[Federal Register Volume 68, Number 248 (Monday, December 29, 2003)]
[Proposed Rules]
[Pages 74893-74907]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-31620]


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

DEPARTMENT OF VETERANS AFFAIRS

38 CFR Parts 1 and 2

RIN 2900-AK10


Standards for Collection, Compromise, Suspension, or Termination 
of Collection Effort, and Referral of Civil Claims for Money or 
Property; Regional Office Committees on Waivers and Compromises; Salary 
Offset Provisions; Delegations of Authority

AGENCY: Department of Veterans Affairs.

ACTION: Proposed rule.

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

SUMMARY: The Department of Veterans Affairs (VA) proposes to revise its 
current regulations concerning the collection, compromise, suspension, 
termination, and referral of debts owed to VA. The proposed revision 
clarifies and simplifies debt collection standards and reflects changes 
to Federal debt collection procedures under the Debt Collection 
Improvement Act of 1996. VA also proposes to revise regulations 
pertaining to the administration of regional office Committees on 
Waivers and Compromises, as well as a regulation pertaining to 
delegations of authority to the Assistant Secretary for Management.

DATES: Comments must be received on or before February 27, 2004.

ADDRESSES: Mail or hand deliver written comments to: Director, 
Regulations Management (00REG1), 810 Vermont Avenue NW., Room 1068, 
Washington,

[[Page 74894]]

DC 20420; or fax comments to (202) 273-9026; or e-mail comments to 
[email protected]. Comments should indicate that they are 
submitted in response to ``RIN 2900-AK10.'' All comments received will 
be available for public inspection in the Office of Regulation Policy 
and Management, Room 1063B, between the hours of 8 a.m. and 4:30 p.m., 
Monday through Friday, except holidays. Please call (202) 273-9515 for 
an appointment.

FOR FURTHER INFORMATION CONTACT: Peter Mulhern, Cash and Debt 
Management Division (047GC1), Department of Veterans Affairs, 810 
Vermont Ave. NW., Washington, DC 20420, (202) 273-5570.

SUPPLEMENTARY INFORMATION: The ``Debt Collection Improvement Act (DCIA) 
of 1996,'' Pub. L. 104-134, 110 Stat. 1321, 1358 (April 26, 1996) 
authorizes several new methods for collecting debts and is the most 
significant legislation for the administrative collection of Federal 
debt since the Debt Collection Act of 1982, Pub. L. 97-365, 96 Stat. 
1749 (October 25, 1982). The DCIA authorizes new debt collection 
procedures, including centralized administrative offset, the transfer 
or referral of delinquent debt to the Department of the Treasury 
(Treasury) or Treasury-designated debt collection centers for 
collection (cross-servicing), and administrative wage garnishment. 
Treasury and the Department of Justice (DOJ) subsequently issued 
revised Federal Claims Collection Standards (FCCS) on November 22, 
2000, with an effective date of December 22, 2000. The revised FCCS are 
found at Title 31 of the Code of Federal Regulations (CFR), chapter IX, 
parts 900 through 904 and conform with relevant statutory changes to 
Federal debt collection procedures under the DCIA. Additional rules 
concerning these new debt collection procedures have also been issued 
by Treasury at Title 31 of the CFR part 285.
    The following major changes were incorporated into the revised 
FCCS:
    1. The Comptroller General was removed as a co-promulgator of the 
FCCS and the Secretary of the Treasury was added as a co-promulgator.
    2. The revised FCCS reflect the elimination of the Comptroller 
General's role in Federal debt collection.
    3. The revised FCCS provides agencies with greater latitude to 
streamline and customize debt collection procedures to accommodate 
agency-specific requirements or unique circumstances.
    4. The revised FCCS reflects the requirement that agencies use 
government-wide debt collection contracts for referrals to private 
collection contractors.
    5. The revised FCCS reflects the increase in the maximum principal 
amount for a claim, from $20,000 to $100,000, agencies are authorized 
to compromise or to suspend or terminate collection activity thereon, 
without concurrence by DOJ. In addition, the minimum amount of a claim 
that may be referred to DOJ for enforced collection is increased from 
$600 to $2,500.
    6. The revised FCCS reflects several new debt collection procedures 
under the DCIA, including, but not limited to:
    (a) Transfer or referral of debt delinquent for more than 180 days 
to Treasury or Treasury-designated debt collection centers, for 
collection known as ``cross-servicing;''
    (b) Mandatory, centralized administrative offset by disbursing 
officials; and
    (c) Mandatory prohibition against extending federal financial 
assistance in the form of a loan or loan guarantee to delinquent 
debtors.
    In conjunction with the publication of the Treasury/DOJ FCCS and 
Treasury's debt collection regulations, VA reviewed its debt collection 
regulations in order to identify those regulations that required 
revision or could be deleted as either obsolete or duplicative of 
Treasury and Treasury/DOJ regulations, as well as to ensure that our 
regulations are consistent with statutory mandates and that they are 
clearly written. Consequently, VA has prepared the attached proposed 
amendments that will remove some debt collection regulations, add new 
regulations, and revise the remainder.
    As part of the revision of our debt collection regulations, VA also 
proposes to revise its interest-charging regulation. Section 1.919 
implements VA's authority to assess interest and administrative costs 
on debts that arise as a result of participation in a VA benefits, 
medical care, or home loan program. The authority for this regulation 
is derived from 38 U.S.C. 5315. The recent review of this regulation 
indicated that one portion needs to be deleted. Specifically, the 
current regulation states that when a debtor requests a waiver, 
interest and administrative costs shall not be assessed until either an 
initial determination is made on the request or the statutory time 
limit for requesting waiver has expired. We propose to amend Sec.  
1.919 by removing this portion, since it has no basis in 38 U.S.C. 
5315. Likewise, there is no such language in the statutory requirement 
for waiver consideration of VA benefit and home loan program debts (38 
U.S.C. 5302). Finally, the FCCS does not contain such a requirement in 
its government-wide interest regulation (31 CFR 901.9).
    VA also is proposing to add two new debt collection regulations. 
Section 1.923, ``Administrative wage garnishment,'' is another 
collection tool derived from the DCIA and is written in accordance with 
Treasury's implementing regulation (31 CFR 285.11). It allows, but does 
not mandate, VA to request a non-Federal employer to garnish the 
disposable pay of an individual to collect non-tax delinquent debt owed 
to VA. VA may do this directly or it may request that Treasury initiate 
administrative garnishment procedures after VA has referred the debt to 
Treasury for collection. The other proposed new regulation is Sec.  
1.924, ``Barring delinquent debtors from obtaining federal loans or 
loan insurance or guarantees.'' This is also derived from the DCIA and 
a Treasury regulation (31 CFR 285.13), as well as the FCCS (31 CFR 
901.6). This regulation states that a person owing an outstanding non-
tax debt that is in delinquent status shall not be eligible for certain 
Federal financial assistance.
    At the request of the Veterans Benefits Administration, we are 
proposing to amend Sec.  1.955(c), ``Regional Office Committees on 
Waivers and Compromises.'' The amendment would continue to state that 
the administrative control function of the Committees remains with the 
fiscal officer. However, it would authorize the station director to 
reassign the function to another station activity when the director 
determines that another station activity is more appropriate. We 
believe this amendment would provide each regional office director with 
needed greater management latitude in assigning responsibility for the 
administrative control of that station's Committee on Waivers and 
Compromises.
    The Office of Personnel Management has made changes to their 
government-wide salary offset regulations (5 CFR part 550, Subpart K) 
in order to comply with the DCIA, which amended 5 U.S.C. 5514. The DCIA 
requires that all Federal agencies, to which outstanding delinquent 
debts are owed, must participate in an annual computer match of their 
delinquent debt records with records of federal employees. In addition, 
agencies must notify Treasury of all non-tax debts over 180 days 
delinquent. Treasury will match payments to the debtors from the 
Federal Government, including federal salary payments, against these 
debts. Where a match occurs, the payment will be offset to satisfy the 
debt. We are

[[Page 74895]]

proposing to amend VA's regulations to reflect the use of centralized 
administrative offset, including salary offset.
    Our regulations also would be revised to reflect the fact that the 
DCIA amended 5 U.S.C. 5514 so that pay adjustments made to correct 
clerical or administrative errors or delays that resulted in 
overpayments occurring within the four pay periods next preceding the 
adjustment, are excluded from the normally required notice and hearing 
procedures. Collection of a debt amounting to $50 or less also would be 
excluded from such procedures.
    Finally, the review of VA regulations also indicated a need to 
revise Sec.  2.6, which delegates certain debt collection authorities 
to the Assistant Secretary for Management. Current internal directives 
redelegate these authorities directly from the Assistant Secretary to 
field personnel. We are proposing to revise the regulation to 
correspond to this delegation.

Paperwork Reduction Act

    This document contains no provisions constituting a collection of 
information under the Paperwork Reduction Act (44 U.S.C. 3501-3521).

Unfunded Mandates

    The Unfunded Mandates Reform Act requires, at 2 U.S.C. 1532, that 
agencies prepare an assessment of anticipated costs and benefits before 
developing any rule that may result in an expenditure by State, local, 
or tribal governments, in the aggregate, or by the private sector of 
$100 million or more in any given year. This proposed amendment would 
have no such effect on State, local, or tribal governments, or the 
private sector.

Regulatory Flexibility Act

    The Secretary hereby certifies that this proposed rule will not 
have a significant economic impact on a substantial number of small 
entities as they are defined in the Regulatory Flexibility Act, 5 
U.S.C. 601-612. This proposed rule directly affect only individuals 
indebted to VA, and do not affect small entities. Therefore, pursuant 
to 5 U.S.C. 605(b), this proposed rule is exempt from the initial and 
final regulatory flexibility analysis requirements of sections 603 and 
604.

Executive Order 12866

    This regulatory action has been reviewed by the Office of 
Management and Budget under Executive Order 12866.
    There is no Catalog of Federal Domestic Assistance number.

List of Subjects

38 CFR Part 1

    Claims, Administrative practice and procedure, Veterans.

