) That the timely filing of a request for a hearing on or before 
the 15th business day following the date of the notice will stay the 
commencement of administrative wage garnishment, but not necessarily 
other collection procedures; and
    (iii) The name and address of the office to which the request for a 
hearing should be sent.
    (11) How a debtor who is a Federal employee subject to Federal 
salary offset may request a hearing (see Sec.  5.12(e) of this part), 
including:
    (i) The method and time period for requesting a hearing;
    (ii) That the timely filing of a request for a hearing on or before 
the 15th calendar day following receipt of the notice will stay the 
commencement of salary offset, but not necessarily other collection 
procedures;
    (iii) The name and address of the office to which the request for a 
hearing should be sent;
    (iv) That the Treasury entity will refer the debt to the debtor's 
employing agency or to the Financial Management Service to implement 
salary offset, unless the employee files a timely request for a 
hearing;
    (v) That a final decision on the hearing, if requested, will be 
issued at the earliest practical date, but not later than 60 days after 
the filing of the request for a hearing, unless the employee requests 
and the hearing official grants a delay in the proceedings;
    (vi) That any knowingly false or frivolous statements, 
representations, or evidence may subject the Federal employee to 
penalties under the False Claims Act (31 U.S.C. 3729-3731) or other 
applicable statutory authority, and criminal penalties under 18 U.S.C. 
286, 287, 1001, and 1002, or other applicable statutory authority;
    (vii) That unless prohibited by contract or statute, amounts paid 
on or deducted for the debt which are later waived or found not owed to 
the United States will be promptly refunded to the employee; and (viii) 
That proceedings with respect to such debt are governed by 5 U.S.C. 
5514 and 31 U.S.C. 3716;
    (12) How the debtor may request a waiver of the debt, if applicable 
(see, for example, Treasury Directive 34-01 (Waiving Claims Against 
Treasury Employees for Erroneous Payments), set forth at Appendix A of 
this part and at http://www.treas.gov/regs);

[[Page 65848]]

    (13) How the debtor's spouse may claim his or her share of a joint 
income tax refund by filing Form 8379 with the Internal Revenue Service 
(see http://www.irs.gov)
    (14) How the debtor may exercise other statutory or regulatory 
rights and remedies available to the debtor;
    (15) That certain debtors may be ineligible for Federal Government 
loans, guaranties and insurance (see 31 U.S.C. 3720B, 31 CFR 285.13, 
and Sec.  5.17(a) of this part);
    (16) If applicable, the Treasury entity's intention to suspend or 
revoke licenses, permits or privileges (see Sec.  5.17(b) of this 
part); and
    (17) That the debtor should advise the Treasury entity of a 
bankruptcy proceeding of the debtor or another person liable for the 
debt being collected.
    (b) Exceptions to notice requirements. A Treasury entity may omit 
from a notice to a debtor one or more of the provisions contained in 
paragraphs (a)(6) through (a)(17) of this section if the Treasury 
entity, in consultation with its legal counsel, determines that any 
provision is not legally required given the collection remedies to be 
applied to a particular debt.
    (c) Respond to debtors; comply with FCCS. Treasury entities should 
respond promptly to communications from debtors and comply with other 
FCCS provisions applicable to the administrative collection of debts. 
See 31 CFR part 901.


Sec.  5.5  How will Treasury entities add interest, penalty charges, 
and administrative costs to a Treasury debt?

    (a) Assessment and notice. Treasury entities shall assess interest, 
penalties and administrative costs on Treasury debts in accordance with 
the provisions of 31 U.S.C. 3717 and 31 CFR 901.9, on Treasury debts. 
Interest shall be charged in accordance with the requirements of 31 
U.S.C. 3717(a). Penalties shall accrue at the rate of 6% per year, or 
such other higher rate as authorized by law. Administrative costs, that 
is the costs of processing and handling a delinquent debt, shall be 
determined by the Treasury entity collecting the Treasury debt. 
Treasury entities may have additional policies regarding how interest, 
penalties, and administrative costs are assessed on particular types of 
debts. Treasury entities are required to explain in the notice to the 
debtor described in Sec.  5.4 of this part how interest, penalties, 
costs, and other charges are assessed, unless the requirements are 
included in a contract or repayment agreement.
    (b) Waiver of interest, penalties, and administrative costs. Unless 
otherwise required by law, Treasury entities may not charge interest if 
the amount due on the debt is paid within 30 days after the date from 
which the interest accrues. See 31 U.S.C. 3717(d). Treasury entities 
may waive interest, penalties, and administrative costs, or any portion 
thereof, when it would be against equity and good conscience or not in 
the Treasury entity's best interest to collect such charges, in 
accordance with Treasury guidelines for waiving claims against Treasury 
employees for erroneous overpayments. See Treasury Directive 34-01 
(Waiving Claims Against Treasury Employees for Erroneous Payments) set 
forth at Appendix A of this part and at http://www.treas.gov/regs. 
Legal counsel approval is not required to waive such charges. Cf., 
Sec. Sec.  5.7 and 5.8 of this part, which require legal counsel 
approval when compromising a debt or terminating debt collection 
activity on a debt.
    (c) Accrual during suspension of debt collection. In most cases, 
interest, penalties and administrative costs will continue to accrue 
during any period when collection has been suspended for any reason 
(for example, when the debtor has requested a hearing). Treasury 
entities may suspend accrual of any or all of these charges when 
accrual would be against equity and good conscience or not in the 
Treasury entity's best interest, in accordance with Treasury guidelines 
for waiving claims against Treasury employees for erroneous 
overpayments. See Treasury Directive 34-01 (Waiving Claims Against 
Treasury Employees for Erroneous Payments), set forth at Appendix A of 
this part and http://www.treas.gov/regs.


Sec.  5.6  When will Treasury entities allow a debtor to pay a Treasury 
debt in installments instead of one lump sum?

    If a debtor is financially unable to pay the debt in one lump sum, 
a Treasury entity may accept payment of a Treasury debt in regular 
installments, in accordance with the provisions of 31 CFR 901.8 and the 
Treasury entity's policies and procedures.


Sec.  5.7  When will Treasury entities compromise a Treasury debt?

    If a Treasury entity cannot collect the full amount of a Treasury 
debt, the Treasury entity may compromise the debt in accordance with 
the provisions of 31 CFR part 902 and the Treasury entity's policies 
and procedures. Legal counsel approval to compromise a Treasury debt is 
required as described in Treasury Directive 34-02 (Credit Management 
and Debt Collection), which may be found at http://www.treas.gov/regs.


Sec.  5.8  When will Treasury entities suspend or terminate debt 
collection on a Treasury debt?

