[Federal Register Volume 69, Number 14 (Thursday, January 22, 2004)]
[Rules and Regulations]
[Pages 2999-3000]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-1261]


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DEPARTMENT OF AGRICULTURE

Rural Housing Service

Rural Business-Cooperative Service

Rural Utilities Service

Farm Service Agency

7 CFR Part 1951

RIN 0570-AA52


Debt Collection Improvement Act--Treasury Offset and Cross 
Servicing

AGENCY: Rural Housing Service, Rural Business-Cooperative Service, 
Rural Utilities Service, Farm Service Agency, USDA.

ACTION: Final rule.

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SUMMARY: This action amends the regulations governing the servicing of 
Rural Business-Cooperative Service (RBS) loan and grant programs by 
adding a section to clarify that any amounts paid by RBS on account of 
the liabilities of a guaranteed loan borrower will constitute a Federal 
debt owing to RBS by the guaranteed loan borrower. RBS may use all 
remedies available to it, including offset under the Debt Collection 
Improvement Act (DCIA), to collect the debt from the borrower.

EFFECTIVE DATE: This rule is effective on January 22, 2004.

FOR FURTHER INFORMATION CONTACT: Bill Hagy, Deputy Administrator, Rural 
Business-Cooperative Service, USDA, Stop 3220, Room 5050, 1400 
Independence Ave. SW., Washington, DC 20250-3250, Telephone (202) 720-
7287, or internet e-mail [email protected].

SUPPLEMENTARY INFORMATION:

Classification

    This rule has been reviewed under Executive Order 12866 and has 
been determined to be a nonsignificant regulatory action by the Office 
of Management and Budget (OMB).
    This rule is not published for notice and comment because it 
implements statutory and regulatory provisions that are binding on the 
RBS. Since RBS does not have discretion in this matter, public comment 
would not be able to affect the provisions of the rule. Therefore, the 
rule is published as final and effective upon publication.

Programs Affected

    The Catalog of Federal Domestic Assistance Program number assigned 
to this program is: 10.768, Business and Industrial Loans.

Paperwork Reduction Act

    There are no reporting or record keeping requirements associated 
with this rule.

Environmental Impact Statement

    It is the determination of the Secretary that this action is not a 
major Federal action significantly affecting the environment. 
Therefore, in accordance with the National Environmental Policy Act of 
1969, an Environmental Impact Statement is not required.

Executive Order 12988

    This rule has been reviewed in accordance with E.O. 12988, Civil 
Justice Reform. In accordance with this rule: (1) All State and local 
laws and regulations that are in conflict with this rule will be 
preempted; (2) no retroactive effect will be given to this rule; and 
(3) administrative proceedings in accordance with 7 CFR part 11 must be 
exhausted before bringing suit in court challenging action taken under 
this rule unless those regulations specifically allow bringing suit at 
an earlier time.

The Unfunded Mandates Reform Act of 1995

    Title II of the Unfunded Mandates Reform Act of 1995 (UMRA) 
establishes requirements for Federal agencies to assess the effects of 
their regulatory actions on State, local, and tribal Governments and 
the private sector. Under section 202 of the UMRA, USDA must prepare a 
written statement, including a cost benefit analysis, for proposed and 
final rules with ``Federal mandates'' that may result in expenditures 
to State, local or tribal Governments, in the aggregate, or to the 
private sector, of $100 million or more in any one year. When such a 
statement is needed for a rule, section 205 of UMRA generally requires 
USDA to identify and consider a reasonable number of regulatory 
alternatives and adopt the least costly, more cost effective, or least 
burdensome alternative that achieves the objectives of the rule.
    This rule contains no Federal mandates (under the regulatory 
provisions of Title II of the UMRA) for State, local, and tribal 
Governments or the private sector. Therefore, this rule is not subject 
to the requirements of sections 202 and 205 of UMRA.

Regulatory Flexibility Act

    In compliance with the Regulatory Flexibility Act (5 U.S.C. 601-
612), the undersigned has determined and certified by signature of this 
document that this rule will not have a significant

[[Page 3000]]

economic impact on a substantial number of small entities. The 
Regulatory Flexibility Act is intended to encourage Federal Agencies to 
utilize innovative administrative procedures in dealing with 
individuals, small businesses, small organizations, and small 
governmental bodies that would otherwise be unnecessarily adversely 
affected by Federal regulations. The provisions included in this rule 
will not impact a substantial number of small entities to a greater 
extent than large entities. Therefore, no regulatory flexibility 
analysis under the Regulatory Flexibility Act is necessary.