38 CFR Part 2

    Delegations of authority.

    Approved: September 25, 2003.
Anthony J. Principi,
Secretary of Veterans Affairs.
    For the reasons set forth in the preamble, VA proposes to amend 38 
CFR part 1 as follows:

PART 1--GENERAL PROVISIONS

    1. The authority citation for part 1 continues to read as follows:

    Authority: 38 U.S.C. 501(a), unless otherwise noted.

    2. The authority citation preceding Sec.  1.900 is revised to read 
as follows:

    Authority: Sections 1.900 through 1.953 are issued under the 
authority of 31 U.S.C. 3711 through 3720E; 38 U.S.C. 501, unless 
otherwise stated.

    3. Section 1.900 is revised to read as follows:


Sec.  1.900  Prescription of standards.

    (a) The standards contained in Sec. Sec.  1.900 through 1.953 are 
issued pursuant to the Federal Claims Collection Standards, issued by 
the Department of the Treasury and the Department of Justice (DOJ) in 
parts 900 through 904 of 31 CFR, as well as other debt collection 
authority issued by Treasury in part 285 of 31 CFR 1.900 through 1.953, 
and apply to the collection, compromise, termination, and suspension of 
debts owed to VA, and the referral of such debts to Treasury (or other 
Federal agencies designated by Treasury) for offset and collection 
action and to DOJ for litigation, unless otherwise stated in this part 
or in other statutory or regulatory authority, or by contract.
    (b) Standards and policies regarding the classification of debt for 
accounting purposes (for example, write-off of uncollectible debt) are 
contained in the Office of Management and Budget's Circular A-129 
(Revised), ``Policies for Federal Credit Programs and Non-Tax 
Receivables.''
    4. Section 1.901 is revised to read as follows:


Sec.  1.901  No private rights created.

    Sections 1.900 through 1.953 do not create any right or benefit, 
substantive or procedural, enforceable at law or in equity by a party 
against the United States, its agencies, its officers, or any other 
person, nor shall the failure of VA to comply with any of the 
provisions of Sec. Sec.  1.900 through 1.953 be available to any debtor 
as a defense.
    5. Section 1.902 is revised to read as follows:


Sec.  1.902  Antitrust, fraud, and tax and interagency claims.

    (a) The standards in Sec. Sec.  1.900 through 1.953 relating to 
compromise, suspension, and termination of collection activity do not 
apply to any debt based in whole or in part on conduct in violation of 
the antitrust laws or to any debt involving fraud, the presentation of 
a false claim, or misrepresentation on the part of the debtor or any 
party having an interest in the claim. Only DOJ has the authority to 
compromise, suspend, or terminate collection activity on such claims. 
The standards in Sec. Sec.  1.900 through 1.953 relating to the 
administrative collection of claims do apply, but only to the extent 
authorized by DOJ in a particular case. Upon identification of a claim 
based in whole or in part on conduct in violation of the antitrust laws 
or any claim involving fraud, the presentation of a false claim, or 
misrepresentation on the part of the debtor or any party having an 
interest in the claim, VA shall promptly refer the case to DOJ. At its 
discretion, DOJ may return the claim to VA for further handling in 
accordance with the standards in Sec. Sec.  1.900 through 1.953.
    (b) Sections 1.900 through 1.953 do not apply to tax debts.
    (c) Sections 1.900 through 1.953 do not apply to claims between 
Federal agencies.
    (d) Federal agencies should attempt to resolve interagency claims 
by negotiation in accordance with Executive Order 12146 (3 CFR, 1980 
Comp., pp. 409-412).
    6. Section 1.903 is revised to read as follows:


Sec.  1.903  Settlement, waiver, or compromise under other statutory or 
regulatory authority.

    Nothing in Sec. Sec.  1.900 through 1.953 precludes VA settlement, 
waiver, compromise, or other disposition of any claim under statutes 
and implementing regulations other than subchapter II of chapter 37 of 
Title 31 of the United States Code (Claims of the United States 
Government) and the standards in Title 31 CFR, parts 900 through 904. 
See, for example, the Federal Medical Care Recovery Act (42 U.S.C. 2651 
et seq.) and applicable regulations, 28 CFR, part 43. In such cases, 
the laws and regulations that are specifically applicable to claims 
collection activities of VA generally take precedence over 31 CFR, 
parts 900 through 904.

[[Page 74896]]

    7. Section 1.904 is revised to read as follows:


Sec.  1.904  Form of payment.

    Claims may be paid in the form of money or, when a contractual 
basis exists, VA may demand the return of specific property or the 
performance of specific services.
    8. Section 1.905 is revised to read as follows:


Sec.  1.905  Subdivision of claims not authorized.

    Debts may not be subdivided to avoid the monetary ceiling 
established by 31 U.S.C. 3711(a)(2). A debtor's liability arising from 
a particular transaction or contract shall be considered as a single 
debt in determining whether the debt is one of less than $100,000 
(excluding interest, penalties, and administrative costs) or such 
higher amount as the Attorney General shall from time to time prescribe 
for purposes of compromise, suspension, or termination of collection 
activity.
    9. Section 1.906 is revised to read as follows:


Sec.  1.906  Required administrative proceedings.

    (a) In applying Sec. Sec.  1.900 through 1.953, VA is not required 
to omit, foreclose, or duplicate administrative proceedings required by 
contract or other laws or regulations.
    (b) Nothing contained in Sec. Sec.  1.900 through 1.953 is intended 
to foreclose the right of any debtor to an administrative proceeding, 
including appeals, waivers, and hearings provided by statute, contract, 
or VA regulation (See 38 U.S.C. 3720(a)(4) and 5302 and 42 U.S.C. 2651-
2653).
    10. Section 1.907 is revised to read as follows:


Sec.  1.907  Definitions.

    (a) The definitions found in the Federal Claims Collection 
Standards issued in Sec.  900.2 of Title 31 of the CFR shall apply to 
Sec. Sec.  1.900 through 1.953.
    (b) As used in Sec. Sec.  1.900 through 1.953, referral for 
litigation means referral to the Department of Justice for appropriate 
legal action, except in those specified instances where a case is 
referred to VA Regional Counsels for legal action.
    (c) As used in Sec. Sec.  1.900 through 1.953, VA benefit program 
means medical care, home loan, and benefits payment programs 
administered by VA under Title 38 of the United States Code, unless 
stated otherwise.

(Authority: 31 U.S.C. 3701, 3711 and 38 U.S.C. 5316)

    11. The authority citation preceding Sec.  1.910 is removed.
    12. Section 1.910 is revised to read as follows:


Sec.  1.910  Aggressive collection action.

    (a) VA will take aggressive collection action on a timely basis, 
with effective follow-up, to collect all claims for money or property 
arising from its activities.
    (b) In accordance with 31 U.S.C. 3711(g) and the procedures set 
forth at 31 CFR 285.12, VA shall transfer to Treasury any non-tax debt 
or claim that has been delinquent for a period of 180 days or more so 
that Treasury may take appropriate action to collect the debt or 
terminate collection action. This requirement does not apply to any 
debt that:
    (1) Is in litigation or foreclosure;
    (2) Will be disposed of under an approved asset sale program;
    (3) Has been referred to a private collection contractor for a 
period of time acceptable to the Secretary of the Treasury;
    (4) Is at a debt collection center for a period of time acceptable 
to the Secretary of the Treasury;
    (5) Will be collected under internal offset procedures within 3 
years after the debt first became delinquent; or
    (6) Is exempt from this requirement based on a determination by the 
Secretary of the Treasury that exemption for a certain class of debt is 
in the best interest of the United States. VA may request that the 
Secretary exempt specific classes of debts.
    (c) In accordance with 31 U.S.C. 3716(c)(6) and the procedures set 
forth in 31 CFR part 285, VA shall notify Treasury of all past due, 
legally enforceable non-tax debt that is over 180 days delinquent for 
purposes of administrative offset, including tax refund offset and 
federal salary offset. Procedures for referral to Treasury for tax 
refund offset are found at 31 CFR 285.2 and procedures for referral to 
Treasury for federal salary offset are found at 38 CFR 1.995 and 31 CFR 
285.7.
    13. Section 1.911 is amended by:
    A. Revising paragraphs (a) and (b).
    B. Revising paragraphs (c)(3), (d)(4) and (d)(5).
    C. Adding paragraphs (d)(6) and (d)(7).
    D. Revising paragraphs (f)(1) and (f)(5).
    The revisions and addition read as follows:


Sec.  1.911  Collection of debts owed by reason of participation in a 
benefits program.

    (a) Scope. This section applies to the collection of debts 
resulting from an individual's participation in a VA benefit or home 
loan program. It does not apply to VA's other debt collection 
activities. Standards for the demand for payment of all other debts 
owed to VA are set forth in Sec.  1.911a. School liability debts are 
governed by Sec.  21.4009 of this title.
    (b) Written demands. When VA has determined that a debt exists by 
reason of an administrative decision or by operation of law, VA shall 
promptly demand, in writing, payment of the debt. VA shall notify the 
debtor of his or her rights and remedies and the consequences of 
failure to cooperate with collection efforts. Generally, one demand 
letter is sufficient, but subsequent demand letters may be issued as 
needed.
    (c) * * *
* * * * *
    (3) Appeal. In accordance with parts 19 and 20 of this title, the 
debtor may appeal the decision underlying the debt.
    (d) * * *
* * * * *
    (4) That collection may be made by offset from current or future VA 
benefit payments (see Sec.  1.912a). In addition, the debtor should be 
advised of any policies with respect to the use of credit bureaus, debt 
collection centers, and collection agencies; any other remedies to 
enforce payment of the debt, including administrative wage garnishment, 
Federal salary offset, tax refund offset, and litigation; and the 
requirement that any debt delinquent for more than 180 days be 
transferred to Treasury for administrative offset or collection.
    (5) That interest and administrative costs may be assessed in 
accordance with Sec.  1.915, as appropriate;
    (6) That the debtor shall have the opportunity to inspect and copy 
records; and
    (7) That the debtor shall have the opportunity to enter into a 
repayment agreement.
* * * * *
    (f) * * *
    (1) Appellate rights, in parts 19 and 20 of this title;
* * * * *
    (5) The assessment of interest and administrative costs, in Sec.  
1.915.
* * * * *
    14. Section 1.911a is added to read as follows:


Sec.  1.911a  Collection of non-benefit debts.