    If, after pursuing all appropriate means of collection, a Treasury 
entity determines that a Treasury debt is uncollectible, the Treasury 
entity may suspend or terminate debt collection activity in accordance 
with the provisions of 31 CFR part 903 and the Treasury entity's 
policies and procedures. Legal counsel approval to terminate debt 
collection activity is required as described in Treasury Directive 34-
02 (Credit Management and Debt Collection), which may be found at 
http://www.treas.gov/regs.


Sec.  5.9  When will Treasury entities transfer a Treasury debt to the 
Treasury Department's Financial Management Service for collection?

    (a) Treasury entities will transfer any eligible debt that is more 
than 180 days delinquent to the Financial Management Service for debt 
collection services, a process known as ``cross-servicing.'' See 31 
U.S.C. 3711(g) and 31 CFR 285.12. Treasury entities may transfer debts 
delinquent 180 days or less to the Financial Management Service in 
accordance with the procedures described in 31 CFR 285.12. The 
Financial Management Service takes appropriate action to collect or 
compromise the transferred debt, or to suspend or terminate collection 
action thereon, in accordance with the statutory and regulatory 
requirements and authorities applicable to the debt and the collection 
action to be taken. See 31 CFR 285.12(b)(2). Appropriate action 
includes, but is not limited to, contact with the debtor, referral of 
the debt to the Treasury Offset Program, private collection agencies or 
the Department of Justice, reporting of the debt to credit bureaus, and 
administrative wage garnishment.
    (b) At least sixty (60) days prior to transferring a Treasury debt 
to the Financial Management Service, Treasury entities will send notice 
to the debtor as required by Sec.  5.4 of this part. Treasury entities 
will certify to the Financial Management Service, in writing, that the 
debt is valid, delinquent, legally enforceable, and that there are no 
legal bars to collection. In addition, Treasury entities will certify 
their compliance with all applicable due process and other requirements 
as described in this part and other Federal laws. See 31 CFR 285.12(i) 
regarding the certification requirement.

[[Page 65849]]

    (c) As part of its debt collection process, the Financial 
Management Service uses the Treasury Offset Program to collect Treasury 
debts by administrative and tax refund offset. See 31 CFR 285.12(g). 
The Treasury Offset Program is a centralized offset program 
administered by the Financial Management Service to collect delinquent 
debts owed to Federal agencies and states (including past-due child 
support). Under the Treasury Offset Program, before a Federal payment 
is disbursed, the Financial Management Service compares the name and 
taxpayer identification number (TIN) of the payee with the names and 
TINs of debtors that have been submitted by Federal agencies and states 
to the Treasury Offset Program database. If there is a match, the 
Financial Management Service (or, in some cases, another Federal 
disbursing agency) offsets all or a portion of the Federal payment, 
disburses any remaining payment to the payee, and pays the offset 
amount to the creditor agency. Federal payments eligible for offset 
include, but are not limited to, income tax refunds, salary, travel 
advances and reimbursements, retirement and vendor payments, and Social 
Security and other benefit payments.


Sec.  5.10  How will Treasury entities use administrative offset 
(offset of non-tax Federal payments) to collect a Treasury debt?

    (a) Centralized administrative offset through the Treasury Offset 
Program. (1) In most cases, the Financial Management Service uses the 
Treasury Offset Program to collect Treasury debts by the offset of 
Federal payments. See Sec.  5.9(c) of this part. If not already 
transferred to the Financial Management Service under Sec.  5.9 of this 
part, Treasury entities will refer any eligible debt over 180 days 
delinquent to the Treasury Offset Program for collection by centralized 
administrative offset. See 31 U.S.C. 3716(c)(6); 31 CFR part 285, 
subpart A; and 31 CFR 901.3(b). Treasury entities may refer any 
eligible debt less than 180 days delinquent to the Treasury Offset 
Program for offset.
    (2) At least sixty (60) days prior to referring a debt to the 
Treasury Offset Program, in accordance with paragraph (a)(1) of this 
section, Treasury entities will send notice to the debtor in accordance 
with the requirements of Sec.  5.4 of this part. Treasury entities will 
certify to the Financial Management Service, in writing, that the debt 
is valid, delinquent, legally enforceable, and that there are no legal 
bars to collection by offset. In addition, Treasury entities will 
certify their compliance with the requirements described in this part.
    (b) Non-centralized administrative offset for Treasury debts. (1) 
When centralized administrative offset through the Treasury Offset 
Program is not available or appropriate, Treasury entities may collect 
past-due, legally enforceable Treasury debts through non-centralized 
administrative offset. See 31 CFR 901.3(c). In these cases, Treasury 
entities may offset a payment internally or make an offset request 
directly to a Federal payment agency. If the Federal payment agency is 
another Treasury entity, the Treasury entity making the request shall 
do so through the Deputy Chief Financial Officer as described in Sec.  
5.20(c) of this part.
    (2) At least thirty (30) days prior to offsetting a payment 
internally or requesting a Federal payment agency to offset a payment, 
Treasury entities will send notice to the debtor in accordance with the 
requirements of Sec.  5.4 of this part. When referring a debt for 
offset under this paragraph (b), Treasury entities making the request 
will certify, in writing, that the debt is valid, delinquent, legally 
enforceable, and that there are no legal bars to collection by offset. 
In addition, Treasury entities will certify their compliance with these 
regulations concerning administrative offset. See 31 CFR 
901.3(c)(2)(ii).
    (c) Administrative review. The notice described in Sec.  5.4 of 
this part shall explain to the debtor how to request an administrative 
review of a Treasury entity's determination that the debtor owes a 
Treasury debt and how to present evidence that the debt is not 
delinquent or legally enforceable. In addition to challenging the 
existence and amount of the debt, the debtor may seek a review of the 
terms of repayment. In most cases, Treasury entities will provide the 
debtor with a ``paper hearing'' based upon a review of the written 
record, including documentation provided by the debtor. Treasury 
entities shall provide the debtor with a reasonable opportunity for an 
oral hearing when the debtor requests reconsideration of the debt and 
the Treasury entity 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. Unless otherwise required by law, an oral hearing under this 
section is not required to be a formal evidentiary hearing, although 
Treasury entities should carefully document all significant matters 
discussed at the hearing. Treasury entities may suspend collection 
through administrative offset and/or other collection actions pending 
the resolution of a debtor's dispute. Each Treasury entity will have 
its own policies and procedures concerning the administrative review 
process consistent with the FCCS and the regulations in this section.
    (d) Procedures for expedited offset. Under the circumstances 
described in 31 CFR 901.3(b)(4)(iii), Treasury entities may effect an 
offset against a payment to be made to the debtor prior to sending a 
notice to the debtor, as described in Sec.  5.4 of this part, or 
completing the procedures described in paragraph (b)(2) and (c) of this 
section. Treasury entities shall give the debtor notice and an 
opportunity for review as soon as practicable and promptly refund any 
money ultimately found not to have been owed to the Government.