Executive Order 13132, Federalism

    The policies contained in this rule do not have any substantial 
direct effect on States, the relationship between the National 
Government and the States, or the distribution of power and 
responsibilities among the various levels of government. Nor does this 
rule impose substantial direct compliance costs on State and local 
Governments. Therefore, consultation with the States is not required.

Discussion

    This rule clarifies the policy of the RBS concerning the statutory 
mandate imposed on the Agency by the Debt Collection Improvement Act of 
1996 (104 Pub. L. 134) (DCIA).
    Section 3701 of 31 U.S.C. defines ``claim'' or ``debt'' in part to 
include funds owed on account of loans guaranteed by the Government. 
This rule puts the guarantee borrower on notice that RBS will attempt 
to collect from them through Treasury Offset and any other available 
remedies when a final loss claim is paid to a guaranteed lender. It 
provides that a debt for purposes of the DCIA is established upon 
payment of a loss claim to the original guarantee-lender.
    The Debt Collection Act of 1982 (Act) (97 Pub. L. 365) provides for 
the use of administrative, salary and Internal Revenue Service (IRS) 
offsets by Government Agencies to collect delinquent Federal debts. Any 
money that is or may become payable from the United States to an 
individual or entity indebted to RBS may be offset for the collection 
of a debt owed to RBS. In addition, money may be collected from the 
debtor's retirement payments for delinquent amounts owed to RBS if the 
debtor is an employee or retiree of a Federal Agency, the U.S. Postal 
Service, the Postal Rate Commission, or a member of the U.S. Armed 
Forces or the Reserve. Current regulations published for RBS programs 
in title 7 of the Code of Federal Regulations do not expressly discuss 
at what point a debt to the Federal Government is established for 
purposes of the remedies available under the DCIA; this rulemaking 
expressly provides that the debt is created at the time the loss claim 
is paid to the guaranteed lender.
    This rule is consistent with the Act and clarifies that, in cases 
of guaranteed loans, a Federal debt is established when a guaranteed 
loss claim is paid. The loss claim paid may or may not be a final loss 
claim for purposes of this rule. Accordingly, if several claims are 
paid over time, separate debts are created accordingly. RBS will 
exercise all remedies available for collection, including those 
provided by the Debt Collection Improvement Act of 1996. RBS has 
already implemented a practice of referring debts arising from direct 
loans to the U.S. Department of the Treasury.
    The Agency is in the process of revising the applicable forms to 
include the applicant's certification and acknowledgment that any 
amounts paid by RBS on account of liabilities of the guaranteed loan 
borrower will constitute a Federal debt to RBS on the part of the 
borrower. The forms will provide direct notice to interested applicants 
of RBS' debt collection policy and memorialize their understanding and 
acknowledgment of RBS' collection policy.
    RBS loan officials will provide notification to the B&I guaranteed 
borrower of their applicable rights and potential collection actions by 
sending a 60 day due process letter.

List of Subjects in 7 CFR Part 1951

    Accounting, Account servicing, Credit, Debt collection, Loan 
programs--agriculture, Low and moderate income housing loans--
servicing, Offsets of Federal payments.

0
Accordingly, chapter VXIII, title 7, Code of Federal Regulations, is 
amended as follows:

PART 1951--SERVICING AND COLLECTIONS

0
1. The authority citation for part 1951 continues to read as follows:

    Authority: 5 U.S.C. 301; 7 U.S.C. 1932 Note; 7 U.S.C. 1989; 31 
U.S.C. 3716; 42 U.S.C. 1480.

Subpart C--Offsets of Federal Payments to USDA Agency Borrowers

0
2. Section 1951.133 is added to read as follows:


Sec.  1951.133  Establishment of Federal Debt.

    Any amounts paid by RBS on account of liabilities of a business and 
industry (B&I) program guaranteed loan borrower will constitute a 
Federal debt owing to RBS by the B&I guaranteed loan borrower. In such 
case, the RBS may use all remedies available to it, including offset 
under the Debt Collection Improvement Act of 1996 (DCIA), to collect 
the debt from the borrower. Interest charges will be established at the 
note rate of the guaranteed loan on the date a loss claim is paid. RBS 
may, at its option, refer such debt in all or part to the Department of 
the Treasury, before a final loss claim is determined.

    Dated: January 14, 2004.
John Rosso,
Administrator, Rural Business-Cooperative Service.
[FR Doc. 04-1261 Filed 1-21-04; 8:45 am]
BILLING CODE 3410-XY-P