    (a) This section is written in accordance with 31 CFR 901.2 and 
applies to the demand for payment of all debts, except those debts 
arising out of participation in a VA benefit or home loan program. 
Procedures for the

[[Page 74897]]

demand for payment of VA benefit or home loan program debts are set 
forth in Sec.  1.911.
    (b) Written demand as described in paragraph (c) of this section 
shall be made promptly upon a debtor of VA in terms that inform the 
debtor of the consequences of failing to cooperate with VA to resolve 
the debt. Generally, one demand letter is sufficient, but subsequent 
letters may be issued as needed. In determining the timing of the 
demand letter, VA should give due regard to the need to refer debts 
promptly to DOJ for litigation, in accordance with Sec. Sec.  1.950 
through 1.953. When necessary to protect VA's interest (for example, to 
prevent the running of a statute of limitations), written demand may be 
preceded by other appropriate actions under 38 CFR 1.900 through 1.953, 
including immediate referral for litigation.
    (c) The written demand letter shall inform the debtor of:
    (1) The basis for the indebtedness and any rights the debtor may 
have to seek review within VA, including the right to request waiver;
    (2) The applicable standards for imposing any interest or other 
late payment charges;
    (3) The date by which payment should be made to avoid interest and 
other late payment charges and enforced collection, which generally 
should not be more than 30 days from the date that the demand letter is 
mailed;
    (4) The name, address, and phone number of a contact person or 
office within the agency;
    (5) The opportunity to inspect and copy VA records related to the 
debt; and
    (6) The opportunity to make a written agreement to repay the debt.
    (d) In addition to the items listed in paragraph (c) of this 
section, VA should include in the demand letter such items as VA's 
willingness to discuss alternative methods of payment and its policies 
with respect to the use of credit bureaus, debt collection centers, and 
collection agencies. The letter should also indicate the agency's 
remedies to enforce payment of the debt (including assessment of 
interest, administrative costs and penalties, administrative 
garnishment, Federal salary offset, tax refund offset, administrative 
offset, and litigation) and the requirement that any debt delinquent 
for more than 180 days be transferred to Treasury for collection.
    (e) VA should respond promptly to communications from debtors and 
should advise debtors who dispute debts, or request waiver, to furnish 
available evidence to support their contentions.
    (f) Prior to referring a debt for litigation, VA should advise each 
person determined to be liable for the debt that, unless the debt can 
be collected administratively, litigation may be initiated. This 
notification may be given as part of a demand letter under paragraph 
(c) of this section or in a separate letter.
    (g) When VA learns that a bankruptcy petition has been filed with 
respect to a debtor, before proceeding with further collection action, 
VA should immediately seek legal advice from either VA General Counsel 
or Regional Counsel concerning the impact of the Bankruptcy Code on any 
pending or contemplated collection activities. Unless VA determines 
that the automatic stay imposed at the time of filing pursuant to 11 
U.S.C. 362 has been lifted or is no longer in effect, in most cases 
collection activity against the debtor should stop immediately.
    (1) After seeking legal advice, a proof of claim should be filed in 
most cases with the bankruptcy court or the Trustee. VA should refer to 
the provisions of 11 U.S.C. 106 relating to the consequences on 
sovereign immunity of filing a proof of claim.
    (2) If VA is a secured creditor, it may seek relief from the 
automatic stay regarding its security, subject to the provisions and 
requirements of 11 U.S.C. 362.
    (3) Offset is prohibited in most cases by the automatic stay. 
However, VA should seek legal advice from VA's General Counsel or 
Regional Counsel to determine whether payments to the debtor and 
payments of other agencies available for offset may be frozen by VA 
until relief from the automatic stay can be obtained from the 
bankruptcy court. VA also should seek legal advice from VA's General 
Counsel or Regional Counsel to determine whether recoupment is 
available.
    15. Section 1.912 is amended by:
    A. Revising paragraphs (a), (c)(2), (d)(1), (d)(2), and (f).
    B. Adding paragraphs (d)(3), (d)(4), (g), (h), and (i).
    The additions and revisions read as follows:


Sec.  1.912  Collection by offset.

    (a) Authority and scope. In accordance with the procedures set 
forth in 31 CFR 901.3, as well as 31 CFR, part 285, VA shall collect 
debts by administrative offset from payments made by VA to an 
individual indebted to VA. Also in accordance with 31 CFR 901.3(b), as 
well as 31 CFR part 285, VA shall refer past due, legally enforceable 
non-tax debts which are over 180 days delinquent to Treasury for 
collection by centralized administrative offset (further procedures are 
set forth in paragraph (g) of this section). This section does not 
pertain to offset from either VA benefit payments or from current 
salary, but does apply to offset from all other VA payments, including 
an employee's final salary check and lump-sum leave payment. Procedures 
for offset from benefit payments are found in Sec.  1.912a. Procedures 
for offset from current Federal salary are found in Sec. Sec.  1.980 
through 1.995. NOTE: VA cannot offset, or refer for the purpose of 
offset, either under the authority of this section or under any other 
authority found in Sec. Sec.  1.900 through 1.953 and Sec. Sec.  1.980 
through 1.995, any VA home loan program debt described in 38 U.S.C. 
3726 unless the requirements set forth in that section have been met.
* * * * *
    (c) * * *
    (2) If the debtor, within 30 days of the date of the required 
notification by VA, requests in writing the waiver of collection of the 
debt in accordance with Sec.  1.963, Sec.  1.963a, or Sec.  1.964, 
offset shall not commence until VA has made an initial decision to deny 
the waiver request.
* * * * *
    (d) * * *
    (1) Offset may commence prior to either resolution of a dispute or 
decision on a waiver request as discussed in paragraph (c) of this 
section, if collection of the debt would be jeopardized by deferral of 
offset (for example, if VA first learns of the debt when there is 
insufficient time before a final payment would be made to the debtor to 
allow for prior notice and opportunity for review or waiver 
consideration). In such a case, notification pursuant to paragraph (b) 
of this section shall be made at the time offset begins or as soon 
thereafter as possible. VA shall promptly refund any money that has 
been collected that is ultimately found not to have been owed to the 
Government.
    (2) If the United States has obtained a judgment against the 
debtor, offset may commence without the notification required by 
paragraph (b) of this section. However, a waiver request filed in 
accordance with the time limits and other requirements of Sec.  1.963, 
Sec.  1.963a, or Sec.  1.964 will be considered, even if filed after a 
judgment has been obtained against the debtor. If waiver is granted, in 
whole or in part, refund of amounts already collected will be made in 
accordance with Sec.  1.967.
    (3) The procedures set forth in paragraph (b) of this section may 
be omitted when the debt arises under a

[[Page 74898]]

contract that provides for notice and other procedural protections.
    (4) Offset may commence without the notification required by 
paragraph (b) of this section when the offset is in the nature of a 
recoupment. As defined in 31 CFR 900.2(d), recoupment is a special 
method for adjusting debts arising under the same transaction or 
occurrence.
* * * * *
    (f) When collecting multiple debts by administrative offset, VA 
shall apply the recovered amounts to those debts in accordance with the 
best interests of the United States, as determined by the facts and 
circumstances of the particular case, paying special attention to 
applicable statutes of limitation. In accordance with 31 CFR 
901.3(a)(4), VA may not initiate offset to collect a debt more than 10 
years after VA's right to collect the debt first accrued (with certain 
exceptions as specified in Sec.  901.3(a)(4)).
    (g) When VA refers delinquent debts to Treasury for centralized 
administrative offset in accordance with 31 CFR part 285, VA must 
certify that:
    (1) The debts are past due and legally enforceable; and
    (2) VA has complied with all due process requirements under 31 
U.S.C. 3716(a) and paragraphs (b) and (c) of this section. Payments 
that are prohibited by law from being offset are exempt from 
centralized administrative offset.
    (h) In accordance with 31 U.S.C. 3716(f), the Secretary of the 
Treasury may waive the provisions of the Computer Matching and Privacy 
Protection Act of 1988 concerning matching agreements and post-match 
notification and verification (5 U.S.C. 552a(o) and (p)) for 
centralized administrative offset upon receipt of a certification from 
a creditor agency that the due process requirements enumerated in 31 
U.S.C. 3716(a) and paragraphs (b) and (c) of this section have been 
met. The certification of a debt in accordance with paragraph (g) of 
this section will satisfy this requirement. If such a waiver is 
granted, only the Data Integrity Board of the Department of the 
Treasury is required to oversee any matching activities, in accordance 
with 31 U.S.C. 3716(g).
    (i)(1) Unless the offset would not be in VA's best interest, or 
would otherwise be contrary to law, VA will comply with requests by 
creditor agencies to offset VA payments (except for current salary or 
benefit payments) made to a person indebted to the creditor agency. 
However, before VA may initiate offset, the creditor agency must 
certify in writing to VA that the debtor has been provided:
    (i) Written notice of the type and amount of the debt and the 
intent of the creditor agency to use administrative offset to collect 
the debt;
    (ii) The opportunity to inspect and copy agency records related to 
the debt;
    (iii) The opportunity for review within the agency of the 
determination of the indebtedness; and,
    (iv) The opportunity to make a written agreement to repay the debt.
    (2) Procedures for current salary offset are set forth at 
Sec. Sec.  1.980-1.995. Procedures for offset of VA benefit payments 
are set forth at Sec.  1.912a.
    16. Section 1.912a is amended by adding paragraph (c)(4) to read as 
follows:


Sec.  1.912a  Collection by offset--from VA benefit payments.