Sec.  5.11  How will Treasury entities use tax refund offset to collect 
a Treasury debt?

    (a) Tax refund offset. In most cases, the Financial Management 
Service uses the Treasury Offset Program to collect Treasury debts by 
the offset of tax refunds and other Federal payments. See Sec.  5.9(c) 
of this part. If not already transferred to the Financial Management 
Service under Sec.  5.9 of this part, Treasury entities will refer to 
the Treasury Offset Program any past-due, legally enforceable debt for 
collection by tax refund offset. See 26 U.S.C. 6402(d), 31 U.S.C. 3720A 
and 31 CFR 285.2.
    (b) Notice. At least sixty (60) days prior to referring a debt to 
the Treasury Offset Program, Treasury entities will send notice to the 
debtor in accordance with the requirements of Sec.  5.4 of this part. 
Treasury entities will certify to the Financial Management Service's 
Treasury Offset Program, in writing, that the debt is past-due and 
legally enforceable in the amount submitted and that the Treasury 
entities have made reasonable efforts to obtain payment of the debt as 
described in 31 CFR 285.2(d). In addition, Treasury entities will 
certify their compliance with all applicable due process and other 
requirements described in this part and other Federal laws. See 31 
U.S.C. 3720A(b) and 31 CFR 285.2.
    (c) Administrative review. The notice described in Sec.  5.4 of 
this part shall provide the debtor with at least 60 days prior to the 
initiation of tax refund offset to request an administrative review as 
described in Sec.  5.10(c) of this part. Treasury entities may suspend 
collection through tax refund offset and/or other collection actions 
pending the resolution of the debtor's dispute.

[[Page 65850]]

Sec.  5.12  How will Treasury entities offset a Federal employee's 
salary to collect a Treasury debt?

    (a) Federal salary offset. (1) Salary offset is used to collect 
debts owed to the United States by Treasury Department and other 
Federal employees. If a Federal employee owes a Treasury debt, Treasury 
entities may offset the employee's Federal salary to collect the debt 
in the manner described in this section. For information on how a 
Federal agency other than a Treasury entity may collect debt from the 
salary of a Treasury Department employee, see Sec. Sec.  5.20 and 5.21, 
subpart C, of this part.
    (2) Nothing in this part requires a Treasury entity to collect a 
Treasury debt in accordance with the provisions of this section if 
Federal law allows otherwise. See, for example, 5 U.S.C. 5705 (travel 
advances not used for allowable travel expenses are recoverable from 
the employee or his estate by setoff against accrued pay and other 
means) and 5 U.S.C. 4108 (recovery of training expenses).
    (3) Treasury entities may use the administrative wage garnishment 
procedure described in Sec.  5.13 of this part to collect a debt from 
an individual's non-Federal wages.
    (b) Centralized salary offset through the Treasury Offset Program. 
As described in Sec.  5.9(a) of this part, Treasury entities will refer 
Treasury debts to the Financial Management Service for collection by 
administrative offset, including salary offset, through the Treasury 
Offset Program. When possible, Treasury entities should attempt salary 
offset through the Treasury Offset Program before applying the 
procedures in paragraph (c) of this section. See 5 CFR 550.1109.
    (c) Non-centralized salary offset for Treasury debts. When 
centralized salary offset through the Treasury Offset Program is not 
available or appropriate, Treasury entities may collect delinquent 
Treasury debts through non-centralized salary offset. See 5 CFR 
550.1109. In these cases, Treasury entities may offset a payment 
internally or make a request directly to a Federal payment agency to 
offset a salary payment to collect a delinquent debt owed by a Federal 
employee. If the Federal payment agency is another Treasury entity, the 
Treasury entity making the request shall do so through the Deputy Chief 
Financial Officer as described in Sec.  5.20(c) of this part. At least 
thirty (30) days prior to offsetting internally or requesting a Federal 
agency to offset a salary payment, Treasury entities will send notice 
to the debtor in accordance with the requirements of Sec.  5.4 of this 
part. When referring a debt for offset, Treasury entities will certify 
to the payment agency, in writing, that the debt is valid, delinquent 
and legally enforceable in the amount stated, and there are no legal 
bars to collection by salary offset. In addition, Treasury entities 
will certify that all due process and other prerequisites to salary 
offset have been met. See 5 U.S.C. 5514, 31 U.S.C. 3716(a), and this 
section for a description of the due process and other prerequisites 
for salary offset.
    (d) When prior notice not required. Treasury entities are not 
required to provide prior notice to an employee when the following 
adjustments are made by a Treasury entity to a Treasury employee's pay:
    (1) Any adjustment to pay arising out of any employee's election of 
coverage or a change in coverage under a Federal benefits program 
requiring periodic deductions from pay, if the amount to be recovered 
was accumulated over four pay periods or less;
    (2) 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
    (3) 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.
    (e) Hearing procedures. (1) Request for a hearing. A Federal 
employee who has received a notice that his or her Treasury debt will 
be collected by means of salary offset may request a hearing concerning 
the existence or amount of the debt. The Federal employee also may 
request a hearing concerning the amount proposed to be deducted from 
the employee's pay each pay period. The employee must send any request 
for hearing, in writing, to the office designated in the notice 
described in Sec.  5.4. See Sec.  5.4(a)(11). The request must be 
received by the designated office on or before the 15th calendar day 
following the employee's receipt of the notice. The employee must sign 
the request and specify whether an oral or paper hearing is requested. 
If an oral hearing is requested, the employee must explain why the 
matter cannot be resolved by review of the documentary evidence alone. 
All travel expenses incurred by the Federal employee in connection with 
an in-person hearing will be borne by the employee.
    (2) Failure to submit timely request for hearing. If the employee 
fails to submit a request for hearing within the time period described 
in paragraph (e)(1) of this section, the employee will have waived the 
right to a hearing, and salary offset may be initiated. However, 
Treasury entities should accept a late request for hearing if the 
employee can show that the late request was the result of circumstances 
beyond the employee's control or because of a failure to receive actual 
notice of the filing deadline.
    (3) Hearing official. Treasury entities must obtain the services of 
a hearing official who is not under the supervision or control of the 
Secretary. Treasury entities may contact the Deputy Chief Financial 
Officer as described in Sec.  5.20(c) of this part or an agent of any 
agency designated in Appendix A to 5 CFR part 581 (List of Agents 
Designated to Accept Legal Process) to request a hearing official.
    (4) Notice of hearing. After the employee requests a hearing, the 
designated hearing official shall inform the employee of the form of 
the hearing to be provided. For oral hearings, the notice shall set 
forth the date, time and location of the hearing. For paper hearings, 
the notice shall notify the employee of the date by which he or she 
should submit written arguments to the designated hearing official. The 
hearing official shall give the employee reasonable time to submit 
documentation in support of the employee's position. The hearing 
official shall schedule a new hearing date if requested by both 
parties. The hearing official shall give both parties reasonable notice 
of the time and place of a rescheduled hearing.
    (5) Oral hearing. The hearing official will conduct an oral hearing 
if he or she determines that the matter cannot be resolved by review of 
documentary evidence alone (for example, when an issue of credibility 
or veracity is involved). The hearing need not take the form of an 
evidentiary hearing, but may be conducted in a manner determined by the 
hearing official, including but not limited to:
    (i) Informal conferences with the hearing official, in which the 
employee and agency representative will be given full opportunity to 
present evidence, witnesses and argument;
    (ii) Informal meetings with an interview of the employee by the 
hearing official; or