* * * * *
    (c) * * *
    (4) VA will pursue collection action once an adverse initial 
decision is reached on the debtor's request for waiver and/or the 
debtor's informal dispute (as described in Sec.  1.911a(c)(1)) 
concerning the existence or amount of the debt, even if the debtor 
subsequently pursues appellate relief in accordance with parts 19 and 
20 of this title.
* * * * *


Sec.  1.913  [Removed]


Sec.  1.914  [Removed]


Sec.  1.915  [Removed]

    17. Sections 1.913, 1.914, and 1.915 are removed.


Sec.  1.916  [Redesignated as Sec.  1.913]

    18. Section 1.916 is redesignated as Sec.  1.913 and is revised to 
read as follows:


Sec.  1.913  Liquidation of collateral.

    (a) VA should liquidate security or collateral through the exercise 
of a power of sale in the security instrument or a nonjudicial 
foreclosure, and apply the proceeds to the applicable debt, if the 
debtor fails to pay the debt within 180 days after demand and if such 
action is in the best interest of the United States. Collection from 
other sources, including liquidation of security or collateral, is not 
a prerequisite to requiring payment by a surety, insurer, or guarantor, 
unless such action is expressly required by statute or contract.
    (b) When VA learns that a bankruptcy petition has been filed with 
respect to a debtor, VA should seek legal advice from the VA General 
Counsel or Regional Counsel concerning the impact of the Bankruptcy 
Code, including, but not limited to, 11 U.S.C. 362, to determine the 
applicability of the automatic stay and the procedures for obtaining 
relief from such stay prior to proceeding under paragraph (a) of this 
section.


Sec.  1.917  [Redesignated as Sec.  1.914]

    19. Section 1.917 is redesignated as Sec.  1.914 and is revised to 
read as follows:


Sec.  1.914  Collection in installments.

    (a) Whenever feasible, VA shall collect the total amount of a debt 
in one lump sum. If a debtor is financially unable to pay a debt in one 
lump sum, VA may accept payment in regular installments. VA should 
obtain financial statements from debtors who represent that they are 
unable to pay in one lump sum and independently verify such 
representations whenever possible. If VA agrees to accept payments in 
regular installments, VA should obtain a legally enforceable written 
agreement from the debtor that specifies all of the terms of the 
arrangement and contains a provision accelerating the debt in the event 
of default.
    (b) The size and frequency of installment payments should bear a 
reasonable relation to the size of the debt and the debtor's ability to 
pay. If possible, the installment payments should be sufficient in size 
and frequency to liquidate the debt in 3 years or less.
    (c) Security for deferred payments should be obtained in 
appropriate cases. However, VA may accept installment payments if the 
debtor refuses to execute a written agreement or to give security.


Sec.  1.918  [Removed]

    20. Section 1.918 is removed.


Sec.  1.919  [Redesignated as Sec.  1.915]

    21. Section 1.919 is redesignated as Sec.  1.915 and is amended by:
    A. Revising the heading and paragraphs (a) and (c).
    B. In paragraph (d), removing ``Sec.  1.919'' and adding, in its 
place, ``this section''.
    C. Removing paragraphs (f)(2)(i) and (ii).
    D. Revising paragraph (g).
    The revisions read as follows:


Sec.  1.915  Interest, administrative costs, and penalties.

    (a) Except as otherwise provided by statute, contract, or other 
regulation to the contrary, and subject to 38 U.S.C. 3485(e) and 5302, 
VA shall assess:
    (1) Interest on all indebtedness to the United States arising out 
of participation in a VA benefit, medical

[[Page 74899]]

care, or home loan program under authority of Title 38, U.S. Code.
    (2) Interest and administrative costs of collection on such debts 
described in paragraph (a)(1) of this section where repayment has 
become delinquent (as defined in 31 CFR 900.2(b)), and
    (3) Interest, administrative costs, and penalties in accordance 
with 31 CFR 901.9 on all debts other than those described in paragraph 
(a)(1) of this section.
* * * * *
    (c) The rate of interest charged by VA shall be based on the rate 
established annually by the Secretary of the Treasury in accordance 
with 31 U.S.C. 3717 and shall be adjusted annually by VA on the first 
day of the calendar year. Once the rate of interest has been determined 
for a particular debt, the rate shall remain in effect throughout the 
duration of repayment of that debt. When a debtor defaults on a 
repayment agreement and seeks to enter into a new agreement, VA may 
require payment of interest at a new rate that reflects the current 
value of funds to the Treasury at the time the new agreement is 
executed. Interest shall not be compounded, that is, interest shall not 
be charged on accrued interest and administrative costs required by 
this section. If, however, a debtor defaults on a previous repayment 
agreement, interest and administrative costs that accrued but were not 
collected under the defaulted agreement shall be added to the principal 
under the new agreement.
* * * * *
    (g) Administrative costs assessed under this section shall be the 
average costs of collection of similar debts, or actual collection 
costs as may be accurately determined in the particular case. No 
administrative costs of collection will be assessed under this section 
in any cases where the indebtedness is paid in full prior to the 30-day 
period specified in paragraph (e) of this section, or in any case where 
a repayment plan is proposed by the debtor and accepted by VA within 
that 30-day period, unless such repayment agreement becomes delinquent 
(as defined in 31 CFR 900.2(b)).


Sec.  1.920  [Removed]

    22. Section 1.920 is removed.


Sec.  1.921  [Removed]

    23. Section 1.921 is removed.


Sec.  1.922  [Redesignated as Sec.  1.916]

    24. Section 1.922 is redesignated as Sec.  1.916 and is amended by:
    A. Revising paragraph (d)(2)(i).
    B. Revising the authority citation at the end of the section.
    The revision reads as follows:


Sec.  1.916  Disclosure of debt information to consumer reporting 
agencies (CRA).

* * * * *
    (d) * * *
    (2)(i) In accordance with Sec.  1.911 and Sec.  1.911a, VA shall 
notify each individual of the right to dispute the existence and amount 
of the debt and to request a waiver of the debt, if applicable.
* * * * *

(Authority: 38 U.S.C. 5701(g), (i); 31 U.S.C. 3711(e))

Sec.  1.923  [Redesignated as Sec.  1.917]

    25. Section 1.923 is redesignated as Sec.  1.917 and is amended by:
    A. Revising paragraph (b) introductory text.
    B. Adding paragraphs (c) through (e).
    The revision and additions read as follows:


Sec.  1.917  Contracting for collection services.

* * * * *
    (b) In accordance with 31 U.S.C. 3718(d), or as otherwise permitted 
by law, collection service contracts may be funded in the following 
manner:
* * * * *
    (c) VA shall use government-wide debt collection contracts to 
obtain debt collection services provided by private collection 
contractors. However, VA may refer debts to private collection 
contractors pursuant to a contract between VA and a private collection 
contractor only if such debts are not subject to the requirement to 
transfer debts to Treasury for debt collection. See 31 U.S.C. 3711(g); 
31 CFR 285.12(e), and 38 CFR 1.910.
    (d) VA may enter into contracts for locating and recovering assets 
of the United States, such as unclaimed assets.
    (e) VA may enter into contracts for debtor asset and income search 
reports. In accordance with 31 U.S.C. 3718(d), such contracts may 
provide that the fee a contractor charges the agency for such services 
may be payable from the amounts recovered, unless otherwise prohibited 
by statute.

(Authority: 31 U.S.C. 3718)

Sec.  1.924  [Redesignated as Sec.  1.918]

    26. Section 1.924 is redesignated as Sec.  1.918 and is amended by 
revising paragraphs (a) and (b) to read as follows:


Sec.  1.918  Use and disclosure of mailing addresses.

    (a) When attempting to locate a debtor in order to compromise or 
collect a debt in accordance with Sec. Sec.  1.900 through 1.953, VA 
may send a request to the Secretary of the Treasury, or his/her 
designee, in order to obtain the debtor's most current mailing address 
from the records of the Internal Revenue Service.
    (b) VA is authorized to use mailing addresses obtained under 
paragraph (a) of this section to enforce collection of a delinquent 
debt and may disclose such mailing addresses to other agencies and to 
collection agencies for collection purposes.
* * * * *


Sec.  1.925  [Redesignated as Sec.  1.919]

    27. Section 1.925 is redesignated as Sec.  1.919 and is amended by 
revising paragraphs (a) and (b)(3) to read as follows:


Sec.  1.919  Administrative offset against amounts payable from Civil 
Service Retirement and Disability Fund, Federal Employees Retirement 
System (FERS), final salary check, and lump sum leave payments.

    (a) Unless otherwise prohibited by law or regulation, and in 
accordance with 31 CFR 901.3(d), VA may request that money which is due 
and payable to a debtor from either the Civil Service Retirement and 
Disability Fund or FERS be administratively offset in reasonable 
amounts in order to collect, in one full payment or a minimal number of 
payments, debts that are owed to VA by the debtor. Such requests shall 
be made to the appropriate officials at the Office of Personnel 
Management (OPM) in accordance with such regulations prescribed by the 
Director of OPM. (See 5 CFR 831.1801 through 831.1808). In addition, VA 
may also offset against a Federal employee's final salary check and 
lump sum leave payment, unless such offset represents continuation of 
an offset against current salary initiated in accordance with 
Sec. Sec.  1.980 through 1.995. See Sec.  1.912 for procedures for 
offset against a final salary check and lump sum leave payment.
    (b) * * *
    (3) VA has complied with Sec. Sec.  1.911, 1.911a, 1.912, 1.912a, 
or 31 CFR Sec.  901.3, including any required hearing or review.
* * * * *


Sec.  1.926  [Redesignated as Sec.  1.920]

    28. Section 1.926 is redesignated as Sec.  1.920 and amended by:
    A. Revising paragraph (a).
    B. Revising paragraph (c)(6).
    C. Revising paragraph (e).
    The revisions read as follows:


Sec.  1.920  Referral of VA debts.

    (a) When authorized, VA may refer an uncollectible debt to another 
Federal or

[[Page 74900]]

State agency for the purpose of collection action. Collection action 
may include the offsetting of the debt from any current or future 
payment, except salary (see paragraph (e) of this section), made by 
such Federal or State agency to the person indebted to VA.
* * * * *
    (c) * * *
    (6) Other applicable notices required by Sec. Sec.  1.911, 1.911a, 
1.912, and 1.912a.
* * * * *
    (e) The referral by VA of a VA debt to another agency for the 
purpose of salary offset shall be done in accordance with 38 CFR 1.980 
through 1.995 and regulations prescribed by the Director of the Office 
of Personnel Management (OPM) in 5 CFR part 550, subpart K.
* * * * *


Sec.  1.927  [Redesignated as Sec.  1.921]

    29. Section 1.927 is redesignated as Sec.  1.921 and is revised to 
read as follows:


Sec.  1.921  Analysis of costs.

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


Sec.  1.928  [Redesignated as Sec.  1.922]

    30. Section 1.928 is redesignated as Sec.  1.922 and is revised to 
read as follows:


Sec.  1.922  Exemptions.

    (a) Sections 1.900 through 1.953, to the extent they reflect 
remedies or procedures prescribed by the Debt Collection Act of 1982 
and the Debt Collection Improvement Act of 1996, such as administrative 
offset, use of credit bureaus, contracting for collection agencies, and 
interest and related charges, do not apply to debts arising under, or 
payments made under, the Internal Revenue Code of 1986, as amended (26 
U.S.C. 1 et seq.); the Social Security Act (42 U.S.C. 301 et seq.), 
except to the extent provided under 42 U.S.C. 404 and 31 U.S.C. 
3716(c); or the tariff laws of the United States. These remedies and 
procedures, however, may be authorized with respect to debts that are 
exempt from the Debt Collection Act of 1982 and the DCIA of 1996, to 
the extent that they are authorized under some other statute or the 
common law.
    (b) This section should not be construed as prohibiting the use of 
Sec. Sec.  1.900 through 1.953 when collecting debts owed by persons 
employed by agencies administering the laws cited in paragraph (a) of 
this section unless the debt arose under those laws.

(Authority: 31 U.S.C. 3711)

    31. Section 1.923 is added to read as follows:


Sec.  1.923  Administrative wage garnishment.

    (a) In accordance with the procedures set forth in 31 U.S.C. 3720D 
and 31 CFR 285.11, VA or Treasury may request that a non-Federal 
employer garnish the disposable pay of an individual to collect 
delinquent non-tax debt owed to VA. VA may pursue wage garnishment 
independently in accordance with this section or garnishment may be 
pursued after VA refers a debt to Treasury in accordance with 31 CFR 
285.12 or with Sec.  1.910 of this title. For the purposes of this 
section, any reference to Treasury also includes any private collection 
agency under contract to Treasury.
    (b) At least 30 days prior to the initiation of garnishment 
proceedings, VA or Treasury shall send a written notice, as described 
in 31 CFR 285.11(e), by first class mail to the debtor's last known 
address. This notice shall inform the debtor of:
    (1) The nature and amount of the debt;
    (2) The intention of VA or Treasury to initiate proceedings to 
collect the debt through deductions from the debtor's pay until the 
debt and all accumulated interest, and other late payment charges, are 
paid in full, and;
    (3) An explanation of the debtor's rights, including the 
opportunity:
    (i) To inspect and copy VA records pertaining to the debt;
    (ii) To enter into a written repayment agreement with VA or 
Treasury under terms agreeable to VA or Treasury, and;
    (iii) To request a hearing in accordance with 31 CFR 285.11(f) and 
paragraph (c) of this section concerning the existence or amount of the 
debt or the terms of the proposed repayment schedule under the 
garnishment order. However, the debtor is not entitled to a hearing 
concerning the terms of the proposed repayment schedule if these terms 
have been established by written agreement under paragraph (b)(3)(ii) 
of this section.
    (c) Any hearing conducted as part of the administrative wage 
garnishment process shall be conducted by the designated hearing 
official in accordance with the procedures set forth in 31 CFR 
285.11(f). This hearing official may be any VA Board of Contract 
Appeals Administrative Judge or Hearing Examiner, or any other VA 
hearing official. This hearing official may also conduct administrative 
wage garnishment hearings for other Federal agencies.
    (1) The hearing may be oral or written as determined by the 
designated hearing official. The hearing official shall provide the 
debtor with a reasonable opportunity for an oral hearing when the 
hearing official determines that the issue in dispute cannot be 
resolved by review of documentary evidence. The hearing official shall 
establish the time and place of any oral hearing. At the debtor's 
option, an oral hearing may be conducted either in person or by 
telephone conference call. A hearing is not required to be a formal, 
evidentiary-type hearing, but witnesses who testify in oral hearings 
must do so under oath or affirmation. While it is not necessary to 
produce a transcript of the hearing, the hearing official must maintain 
a summary record of the proceedings. All travel expenses incurred by 
the debtor in connection with an in-person hearing shall be borne by 
the debtor. VA or Treasury shall be responsible for all telephone 
expenses. In the absence of good cause shown, a debtor who fails to 
appear at a hearing will be deemed as not having timely filed a request 
for a hearing.
    (2) If the hearing official determines that an oral hearing is not 
necessary, then he/she shall afford the debtor a ``paper hearing.'' In 
a ``paper hearing,'' the hearing official will decide the issues in 
dispute based upon a review of the written record.
    (3) If the debtor's written request for a hearing is received by 
either VA or Treasury within 15 business days following the mailing of 
the notice described in paragraph (b) of this section, then VA or 
Treasury shall not issue a withholding order as described in paragraph 
(d) of this section until the debtor is afforded the requested hearing 
and a decision rendered. If the debtor's written request for a hearing 
is not received within 15 business days following the mailing of the 
notice described in paragraph (b) of this section, then the hearing 
official shall provide a hearing to the debtor, but will not delay 
issuance of a withholding order as described in paragraph (d) of this 
section, unless the hearing official determines that the delay in 
filing was caused by factors beyond the debtor's control.
    (4) The hearing official shall notify the debtor of:
    (i) The date and time of a telephone conference hearing;

[[Page 74901]]

    (ii) The date, time, and location of an in-person oral hearing, or;
    (iii) The deadline for the submission of evidence for a written 
hearing.
    (5) Except as provided in paragraph (c)(6) of this section, VA or 
Treasury shall have the burden of going forward to prove the existence 
or amount of the debt, after which the debtor must show, by a 
preponderance of the evidence, that no debt exists or that the amount 
of the debt is incorrect. In general, this means that the debtor must 
show that it is more likely than not that a debt does not exist or that 
the amount of the debt is incorrect. The debtor may also present 
evidence that terms of the repayment agreement are unlawful, would 
cause a financial hardship, or that collection of the debt may not be 
pursued due to operation of law.
    (6) If the debtor has previously contested the existence and/or 
amount of the debt in accordance with Sec.  1.911(c)(1) or Sec.  
1.911a(c)(1) of this title and VA subsequently rendered a decision 
upholding the existence or amount of the debt, then such decision shall 
be incorporated by reference and become the basis of the hearing 
official's decision on such matters described in paragraph (c)(7) of 
this section.
    (7) The hearing official shall issue a written decision as soon as 
practicable, but not later than 60 days after the date on which the 
request for such hearing was received by VA or Treasury. The decision 
will be the final action for the purposes of judicial review under the 
Administrative Procedures Act (5 U.S.C. 701 et seq.). The decision 
shall include:
    (i) A summary of the facts presented;
    (ii) The hearing official's findings, analysis, and conclusions, 
and;
    (iii) The terms of the repayment schedule, if applicable.
    (d) In accordance with 31 CFR 285.11(g) and (h), VA or Treasury 
shall send a withholding order and certification form (Treasury Form 
SF-29) by first class mail to the debtor's employer within 30 days 
after the debtor fails to make a timely request for a hearing. If a 
timely request for a hearing has been filed by the debtor, then VA or 
Treasury shall send a withholding order and certification form by first 
class mail to the debtor's employer within 30 days after a final 
decision (see paragraph (c)(6) of this section) is made to proceed with 
the garnishment. The employer shall complete and return the 
certification form as described in Sec.  285.11(h).
    (e) After receipt of the garnishment order, the employer shall 
withhold the amount of garnishment as described in 31 CFR 285.11(i) 
from all disposable pay payable to the applicable debtor during each 
pay period.
    (f) A debtor whose wages are subject to a wage withholding order 
under 31 CFR 285.11 may request a review, under the procedures set 
forth in paragraph (k) of Sec.  285.11, of the amount garnished. A 
request for review shall only be considered after garnishment has been 
initiated. The request must be based on materially changed 
circumstances such as disability, divorce, or catastrophic illness 
which result in financial hardship that limits the debtor's ability to 
provide food, housing, clothing, transportation, and medical care for 
himself/herself and his/her dependents.
    32. Section 1.924 is added to read as follows:


Sec.  1.924  Suspension or revocation of eligibility for federal loans, 
loan insurance, loan guarantees, licenses, permits, or privileges.