[[Page 65851]]

    (iii) Formal written submissions, with an opportunity for oral 
presentation.
    (6) Paper hearing. If the hearing official determines that an oral 
hearing is not necessary, he or she will make the determination based 
upon a review of the available written record, including any 
documentation submitted by the employee in support of his or her 
position.
    (7) Failure to appear or submit documentary evidence. In the 
absence of good cause shown (for example, excused illness), if the 
employee fails to appear at an oral hearing or fails to submit 
documentary evidence as required for a paper hearing, the employee will 
have waived the right to a hearing, and salary offset may be initiated. 
Further, the employee will have been deemed to admit the existence and 
amount of the debt as described in the notice of intent to offset. If 
the Treasury entity representative fails to appear at an oral hearing, 
the hearing official shall proceed with the hearing as scheduled, and 
make his or her determination based upon the oral testimony presented 
and the documentary evidence submitted by both parties.
    (8) Burden of proof. Treasury entities will have the initial burden 
to prove the existence and amount of the debt. Thereafter, if the 
employee disputes the existence or amount of the debt, the employee 
must prove by a preponderance of the evidence that no debt exists or 
that the amount of the debt is incorrect. In addition, the employee may 
present evidence that the proposed terms of the repayment schedule are 
unlawful, would cause a financial hardship to the employee, or that 
collection of the debt may not be pursued due to operation of law.
    (9) Record. The hearing official shall maintain a summary record of 
any hearing provided by this part. Witnesses will testify under oath or 
affirmation in oral hearings.
    (10) Date of decision. The hearing official shall issue a written 
opinion stating his or her decision, based upon documentary evidence 
and information developed at the hearing, as soon as practicable after 
the hearing, but not later than 60 days after the date on which the 
request for hearing was received by the Treasury entity. If the 
employee requests a delay in the proceedings, the deadline for the 
decision may be postponed by the number of days by which the hearing 
was postponed. When a decision is not timely rendered, the Treasury 
entity shall waive penalties applied to the debt for the period 
beginning with the date the decision is due and ending on the date the 
decision is issued.
    (11) Content of decision. The written decision shall include:
    (i) A statement of the facts presented to support the origin, 
nature, and amount of the debt;
    (ii) The hearing official's findings, analysis, and conclusions; 
and
    (iii) The terms of any repayment schedules, if applicable.
    (12) Final agency action. The hearing official's decision shall be 
final.
    (f) Waiver not precluded. Nothing in this part precludes an 
employee from requesting waiver of an overpayment under 5 U.S.C. 5584 
or 8346(b), 10 U.S.C. 2774, 32 U.S.C. 716, or other statutory 
authority.
    (g) Salary offset process. (1) Determination of disposable pay. The 
office of the Deputy Chief Financial Officer will consult with the 
appropriate Treasury entity payroll office to determine the amount of a 
Treasury Department employee's disposable pay (as defined in Sec.  5.1 
of this part) and will implement salary offset when requested to do so 
by a Treasury entity, as described in paragraph (c) of this section, or 
another agency, as described in Sec.  5.20 of this part. If the debtor 
is not employed by the Treasury Department, the agency employing the 
debtor will determine the amount of the employee's disposable pay and 
will implement salary offset upon request.
    (2) When salary offset begins. Deductions shall begin within three 
official pay periods following receipt of the creditor agency's request 
for offset.
    (3) Amount of salary offset. The amount to be offset from each 
salary payment will be up to 15 percent of a debtor's disposable pay, 
as follows:
    (i) If the amount of the debt is equal to or less than 15 percent 
of the disposable pay, such debt generally will be collected in one 
lump sum payment;
    (ii) Installment deductions will be made over a period of no 
greater than the anticipated period of employment. An installment 
deduction will not exceed 15 percent of the disposable pay from which 
the deduction is made unless the employee has agreed in writing to the 
deduction of a greater amount or the creditor agency has determined 
that smaller deductions are appropriate based on the employee's ability 
to pay.
    (4) Final salary payment. After the employee has separated either 
voluntarily or involuntarily from the payment agency, the payment 
agency may make a lump sum deduction exceeding 15 percent of disposable 
pay from any final salary or other payments pursuant to 31 U.S.C. 3716 
in order to satisfy a debt.
    (h) Payment agency's responsibilities. (1) As required by 5 CFR 
550.1109, if the employee separates from the payment agency from which 
a Treasury entity has requested salary offset, the payment agency must 
certify the total amount of its collection and notify the Treasury 
entity and the employee of the amounts collected. If the payment agency 
is aware that the employee is entitled to payments from the Civil 
Service Retirement Fund and Disability Fund, the Federal Employee 
Retirement System, or other similar payments, it must provide written 
notification to the payment agency responsible for making such payments 
that the debtor owes a debt, the amount of the debt, and that the 
Treasury entity has complied with the provisions of this section. 
Treasury entities must submit a properly certified claim to the new 
payment agency before the collection can be made.
    (2) If the employee is already separated from employment and all 
payments due from his or her former payment agency have been made, 
Treasury entities may request that money due and payable to the 
employee from the Civil Service Retirement Fund and Disability Fund, 
the Federal Employee Retirement System, or other similar funds, be 
administratively offset to collect the debt. Generally, Treasury 
entities will collect such monies through the Treasury Offset Program 
as described in Sec.  5.9(c) of this part.
    (3) When an employee transfers to another agency, Treasury entities 
should resume collection with the employee's new payment agency in 
order to continue salary offset.


Sec.  5.13  How will Treasury entities use administrative wage 
garnishment to collect a Treasury debt from a debtor's wages?

    (a) Treasury entities are authorized to collect debts from a 
debtor's wages by means of administrative wage garnishment in 
accordance with the requirements of 31 U.S.C. 3720D and 31 CFR 285.11. 
This part adopts and incorporates all of the provisions of 31 CFR 
285.11 concerning administrative wage garnishment, including the 
hearing procedures described in 31 CFR 285.11(f). Treasury entities may 
use administrative wage garnishment to collect a delinquent Treasury 
debt unless the debtor is making timely payments under an agreement to 
pay the debt in installments (see Sec.  5.6 of this part). At least 
thirty (30) days prior to initiating an administrative wage 
garnishment, Treasury entities will send notice to the debtor in 
accordance with the requirements of Sec.  5.4 of this part,

[[Page 65852]]

including the requirements of Sec.  5.4(a)(10) of this part. For 
Treasury debts referred to the Financial Management Service under Sec.  
5.9 of this part, Treasury entities may authorize the Financial 
Management Service to send a notice informing the debtor that 
administrative wage garnishment will be initiated and how the debtor 
may request a hearing as described in Sec.  5.4(a)(10) of this part. If 
a debtor makes a timely request for a hearing, administrative wage 
garnishment will not begin until a hearing is held and a decision is 
sent to the debtor. See 31 CFR 285.11(f)(4). If a debtor's hearing 
request is not timely, Treasury entities may suspend collection by 
administrative wage garnishment in accordance with the provisions of 31 
CFR 285.11(f)(5). All travel expenses incurred by the debtor in 
connection with an in-person hearing will be borne by the debtor.
    (b) This section does not apply to Federal salary offset, the 
process by which Treasury entities collect debts from the salaries of 
Federal employees (see Sec.  5.12 of this part).


Sec.  5.14  How will Treasury entities report Treasury debts to credit 
bureaus?

    Treasury entities shall report delinquent Treasury debts to credit 
bureaus in accordance with the provisions of 31 U.S.C. 3711(e), 31 CFR 
901.4, and the Office of Management and Budget Circular A-129, 
``Policies for Federal Credit Programs and Nontax Receivables.'' For 
additional information, see Financial Management Service's ``Guide to 
the Federal Credit Bureau Program,'' which may be found at http://www.fms.treas.gov/debt. At least sixty (60) days prior to reporting a 
delinquent debt to a consumer reporting agency, Treasury entities will 
send notice to the debtor in accordance with the requirements of Sec.  
5.4 of this part. Treasury entities may authorize the Financial 
Management Service to report to credit bureaus those delinquent 
Treasury debts that have been transferred to the Financial Management 
Service under Sec.  5.9 of this part.


Sec.  5.15  How will Treasury entities refer Treasury debts to private 
collection agencies?

    Treasury entities will transfer delinquent Treasury debts to the 
Financial Management Service to obtain debt collection services 
provided by private collection agencies. See Sec.  5.9 of this part.


Sec.  5.16  When will Treasury entities refer Treasury debts to the 
Department of Justice?

    (a) Compromise or suspension or termination of collection activity. 
Treasury entities shall refer Treasury debts having a principal balance 
over $100,000, or such higher amount as authorized by the Attorney 
General, to the Department of Justice for approval of any compromise of 
a debt or suspension or termination of collection activity. See 
Sec. Sec.  5.7 and 5.8 of this part; 31 CFR 902.1; 31 CFR 903.1.
    (b) Litigation. Treasury entities shall promptly refer to the 
Department of Justice for litigation delinquent Treasury debts on which 
aggressive collection activity has been taken in accordance with this 
part and that should not be compromised, and on which collection 
activity should not be suspended or terminated. See 31 CFR part 904. 
Treasury entities may authorize the Financial Management Service to 
refer to the Department of Justice for litigation those delinquent 
Treasury debts that have been transferred to the Financial Management 
Service under Sec.  5.9 of this part.


Sec.  5.17  Will a debtor who owes a Treasury debt be ineligible for 
Federal loan assistance or Federal licenses, permits or privileges?

    (a) Delinquent debtors barred from obtaining Federal loans or loan 
insurance or guaranties. As required by 31 U.S.C. 3720B and 31 CFR 
901.6, Treasury entities will not extend financial assistance in the 
form of a loan, loan guarantee, or loan insurance to any person 
delinquent on a debt owed to a Federal agency. This prohibition does 
not apply to disaster loans. Treasury entities may extend credit after 
the delinquency has been resolved. See 31 CFR 285.13 for standards 
defining when a ``delinquency'' is ``resolved'' for purposes of this 
prohibition.
    (b) Suspension or revocation of eligibility for licenses, permits, 
or privileges. Unless prohibited by law, Treasury entities should 
suspend or revoke licenses, permits, or other privileges for any 
inexcusable or willful failure of a debtor to pay a debt. The Treasury 
entity responsible for distributing the licenses, permits, or other 
privileges will establish policies and procedures governing suspension 
and revocation for delinquent debtors. If applicable, Treasury entities 
will advise the debtor in the notice required by Sec.  5.4 of this part 
of the Treasury entities' ability to suspend or revoke licenses, 
permits or privileges. See Sec.  5.4(a)(16) of this part.


Sec.  5.18  How does a debtor request a special review based on a 
change in circumstances such as catastrophic illness, divorce, death, 
or disability?

    (a) Material change in circumstances. A debtor who owes a Treasury 
debt may, at any time, request a special review by the applicable 
Treasury entity of the amount of any offset, administrative wage 
garnishment, or voluntary payment, based on materially changed 
circumstances beyond the control of the debtor such as, but not limited 
to, catastrophic illness, divorce, death, or disability.
    (b) Inability to pay. For purposes of this section, in determining 
whether an involuntary or voluntary payment would prevent the debtor 
from meeting essential subsistence expenses (costs incurred for food, 
housing, clothing, transportation, and medical care), the debtor shall 
submit a detailed statement and supporting documents for the debtor, 
his or her spouse, and dependents, indicating:
    (1) Income from all sources;
    (2) Assets;
    (3) Liabilities;
    (4) Number of dependents;
    (5) Expenses for food, housing, clothing, and transportation;
    (6) Medical expenses; and
    (7) Exceptional expenses, if any.
    (c) Alternative payment arrangement. If the debtor requests a 
special review under this section, the debtor shall submit an 
alternative proposed payment schedule and a statement to the Treasury 
entity collecting the debt, with supporting documents, showing why the 
current offset, garnishment or repayment schedule imposes an extreme 
financial hardship on the debtor. The Treasury entity will evaluate the 
statement and documentation and determine whether the current offset, 
garnishment, or repayment schedule imposes extreme financial hardship 
on the debtor. The Treasury entity shall notify the debtor in writing 
of such determination, including, if appropriate, a revised offset, 
garnishment, or payment schedule. If the special review results in a 
revised offset, garnishment, or repayment schedule, the Treasury entity 
will notify the appropriate agency or other persons about the new 
terms.


Sec.  5.19  Will Treasury entities issue a refund if money is 
erroneously collected on a debt?

    Treasury entities shall promptly refund to a debtor any amount 
collected on a Treasury debt when the debt is waived or otherwise found 
not to be owed to the United States, or as otherwise required by law. 
Refunds under this part shall not bear interest unless required by law.