    (a) In accordance with 31 U.S.C. 3720B and the procedures set forth 
in 31 CFR 285.13 and Sec.  901.6, a person owing an outstanding non-tax 
debt that is in delinquent status shall not be eligible for Federal 
financial assistance unless exempted under paragraph (d) or waived 
under paragraph (e) of this section.
    (b) Federal financial assistance or financial assistance means any 
Federal loan (other than a disaster loan), loan insurance, or loan 
guarantee.
    (c) For the purposes of this section only, a debt is in a 
delinquent status if the debt has not been paid within 90 days of the 
payment due date or by the end of any grace period provided by statute, 
regulation, contract, or agreement. The payment due date is the date 
specified in the initial written demand for payment. Further guidance 
concerning the delinquent status of a debt may be found at 31 CFR 
285.13(d).
    (d) Upon the written request and recommendation of the Secretary of 
Veterans Affairs, the Secretary of the Treasury may grant exemptions 
from the provisions of this section. The standards for exemptions 
granted for classes of debts are set forth in 31 CFR 285.13(f).
    (e)(1) VA's Chief Financial Officer or Deputy Chief Financial 
Officer may waive the provisions of paragraph (a) of this section only 
on a person-by-person basis.
    (2) The Chief Financial Officer or Deputy Chief Financial Officer 
should balance the following factors when deciding whether to grant a 
waiver:
    (i) Whether the denial of the financial assistance to the person 
would tend to interfere substantially with or defeat the purposes of 
the financial assistance program or otherwise would not be in the best 
interests of the Federal government; and
    (ii) Whether the granting of the financial assistance to the person 
is contrary to the government's goal of reducing losses by requiring 
proper screening of potential borrowers.
    (3) When balancing the factors described in paragraph (e)(1) and 
(e)(2) of this section, the Chief Financial Officer or Deputy Chief 
Financial Officer should consider:
    (i) The age, amount, and cause(s) of the delinquency and the 
likelihood that the person will resolve the delinquent debt; and
    (ii) The amount of the total debt, delinquent or otherwise, owed by 
the person and the person's credit history with respect to repayment of 
debt.
    (4) A centralized record shall be retained of the number and type 
of waivers granted under this section.
    (f) In non-bankruptcy cases, in seeking the collection of statutory 
penalties, forfeitures, or other similar types of claims, VA may 
suspend or revoke any license, permit, or other privilege granted a 
debtor when the debtor inexcusably or willfully fails to pay such a 
debt. The debtor should be advised in VA's written demand for payment 
of VA's ability to suspend or revoke licenses, permits, or privileges. 
VA may suspend or disqualify any lender, contractor, or broker who is 
engaged in making, guaranteeing, insuring, acquiring, or participating 
in loans from doing further business with VA or engaging in programs 
sponsored by VA if such lender, contractor, or broker fails to pay its 
debts to the Government within a reasonable time, or if such lender, 
contractor, or broker has been suspended, debarred, or disqualified 
from participation in a program or activity by another Federal agency. 
The failure of any surety to honor its obligations in accordance with 
31 U.S.C. 9305 should be reported to Treasury.
    (g) In bankruptcy cases, before advising the debtor of the 
intention to suspend or revoke licenses, permits, or privileges, VA 
should seek legal advice from the VA General Counsel or Regional 
Counsel concerning the impact of the Bankruptcy Code, particularly 11 
U.S.C. 362 and 525, which may restrict such action.

(Authority: 31 U.S.C. 3720B)

    33. The authority citation preceding Sec.  1.930 is removed.
    34. Sections 1.930 through 1.936 are revised to read as follows:


Sec.  1.930  Scope and application.

    (a) The standards set forth in this part apply to the compromise of 
debts

[[Page 74902]]

pursuant to 31 U.S.C. 3711. VA may exercise such compromise authority 
when the amount of the debt due, exclusive of interest, penalties, and 
administrative costs, does not exceed $100,000 or any higher amount 
authorized by the Attorney General.
    (b) Unless otherwise provided by law, when the principal balance of 
a debt, exclusive of interest, penalties, and administrative costs, 
exceeds $100,000 or any higher amount authorized by the Attorney 
General, the authority to accept the compromise rests with DOJ. If VA 
receives an offer to compromise any debt in excess of $100,000, VA 
should evaluate the compromise offer using the same factors as set 
forth in 38 CFR 1.931. If VA believes the offer has merit, it shall 
refer the debt to the Civil Division or other appropriate division in 
DOJ using a Claims Collection Litigation Report (CCLR). The referral 
shall include appropriate financial information and a recommendation 
for the acceptance of the compromise offer. DOJ approval is not 
required if VA decides to reject a compromise offer.
    (c) The $100,000 limit in paragraph (b) of this section does not 
apply to debts that arise out of participation in a VA loan program 
under Chapter 37 of Title 38 of the U.S. Code. VA has unlimited 
authority to compromise debts arising out of participation in a Chapter 
37 loan program, regardless of the amount of the debt.


Sec.  1.931  Bases for compromise.

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


Sec.  1.932  Enforcement policy.

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


Sec.  1.933  Joint and several liability.

    (a) When two or more debtors are jointly and severally liable, VA 
will pursue collection activity against all debtors, as appropriate. VA 
will not attempt to allocate the burden of payment between the debtors 
but should proceed to liquidate the indebtedness as quickly as 
possible.
    (b) VA will ensure that a compromise agreement with one debtor does 
not release VA's claim against the remaining debtors. The amount of a 
compromise with one debtor shall not be considered a precedent or 
binding in determining the amount that will be required from other 
debtors jointly and severally liable on the claim.


Sec.  1.934  Further review of compromise offers.

    If VA is uncertain whether to accept a firm, written, substantive 
compromise offer on a debt that is within its delegated compromise 
authority, it may refer the offer to VA General Counsel or Regional 
Counsel or to the Civil Division or other appropriate division in DOJ, 
using a CCLR accompanied by supporting data and particulars concerning 
the debt. DOJ may act upon such an offer or return it to the agency 
with instructions or advice.


Sec.  1.935  Consideration of tax consequences to the Government.

    In negotiating a compromise, VA will consider the tax consequences 
to the Government. In particular, VA will consider requiring a waiver 
of tax-loss-carry-forward and tax-loss-carry-back rights of the debtor.


Sec.  1.936  Mutual releases of the debtor and VA.

    In all appropriate instances, a compromise that is accepted by VA 
shall be implemented by means of a mutual release, in which the debtor 
is released from further non-tax liability on the compromised debt in 
consideration of payment in full of the

[[Page 74903]]

compromise amount, and VA and its officials, past and present, are 
released and discharged from any and all claims and causes of action 
arising from the same transaction that the debtor may have. In the 
event a mutual release is not executed when a debt is compromised, 
unless prohibited by law, the debtor is still deemed to have waived any 
and all claims and causes of action against VA and its officials 
related to the transaction giving rise to the compromised debt.


Sec.  1.937  [Removed]


Sec.  1.938  [Removed]

    35. Sections 1.937 and 1.938 are removed.
    36. Sections 1.940 and 1.941 are revised to read as follows:


Sec.  1.940  Scope and application.

    (a) The standards set forth in Sec. Sec.  1.940 through 1.944 apply 
to the suspension or termination of collection activity pursuant to 31 
U.S.C. 3711 on debts that do not exceed $100,000, or such other amount 
as the Attorney General may direct, exclusive of interest, penalties, 
and administrative costs, after deducting the amount of partial 
payments or collections, if any. Prior to referring a debt to DOJ for 
litigation, VA may suspend or terminate collection under this part with 
respect to the debt.
    (b) If, after deducting the amount of any partial payments or 
collections, the principal amount of a debt exceeds $100,000, or such 
other amount as the Attorney General may direct, exclusive of interest, 
penalties, and administrative costs, the authority to suspend or 
terminate rests solely with DOJ. If VA believes that suspension or 
termination of any debt in excess of $100,000 may be appropriate, it 
shall refer the debt to the Civil Division or other appropriate 
division in DOJ, using the CCLR. The referral should specify the 
reasons for VA's recommendation. If, prior to referral to DOJ, VA 
determines that a debt is plainly erroneous or clearly without legal 
merit, VA may terminate collection activity regardless of the amount 
involved without obtaining DOJ concurrence.


Sec.  1.941  Suspension of collection activity.

    (a) VA may suspend collection activity on a debt when:
    (1) It cannot locate the debtor;
    (2) The debtor's financial condition is expected to improve; or
    (3) The debtor has requested a waiver or review of the debt.
    (b) Based on the current financial condition of the debtor, VA may 
suspend collection activity on a debt when the debtor's future 
prospects justify retention of the debt for periodic review and 
collection activity and:
    (1) The applicable statute of limitations has not expired; or
    (2) Future collection can be effected by administrative offset, 
notwithstanding the expiration of the applicable statute of limitations 
for litigation of claims, and with due regard to the 10-year limitation 
for administrative offset prescribed by 31 U.S.C. 3716(e)(1); or
    (3) The debtor agrees to pay interest on the amount of the debt on 
which collection will be suspended, and such suspension is likely to 
enhance the debtor's ability to pay the full amount of the principal of 
the debt with interest at a later date.
    (c) Collection action may also be suspended, in accordance with 
Sec. Sec.  1.911, 1.911a, 1.912, and 1.912a, pending VA action on 
requests for administrative review of the existence or amount of the 
debt or a request for waiver of collection of the debt. However, 
collection action will be resumed once VA issues an initial decision on 
the administrative review or waiver request.
    (d) When VA learns that a bankruptcy petition has been filed with 
respect to a debtor, in most cases the collection activity on a debt 
must be suspended, pursuant to the provisions of 11 U.S.C. 362, 1201, 
and 1301, unless VA can clearly establish that the automatic stay does 
not apply, has been lifted, or is no longer in effect. VA shall seek 
legal advice immediately from either the General Counsel or Regional 
Counsel and, if legally permitted, take the necessary steps to ensure 
that no funds or money are paid by VA to the debtor until relief from 
the automatic stay is obtained.
    37. Section 1.942 is amended by adding paragraphs (g) and (h) to 
read as follows:


Sec.  1.942  Termination of collection activity.

* * * * *
    (g) Discharge in bankruptcy. Generally, VA shall terminate 
collection activity on a debt that has been discharged in bankruptcy, 
regardless of the amount. VA may continue collection activity, subject 
to the provisions of the Bankruptcy Code, for any payments provided 
under a plan of reorganization. Offset and recoupment rights may 
survive the discharge of the debtor in bankruptcy and, under some 
circumstances, claims also may survive the discharge.
    (h) Before terminating collection activity, VA should have pursued 
all appropriate means of collection and determined, based upon the 
results of the collection activity, that the debt is uncollectible. 
Termination of collection activity ceases active collection of the 
debt. The termination of collection activity does not preclude VA from 
retaining a record of the account for purposes of:
    (1) Selling the debt, if the Secretary of the Treasury determines 
that such sale is in the best interests of the United States;
    (2) Pursuing collection at a subsequent date in the event there is 
a change in the debtor's status or a new collection tool becomes 
available;
    (3) Offsetting against future income or assets not available at the 
time of termination of collection activity; or
    (4) Screening future applicants for prior indebtedness.
    38. Section 1.943 is revised and Sec.  1.944 is added to read as 
follows:


Sec.  1.943  Exception to termination.