[[Page 65853]]

Subpart C--Procedures for Offset of Treasury Department Payments To 
Collect Debts Owed to Other Federal Agencies


Sec.  5.20  How do other Federal agencies use the offset process to 
collect debts from payments issued by a Treasury entity?

    (a) Offset of Treasury entity payments to collect debts owed to 
other Federal agencies. (1) In most cases, Federal agencies submit 
eligible debts to the Treasury Offset Program to collect delinquent 
debts from payments issued by Treasury entities and other Federal 
agencies, a process known as ``centralized offset.'' When centralized 
offset is not available or appropriate, any Federal agency may ask a 
Treasury entity (when acting as a ``payment agency'') to collect a debt 
owed to such agency by offsetting funds payable to a debtor by the 
Treasury entity, including salary payments issued to Treasury entity 
employees. This section and Sec.  5.21 of this subpart C apply when a 
Federal agency asks a Treasury entity to offset a payment issued by the 
Treasury entity to a person who owes a debt to the United States.
    (2) This subpart C does not apply to Treasury debts. See Sec. Sec.  
5.10 through 5.12 of this part for offset procedures applicable to 
Treasury debts.
    (3) This subpart C does not apply to the collection of non-Treasury 
debts through tax refund offset. See 31 CFR 285.2 for tax refund offset 
procedures.
    (b) Administrative offset (including salary offset); certification. 
A Treasury entity will initiate a requested offset only upon receipt of 
written certification from the creditor agency that the debtor owes the 
past-due, legally enforceable debt in the amount stated, and that the 
creditor agency has fully complied with all applicable due process and 
other requirements contained in 31 U.S.C. 3716, 5 U.S.C. 5514, and the 
creditor agency's regulations, as applicable. Offsets will continue 
until the debt is paid in full or otherwise resolved to the 
satisfaction of the creditor agency.
    (c) Where a creditor agency makes requests for offset. Requests for 
offset under this section shall be sent to the U.S. Department of the 
Treasury, ATTN: Deputy Chief Financial Officer, 1500 Pennsylvania 
Avenue, NW., Attention: Metropolitan Square, Room 6228, Washington, DC 
20220. The Deputy Chief Financial Officer will forward the request to 
the appropriate Treasury entity for processing in accordance with this 
subpart C.
    (d) Incomplete certification. A Treasury entity will return an 
incomplete debt certification to the creditor agency with notice that 
the creditor agency must comply with paragraph (b) of this section 
before action will be taken to collect a debt from a payment issued by 
a Treasury entity.
    (e) Review. A Treasury entity is not authorized to review the 
merits of the creditor agency's determination with respect to the 
amount or validity of the debt certified by the creditor agency.
    (f) When Treasury entities will not comply with offset request. A 
Treasury entity will comply with the offset request of another agency 
unless the Treasury entity determines that the offset would not be in 
the best interests of the United States, or would otherwise be contrary 
to law.
    (g) Multiple debts. When two or more creditor agencies are seeking 
offsets from payments made to the same person, or when two or more 
debts are owed to a single creditor agency, the Treasury entity that 
has been asked to offset the payments may determine the order in which 
the debts will be collected or whether one or more debts should be 
collected by offset simultaneously.
    (h) Priority of debts owed to Treasury entity. For purposes of this 
section, debts owed to a Treasury entity generally take precedence over 
debts owed to other agencies. The Treasury entity that has been asked 
to offset the payments may determine whether to pay debts owed to other 
agencies before paying a debt owed to a Treasury entity. The Treasury 
entity that has been asked to offset the payments will determine the 
order in which the debts will be collected based on the best interests 
of the United States.


Sec.  5.21  What does a Treasury entity do upon receipt of a request to 
offset the salary of a Treasury entity employee to collect a debt owed 
by the employee to another Federal agency?

    (a) Notice to the Treasury employee. When a Treasury entity 
receives proper certification of a debt owed by one of its employees, 
the Treasury entity will begin deductions from the employee's pay at 
the next officially established pay interval. The Treasury entity will 
send a written notice to the employee indicating that a certified debt 
claim has been received from the creditor agency, the amount of the 
debt claimed to be owed by the creditor agency, the date deductions 
from salary will begin, and the amount of such deductions.
    (b) Amount of deductions from Treasury employee's salary. The 
amount deducted under Sec.  5.20(b) of this part will be the lesser of 
the amount of the debt certified by the creditor agency or an amount up 
to 15% of the debtor's disposable pay. Deductions shall continue until 
the Treasury entity knows that the debt is paid in full or until 
otherwise instructed by the creditor agency. Alternatively, the amount 
offset may be an amount agreed upon, in writing, by the debtor and the 
creditor agency. See Sec.  5.12(g) (salary offset process).
    (c) When the debtor is no longer employed by the Treasury entity. 
(1) Offset of final and subsequent payments. If a Treasury entity 
employee retires or resigns or if his or her employment ends before 
collection of the debt is complete, the Treasury entity will continue 
to offset, under 31 U.S.C. 3716, up to 100% of an employee's subsequent 
payments until the debt is paid or otherwise resolved. Such payments 
include a debtor's final salary payment, lump-sum leave payment, and 
other payments payable to the debtor by the Treasury entity. See 31 
U.S.C. 3716 and 5 CFR 550.1104(l) and 550.1104(m).
    (2) Notice to the creditor agency. If the employee is separated 
from the Treasury entity before the debt is paid in full, the Treasury 
entity will certify to the creditor agency the total amount of its 
collection. If the Treasury entity is aware that the employee is 
entitled to payments from the Civil Service Retirement and Disability 
Fund, Federal Employee Retirement System, or other similar payments, 
the Treasury entity will provide written notice to the agency making 
such payments that the debtor owes a debt (including the amount) and 
that the provisions of 5 CFR 550.1109 have been fully complied with. 
The creditor agency is responsible for submitting a certified claim to 
the agency responsible for making such payments before collection may 
begin. Generally, creditor agencies will collect such monies through 
the Treasury Offset Program as described in Sec.  5.9(c) of this part.
    (3) Notice to the debtor. The Treasury entity will provide to the 
debtor a copy of any notices sent to the creditor agency under 
paragraph (c)(2) of this section.
    (d) When the debtor transfers to another Federal agency. (1) Notice 
to the creditor agency. If the debtor transfers to another Federal 
agency before the debt is paid in full, the Treasury entity will notify 
the creditor agency and will certify the total amount of its collection 
on the debt. The Treasury entity will provide a copy of the 
certification to the creditor agency. The creditor agency is 
responsible for submitting a certified claim to the debtor's new 
employing agency before collection may begin.

[[Page 65854]]

    (2) Notice to the debtor. The Treasury entity will provide to the 
debtor a copy of any notices and certifications sent to the creditor 
agency under paragraph (d)(1) of this section.
    (e) Request for hearing official. A Treasury entity will provide a 
hearing official upon the creditor agency's request with respect to a 
Treasury entity employee. See 5 CFR 550.1107(a).