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


Sec.  1.944  Discharge of indebtedness; reporting requirements.

    (a) Before discharging a delinquent debt (also referred to as a 
close out of the debt), VA shall take all appropriate steps to collect 
the debt in accordance with 31 U.S.C. 3711(g), including, as 
applicable, administrative offset, tax refund offset, Federal salary 
offset, referral to Treasury or Treasury-designated debt collection 
centers or private collection contractors, credit bureau reporting, 
wage garnishment, litigation, and foreclosure. Discharge of 
indebtedness is distinct from termination or suspension of collection 
activity under Sec. Sec.  1.940 through 1.943 and is governed by the 
Internal Revenue Code. When collection action on a debt is suspended or 
terminated, the debt remains delinquent and further collection action 
may be pursued at a later date in accordance with the standards set 
forth in Sec.  1.900 et seq. When VA discharges a debt in full or in 
part, further collection action is prohibited. Therefore, VA should 
make the determination that collection action is no longer warranted 
before discharging a debt. Before discharging a debt, VA must terminate 
debt collection action.
    (b) Upon discharge of an indebtedness, VA must report the discharge 
to the Internal Revenue Service (IRS) in accordance with the 
requirements of 26 U.S.C. 6050P and 26 CFR 1.6050P-1. VA may request

[[Page 74904]]

Treasury or Treasury-designated debt collection centers to file such a 
discharge report to the IRS on VA's behalf.
    (c) When discharging a debt, VA must request that any liens of 
record securing the debt be released.
    (d) 31 U.S.C. 3711(i)(2) requires agencies to sell a delinquent 
nontax debt upon termination of collection action if the Secretary of 
the Treasury determines such a sale is in the best interests of the 
United States. Since the discharge of a debt precludes any further 
collection action (including the sale of a delinquent debt), VA may not 
discharge a debt until the requirements of Section 3711(i)(2) have been 
met.
    39. The authority citation preceding Sec.  1.950 is removed.
    40. Sections 1.950 through 1.953 are revised to read as follows:


Sec.  1.950  Prompt referral.

    (a) VA shall promptly refer debts to DOJ for litigation where 
aggressive collection activity has been taken in accordance with 
Sec. Sec.  1.900 et seq., and such debts cannot be compromised, or on 
which collection activity cannot be suspended or terminated, in 
accordance with parts Sec. Sec.  1.930 through 1.936 and Sec. Sec.  
1.940 through 1.944. Debts for which the principal amount is over 
$1,000,000, or such other amount as the Attorney General may direct, 
exclusive of interest and other late payment charges, shall be referred 
to the Civil Division or other division responsible for litigating such 
debts at DOJ. Debts for which the principal amount is $1,000,000, or 
less, or such other amount as the Attorney General may direct, 
exclusive of interest or penalties, shall be referred to DOJ's 
Nationwide Central Intake Facility as required by the CCLR 
instructions. Debts should be referred as early as possible, consistent 
with aggressive agency collection activity and the observance of the 
standards contained in Sec. Sec.  1.900 et seq., and, in any event, 
well within the period for initiating timely lawsuits against the 
debtors. VA shall make every effort to refer delinquent debts to DOJ 
for litigation within 1 year of the date such debts last became 
delinquent. In the case of guaranteed or insured loans, VA should make 
every effort to refer these delinquent debts to DOJ for litigation 
within 1 year from the date the loan was presented to VA for payment or 
reinsurance.
    (b) DOJ has exclusive jurisdiction over the debts referred to it 
pursuant to this section. VA shall immediately terminate the use of any 
administrative collection activities to collect a debt at the time of 
the referral of that debt to DOJ. VA should advise DOJ of the 
collection activities that have been utilized to date, and their 
result. VA shall refrain from having any contact with the debtor and 
shall direct all debtor inquiries concerning the debt to DOJ. VA shall 
immediately notify DOJ of any payments credited to the debtor's account 
after referral of a debt under this section. DOJ shall notify VA, in a 
timely manner, of any payments it receives from the debtor.


Sec.  1.951  Claims Collection Litigation Report (CCLR).

    (a) Unless excepted by Justice, VA shall complete the CCLR, 
accompanied by a signed Certificate of Indebtedness, to refer all 
administratively uncollectible claims to DOJ for litigation. VA shall 
complete all of the sections of the CCLR appropriate to each claim as 
required by the CCLR instructions and furnish such other information as 
may be required in specific cases.
    (b) VA shall indicate clearly on the CCLR the actions it wishes DOJ 
to take with respect to the referred claim.
    (c) VA shall also use the CCLR to refer claims to DOJ to obtain 
approval of any proposals to compromise the claims or to suspend or 
terminate agency collection activity.


Sec.  1.952  Preservation of evidence.

    VA must take care to preserve all files and records that may be 
needed by DOJ to prove its claims in court. VA ordinarily should 
include certified copies of the documents that form the basis for the 
claim when referring such claims to DOJ for litigation. VA shall 
provide originals of such documents immediately upon request by DOJ.


Sec.  1.953  Minimum amount of referrals to the Department of Justice.

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


Sec.  1.954  [Removed]

    41. Section 1.954 is removed.
    42. Section 1.955 is amended by revising paragraphs (b) through (d) 
to read as follows: :


Sec.  1.955  Regional Office Committees on Waivers and Compromises.

* * * * *
    (b) Selection. The Director shall designate the employees to serve 
as Chairperson, members, and alternates. Except upon specific 
authorization of the Under Secretary for Benefits, when workload 
warrants a full-time committee, such designation will be part-time 
additional duty upon call of the Chairperson.
    (c) Control and staff. The administrative control of each Committee 
on Waivers and Compromises is the responsibility of the station's 
Fiscal Officer. However, the station Director has the authority to 
reassign the administrative control function to another station 
activity, rather than the Fiscal Officer, whenever the Director 
determines that such reassignment is appropriate. The quality control 
of the professional and clerical staff of the Committee is the 
responsibility of the Chairperson.
    (d) Overall control. The Assistant Secretary for Management is 
delegated complete management authority, including planning, policy 
formulation, control, coordination, supervision, and evaluation of 
Committee operations.
* * * * *
    43. Section 1.956 is amended by:
    A. Revising paragraphs (a)(2)(i) and (a)(2)(ii).
    B. Removing paragraph (a)(2)(iii).
    C. Redesignating paragraph (a)(2)(iv) as new paragraph (a)(2)(iii).
    D. Revising newly redesignated paragraph (a)(2)(iii).
    E. Revising paragraphs (a)(3) and (b).
    The revisions read as follows:


Sec.  1.956  Jurisdiction.

* * * * *
    (a) * * *
    (2) Arising out of operations of the Veterans Health 
Administration:
    (i) Debts resulting from services furnished in error (Sec.  
17.101(a) of this chapter).

[[Page 74905]]

    (ii) Debts resulting from services furnished in a medical emergency 
(Sec.  17.101(b) of this chapter).
    (iii) Other claims arising in connection with transactions of the 
Veterans Health Administration (Sec.  17.103(c) of this chapter).
    (3) Claims for erroneous payments of pay and allowances, and 
erroneous payments of travel, transportation, and relocation expenses 
and allowances, made to or on behalf of employees (5 U.S.C. 5584)
    (b) The Under Secretary for Benefits may, at his or her discretion, 
assume original jurisdiction and establish an ad hoc Board to determine 
a particular issue arising within this section.
* * * * *
    44. Section 1.957 is amended by:
    A. Revising paragraphs (a)(1) introductory text and (a)(1)(iii).
    B. Removing paragraph (a)(3).
    The revision reads as follows:


Sec.  1.957  Committee authority.

    (a) * * *
    (1) Waivers. A decision may be rendered to grant or deny waiver of 
collection of a debt in the following debt categories:
* * * * *
    (iii) Services erroneously furnished (Sec.  17.101(a)).
* * * * *
    45. Section 1.958 is revised to read as follows:


Sec.  1.958  Finality of decisions.

    A decision by the regional office Committee, operating within the 
scope of its authority, denying waiver of all or part of a debt arising 
out of participation in a VA benefit or home loan program, is subject 
to appeal in accordance with 38 CFR parts 19 and 20. A denial of waiver 
of an erroneous payment of pay and allowances is subject to appeal in 
accordance with Sec.  1.963a(a). There is no right of appeal from a 
decision rejecting a compromise offer.
    46. Section 1.963a is revised to read as follows:


Sec.  1.963a  Waiver; erroneous payments of pay and allowances.

    (a) The provisions applicable to VA (including refunds) concerning 
waiver actions relating to erroneous payments to VA employees of pay 
and allowances, and travel, transportation, and relocation expenses and 
allowances are set forth in 5 U.S.C. 5584. The members of Committees on 
Waivers and Compromises assigned to waiver actions under Sec.  1.955 of 
this part are delegated all authority granted the Secretary under 5 
U.S.C. 5584 to deny waiver or to grant waiver in whole or in part of 
any debt regardless of the amount of the indebtedness. Committee 
members also have exclusive authority to consider and render a decision 
on the appeal of a waiver denial or the granting of a partial waiver. 
However, the Chairperson of the Committee must assign the appeal to a 
different Committee member or members than the member or members who 
made the original decision that is now the subject of the appeal. The 
following are the only provisions of Sec. Sec.  1.955 through 1.970 of 
this part applicable to waiver actions concerning erroneous payments of 
pay and allowances and travel, transportation, and relocation expenses 
and allowances under 5 U.S.C. 5584: Sec. Sec.  1.955(a) through (e)(2), 
1.956(a)(introductory text) and (a)(3), 1.959, 1.960, 1.963a, 1.965(c) 
and 1.967(c).
    (b) Waiver may be granted under this section and 5 U.S.C. 5584 when 
collection would be against equity and good conscience and not in the 
best interest of the United States. Generally, these criteria will be 
met by a finding that the erroneous payment occurred through 
administrative error and that there is no indication of fraud, 
misrepresentation, fault, or lack of good faith on the part of the 
employee or other person having an interest in obtaining a waiver of 
the claim. Generally, waiver is precluded when an employee receives a 
significant unexplained increase in pay or allowances, or otherwise 
knows, or reasonably should know, that an erroneous payment has 
occurred, and fails to make inquiries or bring the matter to the 
attention of the appropriate officials. Waiver under this standard will 
depend upon the facts existing in each case.
    (c) An application for waiver must be received within 3 years 
immediately following the date on which the erroneous payment was 
discovered.