Appendix A to Part 5--Treasury Directive 34-01--Waiving Claims Against 
Treasury Employees for Erroneous Payments

Treasury Directive 34-01

    Date: July 12, 2000.
    Sunset Review: July 12, 2004.
    Subject: Waiving Claims Against Treasury Employees for Erroneous 
Payments.

1. Purpose

    This Directive establishes the Department of the Treasury's 
policies and procedures for waiving claims by the Government against 
an employee for erroneous payments of: (1) Pay and allowances (e.g., 
health and life insurance) and (2) travel, transportation, and 
relocation expenses and allowances.

2. Background

    a. 5 U.S.C. Sec.  5584 authorizes the waiver of claims by the 
United States in whole or in part against an employee arising out of 
erroneous payments of pay and allowances, travel, transportation, 
and relocation expenses and allowances. A waiver may be considered 
when collection of the claim would be against equity and good 
conscience and not in the best interest of the United States 
provided that there does not exist, in connection with the claim, an 
indication of fraud, misrepresentation, fault, or lack of good faith 
on the part of the employee or any other person having an interest 
in obtaining a waiver of the claim.
    b. The General Accounting Office Act of 1996 (Pub. L. 104-316), 
Title I, Sec.  103(d), enacted October 19, 1996, amended 5 U.S.C. 
Sec.  5584 by transferring the authority to waive claims for 
erroneous payments exceeding $1,500 from the Comptroller General of 
the United States to the Office of Management and Budget (OMB). OMB 
subsequently redelegated this waiver authority to the executive 
agency that made the erroneous payment. The authority to waive 
claims not exceeding $1,500, which was vested in the head of each 
agency prior to the enactment of Pub. L. 104-316, was unaffected by 
the Act.
    c. 5 U.S.C. Sec.  5514 authorizes the head of each agency, upon 
a determination that an employee is indebted to the United States 
for debts to which the United States is entitled to be repaid at the 
time of the determination, to deduct up to 15%, or a greater amount 
if agreed to by the employee, from the employee's pay at officially 
established pay intervals in order to repay the debt.

3. Delegation

    a. The Deputy Assistant Secretary (Administration), the heads of 
bureaus, the Inspector General, and the Inspector General for Tax 
Administration are delegated the authority to waive, in whole or in 
part, a claim of the United States against an employee for an 
erroneous payment of pay and allowances, travel, transportation, and 
relocation expenses and allowances, aggregating less than $5,000 per 
claim, in accordance with the limitations and standards in 5 U.S.C. 
Sec.  5584.
    b. Treasury's Deputy Chief Financial Officer is delegated the 
authority to waive, in whole or in part, a claim of the United 
States against an employee for an erroneous payment of pay and 
allowances, travel, transportation, and relocation expenses and 
allowances, aggregating $5,000 or more per claim, in accordance with 
the limitations and standards in 5 U.S.C. Sec.  5584.

4. Appeals

    a. Requests for waiver of claims aggregating less than $5,000 
per claim which are denied in whole or in part may be appealed to 
the Deputy Chief Financial Officer for the Department of the 
Treasury.
    b. Requests for waiver of claims aggregating $5,000 or more per 
claim which are denied in whole or in part may be appealed to the 
Assistant Secretary (Management)/Chief Financial Officer.

5. Redelegation

    The Deputy Assistant Secretary (Administration), the heads of 
bureaus, the Inspector General, and the Inspector General for Tax 
Administration may redelegate their respective authority and 
responsibility in writing no lower than the bureau deputy chief 
financial officer unless authorized by Treasury's Deputy Chief 
Financial Officer. Copies of each redelegation shall be submitted to 
the Department's Deputy Chief Financial Officer.

6. Responsibilities

    a. The Deputy Assistant Secretary (Administration), the heads of 
bureaus, the Inspector General, and the Inspector General for Tax 
Administration shall:
    (1) Promptly notify an employee upon discovery of an erroneous 
payment to that employee;
    (2) Promptly act to collect the erroneous overpayment, following 
established debt collection policies and procedures;
    (3) Establish time frames for employees to request a waiver in 
writing and for the bureau to review the waiver request. These time 
frames must take into consideration the responsibilities of the 
United States to take prompt action to pursue enforced collection on 
overdue debts, which may arise from erroneous payments.
    (4) Notify employees whose requests for waiver of claims 
aggregating less than $5,000 per claim are denied in whole or in 
part of the basis for the denial and the right to appeal the denial 
to the Deputy Chief Financial Officer of the Department of the 
Treasury. All such appeals shall:
    (a) Be made in writing;
    (b) Specify the basis for the appeal;
    (c) Include a chronology of the events surrounding the erroneous 
payments;
    (d) Include a statement regarding any mitigating factors; and
    (e) Be submitted to the official who denied the waiver request 
no later than 60 days from receipt by the employee of written notice 
of the denial of the waiver; and
    (f) Attach at least the following documents: the employee's 
original request for a waiver; the bureau's denial of the request; 
any personnel actions, e.g., promotions, demotions, step increases, 
etc. that relate to the overpayment.
    (5) Forward to Treasury's Deputy Chief Financial Officer the 
appeal and supporting documentation, the bureau's recommendation as 
to why the appeal should be approved or denied; and a statement as 
to the action taken by the bureau to avoid a recurrence of the 
error.
    (6) Pay a refund when appropriate if a waiver is granted;
    (7) Fulfill all labor relations responsibilities when 
implementing this directive; and
    (8) Fulfill any other responsibility of the agency imposed by 5 
U.S.C. Sec.  5584, or other applicable laws and regulations.
    b. Treasury's Deputy Chief Financial Officer shall advise 
employees whose requests for waiver of claims aggregating $5,000 or 
more per claim are denied in whole or in part of the basis for the 
denial and the right to appeal the denial to the Assistant Secretary 
(Management)/Chief Financial Officer. All such appeals shall be in 
the format and contain the information and documentation described 
in subsection 6.a.(4), above. The Deputy Chief Financial Officer 
shall forward to Assistant Secretary (Management)/Chief Financial 
Officer the appeal and supporting documentation, his/her 
recommendation as to why the appeal should be approved or denied, 
and a statement obtained from the bureau from which the claim arose 
as to the action taken by the bureau to avoid a recurrence of the 
error.

7. Reporting Requirements

    a. Each bureau, the Deputy Assistant Secretary (Administration) 
for Departmental Offices, the Inspector General, and the Inspector 
General for Tax Administration shall maintain a register of waiver 
actions subject to Departmental review. The register shall cover 
each fiscal year and be prepared by December 31 of each year for the 
preceding fiscal year. The register shall contain the following 
information:
    (1) The total amount waived by the bureau;
    (2) The number and dollar amount of waiver applications granted 
in full;
    (3) The number and dollar amount of waiver applications granted 
in part and denied in part, and the dollar amount of each;
    (4) The number and dollar amount of waiver applications denied 
in their entirety;
    (5) The number of waiver applications referred to the Deputy 
Chief Financial Officer for initial action or for appeal;
    (6) The dollar amount refunded as a result of waiver action by 
the bureau; and
    (7) The dollar amount refunded as a result of waiver action by 
the Deputy Chief Financial Officer or the Assistant Secretary 
(Management)/Chief Financial Officer.
    b. Each bureau, the Deputy Assistant Secretary (Administration) 
for Departmental

[[Page 65855]]

Offices, the Inspector General, and the Inspector General for Tax 
Administration shall retain a written record of each waiver action 
for 6 years and 3 months. At a minimum, the written record shall 
contain:
    (1) The bureau's summary of the events surrounding the erroneous 
payment;
    (2) Any written comments submitted by the employee from whom 
collection is sought;
    (3) An account of the waiver action taken and the reasons for 
such action; and
    (4) Other pertinent information such as any action taken to 
refund amounts repaid.

8. Effect of Request for Waiver

    A request for a waiver of a claim shall not affect an employee's 
opportunity under 5 U.S.C. Sec.  5514(a)(2)(D) for a hearing on the 
determination of the agency concerning the existence or the amount 
of the debt, or the terms of the repayment schedule. A request by an 
employee for a hearing under 5 U.S.C. Sec.  5514(a)(2)(D) shall not 
affect an employee's right to request a waiver of the claim. The 
determination whether to waive a claim may be made at the discretion 
of the deciding official either before or after a final decision is 
rendered pursuant to 5 U.S.C. Sec.  5514(a)(2)(D) concerning the 
existence or the amount of the debt, or the terms of the repayment 
schedule.

9. Guidelines for Determining Requests

    a. A request for a waiver shall not be granted if the deciding 
official determines there exists, in connection with the claim, an 
indication of fraud, misrepresentation, fault, or lack of good faith 
on the part of the employee or any other person having an interest 
in obtaining a waiver of the claim. There are no exceptions to this 
rule for financial hardship or otherwise.
    (1) ``Fault'' exists if, in light of all the circumstances, it 
is determined that the employee knew or should have known that an 
error existed, but failed to take action to have it corrected. Fault 
can derive from an act or a failure to act. Unlike fraud, fault does 
not require a deliberate intent to deceive. Whether an employee 
should have known about an error in pay is determined from the 
perspective of a reasonable person. Pertinent considerations in 
finding fault include whether:
    (a) The payment resulted from the employee's incorrect, but not 
fraudulent, statement that the employee should have known was 
incorrect;
    (b) The payment resulted from the employee's failure to disclose 
material facts in the employee's possession which the employee 
should have known to be material; or
    (c) The employee accepted a payment, which the employee knew or 
should have known to be erroneous.
    (2) Every case must be examined in light of its particular 
facts. For example, where an employee is promoted to a higher grade 
but the step level for the employee's new grade is miscalculated, it 
may be appropriate to conclude that there is no fault on the 
employee's part because employees are not typically expected to be 
aware of and understand the rules regarding determination of step 
level upon promotion. On the other hand, a different conclusion as 
to fault potentially may be reached if the employee in question is a 
personnel specialist or an attorney who concentrates on personnel 
law.
    b. If the deciding official finds an indication of fraud, 
misrepresentation, fault, or lack of good faith on the part of the 
employee or any other person having an interest in obtaining a 
waiver of the claim, then the request for a waiver must be denied.
    c. If the deciding official finds no indication of fraud, 
misrepresentation, fault, or lack of good faith on the part of the 
employee or any other person having an interest in obtaining a 
waiver of the claim, the employee is not automatically entitled to a 
waiver. Before a waiver can be granted, the deciding official must 
also determine that collection of the claim against an employee 
would be against equity and good conscience and not in the best 
interests of the United States. Factors to consider when determining 
if collection of a claim against an employee would be against equity 
and good conscience and not in the best interests of the United 
States include, but are not limited to:
    (1) Whether collection of the claim would cause serious 
financial hardship to the employee from whom collection is sought.
    (2) Whether, because of the erroneous payment, the employee 
either has relinquished a valuable right or changed positions for 
the worse, regardless of the employee's financial circumstances.
    (a) To establish that a valuable right has been relinquished, it 
must be shown that the right was, in fact, valuable; that it cannot 
be regained; and that the action was based chiefly or solely on 
reliance on the overpayment.
    (b) To establish that the employee's position has changed for 
the worse, it must be shown that the decision would not have been 
made but for the overpayment, and that the decision resulted in a 
loss.
    (c) An example of a ``detrimental reliance'' would be a decision 
to sign a lease for a more expensive apartment based chiefly or 
solely upon reliance on an erroneous calculation of salary, and the 
funds spent for rent cannot be recovered.
    (3) The cost of collecting the claim equals or exceeds the 
amount of the claim;
    (4) The time elapsed between the erroneous payment and discovery 
of the error and notification of the employee;
    (5) Whether failure to make restitution would result in unfair 
gain to the employee;
    (6) Whether recovery of the claim would be unconscionable under 
the circumstances.
    d. The burden is on the employee to demonstrate that collection 
of the claim would be against equity and good conscience and not in 
the best interest of the United States.

10. Authorities

    a. 5 U.S.C. Sec.  5584, ``Claims for Overpayment of Pay and 
Allowances, and of Travel, Transportation and Relocation Expenses 
and Allowances.''
    b. 31 U.S.C. Sec.  3711, ``Collection and Compromise.''
    c. 31 U.S.C. Sec.  3716, ``Administrative Offset.''
    d. 31 U.S.C. Sec.  3717, ``Interest and Penalty on Claims.''
    e. 5 CFR Part 550, subpart K, ``Collection by Offset from 
Indebted Government Employees.''
    f. 31 CFR Part 5, subpart B, ``Salary Offset.''
    g. Determination with Respect to Transfer of Functions Pursuant 
to Public Law 104-316, OMB, December 17, 1996.

11. Cancellation

    TD 34-01, ``Waiver of Claims for Erroneous Payments,'' dated 
October 25, 1995, is superseded.

12. Office of Primary Interest

    Office of Accounting and Internal Control.

    Dated: September 26, 2002.
Lisa Ross,
Acting Assistant Secretary for Management and Chief Financial Officer.

Edward R. Kingman, Jr.,
Assistant Secretary for Management and Chief Financial Officer, 
Department of the Treasury.
[FR Doc. 02-27006 Filed 10-25-02; 8:45 am]
BILLING CODE 4811-16-P