(Authority: 5 U.S.C. 5584, 38 U.S.C. 501)

Sec.  1.965  [Amended]

    47. Section 1.965 is amended by removing paragraph (b)(3).


Sec.  1.970  [Amended]

    48. Section 1.970 is amended by removing ``Sec. Sec.  1.900 through 
1.937'' and adding, in its place, ``Sec. Sec.  1.930 through 1.936''.
    49. Section 1.980 is amended by:
    A. Revising paragraphs (a) and (b).
    B. Redesignating paragraphs (f) and (g) as (h) and (i).
    C. Adding new paragraphs (f) and (g).
    D. Revising newly redesignated paragraph (h).
    The revisions and additions read as follows:


Sec.  1.980  Scope.

    (a) In accordance with 5 CFR part 550, subpart K, the provisions 
set forth in Sec. Sec.  1.980 through 1.995 implement VA's authority 
for the use of salary offset to satisfy certain debts owed to VA.
    (b) These regulations apply to offsets from the salaries of current 
employees of VA, or any other agency, who owe debts to VA. Offsets by 
VA from salaries of current VA employees who owe debts to other 
agencies shall be processed in accordance with procedures set forth in 
5 CFR part 550, subpart K.
* * * * *
    (f) These regulations do not apply to 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 practicable, the individual is 
provided written notice of the nature and amount of the adjustment and 
a point of contact for such adjustment.
    (g) These regulations do not apply to any adjustment to collect a 
debt amounting to $50 or less, if at the time of such adjustment, or as 
soon thereafter as practicable, the individual is provided with written 
notice of the nature and amount of the adjustment and a point of 
contact for contesting such adjustment.
    (h) These regulations do not preclude the compromise, suspension, 
or termination of collection action under the FCCS (31 CFR parts 900 
through 904) and VA regulations 38 CFR 1.930 through 1.953.
* * * * *
    50. Section 1.982 is amended by revising paragraphs (a), (b), and 
(c)(3) to read as follows:


Sec.  1.982  Salary offsets of debts involving benefits under the laws 
administered by VA.

    (a) VA will not collect a debt involving benefits under the laws 
administered by VA by salary offset unless the Secretary or appropriate 
designee first provides the employee with a minimum of 30 calendar days 
written notice.
    (b) If the employee has not previously appealed the amount or 
existence of the debt under 38 CFR parts 19 and 20 and the time for 
pursuing such an appeal has not expired (Sec.  20.302), the Secretary 
or appropriate designee will provide the employee with written notice 
of the debt. The written notice will state that the employee may appeal 
the amount and existence of the debt in accordance

[[Page 74906]]

with the procedures set forth in 38 CFR parts 19 and 20 and will 
contain the determination and information required by Sec.  1.983(b)(1) 
through (5), (7), (9), (10), and (12) through (14). The notice will 
also state that the offset schedule under the procedures set forth in 
Sec.  1.984 and such a request will stay the commencement of salary 
offset.
    (c) * * *
    (3) That the employee may request a waiver of the debt pursuant to 
38 CFR 1.911(c)(2) subject to the time limits of 38 U.S.C. 5302.
* * * * *
    51. Section 1.983 is amended by revising paragraphs (b)(8) and 
(b)(13) to read as follows:


Sec.  1.983  Notice requirements before salary offsets of debts not 
involving benefits under laws administered by VA.

* * * * *
    (b) * * *
    (8) The VA employee's right to request an oral or paper hearing on 
the Secretary or appropriate designee's determination of the existence 
or amount of the debt, or the percentage of disposable pay to be 
deducted each pay period, so long as a request is filed by the employee 
as prescribed by the Secretary. A VA Board of Contract Appeals 
Administrative Judge or Hearing Examiner shall conduct such a hearing 
for all VA employees. A VA Board of Contract Appeals Administrative 
Judge or Hearing Examiner, or any other VA hearing official, may also 
conduct an oral or paper hearing at the request of a non-VA employee on 
the determination by an appropriately designated official of the 
employing agency of the existence or amount of the debt, or the 
percentage of disposable pay to be deducted each pay period, so long as 
a hearing request is filed by the non-VA employee as prescribed by the 
employing agency.
* * * * *
    (13) The employee's right, if applicable, to request waiver under 5 
U.S.C. 5584 and 38 CFR 1.963a and any other rights and remedies 
available to the employee under statutes or regulations governing the 
program for which the collection is being made; and
* * * * *


Sec.  1.984  [Amended]

    52. Section 1.984 is amended by:
    A. In paragraph (a), removing ``20 calendar days'' and adding, in 
its place, ``30 calendar days''.
    B. In paragraph (b), removing ``20 day period'' and adding, in its 
place, ``30-day period''.


Sec.  1.989  [Amended]

    53. In Sec.  1.989 paragraph (a) is amended by removing ``20 
calendar days'' and adding, in its place, ``30 calendar days''.


Sec.  1.990  [Amended]

    54. In Sec.  1.990, paragraph (a) is amended by removing ``20 
calendar days'' and adding, in its place, ``30 calendar days''.
    55. Section 1.991 is amended by revising paragraph (d) to read as 
follows:


Sec.  1.991  Procedures for salary offset: when deductions may begin.

* * * * *
    (d) If an employee retires, resigns, or his or her employment ends 
before collection of the amount of the indebtedness is completed, the 
remaining indebtedness will be collected according to procedures for 
administrative offset (see 31 CFR 901.3, 38 CFR 1.912, and 5 CFR 
831.1801 through 831.1808).
    56. Section 1.992 is amended by revising paragraph (c) to read as 
follows:


Sec.  1.992  Procedures for salary offset.

* * * * *
    (c) Imposition of interest, penalties, and administrative costs. 
Interest, penalties, and administrative costs shall be charged in 
accordance with 31 CFR 901.9 and 38 CFR 1.915.
    57. Section 1.995 is added to read as follows:


Sec.  1.995  Requesting recovery through centralized administrative 
offset.

    (a) Under 31 U.S.C. 3716, VA and other creditor agencies must 
notify Treasury of all debts over 180 days delinquent so that recovery 
of such debts may be made by centralized administrative offset. This 
includes those debts that VA and other agencies seek from the pay 
account of an employee of another Federal agency via salary offset. 
Treasury and other disbursing officials will match payments, including 
Federal salary payments, against these debts. Where a match occurs, and 
all the requirements for offset have been met, the payment will be 
offset to satisfy the debt in whole or part.
    (b) Prior to submitting a debt to Treasury for the purpose of 
collection by offset, including salary offset, VA shall provide written 
certification to Treasury that:
    (1) The debt is past due and legally enforceable in the amount 
submitted to Treasury and that VA will ensure that any subsequent 
collections are credited to the debt and that Treasury shall be 
notified of such;
    (2) Except in the case of a judgment debt or as otherwise allowed 
by law, the debt is referred to Treasury for offset within 10 years 
after VA's right of action accrues;
    (3) VA has complied with the provisions of 31 U.S.C. 3716 and 38 
CFR 1.912 and 1.912a including, but not limited to, those provisions 
requiring that VA provide the debtor with applicable notices and 
opportunities for a review of the debt; and
    (4) VA has complied with the provisions of 5 U.S.C. 5514 (salary 
offset) and 38 CFR 1.980 through 1.994 including, but not limited to, 
those provisions requiring that VA provide the debtor with applicable 
notices and opportunities for a hearing.
    (c) Specific procedures for notifying Treasury of debts for 
purposes of collection by centralized administrative offset are 
contained in the 31 CFR 285.7. VA and other creditor agencies may 
notify Treasury of debts that have been delinquent for 180 days or 
less, including debts that VA and other creditor agencies seek to 
recover from the pay of an employee via salary offset.

PART 2--DELEGATIONS OF AUTHORITY

    1. The authority citation for part 2 continues to read as follows:

    Authority: 5 U.S.C. 302, 552a; 38 U.S.C. 501, 512, 515, 1729, 
1729A, 5711; 44 U.S.C. 3702, unless otherwise noted.

    2. Section 2.6 is amended by:
    A. Revising the heading of paragraph (c).
    B. In paragraph (c)(1), removing the ``Assistant Secretary for 
Finance and Information Resources Management'' and adding, in its 
place, ``Assistant Secretary for Management''.
    C. In paragraph (c)(2), removing the ``Assistant Secretary for 
Finance and Information Resources Management'' each time it appears and 
adding, in its place, ``Assistant Secretary for Management''.
    D. Revising paragraph (d).
    The revisions read as follows:


Sec.  2.6  Secretary's delegations of authority to certain officials 
(38 U.S.C. 512).

* * * * *
    (c) Office of Management.
* * * * *
    (d) The Assistant Secretary for Management (Chief Financial 
Officer) is delegated authority to take appropriate action (other than 
provided for in paragraph (e)(3) and (e)(4) of this section) in 
connection with the collection of civil claims by VA for money or 
property, as authorized in Sec.  1.900 et seq. The Assistant Secretary

[[Page 74907]]

for Management (Chief Financial Officer) may redelegate such authority 
as he/she deems appropriate to administration heads and staff office 
directors.
* * * * *
[FR Doc. 03-31620 Filed 12-24-03; 8:45 am
BILLING CODE 8320-01-P